EU-ACP PARTNERSHIP COTONOU AGREEMENT

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					EU-ACP PARTNERSHIP COTONOU AGREEMENT




   How can EIB finance Infrastructure
 projects under the Cotonou Agreement


           INPUT Regional Investment Conference
             30 November 2005, Accra - GHANA


                Jack Reversade - j.reversade@eib.org
  EIB Representative – Regional Office for West Africa at Dakar   1
 PRESENTATION STRUCTURE




1. EIB Background – capital and lending


2. EIB External Mandates

3. Cotonou: Investment Facility and EIB own resources


4. Project considerations


                                                        2
THE EUROPEAN INVESTMENT BANK



EIB - European Union’s financing institution:


      Created by the Treaty of Rome in 1958
      Subscribed capital EUR 163.7bn
      EIB shareholders: 25 Member States of the European Union
      Lending in 2004: EUR 43bn (EUR 40bn within the EU)
      Borrowing in 2004: EUR 50bn (EUR 28bn in EU currencies)




                                                                  3
LOANS IN ACP COUNTRIES, OCT AND SOUTH
AFRICA 2000-2004




              Caribbean 320                                              Pacific 19




  OCT 10
                                                                EURm
                              Africa 1 626                         Energy
                                                                   Communications
                                             South Africa 700      Water
                                                                   Industry
                                                                   Global loans
40 years’ experience in development co-operation                                      4
THE EIB MANDATE UNDER THE COTONOU
AGREEMENT (I)


 The IF: a revolving fund
   • managed along commercial principles to be financially
     sustainable
   • assurance for the ACP countries of future availability of
     resources (re-flows to be invested in new projects)

 Terms and conditions more closely aligned with market
  practice

 Risk-sharing instruments, local currency loans and
  guarantees

           The IF will take risk and will expect reward          5
THE EIB MANDATE UNDER THE COTONOU
AGREEMENT (II)


 Play a catalytic role in mobilising local resources and
  encouraging foreign lending and investment
 Complementarities sought with operations/instruments of EC
  bilateral or multilateral institutions
 Support for the local financial sector
 Subsidies (limited) available for public sector projects, to
  support environmental or social components or for project-
  related technical assistance



                                                                 6
THE COTONOU Agreement : financial aspects




        European Development Fund

 European Commission                European Investment Bank

   Grant aid for long-term     Investment Facility      EIB’s own resources
 development (national and             –                         –
   regional programmes)      Loans/equity/guarantees    Loans for investment
                              for investment projects         projects


   EUR 11 300 million         EUR 2 200 million         EUR 1 700 million




   The EIB is Europe’s development financing institution                       7
TERMS AND CONDITIONS (IF)


LOANS on market related terms

       In foreign currency
           • rate close to EIB EU rates for loans
             plus
           • mark-up to cover perceived risks

       In local currency (whenever feasible)
         • at local market rate if adequate benchmark available
            plus
         • mark-up to cover perceived risks

    [In some cases, an interest rate subsidy can be granted, if its justification
    is clearly demonstrable]
                                                                                    8
TERMS AND CONDITIONS (IF)


 QUASI-EQUITY
  • E.g.: convertible bonds, participating loans, conditional loans, etc.
  • Remuneration linked to the financial return of the project (often
    composed of a fixed interest rate of not more than 3% and a
    variable component related to the project performance)
 EQUITY PARTICIPATION
  • Normally for non-controlling minority only
  • Remunerated on the basis of the project performance
  • Policy: sell as soon as feasible, to make room for private investors
 GUARANTEES
  • New instrument under development
  • Pricing to reflect project characteristics and risks insured


                                                                            9
PROJECT DEVELOPMENT CONSIDERATIONS


  Development structure needs to be carefully assessed


   Public, PPP or Private
   BOO, BOT, Concession
   No ready made recipes or dogmas to be applied

   Depends on factors, such as
     •   Structure and organisation of sector
     •   Market
     •   Country situation
     •   Risk considerations
     •   Availability of finance and type of financial instruments



                                                                     10
ECONOMIC LIFE SPAN


  Economic life span considerations

      Economic life span in line with reasonable expectation of
       efficient use of installations

      In line with duration of Concession or Power Purchase
       agreements

      Taken into account to determine loan duration




                                                                   11
PROCUREMENT ASPECTS



  For items/contracts to be financed by EIB
    • In general, open bidding procedures with world wide
      publication (preferably including Official Journal of EU)
    • No country eligibility constraints
    • No local preferences

  For other items
    • Review of procedures applied and results obtained




                                                                  12
TIMING ASPECTS




After identification of a feasable project, the promoter should
               involve financiers at an early stage


 Detailed project preparation
 Specific requirements
      •   Environmental and social
      •   Procurement
   Guarantees
   Insurance
   Risk mitigation
   Acceptability of financial and economic profitability levels
                                                                   13
  RENEWABLE ENERGY PROJECTS
APPROVED 1995-2005 + PRESENT PIPELINE
(direct loans)

                                           Amounts in EUR m


            2000

            1800

            1600

            1400

            1200
                                                    Europe
            1000
                                                    ACP
             800                                    Other

             600

             400

             200

                 0
                     Hydro   Wind   Geo   Solar




                                                              14
CONCLUSION




 Close collaboration amongst multi- and bilateral as
  well as with commercial institutions required

 Early involvement of financiers in the project
  development considered extremely important

 EIB partner for part-financing of infrastructure
  projects




  www.eib.org                              info@eib.org   15