Annexes to COM(2017)767 - 2016 eib external activity with EU budgetary guarantee - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2017)767 - 2016 eib external activity with EU budgetary guarantee. |
|---|---|
| document | COM(2017)767  |
| date | December 15, 2017 |
Of the new lending signed for the ELM regions in 2016, EUR 1.9 billion will contribute to the climate change mitigation and adaptation. This will be achieved through a large number of projects across almost all sectors. All of these projects also contribute to either local private sector development or the development of social and economic infrastructure.
In many cases, only part of a project contributes to the climate change objective and only a proportion of that project’s lending total is therefore reported as contributing towards the objective. Analysis of the results of past EIB projects has revealed that many projects make a small contribution to action on climate change even if this is not the main objective of the project. A typical example is a credit line for SMEs in which some investment projects by beneficiary businesses involve achieving greater energy efficiency in buildings or installing small-scale renewable energy generation capacity, such as solar panels. Accordingly, some 50 new projects in 2016 contribute to the climate action objective of which 21 are credit lines.
Overall, by far the largest contribution is from lower carbon transport, accounting for 64% of the total volume, with renewable energy and energy efficiency contributing a further 21% of new non-EU climate action lending in 2016. Mitigation such as methane avoidance in waste and wastewater sector also continues to play an important role, while adaptation contributed 3.5%.
Reducing diesel dependence in the Maldives
Power generation represents a challenge for the Maldives, as an archipelago of 26 atolls. The country has relied substantially on old and inefficient diesel generators. As recently as 2012, oil imports made up 35% of GDP. A EUR 45 million EIB loan covered by the EU's guarantee under the External Lending Mandate is supporting a project to help change this situation by installing at least 50 MW of solar-diesel hybrid energy systems, with about 25 MW of roof-top and ground mounted solar PV panels and about 27 MW of more efficient diesel generator capacity, as well as the rehabilitation of about 430 km of distribution lines and the installation of lithium-ion batteries and control system equipment. This will allow about 37 MW of obsolete diesel generator capacity to be retired.
The project will supply enough energy to meet the needs of about 110,000 households and will enable some 14,500 new connections to the network. It will save the country an estimated EUR 13.6 million a year in reduced fuel imports and will also have an impact in terms of lower emissions of CO2 and other pollutants. During operation, the project will result in estimated GHG emissions of 76 kt CO2-eq/year. However relative to predicted emissions without the project, it is expected to result in a reduction of 34 kt CO2-eq/year.
Regional integration
The EIB signed 15 new projects in 2016 that contribute to regional integration. The total approved EIB finance for these projects was EUR 1.6 billion. These projects cover transport links, support to convergence through local private sector development and an energy interconnection. Seven projects (EUR 1 billion) were signed for credit lines supporting access to long-term finance for SMEs and mid-caps, thereby supporting economic convergence with the EU. Six of these are in Turkey and one is in Bosnia and Herzegovina. A further credit line specifically targets SMEs in the food and agriculture sector in Georgia. The EIB signed four transport projects, which include rail modernisation in Ukraine and Moldova that will expand capacity for passenger and cargo services and help to facilitate trade across the region and with the EU.
3.2.OVERVIEW OF EIB FINANCING BY REGION AND SECTOR
Table 1 provides an overview of the volume of EIB financing in 2016 in the regions covered by the ELM, including those with an ELM guarantee (comprehensive or political risk) and those financed under the EIB's own-risk facilities.
Table 1: EIB Financing Operations signed in 2016
The EIB signed EUR 6.8 billion of loans in the regions covered by the ELM in 2016 out of a worldwide total of EUR 7.9 billion (including the ACP countries and the Overseas Countries and Territories). Approximately EUR 5.9 billion was carried out in the Pre-Accession (total EIB exposure in Turkey covered by the EU guarantee currently represents EUR 9.6 billion) and in the Neighbourhood regions (both South and East). The rest (26%) was signed in Asia, Central Asia and Latin America.
Compared to 2015, the total volume of EIB financing in ELM regions increased by 2% (EUR 6.7 billion signed in 2015) resulting from an increase of 54% in financing under the own risk facilities (EUR 1.9 billion in 2015) and a decrease by 18% of the use of the EU guarantee (EUR 4.8 billion in 2015).
Table 2: Net signature per year and cumulative net signatures compared with the current EU Mandate
ceilings over 2014-2020
As presented above, the cumulative signatures under the ELM reached EUR 10.7 billion and the cumulative utilisation rate of the ELM in terms of signatures currently stands at 40% (some 38% of implementation time elapsed). In relation to the current ELM mandate with a ceiling at EUR 27 billion, the utilisation rate in Central Asia has reached 88% of the mandate ceiling, followed by the Eastern Neighbours with 85%, Asia with 56%, and Latin America with 44%. Note that these percentages do not take into account the proposed increase to the ELM ceiling currently under discussion by Council and Parliament.
Chart 2: Annual evolution of EIB lending volumes on EIB own resources
Chart 2 illustrates the evolution of lending under the ELM and the own-risk facilities between 2014 and 2016. Over this period, an average of 64% of EIB financing in these regions benefited from the EU guarantee, with annual fluctuations between 58% and 72%.
The number of financing projects with contracts signed by the EIB in the regions covered by the ELM increased from 55 in 2015 to 71 in 2016. Of these 71 operations, 54 projects were 'new' with a first EIB finance contract signed in 2016; for 17 projects, part of the total EIB financing had been provided by contracts signed in previous years.
Table 3: Number of operations signed by region (all resources) in 2016
In 2016, the EIB significantly increased its lending in the Western Balkans compared to 2015 (+92%), where the amount reached EUR 427 million and in the Mediterranean countries (+12%), where the amount signed reached EUR 1.6 billion, in the context of the implementation of the Bank's Economic Resilience Initiative in support of those regions. The majority of this amount was for projects focused on providing support to build local private sector development, especially credit lines to support SMEs (54% in the Mediterranean and 64% in the Western Balkans).
In 2016, credit lines represented 46% of the total lending (37.5% in 2015), while 54% were dedicated to finance infrastructure projects and others (62.5% in 2015), in which transport projects represents half of the volume.
Lending in the Pre-Accession countries contributed the most to the objective of local private sector development with EUR 1.8 billion (52%) followed by the Mediterranean countries with 960 million (28%).
The Eastern Neighbourhood is the region that contributes the most to the objective of economic and social infrastructure with 1.2 billion (34%) of the total lending to this objective.
Finally, the Pre-Accession region also scores higher in the regional integration objective with 1.3 billion (69%) of all resources lending.
Table 4: Sectorial distribution of EIB financing operations signed in 2016 in the regions covered by the Decision (all resources)
3.3.IMPACT AND VALUE ADDED OF EIB OPERATIONS
The ReM Framework provides an assessment of EIB financing operations throughout their lifecycle. It helps to select sound projects which are in line with EU priorities and where EIB involvement will add value. At appraisal stage, results indicators are identified, with baselines and targets that capture expected economic, social, and environmental outcomes of the operation. Achievement against those specified performance benchmarks is monitored throughout the project's life and reported at two major milestones: project completion and three years after project completion ('post completion') for direct operations; the end of the investment period and the end of life of private equity funds; and the end of the allocation period for intermediated lending.
Projects are rated according to three 'Pillars':
(i) Pillar 1 rates the expected contribution to EU and partner countries' priorities and eligibility under EIB mandate objectives.
(ii) Pillar 2 rates the quality and soundness of the operation, based on the expected results.
(iii) Pillar 3 rates expected EIB financial and non-financial additionality.
This section reports expected results on EU policy objectives as recorded by the ReM Framework. The scope of this section with regard to expected results is not all contracts signed in 2016, but all projects for which the first financing contract was signed in 2016 (these are referred to as 'new projects'). Within this scope, in 2016, 54 new projects were signed in the ELM regions. The total approved EIB lending associated with these projects is EUR 7.3 billion.
In 2016, 11 projects in the ELM regions that were originally appraised under the ReM Framework reached completion, allowing for a more comprehensive monitoring of results achieved. These included six credit lines for SMEs and mid-caps, three infrastructure projects and two industry/R&D projects.
Chart 3: ReM ratings by pillar for 2016 new signed operations
In 2016, all new projects were rated at least 'good' under Pillar 1, signifying that they are in line with ELM objectives and make a high contribution to either national development objectives or those of the EU and a moderate contribution to the other. Nineteen projects were rated 'excellent' for making a high contribution to both EU priorities and national development objectives.
The Pillar 2 rating is based on project soundness, financial and economic sustainability, and environmental and social sustainability in the case of directly financed projects. For intermediated operations, the rating is based on the expected results, weighted by risk considerations as measured by the soundness of the intermediary and the quality of the operating environment. Fifty projects were rated 'good' under Pillar 2, with an average economic rate of return of 10% to 15% in the case of infrastructure projects. Four projects received an 'acceptable' rating, often because of high risk environments that impact on the probability of achieving planned results. These include projects in Ukraine and Kyrgyz Republic.
Under Pillar 3, 7 projects have been rated as 'high' and 39 projects as 'significant'.
4. EIB COOPERATION WITH OTHERS
4.1 COOPERATION WITH THE COMMISSION
Cooperation between the EIB and the Commission on matters related to the External Lending Mandate takes place in the context of a broader partnership between the two institutions on a whole range of areas ranging from stimulating investment in the EU including via the European Fund for Strategic Investments as well as the blending facilities supporting EIB and other IFIs' development activities outside the EU.
The ELM Decision requires that the Commission, the EEAS and the EIB cooperate and strengthen the alignment of EIB external actions and the EU's external policy objectives in order to maximise synergies between EIB financing and EU budgetary resources. This occurs mainly through regular and systematic dialogue and early consultation on policies, strategies and project pipelines. The Memorandum of Understanding (revised in 2013) between the Commission, EEAS and the EIB in respect of cooperation and coordination in the regions covered by the ELM continues to be applied, e.g. through exchange of information on project pipeline and contact information.
A concrete example of this cooperation is the co-location of EIB offices within EU Delegations, with new EIB external offices moving into local Delegations. The office in Beijing was formally inaugurated on 30 May 2016 and covers China and Mongolia. In addition, in the first quarter of 2017, the office in New Delhi was inaugurated.
The EU's blending mechanisms offer a further venue for structured cooperation. Blending results in strong co-financing relations with other international financial institutions (IFIs) and alignment with EU policies and priorities in each respective country context. Moreover, the governance structure of those facilities enables and requires close coordination and cooperation with the Commission, the EEAS and other IFIs before presenting a project for blending of grant resources with EIB lending.
The EIB continued to actively participate in the regional blending mechanisms in 2016. EUR 177.32 million of EU budget-funded contributions (grants, technical assistance, risk capital) managed by the EIB were approved or signed in 2016 complementing EIB financing in ELM regions (EUR 39 million of EU budget resources complementing EIB loans in the Neighbourhood Investment Facility, EUR 53 million in the Western Balkan Investment Facility, EUR 18 million in the Latin America Investment Facility, EUR 18 million in the Eastern Europe Energy Efficiency and Environment Partnership, EUR 5.32 million in the Eastern partnership Technical Assistance Trust Fund, EUR 1.64 million in the FEMIP and EUR 41 million for risk capital). The EIB closely cooperated with the Commission in the technical group of experts of the EU Platform for Blending in External Cooperation (EUBEC). The detailed list of EIB-managed Union budget-funded operations (TA, Grants, Equity) in 2015 can be found in the accompanying staff working document.
The Commission continues to actively engage with the EIB in a number of other policy areas, including dealing with non-cooperative tax jurisdictions. In January 2016, the Commission adopted a new Anti-Tax Avoidance Package, containing a series of initiatives for a stronger and more coordinated EU stance against corporate tax abuse within the Single Market and beyond. The package further expands on the criteria that constitute good tax governance, including measures on the fight against aggressive tax planning. That package reflects discussions in the Council, recommendations from the European Parliament as well as the outcomes of the OECD's Base Erosion and Profit Shifting project. In January 2017, the EIB presented its interim approach to its policy towards weakly regulated, non-transparent and uncooperative jurisdictions ('NCJ policy') and tax sensitive jurisdictions.
The detailed aspects of the inter-institutional cooperation between the EIB, the Commission and the EEAS to support the priorities both of the EU and the partner countries in these regions can be found in the accompanying staff working document.
4.2. COOPERATION WITH THE EUROPEAN OMBUDSMAN
The Memorandum of Understanding signed between the EIB and the European Ombudsman in 2008 sets the basis for the two stages of the EIB Complaints Mechanism - the internal (EIB-CM) and the external (the Ombudsman) - approved by the EIB Board of Directors in 2010 after extensive public consultation. It achieves a common understanding of purpose and consistency of application across its internal and external parts, with a specific focus on:
• The existence of an effective internal Complaints Mechanism (the EIB-CM) that deals with complaints lodged by external parties to the EIB across all the business units of the EIB;
• Concerning complaints related to operations outside the EU, including the external mandates, the Ombudsman commits to use its own initiative power systematically in order to handle complaints when the complainant is not a citizen or resident of the EU;
• The scope of the Ombudsman's review, with the recognition of the EIB-CM as the required prior approach.
During 2016, the Ombudsman received no complaints related to the EIB activities in the External Lending Region.²
The current EIB Complaints Mechanism Policy stipulates that the EIB endeavours to periodically review the mechanism. The current review, including a public consultation, is expected to conclude at the end of 2017.
4.3. COOPERATION WITH INTERNATIONAL FINANCING INSTITUTIONS
Cooperation with other IFIs is an integral part of EIB activities, ranging from dialogue on institutional matters, horizontal topics and thematic issues, and mutual consultation, to enhanced forms of operational co-financing and work sharing. Dialogue between IFIs mostly takes place within specialised working groups meeting periodically to share best practices or address specific issues.
Cooperation between the EIB and the European Bank for Reconstruction and Development (EBRD) has continued under the 2012 Memorandum of Understanding. A Steering Committee chaired by the Commission took place in June 2016. This focused in particular on the Banks’ response to the migration crisis as well as overall cooperation. The EIB and EBRD also held two Contact Group meetings to exchange views on their pipelines of operations in the regions where they both operate. In addition, the Banks shared information on their response to the migration crisis and on other common topics of interest including issues arising in relation to offshoring and the newly created EU4Business initiative in the Eastern Partnership region.Twenty-seven projects signed in 2016 were cofinanced by other IFIs. EBRD is the first co-financer (13 projects) with a total of EUR 1.1 billion representing 44% of the total volume of cofinancing, followed by World Bank group (7 projects) representing 32% of the total volume of co-financing. The Inter-american Development Bank and the Development Bank of Latin America co-financed 2 projects (4%), the Asian Development Bank co-financed 4 projects (22%).²
Cooperation between EIB, AFD and KfW has continued to intensify over the last years. In 2016, 4 projects were co-financed with AFD in the ELM regions with a total EIB financing of EUR 778 million. 3 projects were co-financed with KfW group with a total EIB financing of EUR 142 million. Meanwhile, a regular routine of meetings on policy/coordination level as well as on operational level has been established which has facilitated exchange of information and transparency.
The three institutions also cooperate closely in the context of the Mutual Reliance Initiative (MRI). Launched in 2013, the MRI is a widely recognised means of implementing EU external cooperation policies. It foresees that the three MRI partners rely on one of them to perform certain tasks, e.g. some of the project due diligence or procurement supervision. Promoters appreciate the resulting simplified processes. The management and decision-making bodies of the MRI partners have become acquainted with documents prepared by another institution which they use for their own decisions. Talks continued during 2016 on how to further increase the level of work sharing and delegation and take the MRI to a higher level of relevance and effectiveness.
A new and significant development in 2016 was the entry of three new members, the Asia Infrastructure Investment Bank (AIIB), the Islamic Development Bank and the New Development Bank (also known as 'BRICS' Bank). The MoU signed by EIB with AIIB in May 2016 in Beijing provides the framework to further consolidate the relations between EIB and AIIB in the areas of joint financing of eligible operations, knowledge sharing and the establishment of regular high level meetings.
In addition to the multiple working groups and initiatives covering a broad range of issues (climate, infrastructure, finance, risk, results measurement, ex post evaluation, debt management etc.), MDB cooperation remains strong at the highest level. In 2016, high-level discussions among MDBs focused on the main topics of the development agenda, namely how to jointly enhance MDB support for Climate Action and contribute to the Sustainable Development Goals. Addressing the consequences of the refugee crisis and forced displacement was another key topic for MDB cooperation in 2016. A special MDB Task Force was set up to define and measure mobilisation and catalysation by MDBs of private sector finance. Building on recommendations from the G7 and the G20, MDBs also worked jointly on ways to optimise their balance sheets and increase their lending capacity in support of development objectives.
The EIB also continued to strengthen its ties with the UN system, following the signature of Memoranda of Understanding with UNIDO, IFAD and FAO. The EIB and UNDP signed a Memorandum of Understanding in October 2016. The thematic focuses of this partnership are climate change response, responding to crisis and post-crisis situations, the migration crisis and promoting inclusive markets and entrepreneurship. An agreement was also signed in April 2016 with UNOPS. This partnership will enable both institutions to overcome ongoing challenges to sustainable development, most notably in fragile economies, as well as climate change and increasing the capacity of the private sector to drive growth and change.
(1) In September 2016, the Commission proposed increasing the maximum ceiling for the current ELM to EUR 32.3 billion (COM(2016) 583). The legislative process is expected to finish with an agreement between Parliament and the Council in the second half of 2017.
(2) This report has been prepared in line with the requirements set out in Article 11 of Decision 466/2014/EU of the European Parliament and of the Council of 16 April 2014 which establishes the External Lending Mandate.
(3) 'New' operations are those for which the first financing contract was signed in 2016. These operations represent a total approved volume of EUR 7.2 billion.
(4) COM(2016) 583
(5) COM(2016) 584