Regulation (EU) No 670/2012 of the European Parliament and of the CouncilShow full title

Article 1 U.K. Amendments to Decision No 1639/2006/EC

Decision No 1639/2006/EC is hereby amended as follows:

(1)

in Article 8, the following paragraph is added:

‘5a. Without prejudice to paragraphs 1 to 5, for projects carried out under the risk-sharing instrument for project bonds referred to in Article 31(2), the Commission and the European Investment Bank (EIB) shall submit an interim report to the European Parliament and the Council in the second half of 2013. An independent full-scale evaluation shall be carried out in 2015.

On the basis of that evaluation, the Commission shall assess the relevance of the Europe 2020 Project Bond Initiative and its effectiveness in increasing the volume of investments in priority projects and enhancing the efficiency of Union spending. In the light of that assessment, taking into account all options, the Commission shall consider proposing appropriate regulatory changes, including legislative changes, in particular if the predicted market uptake is not satisfactory or in the event that alternative sources of long-term debt financing become sufficiently available.

The interim report referred to in the first subparagraph shall include a list of the projects which have benefited from the risk-sharing instrument for project bonds referred to in Article 31(2a) to (2e), with information on the terms of the bonds issued and the types of current and potential future investors.’;

(2)

in Article 26(2), point (b) is replaced by the following:

‘(b)

stimulation of innovation through the wider adoption of, and investment in, ICT and broadband;’;

(3)

Article 31 is amended as follows:

(a)

paragraph 2 is replaced by the following:

‘2. The projects referred to in paragraph 1(a) shall aim to promote innovation, technology transfer and the dissemination of new technologies that are ready for market uptake.

The Union may award a grant to contribute to the budget of those projects.

The Union may, alternatively, make, during a pilot phase in 2012 and 2013, a financial contribution to the EIB towards the provisioning and capital allocation for debt instruments or guarantees to be issued by the EIB from its own resources under the risk-sharing instrument for project bonds.’;

(b)

the following paragraphs are inserted:

‘2a. The risk-sharing instrument for project bonds referred to in the third subparagraph of paragraph 2 is a joint instrument by the Commission and the EIB which provides added value as a Union intervention, addresses sub-optimal investment situations when projects do not receive adequate financing from the market, and provides additionality. It avoids distortion of competition, aims to secure a multiplier effect and aligns interests in the form of a credit enhancement. The risk-sharing instrument for project bonds shall:

(a) take the form of a debt instrument or a guarantee granted by the EIB with the support of a Union budget contribution in favour of financing provided to projects in the field of ICT and broadband, complementing or attracting financing by Member States or the private sector;

(b) mitigate the debt service risk of a project and the credit risk of bond holders;

(c) be used only for projects whose financial viability is based on project revenues.

2b. The Union exposure to the risk-sharing instrument for project bonds, including management fees and other eligible costs, shall in no case exceed the amount of the Union contribution to the risk-sharing instrument for project bonds nor extend beyond the maturity of the underlying portfolio of credit enhancement facilities. There shall be no further liability on the general budget of the Union. The residual risk related to project bond operations shall always be borne by the EIB.

2c. The main terms, conditions and procedures of the risk-sharing instrument for project bonds are laid down in Annex IIIa. The detailed terms and conditions for implementing the risk-sharing instrument for project bonds, including risk sharing, remuneration, monitoring and control, shall be laid down in a cooperation agreement between the Commission and the EIB. That cooperation agreement shall be approved by the Commission and the EIB according to their respective procedures.

2d. In 2013, an amount of up to EUR 20 million may be used from the budget allocated for the pursuance of ICT and broadband policy in accordance with the rule set out in point (b) of Annex I. Given the limited duration of the pilot phase, the risk-sharing instrument for project bonds may reuse any revenues received before 31 December 2013 for new debt instruments and guarantees within the same risk-sharing facility and for projects fulfilling the same eligibility criteria in order to maximise the volume of investments supported. In the event that the risk-sharing instrument for project bonds is not extended into the next multiannual financial framework, any remaining funds shall be returned to the revenue side of the general budget of the Union.

2e. In addition to the reporting requirements set out in point 49 of the Interinstitutional Agreement of 17 May 2006 on budgetary discipline and sound financial management, and without prejudice to any other regulatory reporting requirements, the Commission shall report to the European Parliament and the Council every six months during the pilot phase on the performance of the risk-sharing instrument for project bonds, including the financial terms and placement of any project bonds issued.’;

(4)

the following Annex is added:

‘ANNEX IIIa

Main terms, conditions and procedures of the risk-sharing instrument for project bonds referred to in Article 31(2c)

The EIB shall be a risk-sharing partner and shall manage the Union contribution to the risk-sharing instrument for project bonds on behalf of the Union. More detailed terms and conditions for implementing that instrument, including its monitoring and control, shall be laid down in a cooperation agreement between the Commission and the EIB, taking into account the provisions laid down in this Annex.

(a) The EIB facility U.K.

1. The risk-sharing instrument for project bonds will be designed for each eligible project as a subordinated facility, in the form of a debt instrument or a contingent (guarantee) facility or both, in order to facilitate the issue of a project bond. U.K.

2. Should the EIB be or become a creditor to a project, the EIB’s rights under the risk-sharing instrument for project bonds shall rank behind the debt service of the senior debt and ahead of equity and any financing related to equity. U.K.

3. The facility shall not exceed 20 % of the total amount of the senior debt issued. U.K.

(b) Budget U.K.

ICT:

2013: Up to EUR 20 million.

The request for transfer of the sums above shall be issued by 31 December 2012 and shall be supported by a forecast of the need for the scheduled Union contribution.

If necessary, that forecast may serve as the basis for a demand-based reduction of the 2013 amount which shall be decided in accordance with the procedure referred to in Article 46(2).

(c) Fiduciary account U.K.

1. The EIB shall set up a fiduciary account to hold the Union contribution and revenues resulting from the Union contribution. U.K.

2. Given the limited duration of the pilot phase, the interest earned on the fiduciary accounts and other revenues resulting from the Union contribution, such as guarantee premiums, interest and risk margins on sums disbursed by the EIB, shall be added to the resources of the fiduciary account. However, the Commission may decide, in accordance with the procedure referred to in Article 46(2), that they are to be returned to the CIP ICT budget line. U.K.

(d) Use of the Union contribution U.K.

The Union contribution shall be used by the EIB:

1.

towards risk provisioning on a first-loss basis for the subordinated facilities of the eligible project portfolio, in accordance with the relevant rules of the EIB and a risk assessment performed by the EIB under its applicable policies;

2.

to cover any non-project-related eligible costs associated with the establishment and administration of the risk-sharing instrument for project bonds, including its evaluation.

(e) Risk and revenue sharing U.K.

The risk-sharing pattern resulting from point (d) shall be reflected in an appropriate sharing between the Union and the EIB of the risk remuneration charged by the EIB to its counterpart in respect of each facility within the project portfolio.

(f) Pricing U.K.

The pricing of the project bond facilities is based upon the risk remuneration in accordance with relevant standard rules and criteria of the EIB.

(g) Application procedure U.K.

Applications for risk coverage under the risk-sharing instrument for project bonds shall be addressed to the EIB in accordance with the EIB’s standard application procedure.

(h) Approval procedure U.K.

The EIB shall carry out risk, financial, technical and legal due diligence and shall decide upon the use of the risk-sharing instrument for project bonds and select the appropriate type of subordinated facility in accordance with its standard rules and criteria, notably EIB Credit Risk Policy Guidelines, and the EIB’s selection criteria in the social, environmental and climate field.

(i) Duration U.K.

1. The Union contribution to the risk-sharing instrument for project bonds shall be committed no later than 31 December 2013. The actual approval of project bond facilities by the EIB’s Board of Directors shall be finalised by 31 December 2014. U.K.

2. In the event of termination of the risk-sharing instrument for project bonds during the current multiannual financial framework, any balances on the fiduciary account, other than funds committed and funds needed to cover other eligible costs and expenses, shall be returned to the CIP ICT budget line. U.K.

3. Funds allocated to the risk-sharing instrument for project bonds shall be reimbursed to the relevant fiduciary account as facilities expire or are repaid, provided risk coverage remains sufficient. U.K.

(j) Reporting U.K.

Annual reporting methods on the implementation of the risk-sharing instrument for project bonds shall be agreed between the Commission and the EIB.

In addition, the Commission shall, with the support of the EIB, report on implementation every six months to the European Parliament and the Council, starting six months after the signature of the cooperation agreement referred to in Article 31(2c).

(k) Monitoring, control and evaluation U.K.

The Commission shall monitor the implementation of the instrument, including through on-the-spot controls as appropriate, and shall perform verification and controls in line with Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities(1).

The EIB shall manage subordinated facilities in accordance with EIB’s own rules and procedures, including appropriate audit, control and monitoring measures. Furthermore, the EIB’s Board of Directors, on which the Commission and Member States are represented, shall approve each subordinated facility and monitor that the EIB is managed in accordance with its Statute and with the general directives laid down by its Board of Governors.

The Commission and the EIB shall submit an interim report on the functioning of the pilot risk-sharing instrument for project bonds to the European Parliament and the Council in the second half of 2013 with a view to optimising the design of that instrument.

A full-scale independent evaluation shall be undertaken in 2015 after approval of the final project bond operations. It shall cover, inter alia, the value added, additionality compared to other Union or Member State instruments and other existing forms of long-term debt financing, the achieved multiplier effect, an assessment of the risks involved as well as the creation or correction of distortive effects, if any. The evaluation shall also cover the impact on projects’ financial viability, volume, terms and costs of bond issuance, the effect on the wider bond markets as well as controlling creditor and procurement aspects. It shall also provide, if possible, a cost comparison with alternative means of project finance including bank loans. During the pilot phase, each selected project shall be assessed.”

(1)

OJ L 248, 16.9.2002, p. 1.’.