Amendments to Regulation (EC) No 680/2007
Article 2
Regulation (EC) No 680/2007 is hereby amended as follows:
1. in Article 2 the following points are added:
  1. The “risk-sharing instrument for project bonds” means a joint instrument by the Commission and the EIB which provides added value as a Union intervention, addresses sub-optimal investment situation when projects do not receive adequate financing from the markets, and provides additionality, by complementing or attracting financing by Member States or the private sector. It avoids distortion of competition, aims to secure a multiplier effect and aligns interests. The risk-sharing instrument for project bonds takes the form of a credit enhancement to projects of common interest, mitigates the debt service risk of a project and the credit risk of bond holders and is used only for projects whose financial viability is based on project revenues.
  2. “Credit enhancement” means the improvement of the credit quality of a project debt by means of a subordinated facility in the form of an EIB debt instrument or of an EIB guarantee or both, supported by a contribution from the Union budget.
;
2. in the first paragraph of Article 4 the following sentence is added:
‘Applications for risk coverage under the risk-sharing instrument for project bonds under Article 6(1)(g) shall be addressed to the EIB in accordance with the EIB’s standard application procedure.’;
3. Article 6(1) is amended as follows:
  1. in point (d), the following sentence is added:
‘In 2012 and 2013, an amount of up to EUR 200 million may be redeployed for the pilot phase of the risk-sharing instrument for project bonds in the transport sector.’;
  2. the following point is added:
    1. 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 in the field of TEN-T and TEN-E. The Union exposure to the risk-sharing instrument, 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 portfolio of underlying credit enhancement facilities. There shall be no further liability on the general budget of the Union. The residual risk related to these project bond operations shall always be borne by the EIB.
The main terms, conditions and procedures of the risk-sharing instrument for project bonds are laid down in Annex Ia. 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. This cooperation agreement shall be approved by the Commission and the EIB according to their respective procedures.
In 2012 and 2013, an amount of up to EUR 210 million, of which up to EUR 200 million for transport projects and up to EUR 10 million for energy projects, may be redeployed for the risk-sharing instrument for project bonds in accordance with the procedure referred to in Article 15(2) from the budget lines for the loan guarantee instrument for TEN-T projects, referred to in Annex I, and for TEN-E respectively.
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, including the financial terms and placement of any project bonds issued.
Given the limited duration of the pilot phase, interest and other revenue generated by the risk-sharing instrument for project bonds which is received before 31 December 2013 may be reused 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. If the risk-sharing instrument for project bonds is not extended into the next financial framework, any remaining funds shall be returned to the revenue side of the general budget of the Union.
;
4. in Article 16, the following paragraph is added:
2a.
Without prejudice to paragraphs 1 and 2, for projects carried out under the risk-sharing instrument for project bonds referred to in Article 6(1)(g), the Commission and the 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.
;
5. in Article 17(1), the following subparagraph is added:
The interim report referred to in Article 16(2a) shall also contain a list of the projects which have benefited from the risk-sharing instrument for project bonds referred to in Article 6(1)(g), with information on the terms of the bonds issued and the types of current and potential future investors.
;
6. the Annex is renumbered Annex I and the words ‘the Annex’ in Article 6(1)(d) are accordingly replaced with ‘Annex I’;
7. the following Annex is added:
‘ANNEX Ia
Main terms, conditions and procedures of the risk-sharing instrument for project bonds referred to in Article 6(1)(g)
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
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.
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.
3.
The facility shall not exceed 20 % of the total amount of the senior debt issued.
(b)

Budget
  - TEN-T:
    - 2012: Up to EUR 100 million
    - 2013: Up to the cumulated amount of EUR 200 million
to be reallocated from the TEN-T budget dedicated to the loan guarantee instrument for TEN-T projects, referred to in Annex I, but unspent.
  - TEN-E:
2013: Up to EUR 10 million.
The request for transfer of the 2012 amount shall be issued without undue delay following the signature of the cooperation agreement.
The transfer requests in subsequent years shall be issued by 31 December of the preceding year.
In all cases the transfer request 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 amounts which shall be decided in accordance with the procedure referred to in Article 15(2).
(c)

Fiduciary account
1.
The EIB shall set up two fiduciary accounts (one for projects under TEN-T, the other for projects under TEN-E) to hold the Union contributions and revenues resulting from the Union contributions. The fiduciary account for TEN-T may be merged with the fiduciary account set up for the loan guarantee instrument for TEN-T projects, referred to in Annex I, provided such measure does not impede the quality of reporting and monitoring as stipulated under points (j) and (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 15(2), that they are to be returned to the TEN-T or TEN-E budget lines.
(d)

Use of the Union contribution
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
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 constituting the portfolio.
Notwithstanding the provisions applying to risk sharing for the loan guarantee instrument for TEN-T projects, referred to in Annex I, the risk-sharing pattern for project bonds shall also apply to that instrument including the operations of its existing portfolio.
(f)

Pricing
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
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
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
1.
The last tranche of 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 no later than 31 December 2014.
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 accounts, other than funds committed and funds needed to cover other eligible costs and expenses, shall be returned to the TEN-T, TEN-E budget lines.
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.
(j)

Reporting
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 6(1)(g).
(k)

Monitoring, control and evaluation
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 Regulation (EC, Euratom) No 1605/2002.
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.’.