I.<Strong>Debt instrument</Strong>1.<Emphasis>General provisions</Emphasis>The goal of the Debt Instrument shall be to contribute to overcoming deficiencies of the European debt capital markets by offering risk-sharing for debt financing. Debt financing shall be provided by entrusted entities or dedicated investment vehicles in the form of senior and subordinated debt or guarantees.
The Debt Instrument shall consist of a risk-sharing instrument for loans and guarantees and of the Project Bond Initiative. The project promoters may, in addition, seek equity financing under the Equity Instrument.
a.Risk-sharing instrument for loans and guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b.Project Bond Initiative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.<Emphasis>Financial parameters and leverage</Emphasis>Risk- and revenue-sharing parameters shall be set in such a way that specific policy objectives, including targeting of particular categories of projects, can be achieved while still preserving the market-oriented approach of the Debt Instrument.
The expected leverage of the Debt Instrument — defined as the total funding (i.e. Union contribution plus contributions from other financial sources) divided by the Union contribution — shall be expected to range from 6 to 15, depending on the type of operations involved (level of risk, target beneficiaries, and the debt financing concerned).
3.<Emphasis>Combination with other sources of funding</Emphasis>Funding from the Debt Instrument may be combined with other ring-fenced budgetary contributions listed below, subject to the rules laid down in Regulation(EU, Euratom) No 966/2012 and the relevant legal base:
other parts of the CEF;other instruments, programmes and budget lines in the Union budget;Member States, including regional and local authorities, that wish to contribute own resources or resources available from the funds under the cohesion policy without changing the nature of the instrument.
4.<Emphasis>Implementation</Emphasis><CommentaryRef Ref="key-3e0e4183c893d09951550b7dea9e69d3"/>Entrusted entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<CommentaryRef Ref="key-3e0e4183c893d09951550b7dea9e69d3"/>Design and implementation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<CommentaryRef Ref="key-3e0e4183c893d09951550b7dea9e69d3"/>Fiduciary account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.<Emphasis>Use of the Union contribution</Emphasis>The Union contribution shall be used:
towards risk provisioning;to cover agreed fees and costs associated with the establishment and management of the Debt Instrument, including its evaluation and support actions, which have been determined in line with Regulation (EU, Euratom) No 966/2012 and market practice. The administrative and performance-based fees to be paid to the entrusted entity shall not exceed 2 % and 3 % respectively of the Union contribution effectively used for individual operations, on the basis of a cost-based agreed methodology between the Commission and the entrusted entities;for directly related support actions.
6.<Emphasis>Pricing, risk and revenue sharing</Emphasis>The Debt Instruments shall bear a price, to be charged to the beneficiary, in accordance with the relevant rules and criteria of the entrusted entities or dedicated investment vehicles and in line with best market practices.
As regards direct mandates to entrusted entities, the risk-sharing pattern shall be reflected in an appropriate sharing between the Union and the entrusted entity of the risk remuneration charged by the entrusted entity to its borrowers.
As regards dedicated investment vehicles, the risk-sharing pattern shall be reflected in an appropriate sharing between the Union and the other investors of the risk remuneration charged by the dedicated investment vehicle to its borrowers.
Notwithstanding the risk-sharing pattern chosen, the entrusted entity shall always share a portion of the defined risk and shall always bear the full residual risk tranche.
The maximum risk covered by the Union budget shall not exceed 50 % of the risk of the target debt portfolio under the debt instrument. The maximum risk-taking ceiling of 50 % shall apply to the target size of dedicated investment vehicles.
7.<Emphasis>Application and approval procedure</Emphasis>Applications shall be addressed to the entrusted entity or a dedicated investment vehicle, respectively, in accordance with their standard application procedures. The entrusted entities and the dedicated investment vehicles shall approve the projects in accordance with their internal procedures.
8.<Emphasis>Duration of the Debt Instrument</Emphasis>The last tranche of the Union contribution to the Debt Instrument shall be committed by the Commission by 31 December 2020. The actual approval of debt financing by the entrusted entities or the dedicated investment vehicles shall be finalised by 31 December 2022.
9.<Emphasis>Expiry</Emphasis>The Union contribution allocated to the Debt Instrument shall be reimbursed to the relevant fiduciary account as debt financing expires or is repaid. The fiduciary account shall maintain sufficient funding to cover fees or risks related to the Debt Instrument until its expiry.
10.<Emphasis>Reporting</Emphasis>The reporting methods on the implementation of the Debt Instrument shall be agreed by the Commission in the agreement and the entrusted entity in line with Regulation (EU, Euratom) No 966/2012.
In addition, the Commission shall, with the support of the entrusted entities, report annually to the European Parliament and the Council until 2023 on implementation, the prevailing market conditions for the use of the instrument, the updated projects and the project pipeline including information on projects at different stages of the procedure while respecting confidentiality and sensitive market information in accordance with Article 140(8) of Regulation (EU, Euratom) No 966/2012.
11.<Emphasis>Monitoring, control and evaluation</Emphasis>The Commission shall monitor the implementation of the Debt Instrument, including through on-the-spot controls as appropriate, and shall perform verification and controls in line with Regulation (EU, Euratom) No 966/2012.
12.<Emphasis>Support Actions</Emphasis>The implementation of the Debt Instrument may be supported by a set of accompanying measures. These may include, amongst other measures, technical and financial assistance, measures to raise the awareness of capital providers and schemes to attract private investors.
The European Investment Bank shall, at the request of the European Commission or the Member States concerned, provide technical assistance, including on financial structuring to projects of common interest, including the ones implementing the core network corridors as listed in Part I. Such technical assistance shall also include support to administrations in order to develop appropriate institutional capacity.
II.<Strong>Equity instrument</Strong>1.<Emphasis>General provisions</Emphasis>The goal of the Equity Instrument shall be to contribute to overcoming the deficiencies of European capital markets by providing equity and quasi-equity investments.
The maximum amounts of the Union contribution shall be limited as follows:
33 % of the target equity fund size; orco-investment by the Union in a project shall not exceed 30 % of the total equity of a company.
The project promoters may, in addition, seek debt financing under the Debt Instrument.
2.<Emphasis>Financial parameters and leverage</Emphasis>Investment parameters shall be set in such a way that specific policy objectives, including the targeting of particular categories of infrastructure projects, can be achieved while still preserving the market-oriented approach of this instrument.
The expected leverage of the Equity Instrument — defined as the total funding (i.e. the Union contribution plus all contributions from other investors) divided by the Union contribution — shall be expected on average to range from 5 to 10, depending on market specificities.
3.<Emphasis>Combination with other sources of funding</Emphasis>Funding from the Equity Instrument may be combined with other ring-fenced budgetary contributions listed below, subject to the rules of Regulation (EU, Euratom) No 966/2012 and the relevant legal base:
other parts of the CEF;other instruments, programmes and budget lines in the Union budget; andMember States, including regional and local authorities, that wish to contribute own resources or resources available from the funds under the cohesion policy without changing the nature of the instrument.
4.<Emphasis>Implementation</Emphasis><CommentaryRef Ref="key-3e0e4183c893d09951550b7dea9e69d3"/>Entrusted entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<CommentaryRef Ref="key-3e0e4183c893d09951550b7dea9e69d3"/>Design and implementation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<CommentaryRef Ref="key-3e0e4183c893d09951550b7dea9e69d3"/>Fiduciary account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.<Emphasis>Use of the Union contribution</Emphasis>The Union contribution shall be used:
towards equity participations;to cover agreed fees and costs associated with the establishment and management of the Equity Instrument, including its evaluation, which have been determined in line with Regulation (EU, Euratom) No 966/2012 and market practice; andfor directly related support actions.
6.<Emphasis>Pricing, risk and revenue sharing</Emphasis>The equity remuneration shall comprise the customary return components allocated to equity investors and shall depend on the performance of the underlying investments.
7.<Emphasis>Application and approval procedure</Emphasis>Applications shall be addressed to the entrusted entity or a dedicated investment vehicle, respectively, in accordance with their standard application procedures. The entrusted entities and the dedicated investment vehicles shall approve the projects in accordance with their internal procedures.
8.<Emphasis>Duration of the Equity Instrument</Emphasis>The last tranche of the Union contribution to the Equity Instrument shall be committed by the Commission by 31 December 2020. The actual approval of equity investments by the entrusted entities or the dedicated investment vehicles shall be finalised by 31 December 2022.
9.<Emphasis>Expiry</Emphasis>Union contribution allocated to the Equity Instrument shall be reimbursed to the relevant fiduciary account as investments are exited or otherwise mature. The fiduciary account shall maintain sufficient funding to cover fees or risks related to the Equity Instrument until its expiry.
10.<Emphasis>Reporting</Emphasis>Annual reporting methods on the implementation of the Equity Instrument shall be agreed by the Commission and the entrusted entity in the agreement in line with Regulation (EU, Euratom) No 966/2012.
In addition, the Commission, with the support of the entrusted entities, shall report on implementation annually to the European Parliament and the Council until 2023 in accordance with Article 140(8) of Regulation (EU, Euratom) No 966/2012.
11.<Emphasis>Monitoring, control and evaluation</Emphasis>The Commission shall monitor the implementation of the Equity Instrument, including through on-the-spot controls as appropriate, and shall perform verification and controls in line with the Regulation (EU, Euratom) No 966/2012.
12.<Emphasis>Support actions</Emphasis>The implementation of the Equity Instrument may be supported by a set of accompanying measures. These may include, amongst other measures, technical and financial assistance, measures to raise the awareness of capital providers, and schemes to attract private investors.