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European Investment Bank to launch energy project bonds’ pilot phase

30 Apr 2012 22:11:54 | edem esgm

The European Investment Bank (EIB) and the European Commission may start testing the effectiveness of project bonds to fund energy infrastructure in Europe from July this year, an EIB statement said on Friday.

The initiative follows a legislative proposal that the EU Commission adopted last year on project bonds (see EDEM 19 October 2012). The law - which is expected to be approved by the Council and the Parliament in July - states that project bonds should be implemented in the next EU budgetary period, which runs from 2014 to 2020.

However, the EIB said that the pilot phase can start as soon as the law is approved in July. This pilot phase will involve projects that have started and that should be completed by 2013.

The European bank said that €230m previously included in the 2007-2013 EU budget could now be devoted to energy, transport and broadband project bonds up until 2013.

Project bonds are meant to attract more private financing by enhancing the credit worthiness of infrastructure projects across Europe and of the companies backing them.

This will be done by splitting the debt of the company sponsoring the project and covering a part of it through a loan to boost external investor confidence.

An EIB loan to companies will cover the entire life span of the project, including the construction phase.

According to the Commission, infrastructure investments in energy, transport and communication sectors should reach as much as €2,000bn by 2020.

Covering part of this sum will be the Connecting Europe Facility, a new financial instrument that will come into force the next EU budgetary period. The EU has set aside €9.1bn for the energy sector, out of a proposed total figure of €40bn (see EDEM 1 July 2011). MM

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