EC Proposes EUR 50 B Investment in EU Transport, Energy, Digital Networks

EU Commission Chairman Jose Manuel Barroso (L) and Olli Rehn, European Commissioner for Economic and Monetary Affairs answer journalists questions during a press conference on the Connecting Europe Facility (CEF) in Brussels, 19 October 2011. EPA/BGNES

The European Commission has announced a plan for a "Connecting Europe Facility", which provides for investing EUR 50 B in Europe's transport, energy, and digital networks.

Targeted investments in key infrastructures will help to create jobs and boost Europe's competitiveness at a time when Europe needs this most, the EC said Wednesday.

"The "Connecting Europe Facility" will finance projects which fill the missing links in Europe's energy, transport and digital backbone. It will also make Europe's economy greener by promoting cleaner transport modes, high speed broadband connections and facilitating the use of renewable energy in line with the Europe 2020 Strategy. In addition the funding for energy networks will further integrate the internal energy market, reduce the EU's energy dependency and bolster the security of supply," the Commission explained.

To assist with the financing of the Connecting Europe Facility, the EC has also adopted the terms for the Europe 2020 Project Bond Initiative which will be one of a number of risk-sharing instruments upon which the facility may draw in order to attract private finance in projects. The pilot phase will start in 2012, the plan projects.

The EU executive also pointed out that the Connecting Europe Facility will help to complete the European single market and that the Commission has singled out projects where additional EU investment can have the most impact.

"The Connecting Europe Facility and the Project Bond Initiative are a perfect demonstration of the value added that Europe can provide," declared EC President Jose Manuel Barroso, adding, "These proposals will help to build the roads, railways, energy grids and pipelines, and broadband networks that are so important to our citizens and businesses. We are closing the missing links in Europe's infrastructure networks that otherwise would not be built. This investment will generate growth and jobs and at the same time make work and travel easier for millions of European citizens and businesses."

The greater part of the funds from the proposed Connecting Europe Facility - EUR 31.7 B - will be invested to upgrade Europe's transport infrastructure, build missing links and remove bottlenecks.

This includes EUR 10 B ring fenced in the Cohesion Fund for transport projects in the cohesion countries, with the remaining EUR 21.7 B available for all Member States for investing in transport infrastructure. The idea is to improve links between different parts of the EU, to make it easier for different countries to exchange goods and people with each other, EC says.

"Transport systems in Europe have traditionally developed along national lines. The EU has a crucial role to play in coordinating between Member States when planning, managing and funding cross-border projects. A well-functioning network is essential to the smooth operation of the single market and will boost competitiveness. The Commission proposed to create corridors to cover the most important cross-border projects. It has estimated that by 2020, EUR 500 B will be needed to realise a real European network, including EUR 250 B for removing bottlenecks and completing missing links in the core network," the Commission announced.

In addition to the massive funding for energy, the Connecting Europe Facility provides of a total of investment of EUR 9.1 B into EU's energy sector; this is expected to help develop further the internal market for energy through better interconnections, leading to security of supply and the possibility to transport renewable energy in a cost effective manner across the EU.

The "Connecting Europe Facility" foresees almost EUR 9.2 B "to support investment in fast and very fast broadband networks and pan-European digital services."

The CEF finance will leverage other private and public money, by giving infrastructure projects credibility and lowering their risk profiles. On the basis of conservative estimates, the Commission considers that the network infrastructure finance could stimulate investment worth more than EUR 50 B. The Digital Agenda for Europe set targets for 2020 of broadband access for all at speeds of at least 30 Mbps, with at least 50% of households subscribing to speeds above 100Mbps.

The EC points out further that the EU Budget is a key element to support the growth agenda and to achieve the Europe 2020 policy targets but that a stronger use of innovative financial instruments is needed to multiply the outreach of the EU Budget.

The Europe 2020 Project Bonds Initiative, designed for this purpose, has a double objective: to revive project bond markets and to help the promoters of individual infrastructure projects to attract long-term private sector debt financing, it explains.

The Commission is proposing to launch a pilot phase in the period 2012-2013, still within the current Multiannual Financial Framework. The pilot phase will be based on an amendment of the Trans-European Networks (TEN) Regulation and the Competitiveness and Innovation Framework Program (CIP) Decision and will draw on the budget lines of these program up to a total of EUR 230 M.

Similar to the Risk Sharing Finance Facility and Loan Guarantee instrument for TEN-Transport projects, the EU budget would be used to provide capital contributions to the EIB in order to cover a portion of the risk the EIB is taking when it finances the eligible projects. While the EU budget will provide some risk cushion for the EIB to finance the underlying projects, the EIB would cover the remaining risk. When EU budget funds are combined with the EIB financing, the total budget amount of EUR 230 M is expected to mobilise investments of up to EUR 4.6 B.

In the pilot phase the idea is to focus on 5-10 projects, concentrating on those that are at a relatively developed stage of the bidding and financing process or require refinancing after the construction phase, in one or more of the three targeted sectors of transport, energy and broadband. The pilot phase would be managed by the EIB.

The Connecting Europe package implements the commitments made by the Commission in the Multi-Annual Financial Framework proposals from 29 June 2011.

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