At global level, the need to grant funds for the infrastructure until 2030 will partially depend on the existing infrastructure, the demand increase and the capacity requested in different regions.
According to OECD, worldwide railway infrastructure construction projects, including maintenance, need investments amounting to an average of USD 400 Billion yearly, (until 2030), while total investments for the period 2009-2030, reach USD 5,000 Billion.
In Europe, states must double their high-speed line network by 2030 to shift 30% of the long-distance freight traffic to the railway/water borne transport, and this situation clearly determines the need to develop and modernise the infrastructure for the traffic increase and decongestion. Under these circumstances, the use of instruments meant for financing infrastructures becomes optimal for the execution of projects which contribute to its improvement and development and the European Investment Bank here holds a strategic position, because from 2004 to 2013, the bank has committed to provide to TEN-T projects over EUR 75 Billion, in 2011 allocating EUR 9.8 Billion for the implementation of priority projects. Therefore, 21 railway projects have been selected (out of 30 priority projects in the general transport network) to be executed by 2020.
Nevertheless, for the next period, the states must use EUR 230 Million available from the total EU budget to issue bonds for the financing of projects dedicated to transport, communications and energy infrastructure. “The programme will be managed by the European Investment Bank (EIB) and draft projects have to be submitted by December 31, 2013”, declares Adriana Țicău, Vice-Chair of the European Committee for Transport and Tourism.
The strategic investment for the European infrastructure is seen as one of the most important elements for the construction of a sustainable increase, but the financial needs are huge and public money is scarce. Therefore, the project bonds scheme seeks to attract institutional investors in long-term infrastructure projects. Thus, in order to attract massive investments, EIB and UE launch a risk-sharing mechanism that would enhance the credit rating of senior bond in order to attract such investors. This would be done by separating the debt of the company (regarding the project) into tranches: a senior and a subordinated tranche, the latter contributing to the increase of the credit quality of the senior tranche to a level where most institutional investors are comfortable holding the bond for a long period. The subordinated tranche can also take the form of a loan meant for the company project company or a credit line which can be drawn upon in case the revenues generated by the project are not sufficient to ensure the senior debt.
This mechanism would support the capital market financing of projects as a form of finance to complement loans, not to replace other sources of financing. In this way EU budget resources would be used more effectively and valuable projects could be implemented more quickly.
Under the pilot, the EU budget will provide EUR 200 Million in guarantees for transport infrastructure, EUR 20 Million for communications and EUR 10 Millions for energy. With an expected multiplier ratio of 15-20, these guarantees could mobilise up to EUR 4.6 Billion in overall investment (for all infrastructures). The project management will be dealt with by the EIB, the pilot phase being set for 2012-2013, prior to a possible full roll-out of the instrument from 2014 onwards.
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