EIB financing for Ultra High Speed Broadband investments

1. EIB financing for
Ultra High Speed Broadband investments
Harald Gruber
DigiWorld Summit 2016
Montpellier, 16 November 2016
European Investment Bank Group 1

2. Digital investment gaps in EU
Digital economy sector is suffering from large
underinvestment in Europe:
• R&D: accounts for R&D/GDP gap with US
• Infrastructure: Overall growth constraints due to lack of
high speed broadband infrastructure
• Cybersecurity: EU is lagging (NSA …)
European Investment Bank Group 2

3. European population density
vs. cost distribution of DAE targets
Urban
(> 500 inhab.
Per km2)
Suburban
(500-100 inhab.
Per km2)
Rural
(<100 inhab.
Per km2)
50%
20%
30% 30%
50%
20%
% of total EU population
% of total EU wide FTTH cost
ShareofinhabitantsandFTTH
cost
• 50% of the European population live in
urban areas and additional 30% in
suburbs
• 20% of total investment cost is required to
cover 50% of European population in
urban areas
• 50% of cost is required to cover the 20%
of European population in rural areas
• Market operators are investing in urban
and partly suburban areas which are
already well covered with copper/cable
infrastructures
European Investment Bank Group 3

4. Investment hurdles for broadband infrastructure
• High fragmentation of broadband infrastructure projects
typically aiming at the roll-out at regional or even at
community level;
• Lack of focused equity investors in the market to support
projects with a 10-15 year investment horizon;
• Long payback periods for investments requiring long-term
debt facilities which are not available in the market;
• Lack of sufficient sector knowledge and technical
understanding among investors in the industry and the
associated technological, regulatory and market risks;
• Lack of visibility of service development for the incentives to
adopt high speed broadband infrastructure
European Investment Bank Group 4

5. Role of EIB
• EIB has policy mission to tackle insufficient
investment
• Main business of financing projects
• On average lending for for broadband accounts for
about EUR 2bn per year
• Sector limits are not binding, i.e. funds are
available, but projects must fill requirements
• Projects financed by the Bank must be:
• economically justified
• technically viable
• financially self-supporting
European Investment Bank Group 5

6. Contribution to national plans
EIB supports national plans both at highest level, but also
in the context of regional deployment schemes.
Awareness of resources involved and on the way of how
to leverage additional, private sector financing.
Competitive awards can be very effective, but need to
make provisions for long term sustainability
6European Investment Bank Group

7. EIB scope for financing broadband
infrastructure
7European Investment Bank Group
EIB senior loan
EIB senior loan
EIB framework
loans available
through
intermediaries.
EIB’s SA and
InnovFin large
projects.
EIB’s SA and
InnovFin MGF.
EIB products not
yet available
EIB involvement
through multi-
sector
infrastructure
equity funds
EIB products not
yet available
EIB products not
yet available
Projectsize
Risk level
Large
(>50m)
Medium
(15-50m)
Small
(<15m)
Senior debt Junior/
mezzanine
debt
Equity
EFSI opportunity to
extend higher-risk
lending beyond
corporate finance
Specialized
infrastructure fund
could fulfill the
market gap and
areas where EIB
cannot operate due
statutory reasons

8. Impact of EFSI and follow on
More availability of funds for investment by mobilizing
private capital
No sector limits: first come, first take principle for projects
Usual EIB criteria for project viability apply
But better possibility to cater for higher risk profiles
Opening up for new financial instruments, e.g. market
study under way for exploration for need of equity fund
specialized on small scale broadband infrastructure
companies
Wider availability of advisory services, including advisory
hub
8European Investment Bank Group

9. THANK YOU
European Investment Bank Group 9

10. Backup slides
10European Investment Bank Group

11. 11European Investment Bank Group

12. Example
Gigaclear
Founded in December 2010
Passing FTTH at more than 15 000 properties in rural
parts of in UK, with 10 000 more already in construction
12 M loan facility under InnovFin MidCap Growth
Finance
During 2016 Gigaclear plans to build its pure fibre,
ultrafast broadband network to at least 40 000 additional
properties. This will involve a major investment by the
company, one third of which is being financed through
the EIB facility.
12European Investment Bank Group

13. Example
enet
An open access network operator
enet holds the concession to manage, maintain and
operate 2 phases of the Irish State’s Metropolitan Area
Network (MAN) programme, covering 94 towns and cities
across the country
12 M loan facility under InnovFin MidCap Growth
Finance
Will allow enet to develop for the delivery of ‘Fibre to the
Business’ (FTTB) networks in a number of Irish towns
and cities, including Claremorris, Loughrea, Ardee and
Kilkenny
13European Investment Bank Group