The European Investment Bank EIB presents challenges for financing innovation development in the water sector and potential instruments / mechanisms for doing so.

1. Stimulating investment in water
innovation: the viewpoint of an
international financial institution
Monica Scatasta
Head, Water and Waste Management
EUROPEAN INVESTMENT BANK
5 November 2014
Barcelona, Spain

2. Stimulating investment in water innovation:
the viewpoint of an international financial institution
EIP Water Conference 2014
Barcelona
Monica Scatasta
Head, Water and Waste Management
EUROPEAN INVESTMENT BANK
5/11/2014 EIP Water Conference 2014 2

3. EIB : The EU “Water Bank”
 Largest source of loan financing to the sector  over EUR
3
18bn loans signed in 2009-13
 Annual average lending EUR 3.6 bn, (EUR 3.3 bn in EU)
up from EUR 2.5 bn in 2004-08
 About 90% of lending goes to projects in the EU, (outside
the EU, excluding BRIICS, in line with other FIs)
 On avg. EIB loans cover 30% of investment cost of water
projects  high leverage effect, blending
 Flexibility:
 Lends to national/local authorities, public or private
companies, through intermediaries or directly (incl. PF)
 EIB group offers broad spectrum of instruments beyond loans
5/11/2014 EIP Water Conference 2014

4. EIB: The EU Bank
Managing critical resources for sustainable growth
International EU Policy Drivers
Consensus
RE-USE, RECOVER
DRINKING W.
Life & economic support
for human settlements
FOOD
ENERGY
INDUSTRY
RE-CYCLE, RECOVER
Resources &
Environment
WATER
 EU 2020 “A Resource
Efficient Europe”
 Blueprint for
Europe’s Waters
 CC Adaptation Strategy
COM on Circular Economy
Water-
Food-
Energy
Nexus
WATER
WATER
Development
Agenda
Post-2015
5/11/2014 EIP Water Conference 2014 4

5. The Ernst &Young
Market Study for EIP Water
5/11/2014 EIP Water Conference 2014 5

6. Lack of incentives to
water users
►Water prices do not
reflect scarcity value
►Tariff structures and
political pressure
►Price-control
mechanisms
►Disparity between
countries or regions
►Social aversion
Opportunities
► Raising awareness
► Higher quality
standards
► Environmental
requirements
Stringent regulations
►High compliance costs
►Long and expensive
certification procedures
and licensing processes
►No financial
independence (and
access to capital) for
utilities
►Increasing standard
►Country specific
regulation
Opportunities
► New regulations and
requirements can
encourage
innovations
Market
fragmentation
►Local players and
domestic market
►Specific processes
►Tendering processes
and public
procurement rules
►Municipalities are risk-averse
and cost-oriented
►Multiplicity of
regulations
Opportunities
► The fragmentation of
the market allows new
actors to enter it
Maturity of the
sector
► Adaptation of existing
technologies/solutions
►Necessary coordination
in a vast interconnected
network
Opportunities
► New regulatory and
users’ requirements
► Renovation of existing
and ageing
infrastructure
Attractiveness for VCs
► Capital intensive with
low margin
► Long time is required to
market innovative
ventures
► Lack of scalability of
technologies
► Few information is
available and a good
understanding is
necessary
► Limited exit
opportunities
Opportunities
► Substantive
economies / income
can be made
► Financial incentives do
exist to support
innovations
E&Y Market Study Findings:
Main barriers to accessing finance
5/11/2014 EIP Water Conference 2014 6

7. The way forward – proposed options
►Option 1:
E&Y Market Study:
Inclusion of water efficiency criteria in the EIB’s performance
indicators
►Option 2:
Development of a European performance guarantee scheme for
innovative technologies
►Option 3 :
Establishment of a dedicated water technology investment fund
All have pros/cons. They are still under discussion.
5/11/2014 EIP Water Conference 2014 7

8. Supporting innovation and
innovating support at EIB
5/11/2014 EIP Water Conference 2014 8

10. InnovFin overview
Joint initiative launched by the European Investment Bank Group (EIB and EIF) in
cooperation with the European Commission under Horizon 2020:
Facilitate and accelerate access to finance for innovative businesses and other innovative
entities in Europe
Providing a series of integrated and complementary financing tools and advisory services
covering the entire value chain of research and innovation in order to support investments
from the smallest to the largest enterprise
Available across all eligible sectors under Horizon 2020, in EU Member States and
Associated Countries
By 2020, InnovFin is expected to make over EUR 24bn of debt and equity financing
available to innovative companies to support EUR 48bn of final R&I investments.
What
Objective
How
For Whom
Amount

11. Own Resources
InnovFin European
Commission
€ 3 bn € 3 bn
Aaa Aa A (Baa-) Ba B Caa
Equity/Debt
(the EC provides a
First Loss Piece )
InnovFin SME
Guarantee
InnovFin MidCap
Guarantee
InnovFin SME VC
InnovFin MidCap
Growth Finance
RDI Advisory
InnovFin Large
Projects

12. What financing products are available?

13. Some more product details…
• EIF will issue guarantees and counter-guarantees to selected financial
intermediaries, thus allowing them to provide loans, financial leases and loan
guarantees
• For innovative SMEs and Small Mid-Caps
• rolled out through financial intermediaries. Financial intermediaries will be
guaranteed against a portion of their potential losses by the EIB
• guarantees and counter-guarantees on debt financing <€50 million
• for innovative midcaps (< 3000 FTEs)
• Direct long term senior, subordinated or mezzanine loans from EIB
• Amount between €7.5 million < €25 million
• for innovative larger midcaps (< 3000 FTEs), but also SMEs and small midcaps
• direct loans and guarantees from EIB for larger projects
• Loan amount between EUR 25-300 million
• for R&I projects emanating from larger firms; universities and public research
organisations; R&I infrastructures; PPP and SPVs

14. Viveracqua Hydrobond: an innovative financial structure
HYDRO
SPV 130/99
Issuer 1
Issuer 2
……….
Issuer 9
Issuance of Bonds
Subscription price
Remuneration and
repayment of Bonds
Issuance of Notes
Subscription price
Interest and principal on
the Notes
Liquidity and credit support on
the Notes
EIB
+
Investors
Cash reserve
Veneto Liquidity and credit
(20%)
Sviluppo
support on the Notes

15. Back to circular thinking…
International EU Policy Drivers
Consensus
RE-USE, RECOVER
DRINKING W.
Life & economic support
for human settlements
FOOD
ENERGY
INDUSTRY
RE-CYCLE, RECOVER
Resources &
Environment
WATER
 EU 2020 “A Resource
Efficient Europe”
 Blueprint for
Europe’s Waters
 CC Adaptation Strategy
COM on Circular Economy
Strategic
Primary
Input
WATER
WATER
Water-
Food-
Energy
Nexus
5/11/2014 EIP Water Conference 2014 15

16. Thank you!
m.scatasta@eib.org