dws16 - future networks forum - harald gruber, european investment bank

EIB financing for

Ultra High Speed Broadband investments

Harald Gruber

DigiWorld Summit 2016

Montpellier, 16 November 2016

European Investment Bank Group 1

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 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

Sh

are

of in

ha

bitants

an

d F

TT

H

co

st

• 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


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


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


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

EIB scope for financing broadband

infrastructure


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

Pro

ject siz

e

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

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


THANK YOU


Backup slides


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.


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


dws16 - future networks forum - harald gruber, european investment bank

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