r&d projects appraisal by jean-jacques mertens research & innovation associate director eib...

R&D projects Appraisal

by

Jean-Jacques MertensResearch & Innovation

Associate Director

EIB Projects DirectorateDecember 2006

The EU’s long term financing Institution

FEACO seminar, Brussels, 14 December 2006 2

Contents

1. Type of Projects financed and present developments

2. Appraising an RDI project

3. Critical issues summarised


Reminder: i2i financing to date (2006)

Signatures (M €)

Edu & Training

RDI ICT Total i2i

2000 (7m) 482 54 1 628 2 164

2001 1 418 1 688 1 931 5 037

2002 952 1 818 547 3 616

2003 2 711 2 130 1 378 6 219

2004 1 678 4 131 1 257 7 065

2005 2 289 6 134 1 869 10 583

Tot ’00-’05 9 530 15 954 8 610 34 094


RDI project examplesPast• Industrial RDI (pilot plants, labs, research activities) (Boehringer

Ingelheim, Gambro, Robert Bosch, Roche Diagnostics, Novozymes, Haldor Topsoe)

• Prototypes (Primorec: Valorizing steel waste)• Research organisations ( Heavy Ion Therapy, Mario Negri,

Statens Serum Institute, Mazaryk University, etc…) • Hospitals with research: San Mateo, IEO, ..• Large Infrastructures (LHC of CERN, IMEC, FEL Trieste)• Science parks, incubators (EMBL, Helsinki, Oulu, Turku)• Specific global loans for innovative SME’s (ICO, SPIMI, IWT)Future: • also projects generated by Technology Platforms (H2,

Nanotechs, new mobile techs, Steel, Chemicals, Aerospace, etc..) and projects of FP6/FP7.

• Consortia or partners in consortia


RDI promoters

• Industry (direct)• Research organisations • Universities• Specialized intermediaries (Banks, Fin’l Inst, …)• Nat’l/Reg’l RDI support systems• Foundations• Networks & trade associations • Multitype consortia• Partners (Commission/Eureka/…)


Example: EIB involvement in ETPs

• TPs interesting for EIB: seal of relevance• Some have important lending potential• Types of involvement:

– Individual projects or consortia– Research facilities (infra) and activities– Funded by FP or not

• Mono-partner parts of projects likely to be more easy to finance

• But smallness of loan amounts may require regrouping of parts of several projects

• JTIs also a possibility, in financing a PPP


Example: EIB and Nanomedicine

4 reasons for looking at nanomedicines:• Health an economic priority for EU and for the Bank• Nanotechnologies, probably one of the most

important enabling technologies of the future half-century

• Strong european research base• A major opportunity for european technologyy


Possible application in Nanomedicine (1)• Depends on strategic research agenda.• Possible applications are:

– Complementary funding of IPs/STREPS under FP6/FP7– Clinical trials/ demonstration projects in or outside FPs – seed, startups, spinoffs

• Possible funding instruments are– Direct loans, with or without SFFs– Risk sharing finance facility (RSFF)– VC, guarantees and TTA


Possible application in Nanomedicine (2)

• Where applicableBasically all nanomedicine sectors, but full EIB potential rather

released at later than at early stage, whether:– Diagnostics and Imaging– Drug delivery systems– Regenerative Medicine

• Caveats:– Special attention to environmental, safety and social issues


Project Appraisal and follow-up by EIB

• The base of EIB lending operations is the ‘project’ • Multidisciplinary teams

– Ops: contact + financial aspects

– PJ: technico-economic aspects (incl. Environment)

And later:

– Risk Management

– Legal Department

• Monitoring and Post-evaluation are part of the Project Cycle• In lending, appraisal is similar for all types of projects and of

finance considered, but emphasis can shift according to credit rating of the borrower (large corporate, midcap, research organisation, consortium or SPV) and the riskk profile of the operation.


Steps in EIB assessment

Promoter Finance Model

Assessment of Creditwortiness

Project Finance Model

Borrower’s creditworthiness (i.e. credit rating)

SPV’s cash-flow and asset values

Creditworthy

NOT Bankable! -> Grants +

Equity (e.g. EIF

VC Funds)

Eligibility Assessment

NOT Eligible!

Eligible

EIB financing of up to 50% of investment cost!

Project Technical and Economic Viability + Project Cost Definition


Specific RDI appraisal issues• RDI Project selection criteria and procedures• RDI project definition and boundaries• Investment cost (facilities + activities)• Environmental (and social) aspects• Long-term sustainability• “Profitability” or how is success measured (in research

normally no profitability, valuation of intangibles created is delicate)

• Structure issues (legal entity & borrowing capacity, consortia-specific issues)

• LT vision, management of operations• Organise EIB project “monitoring” (follow-up and success)• Repayment capacity, adequate security• IPR issues, Intangibles managementAlso, we understand confidentiality


RDI Project Definition

• Types of investments and Project components– Research Facilities– Prototypes– Research Activities

• Economic life• Investment cost

– Eligible project cost components (internal to EIB)– Contingencies, IDCs– Training and start-up


Project cost items

• Research Facilities– Normal Capex: building, equipment, engineering

• Prototypes and Pilot Plants– Prototype production and production equipment capex

• Research Activities – Salaries– Consumables– IPR registration and other related user costs– (IPR acquisition)– Equipment user fees (leasing costs, amortization)– Share of overheads (not always)


Project justification

• How is the project positioned in the organisation’s strategic objectives?

• What are the benefits to be brought by the project to the organisation, to the sector and/or to the world ?

• Can the benefits be measured?

• What are the criteria to judge whether the project is a success or not?


Are intangibles managed?

Intellectual capital is not limited to patents and copyrights

Some questions:• What are your critical intangibles ? • How do you measure them?• How do you control their evolution and manage

them?• Do you train to manage them?• Do you report on them?• Do intangibles-related indicators figure among your

key performance indicators• Are you familiar with Intellectual Capital thinking?


Points for attention

• Is there a borrower?• Is there a « project » (or programme)?• What costs are eligible?• Who repays and how?• Timing issues when public funds• IPR ownership• How is success measured?• How can we better help the sector?


Final reminders

• We are committed to support good research and innovation with good finance

• We are collaborating with, and have good understanding of industry, universities, research organisations and EU/Natl authorities

• We are adapting our instruments to match research customers needs

• We are ready to help promote research and need good intermediaries.

• Your knowledge and skills can help us devise the right instruments!


Thank you!

& time for questions, please

www.eib.org

www.eif.org

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