EC proposes €50B (US$69B) fund for transport, energy and digital network infrastructures; €31.7B for transport
|The proposal is intended to create a core, unified transport network by 2030. Click to enlarge.|
The European Commission is proposing a new €50-billion (US$69 billion) funding plan to speed up long-term investments in roads, railways, energy grids, pipelines and high-speed broadband networks. This marks the first time the Commission is proposing a single funding instrument for the three network sectors. The bulk of the fund—€31.7 billion (US$44 billion)—is targeted at transforming the existing patchwork of European roads, railways, airports and canals into a unified transport network (TEN-T).
By focusing on smart, sustainable and fully interconnected transport, energy and digital networks, the EC intends that the new “Connecting Europe Facility” (CEF) will help to complete the European single market. The Commission has singled out projects where additional EU investment can have the most impact. In particular, the Commission expects CEF investments to act as a catalyst for further funding from the private and public sector by giving infrastructure projects credibility and lowering their risk profiles.
The CEF would use innovative market instruments such as guarantees and project bonds to encourage investors from the private and public sectors to help finance such projects, some of which would otherwise not be built. It would also promote cleaner transport modes and renewable energy, in line with “Europe 2020”, the EU’s growth and jobs strategy. It would be part of the EU budget proposals for 2014 to 2020. The proposal now needs approval from national governments and the European Parliament.
To assist with the financing of the Connecting Europe Facility, the Commission has also adopted the terms for the Europe 2020 Project Bond Initiative which will be one of a number of risk-sharing instruments upon which the facility may draw in order to attract private finance in projects. The pilot phase will start already next year.
The Connecting Europe package of proposals adopted consists of:
A chapeau communication on a growth package for integrated European infrastructures
A communication on a pilot for the Europe 2020 Project Bond Initiative, pilot phase starting in 2012
A communication on a framework for the next generation of innovative financial instruments – the EU equity and debt platforms
Proposal for a regulation establishing the Connecting Europe Facility
Proposal for a regulation on guidelines for the trans-European transport network
Proposal for a regulation on guidelines for trans-European energy infrastructure
Proposal for a regulation on guidelines for trans European telecommunications networks
Connecting Europe: The new EU core transport network. The package proposes transforming the existing patchwork of European roads, railways, airports and canals into a unified transport network (TEN-T). The new core network is intended to remove bottlenecks, upgrade infrastructure and streamline cross border transport operations for passengers and businesses throughout the EU. It will improve connections between different modes of transport and contribute to the EU’s climate change objectives.
Transport is fundamental to an efficient EU economy, but vital connections are currently missing. Europe’s railways have to use 7 different gauge sizes and only 20 of our major airports and 35 of our major ports are directly connected to the rail network. Without good connections Europe will not grow or prosper.—EC Vice-President Siim Kallas, responsible for transport
The new policy follows a two-year consultation process and establishes a core transport network to be established by 2030 to act as the backbone for transportation within the Single Market. The financing proposals published for the period 2014–2020 also tightly focus EU transport funding on this core transport network, filling in cross-border missing links, removing bottlenecks and making the network smarter.
The new core TEN-T network will be supported by a network of routes, feeding into the core network at regional and national level. This will largely be financed by Member States, with some EU transport and regional funding possibilities, including with new innovative financing instruments. The aim is to ensure that progressively, and by 2050, the great majority of Europe’s citizens and businesses will be no more than 30 minutes’ travel time from this comprehensive network.
The €31.7 billion allocated to transport under the CEF will effectively act as seed capital to stimulate further investment by Member States to complete difficult cross-border connections and links which might not otherwise get built. Every €1 million spent at the European level will generate 5 million from Member State governments and 20 million from the private sector, according to the EC’s calculations.
The new policy sets out a much smaller and more tightly defined transport network for Europe. Its aim is to focus spending on a smaller number of projects where real EU added value can be realized. Member States will also face more rigorous requirements in terms of common specifications which will work cross-border, and legal obligations actually to complete the project.
The TEN-T network consists of two layers: a core network to be completed by 2030 and a comprehensive network feeding into this, to be completed by 2050. The comprehensive network, will ensure full coverage of the EU and accessibility of all regions. The core network will prioritize the most important links and nodes of the TEN-T, to be fully functional until 2030. Both layers include all transport modes: road, rail, air, inland waterways and maritime transport, as well as intermodal platforms.
The TEN-T guidelines set common requirements for the TEN-T infrastructure—with tougher requirements for the core network. This will ensure fluent transport operations throughout the network. The policy also fosters the implementation of traffic management systems which will allow optimizing the use of infrastructure and by increasing efficiency, to reduce CO2 emissions.
The implementation of the core network will be facilitated using a corridor approach. Ten corridors will provide the basis for the co-ordinated development of infrastructure within the core network. Covering at least 3 modes, 3 Member States and 2 cross-border sections, these corridors will bring together the Member States concerned, as well as the relevant stakeholders, for example infrastructure managers and users. European co-ordinators will chair corridor platforms that will bring together all the stakeholders.
The EC estimates that the cost of implementing the first financing phase for the core network for 2014–2020 will cost €250 billion. The core network is to be completed by 2030.
Connecting Europe: Energy. The energy sector will see €9.1 billion (US$12.6 billion) being invested in trans-European infrastructure, helping to meet the EU 2020 energy and climate objectives. The CEF will also help to remove financial gaps and network bottlenecks. The internal market for energy will be further developed through better interconnections, leading to security of supply and the possibility to transport renewable energy in a cost effective manner across the EU. Both citizens and companies need to be able to rely on energy being available at all times and at an affordable price. The money from Connecting Europe will act as a leverage for more funding from other private and public investors.
Connecting Europe: Telecommunications and ICT. The CEF foresees almost €9.2 billion (US$12.8 billion) to support investment in fast and very fast broadband networks and pan-European digital services.
The CEF finance will leverage other private and public money by giving infrastructure projects credibility and lowering their risk profiles. On the basis of conservative estimates, the Commission considers that the network infrastructure finance could stimulate investment worth more than €50 billion. The Digital Agenda for Europe set targets for 2020 of broadband access for all at speeds of at least 30 Mbps, with at least 50% of households subscribing to speeds above 100Mbps.
As regards digital services, the money would be used for grants to build infrastructure needed to roll-out e-ID, eProcurement, electronic health care records, Europeana, eJustice and customs-related services. The money would serve to ensure interoperability and meet the costs of running the infrastructure at European level, linking up Member States’ infrastructures.
Innovative financing and the Project bond initiative. The EU Budget is a key element to support the growth agenda and to achieve the Europe 2020 policy targets. The stronger use of innovative financial instruments is needed to multiply the outreach of the EU Budget. The Europe 2020 Project Bonds Initiative, designed for this purpose, has a double objective: to revive project bond markets and to help the promoters of individual infrastructure projects to attract long-term private sector debt financing. The Project Bond Initiative would set up a means to reduce the risk for third party investors seeking long-term investment opportunities. It will thus act as a catalyst to re-open the debt capital market (currently largely unexploited for infrastructure investments following the financial crisis) as a significant source of financing in the infrastructure sector.
The Commission is proposing to launch a pilot phase in the period 2012-2013, still within the current Multiannual Financial Framework. The pilot phase will be based on an amendment of the Trans-European Networks (TEN) Regulation and the Competitiveness and Innovation Framework Programme (CIP) Decision and will draw on the budget lines of these programmes up to a total of €230 million (US$320 million).
Similar to the Risk Sharing Finance Facility and Loan Guarantee instrument for TEN-Transport projects, the EU budget would be used to provide capital contributions to the EIB in order to cover a portion of the risk the EIB is taking when it finances the eligible projects. While the EU budget will provide some risk cushion for the EIB to finance the underlying projects, the EIB would cover the remaining risk. When EU budget funds are combined with the EIB financing, the total budget amount of €230 million is expected to mobilize investments of up to €4.6 billion (US$6.4 billion).
In the pilot phase the idea is to focus on 5-10 projects, concentrating on those that are at a relatively developed stage of the bidding and financing process or require refinancing after the construction phase, in one or more of the three targeted sectors of transport, energy and broadband.
The pilot phase would be managed by the EIB.