How is EFSI channeled through EIB Group and how can it ... · 8/12/2015 · 08/12/2015 European...

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How is EFSI channeled through EIB

Group and how can it encourage RDI Finnish national workshop on EFSI and innovations

8.12.2015

Jukka Luukkanen

Head of Helsinki Office

European Investment Bank

European Investment Bank 2 08/12/2015

EIB at a Glance

We are the world’s largest

International Financial Institution

Source of funds We raise long-term funds

on the international

capital markets and as

a non-profit organisation

we pass favourable

borrowing conditions

to our clients.

1958 Established to support

long-term investments

primarily in the

European Union. We

have over 50 years’

experience in

financing sustainable

projects.

AAA-rated We’re triple-A rated by

all major rating

agencies and have a

sizeable capital of

€242.4 bn.

Shareholders Owned by the 28

Member States of

the European Union.


The EIB Group

Providing finance and expertise for sound and sustainable investment projects

Leading developer of risk financing for innovative SMEs


EIB Impact - 2014


Innovation and Skills (Knowledge Economy) Historical Lending 2000-2014

2.2 bn

5.1 bn

3.6 bn

6.2 bn

7.1 bn

10.7 bn 10.9 bn

10.2 bn

12.5 bn

18.3 bn

16.5 bn

10.4 bn 9.3 bn

15.6 bn

13.4 bn

18

37

27

48 45

56 57 55

73

95

95

66

76

104 108

0

20

40

60

80

100

120

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Tota

l nu

mb

er

of

op

era

tio

ns

Tota

l Le

nd

ing

volu

me

(EU

R m

)

Total Lending 2000-2014: EUR 152 bn


EFSI - Mobilising new investment


EFSI is NOT legally a fund or a

separate legal entity

It is a contractual arrangement

between EC & EIB Group

All operations are EIB Group

operations

Standard EIB appraisal process

followed by approval by EFSI

Investment Committee

Flexible, diverse products: Adapted

to client’s needs

Risk-absorbing to trigger

investments with higher risk

profile (additionality), but

economically and technically viable

(bankability)

EFSI - Contractual Setup

EFSI setup and governance

5

All EFSI operations are within the EIB Group (EIB&EIF)

• on the EIB’s balance sheet (no separate entity)

• subject to standard due diligence

• EIB & EIF governing bodies approve each operation

Additional EFSI governance:

• Steering Board

• Investment Committee, headed-up by a

• Managing Director

EU Member States, National Promotional Banks, investment platforms

and private sector can participate in different ways

Operations started mid- 2015

EFSI EIB

Group

2015 2016

2017 2018

2019 2020

30 June

2nd

deadline

for

signature

of EFSI

Operations

4 July

Deadline

for

approval of

EFSI

Operations

4 July 4 July

Entry into

force of

EFSI

Regulation

Timeline and investment period

1st

deadline

for

signature

of EFSI

operations

Investment period to achieve EUR 315 bn of total investments “Extended” investment period

EFSI operations to target EUR 315bn of total investment by 2018

Actual investment period runs until 30 June 2020

Third anniversary

of signing the

EFSI Regulation

6

Making a difference

Additionality – our value added is to

• Address market failures or sub-optimal investment situations

• Finance operations not possible to same extent without EFSI-backing

• Absorb part of the risk to trigger additional investments

• Impact orientation:

• Attracting other sources of finance

• Maximising growth

• Supporting employment creation and retention

10

With targeted products

Continuously under development and adapted to market needs

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Key areas

11

Targeting strategic investment

• infrastructure, including transport, energy and digital

• education and training, health, research, development

and innovation

• expansion of renewable energy and energy and

resource efficiency

• projects in the environmental, urban development and

social fields

• support for SMEs and midcaps

Who can benefit?

Eligible counterparts:

• Corporates of all sizes

• Utilities and public sector entities (non-sovereign)

• SMEs (up to 250 employees) or midcaps (up to 3 000)

• National Promotional Banks or other banks for intermediation

• Dedicated Investment Platforms

Contact:

• Application for financing directly with EIB Group (EIB or EIF)

• EIB InfoDesk or relevant Operations Department

• www.eib.org/invest-EU

• http://www.eif.org/what_we_do/efsi/index.htm

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http://www.eib.org/invest-EU







http://www.eif.org/what_we_do/efsi/index.htm










What kind of operations?

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Operations need to be:

• Commercially sound, economically and technically viable

• Underpin EFSI objectives

• Support growth and jobs

• Mature enough to be bankable

• Priced in a manner commensurate with the risk taken

• Covering EU28 countries and cross-border operations

Financing step-by-step

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First operations financed

16

Equity-type financing

for an innovative fund

EUR 75m for

investment in offshore

wind, biomass and

transmission projects

Funding cutting-edge

steel production

facilities

EUR 100m for

innovative and

competitive steel

products

Financing for a Finnish

bio-mill enhancement

EUR 75m introducing renewable

energy generation to

make the plant fossil

fuel free

SME guarantee

agreement

Unlocking EUR

100m of loans for

1 000 SMEs in

Bulgaria

Driving clean

energy

investment

Backing

midcap

modernisation

For more

sustainable

industries

Supporting

smaller

businesses

EIF investment in Open Ocean Fund IV

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• In 2011, EIF played a crucial cornerstone role in helping a team of former MySQL founders to raise their

debut venture capital fund, Open Ocean Fund III with EUR 44.6m in total commitments.

• Fund III has performed well with promising value drivers in the unrealized portfolio (e.g. Truecaller,

Nosto Solutions, EyeEm) with blue-chip syndication partners like Atomico, Balderton Capital,

Holtzbrinck Ventures, KPCB and Sequoia.

• EIF is the largest investor in Open Ocean Fund III.

• Since EIF’s initial support in 2011, the team of Open Ocean has positioned itself as the investor of choice

for entrepreneurs in the software space whose business model relies on open source or community

components, and it is a sought-after co-investor for European and American generalist VC funds investing

in that sector.

• The specialized skillsets that the Open Ocean team brings to the entrepreneurial ecosystem are highly

appreciated by the market.

• By investing in Open Ocean IV, EIF saw an opportunity to further contribute to the consolidation of a

reputed European VC firm with a specialized focus and a key role in the development of European

software start-ups.

• Consequently, EIF made a commitment of EUR 30m at the first closing, hence allowing Open Ocean

Fund IV to reach a viable minimum closing size.

• EIF’s commitment in Open Ocean Fund IV will constitute a transaction to be reported under European

Fund for Strategic Investment (EFSI), in line with the call from the European Council of December 2014.

Results dashboard (EIB+EIF)

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InnovFin Product Overview


EUR 25m

Rovio

EUR 67.5m

EUR 15m

Term loan

2015

Kiosked

Transactions under RSFF and InnovFin

in Finland

Valmet

Term loan

2015

Term loan

2014

EUR 45m

EUR 32.6m

EUR 50m

Kemira

Term loan

2013

Borealis

Term loan

2013

Aalto-Yliopistokiinteistöt

Term loan

2013

EUR 34.7m

Outotec

Term loan

2012

EUR 21.5m

Cargotec

Term loan

2012

EUR 30m

Danisco

Term loan

2010

EUR 10.8m

Ahlstrom

Term loan

2010

EUR 180m

Nokia

Term loan

2009

http://www.kemira.com/en

http://www.outotec.com/

http://www.cargotec.com/en-global

http://www.ahlstrom.com/en/

http://networks.nokia.com/

http://aaltocre.fi/


InnovFin intermediated products

• Designed to enable borrowing or investment

capacity and additional risk taking capacity

with intermediaries

• Portfolio approach whereby whole decision

making is delegated to the intermediaries

• The intermediary needs to confirm the

eligibility of the final counterpart

• Unlike the Bank’s funded SME loans to local

Banks, in these products EIB shares the risk

of the final beneficiary

MCG SME VC

Local banks Funds

Eligible counterparts

Guarantee Equity

Loan Equity


Key Guarantee Terms

Up to 50% loss coverage

(Principal + Interest 90D)

Full Delegation to Financial

Intermediaries

Automatic Coverage/ Inclusion

Attractive Guarantee

Terms

Favourable Capital

Treatment


How does MGF work?

• Direct long term debt and mezzanine finance: EUR 7.5m – EUR 25m

• Loans can be structured as economic equity (silent participation)

• For innovative Mid-Caps and SMEs (eligible counterparty concept)

• EIB can finance up to 50% of all investments over 3 years

• Streamlined EIB approval process & English law

EIF Innovative Mid-Caps

3,000 Employees

Growth Finance / Mezzanine EUR 25m


MGF: Summary of Terms

Indicative Term Sheet Illustration

Short-Term Assets Senior Debt

Junior Debt

Equity

Long-Term Assets

Balance Sheet: Mid-Market Company

Borrower Eligible companies

Product Term Loan / Guarantee

Purpose Finance future investment budgets (capex,

opex and other, mainly R&D related)

Size of the loan EUR 7.5m – EUR 25.0m

Tenor Flexible (usually 5-7 years)

options: amortizing, bullet, grace period

Seniority Senior to mezzanine

Security Secured or unsecured

Pricing Floating, fixed or convertible

No subsidy elements, full risk pricing

Pricing advantage a function of favorable

borrowing costs and non-for-profit

maximization objective

Covenants Based on EIB standard loan contracts

General and financial covenants/limitations

are included according to the credit risk

Fees Limited but certain fees may be applicable

Jurisdiction English law

Appraisal subject to satisfactory documentation

usually between 3 and 5 months

Eligibility

Borrowing

Base*

Screening

process

Industry & company RDI intensity

Company R&D score (quality)

Borrowing base

Planned investments of at least € 15m

and € 50m over the next three years

Research & Development – related

Innovation / Commercialization of new

technology, capex, opex, salaries

Eligible

company

Medium sized companies, usually from

500 to 3,000 employees

“R&D-intensive” of “fast growing”


MidCap Growth Finance – Signed transactions (2013 – 2015 YTD)

1

EVS (2013)

EUR 12m

Senior term loan

2

Marposs (2013)

EUR 25m

Senior term loan

3

Rovio (2014)

EUR 25m

Senior term loan

4

Manz (2014)

EUR 20m

Mezzanine loan

5

Pharmathen (2014)

EUR 25m

Senior term loan

6

Welltec (2014)

EUR 25m

Senior term loan

7

Pramac (2014)

EUR 8m

Senior term loan

8

Maier (2014)

EUR 7.5m

Senior term loan

9

e-Net (2014)

EUR 12m

Subordinated loan

Novabase (2014)

EUR 14m

Senior term loan

10

Marangoni (2014)

EUR 10m

Senior term loan

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1

2

3

4

5

6

7 8

9

10

11

Innocoll (2015)

EUR 25m

Senior PIK loan

12

SAES (2015)

EUR 10m

Senior term loan

13

PLANON (2015)

EUR 12m

Senior term loan

14

KIOSKED (2015)

EUR 15m

Senior term loan

15

16

Pipeline for end

of 2015

DANOBAT (2015)

EUR 10m

13

16

14


Loan structure

Facility: Term Loan

Amount: EUR 25,000,000

Ranking: Senior

Pricing: Cash interest

Borrower: ROVIO ENTERTAINMENT OY

Other: English law,

Financing tailored to the needs of the client

Company Overview

Founded in 2003 by three Finnish students, Rovio is an entertainment media company and best known for its Angry Birds franchise; 800 employees

At the end of 2013 the company had launched 7 Angry Birds sequels and 3 other games, which had been downloaded over 2 billion times and attracted over 200 million monthly active users

The company expanded into animation and by end of 2013 their Toons Channel (toons.tv) had acquired over 1 billion views

In the consumer products area currently there exists 30,000 Angry Birds licensed products distributed by 500 licensing partners in 100 different countries. Angry Birds was listed in 2013 as the 30th most valuable brand in the world, but in top 10 in terms of brand recognition across all categories

High innovativeness of the company with R&D costs 17% of revenue and above average industry benchmarks

Financials: 2013 Revenues: EUR 150.1m ; EBITDA: EUR 30.5m.

EIB investment rationale

Rovio is a significant employer of young and highly skilled

people - the number of employees of the company grew in the

past 2-years from 211 to over 800 at the end of 2013

Support for European presence in an industry mainly dominated

by US players

Significant commitment and investments to growth with a RDI

and capital investment plan around EUR 120m over the next

three years


• Loan structure

Facility: Term Loan

Amount: EUR 15,000,000

Ranking: Senior

Security: Unsecured

Tenor: 5 years, bullet

Pricing: Cash interest + variable element

Borrower: KIOSKED OY AB

Other: English law

Company Overview

Founded in 2010, the company is headquartered in Helsinki with offices in Los Angeles, New York, London and Singapore to ensure local support; 41 employees

Kiosked is a global advertising platform software company delivering unique, targeted ads in all display and video formats and across both desktop and mobile devices

The group's proprietary algorithms dynamically and automatically place ads directly within publisher content, using detailed contextual and behavioral data to provide industry-leading levels of ad targeting

Its advanced data aggregation capabilities allow it to provide in-depth insight and analytics directly to its customers

Kiosked's advertising platform already serves over 10,000 advertisers (inducting e.g. Samsung, American Express, Jeep and AT&T) across a fast-growing network of premium content publishers

The company is experimenting a substantial expansion and is now serving over 3 billion ad impressions per month, resulting in over 255 million people viewing Kiosked ads each month

Financials: 2014 Revenues: EUR 4.2m ; EBITDA: EUR -1.6m

EIB investment rationale

The EIB loan will support the fast growing expansion of the

company contributing to the creation of highly skilled jobs by

supporting the company's expansion plan, and help Kiosked

maintain its competitive edge by providing financing for the

company's RDI activities

Kiosked has been recognized as an Innovative early stage

company with significant market potential established by

numerous technology and start-up awards (most recently

Finnish Growth Company of 2015 and Forbes Top 5 Finnish

Start-up)


• How does InnovFin Large Projects work?

• Senior debt (pari-passu with other senior lenders)

• Eligible project required. EIB can only finance 50% of R&D and

innovation investments

• Comprehensive due diligence including project due diligence

• EIB standard documentation

EIF Large Projects EUR 50m – EUR 600m

Direct Lending EUR 25m - EUR 300m


EIF

• How does InnovFin Energy Demo Projects work?

Broad range of instruments

EIB can only finance 50% of project costs

Comprehensive due diligence (legal, financial, technical, etc.)

EIB standard documentation under English or Luxembourgish law

Projects Direct Lending

Up to EUR 75m


Which projects can be supported?

Pre-commercial stage

Loan amount: min EUR 7.5m, max EUR 75m

Loan maturity: max 15 years

Currency: EUR and local currency

Eligible Projects

Renewable energy Fuel Cells, Hydrogen


Broad range of products - standard debt instruments (i.e. senior,

subordinated, and mezzanine) to risk sharing instruments (RSL) with

forgiveness options

EIB can only finance 50% of project costs

Comprehensive due diligence (legal, financial, technical, etc.)

EIB standard documentation under English or Luxembourgish law

Projects Direct Lending

Up to EUR 75m

How does InnovFin Infectious Diseases work?


• Hydrogen Mobility Germany

• Myrrha

• European Lead Factory (ELF)

• European Spallation Source

(ESS)

• Global TB Vaccine Partnership

• Light Project Advisory (LPA)

pipeline

• Infectious Diseases Financing

Facility (IDFF)

• Circular Economy (CE)

• Key Enabling Technologies (KETs)

• Bio -Economy

• Strategic Energy Technology Plan

(SET Plan)

• Financing options for Pan-

European RI

• Web tool to guide innovative

companies

Enable maximum access to finance for innovative projects

Improve bankability/investment

readiness

Enable earlier/ faster access

to finance

Improve framework conditions

for financing

Develop “business case” for

new financing mechanisms in

RDI sectors

Innovation Finance Advisory- What do we do?

Horizontal Activity Project Advisory


Current portfolio of Horizontal Activities

Bio economy

SET

Pilot LPA Financing Pan-EU RI

Web-tool

IDFF RTOs KETs

Circular economy


• Background

Following a workshop in April 2015 with representation of RTOs and EIB/EIF

operational staff, the EARTO President asked the EIB and EC (DG R&I) for a

dedicated InnovFin Advisory mandate to develop new funding models for RTOs,

also in the context of the EFSI.

This new horizontal activity was approved by the InnovFin Advisory Steering

Committee and the advisory mandate kick-started in Q3 2015, in close

collaboration with EARTO


General

• The majority of RTOs are public entities. Statutes (very) often do not allow

them to take on loans.

• Size in terms of revenues and total assets vary:

• Revenue indication: from below EUR 10 to over EUR 400 million

• Asset size: from around EUR 25 million to close to EUR 400 million

• All RTOs have public and private revenues sources, but the ratio varies

• Finance-related challenges:

• Budgetary constraints, RTOs but also partners (cash-flow generation)

• Risk aversion from the private sector side (technology/product

uncertainty)

• Some Preliminary findings – to be further explored

How is EFSI channeled through EIB Group and how can it ... · 8/12/2015 · 08/12/2015 European...

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