EIC Blending 2.0 Financing Concept
EIC’s innovative “Blending 2.0” concept consists of EU concessional development loans arranged by Lead Financiers ,which are syndicated amongst commercial banks to the extent that commercial bank finance can be guaranteed by comprehensive insurance cover from participating Export Credit Agencies (ECA).
EIC’s Financing Concept is tailor-made for typical public transport sector projects and opens a door for additional sources of finance beyond the development finance community, namely from commercial banks and export credit agencies.
EIC Proposal complements EIP
EIC’s “Blending 2.0” concept complements the EU External Investment Plan to the extent that the EIP requires a project to be “economically and financially viable, with due regard to the possible support from an co-financing by, private and public partners to the project”. Evidently, not many infrastructure projects in Africa can be structured as PPP or concession, and this is particularly true for the transport sector.
“Blending 2.0” would catalyse additional private sector finance for typical “commercially non-viable” public sector infrastructure projects that do not generate sufficient direct project income but are critical for social and economic development of the country, such as transport, roads, bridges, railways, drinking water & sanitation, ports, regional airports, health and education. EIC’s innovative “Blending 2.0” concept consists of EU grant funding to subsidise interest rates for concessional development loans arranged by Lead Financiers (“Blending 1.0”), which are syndicated amongst commercial banks to the extent that commercial bank finance can be guaranteed by comprehensive insurance cover from participating ECAs (“Blending 2.0”).
Win-Win-Win Situation
The proposed Financing Concept would lead to a win-win-win situation for all stakeholders involved in the delivery of public infrastructure projects:
African Governments: By tapping the potential of the ECAs, “Blending 2.0” would substantially increase the availability of finance for strategically important public sector infrastructure projects in Africa.
European Union: EU Institutions and Member States could collectively increase EU development finance for Africa and substantially improve the EU aid efficiency, effectiveness and visibility in Africa.
European Development Finance Institutions: A closer collaboration with ECAs would allow European Development Finance Institutions to draw on additional financial resources beyond development budgets.
European Export Credit Agencies: European ECAs would be able to increase their business portfolio in the infrastructure sector in Africa because coverage in connection with “Blending 2.0” would not be constrained by the rules of the “OECD Consensus”, for instance in relations to “local costs”.
European construction industry: “Blending 2.0” would support the European construction industry by structuring competitive concessional finance packages for public sector infrastructure projects and would create a level playing field with non-OECD competitors.
Sustainable Development: “Blending 2.0” would contribute to sustainable development as tender procedures would incorporate a high sustainability standard. This financing concept would create a strong incentive for non-OECD countries to join the OECD and/or to adopt OECD-DAC and export credit standards.