“Blending”
22
Project Bond Initiative is a joint initiative by the EIB and European focused on large
infrastructure projects,
23 introduced primarily in the context of the “credit crunch”—
there has been tremendous pressure on banks’ balance sheets from higher regulatory
capital requirements resulting in a lack of responsiveness in the debt markets to
provide long-tenor lending and support large scale infrastructure schemes, where the
risks are high. It is basically a credit enhancement instrument—a loan or contingent
facility
24 is given to improve the creditworthiness of project bonds (also called
senior bonds) issued by the project company.
Loan guarantee instrument (LGTT) for EU Trans-European Transport Network
(TEN-T) Projects works in tandem with a Public Private Partnership transport
project. The EIB offers a loan guarantee to underwrite the revenue risks in the
early stages of Public-Private Partnership (PPP) projects. The rationale is to attract
greater private sector financing (there seems to be a preference for commercial
banks) of TEN-T.
25
Connecting Europe Facility (CEF) is perhaps the scheme which is of much
relevance to this study. That “facility” primarily involves innovative financial
instruments and a central plank of the CEF is the promotion of green finance
initiatives. The Green Shipping Guarantee Programme is a product of this scheme.
22 Blending public and private finance.
23 The EIB considers the following to fall within “infrastructure investment”:
• Essential services for the majority of the population and businesses, either relating to physical
flows in the real economy (i.e. transport, energy, broadband) or to social goods (education,
healthcare);
• Government either as a direct client (via fixed term concession) or highly proximate to the
transaction (through economic regulation);
• Long term in nature (thus requiring long term finance);
• Stable cash flows, particularly where payments are based on availability rather than demand
(which is often beyond the control of a given project); charges may be linked fully or partially to
inflation;
• Natural monopolies, either due to network characteristics/capital intensity or government policy;
• Generally low technological risk. (EIB, An outline guide to Project Bonds Credit Enhancement
and the Project Bond Initiative 2012 at p. 4).
24 In finance terminology, a subordinated instrument.
25 An example is the financing of the A11 Brugge motorway in Belgium.
Legal Aspects of Green Shipping Finance: Insights from the European. . .
139
22
Project Bond Initiative is a joint initiative by the EIB and European focused on large
infrastructure projects,
23 introduced primarily in the context of the “credit crunch”—
there has been tremendous pressure on banks’ balance sheets from higher regulatory
capital requirements resulting in a lack of responsiveness in the debt markets to
provide long-tenor lending and support large scale infrastructure schemes, where the
risks are high. It is basically a credit enhancement instrument—a loan or contingent
facility
24 is given to improve the creditworthiness of project bonds (also called
senior bonds) issued by the project company.
Loan guarantee instrument (LGTT) for EU Trans-European Transport Network
(TEN-T) Projects works in tandem with a Public Private Partnership transport
project. The EIB offers a loan guarantee to underwrite the revenue risks in the
early stages of Public-Private Partnership (PPP) projects. The rationale is to attract
greater private sector financing (there seems to be a preference for commercial
banks) of TEN-T.
25
Connecting Europe Facility (CEF) is perhaps the scheme which is of much
relevance to this study. That “facility” primarily involves innovative financial
instruments and a central plank of the CEF is the promotion of green finance
initiatives. The Green Shipping Guarantee Programme is a product of this scheme.
22 Blending public and private finance.
23 The EIB considers the following to fall within “infrastructure investment”:
• Essential services for the majority of the population and businesses, either relating to physical
flows in the real economy (i.e. transport, energy, broadband) or to social goods (education,
healthcare);
• Government either as a direct client (via fixed term concession) or highly proximate to the
transaction (through economic regulation);
• Long term in nature (thus requiring long term finance);
• Stable cash flows, particularly where payments are based on availability rather than demand
(which is often beyond the control of a given project); charges may be linked fully or partially to
inflation;
• Natural monopolies, either due to network characteristics/capital intensity or government policy;
• Generally low technological risk. (EIB, An outline guide to Project Bonds Credit Enhancement
and the Project Bond Initiative 2012 at p. 4).
24 In finance terminology, a subordinated instrument.
25 An example is the financing of the A11 Brugge motorway in Belgium.
Legal Aspects of Green Shipping Finance: Insights from the European. . .
139