SET Plan conference 2013
Session 4: Support the market roll-out of
innovative solutions
Access to risk finance under Horizon 2020
8 May 2013
Martin KOCH
Policy Officer
European Commission - DG Research and Innovation
RTD C-03 – Financial Engineering Unit
Not legally binding
What does "Risk finance" in the Horizon
2020 context mean?
Provision of finance for research and innovation
investments through non-grant instruments:
Loan finance, i.e. risk-sharing loans to companies and for
innovative projects introducing new technologies
Guarantees, to financial intermediaries (commercial and
development banks) that provide lending to research- and
innovation-driven SMEs and small mid-caps
Equity/ quasi-equity, i.e. venture capital to new companies in
their early stage exploiting R&D results
Horizon 2020 risk capital will address financing gaps in the
research and innovation delivery chain and will be provided
through partners of the European Commission (EIB Group and2
other financial intermediaries)
Not legally binding
Risk capital for R&D and Innovation
investments with FP 7 support: RSFF
•
Risk-Sharing Finance Facility (RSFF): Loans and guarantees
•
EU and EIB/ EIF share risks (FP7 budget may cover losses); EIB
provides direct loans for RDI investments
•
Demand-driven approach; market-based pricing of loans
•
Eligible investments: From research to demonstration,
development and innovation, notably by larger companies
•
Loan finance also provided to stand-alone projects (SPV),
research infrastructures and others (any legal entity that is able
to borrow and repay a loan)
•
Loan volumes for direct lending of EIB: From EUR 7.5 to 300
million
•
So far: Signed loans of EUR 8.8 billion for more than 90 projects 3
in 23 countries (EU/ AC)
Not legally binding
RSFF loans for projects related to the
SET Plan implementation - examples
•
RSFF loans provided to SET Plan related projects with a
demonstration character and a certain degree of risk
•
Mainly wind & solar power projects; notably in countries with
favourable framework conditions making such investments
bankable
•
Projects with innovative technology:
•
•
Andasol Thermal Power I and II/ Spain, RSFF loans: EUR 120 m
•
Solucar Solar Thermal Power/ Spain, RSFF loan: EUR 50 m
•
Borkum West II Offshore Windpark/ DE, RSFF loan: EUR 100 m
Companies investing in R&D:
•
Abengoa/ Spain, RSFF loan: EUR 49 m
•
Gamesa Wind Power/ Italy, RSFF loan: EUR 200 m
4
Not legally binding
Current FI for R&D and Innovation
investments with FP 7 support: RSI
•
Risk-Sharing Instrument (RSI): Guarantee facility under the RSFF
for SMEs and small midcaps (up to 499 employees)
•
Target group: Research-driven and innovative SMEs/ small
midcaps (companies with up to 499 employees)
•
Pilot scheme (2012/2013) to test guarantees and counterguarantees for loans/ leases for RDI investments;
•
EIF extends guarantees to financial intermediaries (commercial
and promotional banks; guarantee institutions) to share risk of
default (50% per individual loan/ lease)
•
Loan size between EUR 25,000 and 7.5 m
5
Not legally binding
HORIZON 2020: Budget proposal for
Financial Instruments 2014-2020
• HORIZON 2020 budget proposed: EUR 80 billion for the
period 2014-2020 (actual budget: approx. EUR 70 bn)
• Approximately 4.5% provided not via grants but through
Financial Instruments (various facilities)
• H2020 (SP "Industrial Leadership") – “Access to risk finance”
• € 3,768 million in current prices (net of administrative costs)
for financial facilities supporting all sizes of companies and
types of entity (demand driven) + additional budget possible
for policy targets (topping-up possibility)
6
Not legally binding
HORIZON 2020: Proposed Financial
Instruments (FI)
Two Financial Instruments: One for debt, one for equity
• Debt Financial Instrument:
 Loans and guarantees for investments in Research & Innovation;
demand-driven; target groups midcaps and larger companies, research
bodies and stand-alone projects; ("RSFF II")
 Guarantee facility for research-intensive and innovative SMEs & small
midcaps ("RSI II")
• Equity Financial Instrument: Facility for early-stage finance
 Early stage finance for innovative enterprises (seed and start-up
companies)
 Growth-stage finance also possible
Implementation of the guarantee facility (debt) and the equity facility will be
made in co-operation with COSME financial facilities for SMEs
7
Not legally binding
Horizon 2020 risk capital for SET Plan
projects: opportunities and challenges
Opportunities
 Particularly loan finance could be used to support larger-scale projects
with a certain degree of technological risk (EU would cover part of
such risks vis-à-vis the EIB and/ or other partners)
 Long-term finance both to companies and stand-alone projects
(project finance); relatively large amounts (i.e. up to EUR 200
million per project)
Challenges
 Project promoters need to demonstrate that, in principle, a loan (with
interest) could be repaid (bankability)
 Project promoters need to find other sources of finance (own
resources, equity, grants etc.) to complement Horizon 2020 risk finance
Not legally binding
SET Plan implementation: First-of-its kind
demonstration (Fok) projects
• First-of-its-kind demonstration projects are important to
demonstrate the technical and commercial viability of new
energy technologies
• Due to their pre-commercial development stage and unproven
technologies, such demonstration projects are usually too risky
for commercial finance (equity and/ or debt) and therefore
considered as "not bankable"
• In a number of cases, also EU Financial Instruments (RSFF)
involving significant risk-taking buy the EU budget have not
been able to provide finance (too risky and/ or too large
amounts needed)
Not legally binding
Expert Group on (new) innovative
Financial Instruments for Fok projects
• Expert group launched in January 2013 (EC and experts from
different fields of finance (Equity/ lending/ insurance)
• Bottom-up analysis involving the EIIs of the SET Plan to look at:
 The current financial instruments for
demonstration projects at EU and MS level
first-of-a-kind
commercial
 The future investments needs and obstacles for finance encountered
by the different industrial sectors in the field of energy
 The gaps in terms of Financial Instruments
technologies in the context of the SET Plan
for
breakthrough
• Recommendations on the need and the possibilities for (new)
innovative Financial Instruments for FoK
• Report in preparation; submission by end of May 2013
Not legally binding
Thank you very much for your
attention!