The EU’s long term financing Institution
R&D projects Appraisal
by
Jean-Jacques Mertens
Research & Innovation
Associate Director
EIB Projects Directorate
December 2006
Contents
1. Type of Projects financed and present developments
2. Appraising an RDI project
3. Critical issues summarised
FEACO seminar, Brussels, 14 December 2006
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Reminder: i2i financing to date (2006)
Signatures
(M €)
Edu &
Training
RDI
ICT
Total i2i
482
54
1 628
2 164
2001
1 418
1 688
1 931
5 037
2002
952
1 818
547
3 616
2003
2 711
2 130
1 378
6 219
2004
1 678
4 131
1 257
7 065
2005
2 289
6 134
1 869
10 583
Tot ’00-’05
9 530
15 954
8 610
34 094
2000 (7m)
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RDI project examples
Past
• Industrial RDI (pilot plants, labs, research activities) (Boehringer
Ingelheim, Gambro, Robert Bosch, Roche Diagnostics,
Novozymes, Haldor Topsoe)
• Prototypes (Primorec: Valorizing steel waste)
• Research organisations ( Heavy Ion Therapy, Mario Negri,
Statens Serum Institute, Mazaryk University, etc…)
• Hospitals with research: San Mateo, IEO, ..
• Large Infrastructures (LHC of CERN, IMEC, FEL Trieste)
• Science parks, incubators (EMBL, Helsinki, Oulu, Turku)
• Specific global loans for innovative SME’s (ICO, SPIMI, IWT)
Future:
• also projects generated by Technology Platforms (H2,
Nanotechs, new mobile techs, Steel, Chemicals, Aerospace,
etc..) and projects of FP6/FP7.
• Consortia or partners in consortia
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RDI promoters
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Industry (direct)
Research organisations
Universities
Specialized intermediaries (Banks, Fin’l Inst, …)
Nat’l/Reg’l RDI support systems
Foundations
Networks & trade associations
Multitype consortia
Partners (Commission/Eureka/…)
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Example: EIB involvement in ETPs
• TPs interesting for EIB: seal of relevance
• Some have important lending potential
• Types of involvement:
– Individual projects or consortia
– Research facilities (infra) and activities
– Funded by FP or not
• Mono-partner parts of projects likely to be more easy
to finance
• But smallness of loan amounts may require
regrouping of parts of several projects
• JTIs also a possibility, in financing a PPP
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Example: EIB and Nanomedicine
4 reasons for looking at nanomedicines:
• Health an economic priority for EU and for the Bank
• Nanotechnologies, probably one of the most
important enabling technologies of the future halfcentury
• Strong european research base
• A major opportunity for european technologyy
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Possible application in Nanomedicine (1)
• Depends on strategic research agenda.
• Possible applications are:
– Complementary funding of IPs/STREPS under FP6/FP7
– Clinical trials/ demonstration projects in or outside FPs
– seed, startups, spinoffs
• Possible funding instruments are
– Direct loans, with or without SFFs
– Risk sharing finance facility (RSFF)
– VC, guarantees and TTA
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Possible application in Nanomedicine (2)
• Where applicable
Basically all nanomedicine sectors, but full EIB potential rather
released at later than at early stage, whether:
– Diagnostics and Imaging
– Drug delivery systems
– Regenerative Medicine
• Caveats:
– Special attention to environmental, safety and social issues
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Project Appraisal and follow-up by EIB
• The base of EIB lending operations is the ‘project’
• Multidisciplinary teams
– Ops: contact + financial aspects
– PJ: technico-economic aspects (incl. Environment)
And later:
– Risk Management
– Legal Department
• Monitoring and Post-evaluation are part of the Project Cycle
• In lending, appraisal is similar for all types of projects and of
finance considered, but emphasis can shift according to credit
rating of the borrower (large corporate, midcap, research
organisation, consortium or SPV) and the riskk profile of the
operation.
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Steps in EIB assessment
Promoter Finance Model
Project Finance Model
Eligibility Assessment
Eligible
NOT
Eligible!
Project Technical and Economic Viability + Project Cost Definition
Assessment of Creditwortiness
Borrower’s creditworthiness
(i.e. credit rating)
SPV’s cash-flow
and asset values
Creditworthy
NOT
Bankable!
-> Grants +
Equity
(e.g. EIF
VC Funds)
EIB financing of up to 50% of investment cost!
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Specific RDI appraisal issues
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RDI Project selection criteria and procedures
RDI project definition and boundaries
Investment cost (facilities + activities)
Environmental (and social) aspects
Long-term sustainability
“Profitability” or how is success measured (in research
normally no profitability, valuation of intangibles created is
delicate)
• Structure issues (legal entity & borrowing capacity,
consortia-specific issues)
• LT vision, management of operations
• Organise EIB project “monitoring” (follow-up and success)
• Repayment capacity, adequate security
• IPR issues, Intangibles management
Also, we understand confidentiality
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RDI Project Definition
• Types of investments and Project components
– Research Facilities
– Prototypes
– Research Activities
• Economic life
• Investment cost
– Eligible project cost components (internal to EIB)
– Contingencies, IDCs
– Training and start-up
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Project cost items
• Research Facilities
– Normal Capex: building, equipment, engineering
• Prototypes and Pilot Plants
– Prototype production and production equipment capex
• Research Activities
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Salaries
Consumables
IPR registration and other related user costs
(IPR acquisition)
Equipment user fees (leasing costs, amortization)
Share of overheads (not always)
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Project justification
• How is the project positioned in the organisation’s
strategic objectives?
• What are the benefits to be brought by the project to
the organisation, to the sector and/or to the world ?
• Can the benefits be measured?
• What are the criteria to judge whether the project is a
success or not?
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Are intangibles managed?
Intellectual capital is not limited to patents and copyrights
Some questions:
• What are your critical intangibles ?
• How do you measure them?
• How do you control their evolution and manage
them?
• Do you train to manage them?
• Do you report on them?
• Do intangibles-related indicators figure among your
key performance indicators
• Are you familiar with Intellectual Capital thinking?
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Points for attention
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Is there a borrower?
Is there a « project » (or programme)?
What costs are eligible?
Who repays and how?
Timing issues when public funds
IPR ownership
How is success measured?
How can we better help the sector?
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Final reminders
• We are committed to support good research and
innovation with good finance
• We are collaborating with, and have good
understanding of industry, universities, research
organisations and EU/Natl authorities
• We are adapting our instruments to match research
customers needs
• We are ready to help promote research and need
good intermediaries.
• Your knowledge and skills can help us devise the
right instruments!
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Thank you!
& time for questions, please
www.eib.org
www.eif.org
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