EUROPE - The European Commission has launched a consultation over infrastructure 'project bonds' as part of its blueprint for economic recovery to 2020.

The plan, recently outlined by EU president José Manuel Barroso, targets pension funds and insurance companies as potential capital contributors for private companies involved in infrastructure projects.

Commissioners with responsibility for transport and energy were among those involved in drafting the consultation paper. They claim the EU will need investment of €1.5bn-2bn to plug public-sector deficits in transport, energy and digital infrastructure.

An estimate of member states' investment plans in transport alone suggests the EU as a whole needs €21.5bn annually after 2013 to connect transport routes.

Yet it is not immediately clear why the European Commission would need to   persuade investors to enter what is already a vibrant market - other than to keep private companies afloat by providing guarantees - nor whether it believes it can attract infrastructure investment into countries and sub-sectors investors have been reluctant to enter.

According to a statement that accompanied the launch, the Commission will share risk with the European Investment Bank in an attempt to improve the rating of project companies' senior debt to allow them to issue corporate bonds.

The Commission believes the EIB's involvement will boost lending to infrastructure after the withdrawal of banks as lenders of first resort.
A Commission spokeswoman told IPE Real Estate: "The EIB brings in investors who otherwise wouldn't be involved."

Asked whether the absence of a pan-European regulatory framework for infrastructure investment would dampen appetite for the bonds, she cited the framework agreed for scientific research across the EU as proof of concept for cooperation.

Investor participants at the Infrastructure Investors Forum last month were critical of government involvement in infrastructure funding procurement, with one citing the exaggerated influence of advisers for governments' failure to come up with a credible infrastructure investment framework.

Other participants questioned a definition that "bundles infrastructure into one big mass of things that don't behave in the same way and that have different underlying dynamics".
In the meantime, the EIB will organise a conference on infrastructure investment before the consultation period ends in early May.

Topics