The European Commission has launched on 28 February a public consultation on the "Europe 2020 Project Bond Initiative" which aims at boosting the funding of projects with long-term revenue potential in line with the Europe 2020 policy priorities. The final objective is to help the private project companies to attract capital market funding from investors such as pension funds and insurance companies.

Following the announcement made by President José Manuel Barroso in his State of the Union Address, the European Commission has put forward the Project Bond Initiative which aims to provide EU support to private project promoters issuing bonds to finance in particular infrastructure projects. This should help them attracting capital market financing from institutional investors.

The key role of the Commission and the European Investment Bank (EIB) will be to absorb part of the risk of a project. Technically, the instrument will improve the rating of the senior debt issued by the the project entities, ensuring that such debt can be placed as bonds with institutional investors. As the EU participation will be capped, there will be no unlimited or contingent liabilities for the EU budget.

Attracting private financing in order to meet EU infrastructures challenges

Over the next decade, record investment volumes in Europe's transport, energy, information and communication networks will be needed in order to underpin the Europe 2020 flagship actions. Only in the the transport sector around  21.5 billion euro per year will be needed to meet member states requirements in the post-2013 period to remove significant bottlenecks, construct missing cross-border links, and interconnect transport modes. Furthermore, preliminary estimates point to investment needs of 1.5 to 2 trillion euro for Trans-European Transport Networks, the energy sector and information and communication technologies.

These needs, combined with the fact that government budgets face severe constraints, make it crucial to foster the participation of the private sector in the financing of infrastructure projects.

In order to seek views from stakeholders, the European Commission has launched a public Consultation on the Europe 2020 Project Bond Initiative, which will remain open until 2 May 2011. The purpose of the consultation is to obtain market participants' and decision makers' feedback on the chosen mechanism and its essential terms and conditions, to gauge demand for the initiative in terms of market volumes and the depth of the investor base.

In the meanwhile, the European Commission and the EIB will organise on 11 April a conference on the Project Bond Initiative which will feed into the consultation process. Following the completion of an impact assessment, the Commission will bring forward a proposal for the implementation of the Europe 2020 project Bond Initiative.