In a PPP, commercial financing is generally the responsibility of the PPP company not the public contracting authority But a TEN-T PPP may offer the potential to benefit from a range of financial instruments established by the EU. These may have the effect of increasing the affordability and / or value for money of the project to the public sector The TEN-T Executive Agency will be able to advise further on the applicability of the instruments noted in this section to specific projects

Grants from the Cohesion and Structural Funds

EU grant funding may be available for projects located in areas which benefit from the Cohesion or Structural Funds (see Box 2 Combining Cohesion and Structural Funds with PPPs). In these cases, the public authority will often play a significant role in mobilising this financing (e.g. grants must usually be channelled through a sponsoring public sector entity).<1>

TEN-T funding instruments

In addition to funding available through the TEN-T Annual and Multi-Annual Programmes' Calls for proposals, there are other financing instruments and initiatives that have been designed to facilitate the procurement and implementation of TEN-T projects using PPP arrangements: <2>

□ Construction cost-based grants equivalent to up to 30 percent of the total construction cost to support payment obligations after project completion in availability-based PPPs;

□ Provision of loan guarantees: up to EUR 500 million is availableto support a loan and guarantee instrument (see LGTT below); and

□ Provision of risk capital: up to 1% of EUR 80 billion of the TEN-T budget can be invested as equity or quasi-equity through a dedicated infrastructure fund (see Marguerite fund, below).

The Community's financial envelope for the implementation of the TEN-T Programme for the period 2007-2013 is approximately €8 billion. <3>(4)

EIB finance

The European Investment Bank is also an important source of loans and guarantees for TEN-T projects.

Other initiatives, such as the facilitation of the issuance of TEN-T project bonds, are currently being considered by EIB and the EU Commission. <3>

Loan Guarantee for TEN-Transport (LGTT)

The LGTT was set up and developed jointly by the EIB and the European Commission with the aim to attract a larger private sector participation in the financing of revenue-risk TEN-T projects. The instrument enables the transfer of demand risk inherent in a concession-based PPP project during the early years of operation thereby significantly improving the financial viability of the project and making the capital structure more robust. By providing the guarantee the EIB is taking over this risk by potentially becoming amezzanine lender to the project. The flexibility of the LGTT structure permits a tailoring of the product to fit the needs of the project. The product fits optimally with state-guaranteed senior debt and is an excellent element in mini-perm structures.

The EIB and the EC have committed capital of EUR 500 million each to enable LGTT of around EUR 5 billion to be issued until 2013. The EC contribution is made from the current TEN-T Budget while the EIB part is under the Structured Finance Facility (SFF) capital allocation.

The instrument was launched in 2008 and during its first full year of operation in 2009 it was used in three PPP road projects that reached financial close with a total guarantee amount of EUR 70 million. <5>

A recent example of a TEN-T PPP project which used the LGTT instrument is A5 (Malsch-Offenburg) motorway in Germany. <6>

Marguerite Fund

The Marguerite Fund, established by the EIB and a number of partners, is designed to support equity investments in new (greenfield) infrastructure projects in the areas of transport (TEN-T), energy (TEN-E) and renewables. The target volume of the Fund is EUR 1.5 billion, of which over EUR 700m has already been committed during the initial closing in March 2010.

In subsequent fund-raising rounds, other institutional investors, both private and public may join the Fund. In parallel to the equity commitment, the Core Sponsors and other institutions have also established a EUR 5 billion debt financing initiative. The Fund is expected to be a model in the future for other similar public and private funds in the EU in view of the approach taken to combining market principles while still supporting public policy objectives.  (7)