UK: Europe 2020 Project Bond Initiative

Last Updated: 10 March 2011
Article by Michelle T. Davies and Paul-Michael Rebus

Originally published 9 March 2011

On 28 February 2011 the European Commission launched a public consultation on the "Europe 2020 Project Bond Initiative" (the "Initiative") aimed at boosting the funding of projects with long-term revenue potential in line with the Europe 2020 policy priorities. Its objective is to help private project companies to attract capital market funding from investors such as pension funds and insurance companies. The Energy sector has been specifically highlighted as a key area for the initiative.


Project bond issuance has come to a halt as a result of the financial crisis. In addition, long-term investors, notably pension funds and insurers, lack the appetite for the diversity of project risks and currently do not have the specialist expertise required to appraise projects and carry out the resulting analytical and administrative follow-up tasks which used to be performed by specialist insurance providers known as monolines.

Banks face capital and liquidity constraints. Multi-lateral lending institutions, in particular the European Investment Bank (EIB), have stepped in to bridge the financing gap temporarily, but cannot continue to do so single-handedly.


The principal idea behind the Initiative is to provide EU support to project companies issuing bonds to finance large-scale infrastructure projects. The Commission's key role will be risk-sharing with the EIB (or other financing partners), enabling them to provide guarantees or loans to support such bonds.

It is intended that the Initiative will attract additional private sector financing of individual infrastructure projects through the capital markets with the help of project finance techniques that will rank the future claims on a project's cash flows in order of seniority. Whereby senior claims are served before subordinated claims, which in turn are repaid before equity holders.

By providing support at the subordinated level, the Initiative would absorb much of the risk of insufficient cash being available to service the senior debt, thereby raising its credit quality. This is known as "credit enhancement".

The Initiative would be available to those projects that are economically and technically sound and cost effective and that have a real prospect of financial viability.

The Initiative would result in reduced funding costs for projects with longer maturities, while meeting the demand of institutional investors (such as pension funds and life insurance companies) for stable, long term assets.

Renewable Energy

It is estimated that in the energy sector public and private entities in the Member States will need to spend around €400 billion on distribution networks and smart grids, another €200 billion on transmission networks and storage as well as €500 billion to upgrade and build new generation capacity between now and 2020.

In the renewable energy or low carbon sectors, a challenge arises when the underlying infrastructure projects use untested technologies or are located in a new market, have uncertain operating costs or when the financing cannot be obtained at reasonable cost. However, certain classes of renewable energy projects may have the required characteristics.


The purpose of the consultation is to obtain market participants' and decision makers' feedback on the chosen mechanism and its essential terms and conditions and to gauge demand for the initiative in terms of market volumes and the depth of the investor base.

In addition, the Commission, together with the EIB, intends to organise a conference on 11 April 2011 in Brussels to address a number of the questions raised in the consultation paper. Those questions include:

1) Is the chosen mechanism likely to attract private sector institutional investors to the sectors of transport, energy and ICT in particular? If you are an investor, would you be prepared to buy such project bonds?

2) Are there other sectors with large-scale infrastructure financing needs that should be included?

3) Would the credit enhancement facilitate/accelerate the conclusion of financing packages?

4) What minimum rating of the bonds would be sufficient to attract investors?

5) What degree of credit enhancement would be necessary to achieve this rating?

6) Which impact would the Initiative have on financing costs and on maturities?

7) Is it essential that a single entity acts as controlling creditor?


The contributions from stakeholders to the consultation paper received by 2 May 2011 will directly feed into the reflection on the design of the Initiative. The aim is to have a fully-fledged proposal ready in June 2011 in the context of the next Multiannual Financial Framework with the intention of having the Europe 2020 Project Bond Initiative fully operational in 2014.

Environmental Bonds 2011 - London, 14 March

Finally, we would like to remind you about the Environmental Bonds 2011 Conference which is taking place on Monday 14 March at the Guildhall, London. At this conference an expert panel of speakers will review and explain the latest thinking on how the bond market could help attract $billions of additional capital to tackle environmental challenges.

For further information or advice, please contact:

Michelle Thomas
Partner, Head of clean energy and sustainability
Tel: 0845 498 7553

Paul-Michael Rebus
Tel: 0845 497 4511

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.