independent

Friday 25 April 2014

EIB funds Bord Gais and AIB as it identifies key projects

THE European Investment Bank (EIB) has announced €235m of new financing for Bord Gais and AIB and says more is on the way.

The EIB has agreed a new €155m loan for Bord Gais and is backing an innovative €80m "risk sharing" loan deal with AIB targeted at boosting lending to Irish high tech companies, normally seen as too risky for bank loans.

A further €90m loan has already been earmarked for Bord Gais and is set to be formally agreed next year.

A second, bigger, loan to boost AIB's lending to traditional small and medium enterprises (SMEs) is also set to be announced imminently.

The EIB has become an increasingly active lender in Ireland since July when its president Werner Hoyer paid a high profile visit to Dublin.

A high level working group of officials from the Government and the bank has since been established and is being tipped as a model for other bailed out countries badly hit by a lack of credit.

It has identified funding for infrastructure, high-potential start-ups, SMEs and agrifoods as priority areas.

The Government wants the EIB to double to €1bn its lending to Irish borrowers next year, in an effort to replace absent bank lending and stimulate the economy.

"Our message is that we look forward to doing more business here and lending more money to the Irish Government and the Irish private sector," EIB vice president Mihai Tanasescu said in Dublin yesterday.

The new Bord Gais loan is to finance development of six "onshore" windfarms in counties Clare, Kilkenny and Tipperary with a total capacity of 141 megawatts.

Matching funding from the semi-state means the total investment will be €311m, the EIB said yesterday in a statement.

The Bord Gais loan will be taken either as a nine-year facility repaid in one payment or as a 15-year amortising loan.

It's the latest successful debt financing by Bord Gais following last week's €500m bond deal.

The new windfarms, some of which are already close to completion, will come under the hammer next year when Bord Gais is due to sell power generation assets to meet the New Era privatisation targets.

A sale will not affect the terms of the new loans, Bord Gais chief finance officer Michael O'Sullivan said.

The Luxembourg-based EIB has provided more than €1.4bn for energy infrastructure in Ireland in the past five years.

The €80m of funding for AIB will allow the bank to increase lending to "innovate" companies under a structure known as a "risk-sharing instrument". It means the EIB will guarantee 50pc of loans of up to €7.5m that AIB makes to eligible start-ups and SMEs.

It will be targeted at export and innovation-oriented companies seen by the Government as engines of growth, but often viewed by banks as high risk.

EIB vice president Mihai Tanasescu said his bank is pushing to reopen Public Private Partnership (PPP) funding of infrastructure projects, including examining a deal to fund new work on the M11 motorway.

It is already funding refurbishment and new projects for the Department of Education.

The EIB will lend to almost all sectors, in the private or public sector, but will only fund up to 50pc of any project.

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