EIB welcomes first successful use of project bond credit enhancement and provides EUR 500m for Castor energy storage project in Spain
- Release date: 30 July 2013
- Reference: 2013-117-EN
The first transaction under the Project Bond Credit Enhancement initiative has successfully taken place. Investment in the Castor underground gas storage project, that will provide storage for 30% of Spain’s daily gas consumption, was supported by the successful issue of the first European Investment Bank supported project bond. The EIB will provide a total of EUR 500 million for the project. The Castor project is being developed by ACS Group and Dundee Energy and the promoter is the Spanish Ministry of Industry.
The EUR 1.4 billion bond issue for the Castor project was supported by a EUR 200 million liquidity line under the Project Bond Credit Enhancement Initiative which allowed the project to achieve a credit rating more attractive to investors. The EIB will also purchase EUR 300 million of the bonds as an anchor investor. The issue was placed with a wide range of institutions from across Europe.
“Unlocking the support of institutional investors to provide long-term investment in European infrastructure is crucial for stimulating economic growth and creating new jobs. The European Investment Bank is committed to supporting investment essential for Europe’s future and congratulates Castor for successfully demonstrating how using project bond credit enhancement can enable increased support for long-term investment during challenging economic times. We expect the pilot phase of the joint EIB-European Commission project bond credit enhancement initiative to add a new dimension to the EU Bank’s contribution to infrastructure finance in Europe.” said European Investment Bank President Werner Hoyer.
"Successful issue by Castor of the first project bond is a welcome sign of increasing support for long-term investment essential for sustainable growth in Europe. The project bond initiative is an innovative way to unlock private investment in infrastructure and a key element in helping to boost growth and jobs. The pilot phase is an important first step in view of the next EU financial framework, underlining the role of the EU budget as an engine for growth.” said European Commission Vice President Olli Rehn.
The Europe 2020 Project Bond Initiative, a joint programme by the European Commission and the EIB is designed to stimulate capital market financing for infrastructure delivered under ‘project finance’ structures. The pilot phase will benefit from EUR 230 million from the EU budget and will focus on encouraging capital market investment worth more than EUR 4 billion for transport and energy investment. To benefit from credit enhancement during the pilot phase suitable projects will need to reach financial close between now and the end of 2016, provided that the EIB obtains financing approval by its Board before the end of 2014.
To date nine energy and transport projects eligible for Project Bond Credit Enhancement, in six EU countries, have been approved by the EIB Board. These include motorway projects in Belgium, Germany Slovakia, and the UK, grid connections to offshore wind farms in Germany and the UK, and as well as gas storage facilities in Italy. The Castor project is expected to be followed by additional project bonds later this year and in 2014. Under the project bond model bonds are issued by the project companies themselves, and not the EIB or the Member States. The role of the European Investment Bank is to provide credit enhancement through a subordinated instrument, either a loan or contingent facility, to support the senior debt issued by the project company.
Banco Santander has acted as Global Coordinator in the Castor transaction.