CO-INVESTMENT DWS RAILCAR LEASING

Co-investment in a pan-European rolling stock leasing company to finance exclusively the renewal of freight railcars to be leased predominantly in Europe

EIB investment in the project will contribute to rail freight competitiveness on a European scale and will support the liberalisation process of the railway sector in line with EU policy objectives. The Bank's involvement will allow the Promoter to complete the equity needs for the project. The company will acquire railcars to be leased to private and public operators and companies in EU. The project will support decarbonisation of EU economic flows by developing cleaner ways of transportation and contribute to the renewal of the European freight railcars.

This operation will support a coherent plan for rejuvenation of the European fleet of rolling stock of Ermewa, the second largest European rail lessor, allowing it to maintain and gain critical size and consolidate its team with a long-term strategy. Rail freight is a sector that will require significant financing over the coming years, accommodating future sustainable growth post-Covid 19, an essential ingredient in the greener EU economic recovery program.

Fully aligned with the objectives of the Paris Climate Agreement and yielding good economic returns, social and environmental benefits and employment, the operation contributes to the Bank's lending priority objectives for Transport (Rail), as well as on climate action. The strategy of the promoter involves core aspects of the EU Sustainable and Smart Strategy and the EU's overall objective of cutting greenhouse gas emissions by 55% by 2030, resulting in a policy value rated 'very good' under the Bank's Transport Lending Policy (TLP).

Moreover, the project offers a strong business model, allowing the promoter to maintain and gain critical size and consolidate its team with a long-term strategy. It is expected to yield very good quality and results, due to avoided greenhouse gas emissions, good economic and social benefits, very good employment creation and an adequate governance system. Overall, the Project is expected to have a very good economic return.

The project is supported by sound governance and capabilities of the Promoter. With the appropriate conditions in place, the project is acceptable for financing in environmental and social terms.

The co-investment provided by the Bank under this operation reinforces the Bank's contribution to the rail freight sector and its role through the Fund. EIBs strict environmental and climate conditions have a signaling to effect for other investors, including follow-on investors for the continued growth of Ermewa.

The manufacturing of wagons will take place at the manufacturer's plants and does not therefore fall within the scope of the EIA Directive; therefore no environmental impact assessment (EIA) is required. The provision of improved rail freight services is expected to attract freight transport away from the roads. This would be environmentally beneficial as it reduces energy consumption, road congestion, noise and pollution and increases transport safety. Compliance with EU environmental regulations is to be assessed during appraisal, together with the application of correct environmental policies and procedures for the scrapping of old vehicles. If any of the company investments (associated facilities) falls under Annex I or II of the Environmental Impact Assessment (EIA) Directive 2011/92/EU, the company will be required to perform for these specific investments a full environmental impact assessment or a screening by the national competent authority on the basis of Annex III to determine the need for further assessment. The company will be required to develop an environmental & social policy and establish the appropriate management systems so as to comply with the environmental and social requirements of the Bank. The assessment of the environmental and social impacts and risks will be part of the standard due diligence process that the company will have to carry out for each underlying investment, thereby ensuring that the portfolio and these investments are in compliance with national law, EU environmental legislation as well as the EIB's Environmental and Social Standards.

The Promoter has been assessed by the EIB as being a private company not operating in the utilities sector and not having the status of a contracting entity, and is thus not subject to EU rules on public procurement. However, if after the project appraisal, the EIB were to conclude that the Promoter is after all subject to EU public procurement legislation, then the Bank would require the Promoter to ensure that contracts for the project have been/will be tendered in accordance with the relevant applicable EU procurement legislation.