The European Investment Bank, the European Union's long-term financing institution, is lending EUR 105 million (1) towards the purchase and provision of up to 7 000 modern freight wagons for Europe's railways. The finance goes to AAE Wagon Finance, Luxembourg, a special purpose company of AAE Cargo AG (AAE Cargo), Europe's largest private standard rail freight wagon owner-lessor.

The total facility provides AAE with EUR 350 million of funding and the senior co-funders are CIBC World Markets (arranger), Canada, KFW (Kreditanstalt für Wiederaufbau) of Germany, as well as the European Investment Fund (part of the EIB Group) which is guaranteeing part of the arrangement. The EIB is providing the most senior tranche of the financing package.

The new fleet will include intermodal wagons for containers and road vehicles, sliding door covered wagons, flat wagons and open box wagons. The fleet will be capable of laden speeds of 120 km/h and axle loads of 22.5 tonnes or more, in line with modern and efficient operating standards. All wagons will be certified for international cross-border operation throughout Europe, including Central and Eastern Europe.

The wagons, which will be leased to European railway companies, will help modernise and renew the existing rail freight fleet, and assist the companies' to compete more effectively with road transport services and enhance their services to existing and new markets. The average age of the European fleet is some 25 years compared to a technical economic life of around 30 years.

Commenting on the financing, EIB Vice-President Peter Sedgwick said: "The EIB is very pleased to be financing the investment as it supports EU policies to modernise transport systems and to encourage the transfer of freight traffic from road to rail. This will help reduce energy consumption, decongest road networks, reduce noise and pollution, and increase transport safety."

Annual average rail freight is expected to grow up to 2.5% over the next 20 years, leading to a substantial increase in the volume of traffic transported by rail. The EIB expects rail freight volume to reach some 300 billion tonne-km by in 2010, from 237 billion tonne-km in 1997.

AAE Cargo is registered in Switzerland. The company was established in 1991, and is owned by AAE Ahaus Alstätter Eisenbahn Holding AG and GATX Corporation, a quoted American based finance and services group. The AAE Group's main activity is the leasing of freight wagons to state railways and private railway operators throughout Europe. The group also owns and operates a 12 km railway line between Münster, Germany, and the Dutch border, and operates freight services on a further 100 km of German infrastructure in partnership with the Deutsche Bahn.

The European Investment Fund is a public-private partnership, established by the EIB, the European Commission and private and public financial institutions from EU Member States. The EIF provides credit guarantees and credit enhancement for debt financing.

The European Investment Bank, the European Union's long-term lending institution, finances capital investment furthering EU integration, in particular: regional development; trans-European networks in transport, telecoms and energy; industrial competitiveness and integration; SMEs; environmental protection; and energy security. It also operates outside the EU within the framework of the EU's co-operation external policy. Owned by the Member States, the EIB raises its funds on capital markets (AAA issuer). In 1999, the EIB lent some EUR 30 billion.

The European Investment Fund (EIF) shareholders, at their Annual Meeting in June 2000, approved a reform of the Fund allowing the EIB to become the majority shareholder with a stake of over 50%. The reform clears the way for the concentration of all the EIB Group's risk capital activities in the hands of the EIF and will make it possible to target operations in this highly specialised field more effectively. The EIF's activities are particularly focused on facilitating the access to investment finance for SMEs through investments in venture capital funds, particularly those promoting innovative businesses and through portfolio guarantees for financial intermediaries supporting SME activities.

(1) 1 EUR: 0.632300 GBP.