1999 Annual Press Conference

The EIB finances Europe's modernisation and sets course for the new millennium

In 1998, the European Investment Bank reinforced its key position as the European Union's financing institution for setting Europe's course for the start of the millennium. The main thrust of the EIB's EUR 30 billion in borrowing as well as in lending operations during the year was focused on preparing the way for the introduction of the euro and on supporting capital investment to promote Europe's modernisation and growth and future enlargement. The financial basis for the Bank's continuing operations into the next millennium was secured by an increase in its capital to EUR 100 billion from 1 January 1999.On capital markets, as part of its positive euro-strategy, the EIB used its position as the world's largest international borrower to contribute to the successful launch of the euro by creating a large and widely diversified pool of the new currency. It issued benchmark euro-denominated and euro-tributary bonds totalling EUR 15 billion across the whole yield curve, including a euro-global issue placed simultaneously in Europe, America and Asia, as well as the first ever pure euro bond. This year it has begun redenomination of relevant borrowing lines into euro and by mid-1999, it will have in place a pool of euro debt of over EUR 50 billion. As the largest non-sovereign borrower in the Euro zone, the EIB expects to raise up to a further EUR 30 billion this year, of which about 60% is likely to be in euro.

The majority of the funds raised by the EIB's capital market activities were used to finance sound investment to promote modernisation and growth in the European Union and to create the basis for the successful development of EMU. Under its Amsterdam Special Action Programme (ASAP) the Bank placed a particular emphasis in bolstering Europe's risk capital industry to support the activities of small and medium-sized enterprises, essential for Europe's future growth and employment. Since November 1997, the EIB has approved a substantial EUR 560 million for equity or quasi-equity funding targeted at high-growth small businesses. This was in addition to EUR 2.7 billion in traditional loans during 1998 for investment by small and medium-sized enterprises, arranged through banking partners in every Member State of the Union. Since November 1997, also under the ASAP programme, the Bank has approved EUR 3 billion for new investment in Europe's human capital in the areas of health and education, and EUR 4 billion for 40 projects for urban renewal and renovation, as well as for other environmental schemes.

Outside the European Union, the Bank strengthened its support for the EU's external aid and co-operation policies. In particular, it committed loans of nearly EUR 2.4 billion in the pre-accession countries of Central and Eastern Europe and Cyprus. This amount, boosted by the introduction in January 1998 of the Bank's new Pre-Accession Lending Facility, made the EIB the largest single source of international loan finance in these countries.

EIB President and Chairman Sir Brian Unwin said: "The sheer variety and volume of the Bank's 1998 operations highlighted its key role in promoting the economic and social welfare not only of the members of the present European Union but of the enlarged Union of the future. By our euro-directed funding activities we helped to ensure the successful launch of EMU at the end of the year; and the development of operations under the Amsterdam programme to provide risk capital for small businesses and finance investment in human capital projects contributed significantly to maintaining the momentum of the European Council's Growth and Employment initiative. Outside the Union, the Bank significantly increased its support for investment to help prepare the candidate countries in Central and Eastern Europe and Cyprus for Union membership. The Bank's important role was acknowledged in the most practical terms by the Member States when they agreed unanimously to increase the Bank's subscribed capital, thus providing a solid platform for its continuing operations into the coming millennium."

1998 key features

• Lending totalled EUR 29.5 billion (+13%), of which EUR 25 billion in the EU.

• Borrowing: nearly EUR 31 billion (+30%) launched on capital markets in 20 different currencies.

• Pro-active euro financial strategy: half of borrowing in euro-denominated and euro-tributary bonds totalling EUR 15 billion; implementation of the first ever Global Commercial Paper (CP) Programme of EUR 5 billion.

• Rapid implementation of the Amsterdam Special Action Programme (ASAP) to support growth and employment since its launch in November 1997:
  • EUR 560 million equity and quasi-equity financing approved for high-growth, innovative small and medium-sized enterprises (SMEs) with job-creating potential through specialised partner financing institutions in all EU Member States
  • EUR 3 billion approved for projects in the labour-intensive "human capital" areas of education and health
  • EUR 2.6 billion approved for urban renewal.

• Continued strong support for SMEs: EUR 2.7 billion under traditional global loan arrangements with partner banks benefiting some 10 000 SME ventures.

• EUR 8.2 billion signed for Trans-European Networks (TENs) in transport, telecommunications and energy within the EU, of which EUR 3.4 billion for telecommunications. An additional EUR 1.5 billion went to schemes linking the Union with partner countries in Central and Eastern Europe. Total approved loans for TENs and linked infrastructure schemes since 1993 comes to EUR 56 billion.

• Increased lending totalling EUR 17 billion for projects in less-advanced regions: 72% of total finance in the EU.

• Sharp rise of lending (+60%) to EUR 2.4 billion in the applicant countries in Central and Eastern Europe and Cyprus, boosted by the new Pre-Accession Lending Facility.

• Doubling of lending in ACP countries and the Republic of South Africa, to EUR  700 million.

• Major (over 60%) increase of the Bank's capital to EUR 100 billion, lifting the lending ceiling to EUR 250 billion.

Borrowing

• Strategic support for the introduction of the euro: the EIB's strong performance on the international capital markets in 1998 was focused on its pro-active euro-strategy, aimed at speeding up the early creation of a liquid and widely diversified euro market, prior to the start of EMU. This reinforced the Bank's policy, launched in 1997, to issue euro-denominated and euro-tributary bonds allowing the market to develop a future yield curve for the euro. In 1998, it launched a range of euro and euro-tributary issues, equivalent to EUR15 billion, including Euro-zone (EU-11) currencies DEM, FRF, ITL, ESP and PTE and "pre-in" currencies GBP and GRD. These operations added to the EUR 6 billion euro-related bonds issued in 1997, bringing total euro-related issues to EUR 21 billion, with maturities ranging from 5 to 30 years.

• Other 1998 borrowing highlights included the launch of a EUR 2 billion first EIB euro global issue in February, placed simultaneously on the European, American and Asian markets, and the first-ever pure euro issue, for EUR 1 billion, in December, with a payment date of 7 January 1999. This issue was the first fixed-income transaction in which all cash flows were to be settled in euro.

• The Bank issued the first-ever EUR 5 billion Global Commercial Paper (CP) Programme replacing all its CP programmes in ECU, GBP, ITL, NLG, and USD, and providing it with access to the widest possible investor base.

• The EIB's pro-active euro strategy is aimed at the creation of a critical mass of outstanding debt in euro. Since 1 January 1999, the Bank has implemented a redenomination scheme for its existing EU-11 debt, while ECU debt automatically has already been converted into euro. The Bank is also converting its tributary-debt for euro-debt at the three first redenomination dates in 1999. In June 1998, it launched a Euro Debt Exchange Offer enabling its bondholders, from time to time, to exchange bonds in EU-11 currencies into euro or euro-tributary issues. These operations will provide the Bank by mid-1999 with a debt pool in euro in excess of EUR 50 billion, which would mean that its objective to create a critical mass of outstanding debt in euro would be achieved.

• Supporting the new capital markets in Central and Eastern Europe: the EIB has stepped up its presence on capital markets in the region, launching bond issues on Euro-markets in Czech Korunas, Estonian Kroon and DEM-indexed synthetic Polish Zloty to channel international and domestic savings into local productive investment projects and to encourage the growth and internationalisation of the region's capital markets. It has also placed its first AAA-rated bonds in the Hungarian domestic market with a Hungarian Forint Debt Issuance Programme of HUF 20 billion (some EUR 100 million) and intends to launch similar programmes in other applicant countries. The Bank has played a similar role in developing domestic capital markets in new EU Member States, for instance in Greece, Spain and Portugal.

Breakdown of issues launched (in Mio EUR)

	Before swaps:		After swaps:
EUR	4 700	15.2%	4 754	15.4%
DEM	2 854	9.2%	4 559	14.7%
ITL	4 116	13.3%	4 116	13.3%
ESP	357	1.2%	1 102	3.6%
FRF	696	2.2%	847	2.7%
PTE	74	0.2%	395	1.3%
FIM	0	0.0%	128	0.4%
LUF	49	0.2%	0	0.0%
Total EURO-11	12 846	41.4%	15 902	51.4%
GBP	7 949	25.6%	8 069	26.1%
GRD	255	0.8%	255	0.8%
SEK	120	0.4%	120	0.4%
DKK	0	0.0%	30	0.1%
Total PRE-IN	8 324	26.9%	8 474	27.4%
Total EU	21 170	68.3%	24 376	78.7%
USD	9 005	29.0%	6 451	20.8%
NOK	60	0.2%	60	0.2%
ZAR	344	1.1%	29	0.1%
HUF	28	0.1%	28	0.1%
CZK	64	0.2%	11	0.0%
TWD	170	0.5%	0	0.0%
CAD	62	0.2%	0	0.0%
HKD	59	0.2%	0	0.0%
JPY	28	0.1%	0	0.0%
EEK	9	0.0%	0	0.0%
Total non EU	9 831	24.4%	3 387	14.7%
TOTAL	31 001	100.0%	30 955	100.0%

Lending (1)

Lending in European Union countries

With total lending in the European Union of EUR 25 billion, 1998 saw a rapid implementation of new financing facilities benefiting projects in support of growth and employment and human capital-related investment. At the same time, the Bank sustained the high lending volumes of its "traditional" core activities furthering EU policy objectives with a top priority for regional development.

• Amsterdam Special Action Programme (ASAP): launched in November 1997 as the Bank's response to the June 1997 Amsterdam Summit's Resolution on Growth and Employment, ASAP has become a key EIB activity. Its three main components are: a special SME Window for risk capital facilities for innovative SMEs with growth and job creating potential; extension of lending into the "human capital" sectors of education, health, and urban renewal; and, stepping up financing for Trans-European Networks (TENs) and the environment.

• Small and medium-sized enterprises: a key target for EIB financing, both through traditional global loan arrangements and the ASAP SME Window. Under the SME Window since November 1997, the EIB has approved EUR 560 million for 24 equity and quasi-equity operations in all 15 Member States. This also included the European Technology Facility (ETF), a new EUR 125 million instrument managed by the Bank's affiliate, the European Investment Fund (EIF), to support venture capital funds. 16 operations for EUR 62 million have been approved under the ETF. The EIB and the EIF are co-operating with specialised financing institutions throughout the Union as catalysts to provide a new impetus to the EU's risk capital markets. Risk-sharing operations under the Window are backed with up to EUR 1 billion set aside from the EIB's surpluses.
  In 1998, allocations from global loans benefiting SMEs amounted to over EUR 2.7 billion, involving 10 000 SME ventures.

• Under ASAP, the Bank has begun to be active for the first time in the sectors of education and health. It has so far, since November 1997, approved EUR 3 billion for 24 operations in these areas, also benefiting smaller schemes under dedicated global loans in Belgium, Denmark, France, the Netherlands, and Finland. Urban renewal projects received EUR 2.6 billion and other environmental schemes another EUR 1.3 billion.

• Regional development: the Bank increased its lending in assisted areas to EUR 17 billion - accounting for 72% of total lending within the Union - in keeping with its prime task to enhance the Union's balanced social and economic integration. EIB loans contributed to about 5% of new capital investment on average in the EU as a whole, while amounts in the Cohesion Countries of Greece, Spain, and Portugal were markedly higher, amounting globally to 9%.

• The EIB remained a leading provider of finance for Trans-European networks (TENs) in transport, telecommunications and energy transmission, lending EUR 8.2 billion for TENs within the EU and another EUR 1.5 billion for links with candidate countries in Central and Eastern Europe. 1998 saw an increase to EUR 3.4 billion signed for telecommunications networks (both mobile and conventional); while EUR 4.4 billion went to transport projects, including EUR 1 billion for priority TENs (see below); and EUR 400 million for energy networks, of which a quarter for priority TENs.
  Since 1993, the Bank has approved loans for TENs and associated projects totalling EUR 56 billion, of which EUR 50 billion within the EU, representing aggregate investment of more than EUR 160 billion. Approvals for priority TENs in transport and energy transfer, as defined by the Essen European Council in December 1994, total EUR 12 billion for nine out of fourteen transport projects, and EUR 2.5 billion for seven out of ten energy schemes. Besides, loans signed in support of priority transport corridors and telecom and energy networks in applicant countries in Central Europe came to EUR 3.3 billion, of which EUR 1.5 billion approved for transport corridors in 1998. In the Mediterranean region, EUR 940 million were made available for a gas pipeline bringing gas from Algeria through Morocco to the Union's grids.

• Public Private Partnerships (PPPs): in 1998, the Bank continued providing tailor-made financing under its special TENs Window to meet the requirements of PPPs, for instance the Athens International Airport Spata, the Great Belt link in Denmark, the Öresund link between Denmark and Sweden, the Channel Tunnel Rail Link (CTRL) and the London Underground in the United Kingdom, and the Belgian section of the PBKAL high-speed rail network. In the education sector, the EIB co-financed the Falkirk School PFI project in Scotland. As the EU's financing institution, the Bank also operates as a catalyst attracting other sources of bank financing, often in association with other forms of EU funds, in particular grant finance from the Union's structural funds and the TENs budget line of the European Commission, as well as guarantees from the European Investment Fund.

Breakdown of lending according to EU policy objectives (in Mio EUR) (2)

Lending in applicant countries

1998 was the first year of implementation of the Pre-Accession Lending Facility, which along with existing financing mandates brought a sharp increase in EIB lending in the applicant countries of Central and Eastern Europe and Cyprus, to EUR 2.4 billion.

• Central and Eastern Europe: loans totalling EUR 2.3 billion (+60%) were made available in the ten applicant countries under the Bank's EUR 3.5 billion lending mandate and a EUR 3.5 billion Pre-Accession Facility (launched in January 1998), both running to the year 2000. The Bank's loans were made in direct support of the objectives in the Pre-Accession Partnership Agreements. The investment financed focused on economic integration, both with the EU and within the region, and on support for the adoption of the EU's rules, regulations and standards (acquis communautaire), with particular emphasis on environmental protection. EUR 1.7 billion out of total EUR 2.3 billion finance went to transport schemes such as the modernisation of railway lines in Hungary, Lithuania, and Romania, road improvements in Bulgaria, Lithuania, Poland, the Czech Republic, Romania and Slovenia and urban transport projects in Budapest, Krakow and Katowice. The Bank is the largest source of loan finance in the region, increasingly operating in co-operation with grant aid from the EU's Phare programme and with other multilateral financing institutions such as the EBRD.

• Cyprus : EUR 80 million were advanced, of which EUR 50 million global loan finance under the Pre- Accession-Lending Facility benefiting SMEs in the industrial, agro-industrial, tourism and service sectors.

Lending in other partner countries

The EIB's lending outside the European Union, underpinning the Union's financial aid and co-operation policies with some 100 countries throughout the world, amounted to EUR 2.0 billion, including EUR 360 million for operations using risk capital from EU or Member States' budgetary resources.

• Mediterranean region: lending amounted to nearly EUR 1 billion. Key areas of activity were water supply, energy, environment and the private sector. In line with the Euro-Med Partnership's target to help the private sector to restructure and expand in preparation of the gradual establishment of a free trade zone with the EU Member States by the year 2010, the EIB advanced EUR 250 million for the development of the private sector, including projects in Gaza/West Bank, Egypt, Jordan, Morocco, and Tunisia, many of these with involvement of the local financial sector.

• Lending in the African, Caribbean and Pacific (ACP) States under the Lomé Convention and the Republic of South Africa more than doubled to EUR 700 million, including EUR 135 million in South Africa. This sharp increase was mainly due to the entry into force of the Lomé IV Second Financial Protocol as from 1 June 1998 (almost all of the loans were signed after this date). The protocol, which extends to the year 2000, enables the EIB to provide EUR 1.6 billion from its own resources and another EUR 1 billion from budgetary risk capital resources from the European Development Fund. In 1998, the Bank reinforced its support for development of the private sector with EUR 100 million going to both large and smaller business ventures.

• Asia and Latin America: loans totalled over EUR 360 million of which EUR 220 million in Latin America. The Bank's lending in both regions is aimed at projects involving technology transfer; joint ventures between companies from the regions and the EU; telecommunications and transport; regional integration; and environmental protection.
  The EIB donated to both Honduras and Nicaragua EUR 250 000 as a contribution to the emergency relief efforts of the international community after destruction caused by Hurricane Mitch. The Bank's donations will benefit projects and actions in the social sphere, such as an orphanage and hospitals.

• The Bank formalised its lending in Albania, totalling EUR 22 million in 1998, by signing a Framework Agreement on 9 February. Since 1 January 1998, it has operated in FYR Macedonia, under a two- year lending mandate of EUR 150 million for rail, road and other infrastructure projects, advancing its first loan in July for two key motorway sections.

Capital increase

The EIB's Board of Governors increased the Bank's subscribed capital from EUR 62 billion to EUR 100 billion as from 1 January 1999. This 62% increase raised the statutory ceiling on EIB lending to EUR 250 billion (250% of subscribed capital), providing sufficient headroom for lending for at least the next five years.

The paid-in capital was set at 6% (EUR 6 billion) of the subscribed capital, entirely funded through a transfer from the Bank's accrued reserves, not requiring any cash demand from the owners, the EU's Member States.

(1) Details on lending operations can be found in the "Loans" chapter. (2) As certain financing operations meet several objectives, the amounts for the various heading cannot be meaningfully added together.