on the mid-term review of the application of the Decision N° 466/2014/EU as regards the EU guarantee to the European Investment Bank against losses under financing operations supporting investment projects outside the Union

Executive Summary

This Staff Working Document communicates the methodology, analysis, findings, conclusions and recommendations of the mid-term evaluation of the European Union Guarantee for the European Investment Bank ("EIB") External Lending Mandate ("ELM"). The purpose of this evaluation was to assess the application in the first years of Decision No 466/2014/EU ("the Decision") adopted on 16 April 2014 by the European Parliament and the Council.

The independent external evaluation has been executed by a contractor who works under direct monitoring and supervision of a Steering Committee consisting of representatives from relevant Commission DGs, the European External Action Service ("EEAS") and the EIB. The findings of the final evaluation report of the Contractor and contribution from EIB feed into the Commission's mid-term report.

Background

The Decision has the purpose of granting an EU guarantee to the EIB against losses under financing operations signed over the period 2014-2020 in support of investment projects in eligible countries outside the Union (Annex III to the Decision). Following the signature of the Guarantee Agreement by the Commission and the EIB on 25 July 2014, the current ELM entered into force. The EU guarantee is granted as a global guarantee in respect of payments which were due to the EIB but were not received by it. Those payments must be in connection with loans, loan guarantees and debt capital market instruments granted for or issued for the benefit of EIB investment projects outside the Union.

The EU guarantee is granted only for EIB financing operations which, while complying with the requirements laid out in the Decision, have added value on the basis of the EIB's own assessment and support any of the following high-level objectives, defined in the Decision:

1. Development of the local private sector, in particular support to small and medium-sized enterprises ("SMEs");

2. Development of social and economic infrastructure, including transport, energy, environmental infrastructure, information and communication technology, health and education;

3. Climate change mitigation and adaptation.

In addition to those three high-level objectives, regional integration among countries is considered as an underlying objective, including in particular economic integration between Pre-accession countries, Neighbourhood countries and the Union.

Evaluation results and conclusions

The design of the ELM

All the operations launched under the ELM since its inception in July 2014 are fully aligned with the three objectives stated in the Decision. Those three objectives themselves are aligned with the Sustainable Development Goals as defined by the United Nations. Moreover, the ELM has supported the Union's external policy agenda, showing sufficient flexibility and reactivity to the geopolitical challenges as demonstrated through the cases of Syria, Ukraine (the Ukrainian crisis), Egypt and Morocco (“Arab spring”) and Jordan (the refugee crisis). The ELM has played a role in the economic and political stabilisation of those countries hit by a political crisis. As a result, in some of the regions (Asia; South Africa; Central Asia; Russia, Eastern Europe, South Caucasus), the volume of funds allocated so far represents up to 78% of the regional ceiling, which leaves limited leeway for responding to potential future challenges. EIB cooperation with Russia is restricted because of the restrictive measures introduced by the European Union in the context of the Ukraine conflict.

The management of the ELM

The management of the ELM by the EIB has been compliant with the requirements of the Decision and contributed to the effective use of the EU guarantee. Indeed, the project appraisal results in a comprehensive analysis of the project and provides the decision-maker with sufficient information for assessing the quality and the relevance of the latter. Key part of the appraisal, the Result Measurement Framework ("REM") is well adapted to the operational objectives of the EIB in the framework of the ELM. The reporting from the EIB to the Commission is compliant with the requirements of the Decision and covers effectively the main aspects of the ELM.

The added value of the ELM

Without the EU guarantee, the EIB would not have financed most of the projects under consideration, as the country profiles of the recipient countries are too risky for the EIB to carry out the lending using the own-risk facilities. The added value of the ELM financing operations is substantial compared to private sector both in terms of the interest rate – much lower than the local commercial interest rates – and longer maturity. Thus, it expands greatly the access to funds for the local SMEs and midcaps. Moreover, there is a clear evidence of non-financial benefits for the final beneficiaries generated by the EIB lending: technical assistance, promotion of good financial standards within the local banking sector, procurement standards.

Climate change mitigation and adaptation

The ELM has substantially contributed to the climate change-related objectives, especially in terms of mitigation. It exceeds the quantitative target of 25% and even the future target of 35% by 2020, as the climate change-related actions account for 40% of the total EIB contribution. In addition, the ELM operations have allowed saving an estimated 1.35 Mt CO2-eq/year of greenhouse has ("GHG") emissions through the operations signed between July 2014 and December 2015.