ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(80)192
Vol.1980/0059

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(80)192 final
Brussels,16thApriL1980
COMMUNICATION FROMTHECOMMISSION
TOTHECOUNCIL ANDTOTHEEUROPEAN PARLIAMENT
Firstreportontheborrowing andledingactivities
oftheNewCommunityInstrument (NCI)
-Financialyear1979-
(CouncilDecision 78/870/EECof16October1978)
COMMUNICATION FROMTHECOMMISSION
TOTHECOUNCIL ANDTOTHEEUROPEAN PARLIAMENT
.»\v-f•* ..
Interest'subsidies -forcertainloansgrantedunderthe
.fs ■ .
EuropeanMonetarySystem:CouncilRegulation
K (EEC)No1736/79of3August1979p--r r"J .,
\CM-Reportonthefinancialyear1979-
Y>;.. /:/ \- t.i .-J i
-;:■ ./ν\s>: -"AJ/
NT/V• ■■St?
COM(80)192final

Communication fromtheCommission totheCouncil
andtoParliament
Firstreportontheborrowing andlendingactivities
oftheNewCommunityInstrument (NCI)
-Financial Year1979-
(CouncilDecision78/870/EECof16October1978)

Communication from the Commission tothe Council and toParliament
First report ontheborrowing and lending activities ofthe
NewCommunity Instrument (NCI)
(Council Decision 78/87O/EECof16October 1978 )
I. Introduction
OntheCommission 'sproposal ,theCouncil authorized theCommission ,by
-Cl)
Decision 78/87O/EECof16October 1978 ,tocontract loans forthepurpose
ofpromoting investment within theCommunity with aview tostimulating
economic activity andsupporting common policies .The aimofthis
NewCommunity Instrument forborrowing andlending operations (NCI)isto
assist investment projects which will contribute tothegreater integration
oftheMember States *economic policies andwhich areinline with the
Community 'spriority objectives .
< 1
TheCouncil 'sdecision provides fortheraising ofloans uptoamaximum
of1000million EUAtobeactivated tranche bytranche ,each tranche being
applied tothefinancing ofinvestments inaccordance with guidelines laid
down when the tranche isauthorized .
I
Thefirst tranche ofloans wasauthorized bytheCouncil on14May1979
(2)
(Decision 79/486/teEC)toanamount of500million EUA ;this report covers
solely theoperations under that tranche .
This istheCommission 'sfirst report tothe Council andtoParliament
pursuant toArticle 6ofDecision 78/870/taEC ,which stipulates :"The
Commission shall annually inform theCouncil andtheEuropean Parliament
ofreceipts andexpenses resulting from borrowing andlending transact ions ."
(1)O.J. No.L298/9of25October 1978 /
(2)0,J .No.L125/16of22May 1979

II.Loans raised
The first NCI bond issues onthe capital market were well received and
demonstrate that itisworthwhile fortheCommunity to'offer awider range
ofsecurities toinvestors .
I
3y31December 1979 »"twoloans hadbeen contracted onthefollowing terms :
-a15-year bond issue ofDM225million at7*7/8%;
-a20-year issue ofUSD125million at11.60% ontheUnited States
domestic market . –
These issues ,which amount toatotal of178million EUA^areguaranteed
under theGeneral Budget oftheCommunity .
Pursuant toArticle 2ofCouncil Decision 79/486/EECof14May1979 authorizing
thefirst tranche ofborrowing }thefunds raised aretobeused tofinance
investment projects onCommunity territory which sireconsistent with priority
Community objectives intheinfrastructure andenergy sectors .

-3-
III .Loans granted .
By31December 1979 theCommission ,acting inoonjunotion with the
European Investment Bank ,had signed nine loan ,contracts toatotal
of277million EUA ,ofwhich 174.5 million EUAhadbeen disbursed by
that date .
Therecipient countries areItaly ,theUnited Kingdom and Ireland .
The sectors concerned are inline with those laid down bytheimplementing
decision -viz .infrastructure and energy projects .
The loans were allocated asfollows :
(million EUA)
i
Title ofproject I UK IRL TOTAL %
A.Infrastructure
1.Pertusillo Ilï/Cassa
2.Lothian Water
3.Dublin Water
4.Irish Telephones
5.Irish Roads39.6
25.9
24.7
17.9
19.439.6
25.9
24.7
17.
19.4
TOTAL 39.-6 25.9 62.0 127.5 46
B.Energy
6•Dinorwic CEGB
7•Aghada ESB
8.ENEL -Alto Gesso
9.-EKEL -Geothermal project34«9
10*579.4
24.779A
24.7
34.9
T0.5
TOTAL 45«4 79.4
I24.7 149.5 . 54
TOTAL A+B 85.0 !105.3 86.7 277.0
%31y.
r38% 31%100%
Thebalance of223million EUAavailable from thefirst tranche of500million EUA
maybecommitted shortly .

-4-
IV.Assessment ofthe investments
Thaflrnt finanoing operation *from theFeeourdas of New OeariiUfilfy
Instrument have made anadded contribution toinvestment inthe Community .
They areinline with theCommunity' spriority objeotives forregional
development ,employment andenergy ..
The funds have been provided jointly with ,andcomplementari lyto,theEIB,
thus covering animportant part ofthe investment cost andfacilitating the
implementation ofthepriority projects concerned .Depending onthe time-;
scale oftheprojects andtheir amortization period ,the loans have been
granted for 15t020years .
The nine projects financed represent between them aninvestment of1,810 million
EUA,ofwhich energy accounts for1,050 million EUA .TheMCI loans thus make up
15.3% ofthefinance required onaverage ,the range forindividual projects
varying from 10to27% .
InIreland ,theconstruction ofa270MWpower station atAghada in
County Cork isanimportant feature oftheElectricity Supply Board 'splan ,
which istoincrease generation capacity bynearly 60%byabout 1985 in
order tomeet theexpected increase indemand .Thepower station will be
fuelled bynatural gasdiscovered 60kmoffCork .
Theconstruction ofwater supply works andsewage collection andtreatment
* .
plant inthecity ofDublin anditssuburbs andintheneighbouring newtowns
will meet therequirements steaming from industrial development andpopulation
growth inthis area .
Work oncertain national arterial roads andonurban andouter-city roads at
Dublin ,Cork ,Limerick andDundalk will bring about ageneral improvement in
the road network tomatch the traffic forecasts .
Themodernizing oftelecommunications will add28000newtelephone subscribers
andhelp toimprove conditions forestablishing andoperating undertakings .
Allthese works areessential toIreland 'sregional development programme .

t
-5-
IntheUnitedKingdom*thehydro-electrio powerstationatDinorwicin
North.Waleswillusethe"pumped ,storage"technique:itwillgenerate
electricity (totalcapacity,1680MW)tosupplyenergyatpeakperiods,
provideaboostersupplyifotherpowerstationsfailandregulatethe
frequencyofthenationalgrid.Thisprojectwillmakeitpossibleto
makemaximumuseoftheelectricitygeneratedbythebase-loadstations
(coal-firedornuclearforthemostpart),whicharethemostefficient,
andinthiswaywillhelptoalleviatedependenceonoilforelectricity
generation *
I
ThepurposeofbuildingadamandotherworksbytheLothianRegionalCouncil
inScotlandistoimprovewatersuppliestothecityofEdinburghandin
thecountyofMidlothian andtoreducepollutionintheFirthofForth
bymajorimprovements totheEdinburghsewagesystem.
InItaly,theextensionofthePertusilloaqueductwillmakeamajor
contribution tosolvingthewatersupplyproblemswhichhavealwaysbeen
anobstacletotheeconomicdevelopment ofApuliaandBasilicata.It
willsupply55municipalities inthecentreofApulia,withapopulationof
morethan11/2million.
Thehydroelectric pumpingstationinthemassifofAltoGessoinPiedmont
(capacityofabout1200MW)willregulatetheItaliannationalgridand
replaceoutdated,high-consumption oil-firedpowerstations.
ThegeothermalprojectcoversfivecondensingstationsinTuscanywitha
totalcapacityof63MW.Byusingsubterranean steamtodriveturbo-alternators ,
electricitywillbeproducedfromasourcethatisnon-polluting anddoes
notdependonimports. " ■

-6-
V. Cooperation between the Commission andtheEIB
Pursuant toArticle 5oftheDecision ,aCooperation Agfaeffltnt between the
Commission andtheBank wassigned on27November 1978 ;itlays down their
responsibilities andtheprocedures fortheir cooperation *
Under this Convention :
-theCommission borrows thefunds ,theamount ofwhich isdecided byjoint
\
agreement between theCommission andtheBank inthelight ofprospective
lending operations .Thefunds arethen deposited with theBank inan
account opened inthename oftheCommission ;
--theBank ,following theprocedures laid down byitsStatute andin
accordance with itscustomary criteria ,examines theprojects ,
decides whether togrant theloans ,lays down theterms andadministers
them after they have been approved aseligible bytheCommission .
VI•Grant ofMS interest subsidies for pro.jects financed bythe NCI
Pursuant totheResolution oftheEuropean Council of5December 1978 onthe
establishment oftheEuropean Monetary System ,theCouncil decided on
3August 1979 that aninterest subsidy of3%could begranted onEIBand
NCI loans ,primarily forthefinancing ofinfrastructure investments ,inthe
less prosperous Member States which areeffectively andfully participating
inthe EMS ,
TheCouncil hasdesignated Italy andIreland assuch countries *
In1979 »interest subsidies were granted onfive NCIloans :forthe
Pertusillo IIIproject ,theENEL geothermal project andtheENEL Alto Gesso
project inItaly ,andforthetelephones androads projects inIreland .

-7-
VII .Conclusion
Asthe full amount authorized under the first tranche isnow intheprocess
ofbeing committed ,theCommission decided that itshould asktheCouncil
toauthorize thesecond tranche forthebalance ofthetotal amount setby
the Council ,i.e. ,500million EUA . ^
The Commission presented totheCouncil aproposal tothis endon29January 1980
(Doc .C0M/58Q/20final ),asking that energy and infrastructure beagain made
priority areas forCommunity action . .But since itspurpose istofoster the
revival ofeconomic activity ,the Commission considers that theconcept of
/
infrastructure should bemore broadly interpreted forprojects tobecarried
out inpriority regions orinareas where theproductive sector ishit by
industrial crisis .
Two types ofpriority investment could beconsidered inthis context -housing
and advance factories .They should besubmitted bynational authorities ,
should fitinto programmes co-ordinated bythepublic authorities regarding -
their content andtheir financing ,andshould assist the setting upof
productive activities orthe growth ofeconomic productivity ingeneral in
priority areas . .
Inthis way,thesecond tranche should beused tooffer aninitial response
tothefinancing requirements ofurban renewal projects ,particularly within
the framework ofthe integrated operations nowbeing launched .

COMMUNICATION PROMTHECOMMISSION TOTHECOUNCILANDTOPARLIAMENT
Interestsubsidiesforcertainloansgranted
undertheEuropeanMonetarySystem: *
CouncilRegulation(EEC)No1736/79of
3August1979
y
–Reportonthefinancialyear1979–

CouncilRegulation(EEC)Bo1736/79of3August1979providesforinterest
subsidiesto"bemadeavailable,inthecontextoftheEuropeanMonetary -
System,forcertainloansgrantedfromtheownresourcesoftheEuropean
InvestmentBankorfromtheresourcesoftheNewCommunityInstrument.
Pursuantto.theRegulation,thisaidisintendedessentiallytopromoteinfrastruc­
tureinvestmentprojectsandprogrammesinthelessprosperous MemberStates
effectively andfullyparticipating inthemechanismsoftheEMS.Article10
oftheRegulationstipulatesthattheCommissionistoinformtheCouncil
andParliamentannuallyofoperationscarried-outjsuchisthepurposeof
thisreport. v
Article5oftheRegulationlaysdownthattheinvestments
tobesubsidizedmustcontributetoresolvingthemainstructuralproblems
affectingtheStateconcernedand,inparticular,toreducingregionalimbalances
andtoimprovingtheemploymentsituation.Article7specifiesthefinancial
ceilingsapplicabletotheoperationscarriedout:fiveannualinstalments
of1000millionEUAfortheloanstobesubsidized andfiveannualinstalments
of200millionEUAtobeenteredinthebudgettocoverthediscountedvalue
ofthesubsidiesrepresenting aninterestratereductionof3%peryear.
TheEIBinforms'theCommissionandtheMemberStateconcernedofanyprojects
forwhichanapplicationforaninterestsubsidyhasbeenreceivedand,if
theCommissiongivesitsendorsement,notifiesthelatteroftheamountof
eachsubsidyassoonastheloantermsareknown.TheCommissionthenpays'
totheEIBtheEuropeanunitofaccountequivalentofalltheinterest
paymentsthatwouldbedueattherateof3>%peryearforthedurationof
eachloan,discountedtoadatenotlaterthantwomonthsfromthesigning
ofthecontract.TheEIBadministers theseinterestsubsidies.
\
itsimplementingDecision79/691/feECof3August1979(2>f-theCouncil-
designatedIrelandandItalyasMemberStateseligibleforthemeasures
providedforintheaboveRegulation.
TheindicativeprogrammesreferredtoinArticle3oftheRegulationarebeing
prepared,andtheinvestmentprojectsselectedin1979werejudgedtobecompatible
withtheregionaldevelopment programmesmentionedinthesamearticle.
(1)O.J.no.L200/1of8.8.1979
(2)O.J.no.L200/18of8.8.1979 -

-2-
OPERATIONS CARRIED OUT
Following adoption oftheRegulation "bytheCouncil in ,early August 1979 (with
retrospective effect from 1January 1979 )t34interest .subsidies were granted from
1979 "budget appropriations onthe "basis oftheCommission 'sdecision that thepr^.-
jests were eligible )thecorresponding payments totheSISwere iftAde "between Novem­
ber1979 andApril 1980 .The34interest subsidies inquestion were for30invest­
ment projects ,which were financed "by29loans granted from theEIB'sownresources
andfor 5loans granted from theNCI'sresources ,representing acapital sum
totalling 903.5 million EUA Four oftheprojects were therefore ^jointly
financed "byEIBand "byNCI loans .
The interest subsidies used upthefull 200million EUA ofbudgetary
resources available forthe 1979 instalment ,andafirst drawing of
3.9million EUAhadtobemade on198O appropriations ,sothat thelast
payment could bemade infull .Ofthetwoceilings mentioned in
Regulation Ho1736/79 istherefore the200million EUAappropriation
intended tocover the total discounted value ofthe interest subsidies -
which was decisive .inclosing the accounts forthe 1979
operations .Therelationship between this ceiling andthe amount ofloans
subsidized (estimated atastandard 20%when themechanism wassetup)
depends ontheterms onwhich theloans aregranted ,andinparticular on
their duration .In1979 *"thediscounted value oftheinterest subsidies
granted represented 22.6$ oftheamount oftheloans ,andthis wasthe
reason whythelatter didnotreach theceiling of1000 million EUA .
Theamount ofeach interest subsidy andofeach loan subsidized isgiven
(2intheannexed lists .Thefigures maybesummed upasfollows :v
Onacountry basis ,"thebreaMown oftheinterest subsidies was68$for
Italy and32$forIreland . - '
(1)Theloanamounts inunits ofaccount quoted intheEIB'sdocuments (notably
theAnnual Report ,which hasnotyetbeen published )differ slightly from
those given here ,since thelatter were calculated onthebasis ofthe
exchange rates ruling onthesame date asthat used forcalculating the
.interest subsidies .
(2)Totals maydiffer slightly from thesumofthecomponents because ofrounding

Loans Interestsubsidies
Italy-
IrelandiTumber
19
15millionEUA
645.8
•257.8millionEUA
137.7*
66.1z
67.6
32.4
34 903.5 203.9* 100.0
Takingthesourceofthefunds,the5NCIloansaccountedfor13%ofthe
interestsubsidiesandthe29loansfromtheEIBfsownresourcesfor87$.
Loans Interestsubsidies
SCI
EIBNumber
.5
29millionEUA
122.1
781.5millionEUA
26.3*
177.62
12.9
87.1
34 903.5 203.9* 100.0
Thebreakdownbysectorisasfollows:
Loans Interestsubsidies
Number
Primaryenergy
production
Transformation
ofenergy
Transmission of
energy
Subtotal:
energy
Waterengineering
Communications
Forestry
Total:energy
andother
infrastructure15
12
,6
1
34millionEUA
144.4
37.4
223.3
405.1
357.2
119.3
21.9
903.5millionEUA
28.0*x
9.6
49.8
87.4
83.5
27.1
-5.8
203-9*13.7
4.7
24.4
42.9
41.O
13.3
2.8
100.0
ofwhichananiountof3*9millionECJAfrom198Oappropriations .

-4-
Morespecifically,43$oftheinterestsubsidieswereforprojectsinthe
energysector,with14$concerningthedevelopmentofnewsourcesofprimary
energy(hydrocarbons ,peat,geothermalenergy,hydroelectric power),5$
thermalpowerstations(trass e£eRiPgp)
s
transmission ofenergy(gaspipelines,electricitygrids,districtheating
schemes).,Theinfrastructure projectsintheothersectors,whichaccounted
inallfor57$oftheinterestsubsidies,relat6towatersupply(including ,
irrigation),waterpurification anddrainage(41$);toimprovementsin
telephoneandroadnetworksandtoinfrastructures forindustrialestates(13$),
/
andtoforestrydevelopmentinIreland(3$)•
Asregardsthereductionofregionalimbalances,84$oftheamountspaidout
asinterestsubsidieswereforprojectslocatedwhollyorpartlyinpriority .
regions.Sincetheprojectsinvolveinfrastructure ,thenumberofnew/
permanent .jobsforrunningthecompletedprojectsisnecessarilylimited(2900)
Honetheless,theprojectswill,overtime,helptocreate,aboveall
indirectly,asubstantial numberofjobs.Moreover,theworkinvolvedin
andsuppliesneededforcarryingouttheinfrastructure schemeswillhave
directandindirecttemporaryrepercussions ontheemploymentsituationover
whatmay,insomecases,berelativelylongperiods.
FINANCIAL COMPENSATION FORTHEUNITEDKINGDOM
Article8ofRegulationNo1736/79stipulatesthatanyMemberStatewhich
doesnoteffectively andfullyparticipateintheEMSshallreceive
financialcompensation theamountofwhichistobedetermined onthebasis
ofexpenditure oninterestsubsidies.AstheUnitedKingdomdoesnotplay
afullpartintheEMS,astatementwasenteredintherecordofthe
CouncilmeetingatwhichtheRegulation wasadoptedtotheeffectthatthe
CommissionwillrefundtothatMemberStateonaquarterlybasisitsshare
ofthefinancingoftheinterestsubsidiesgranted.Twopayments,totalling "
44.1JicUA,havebeenmadeforthispurpose. •

EMSINTERESTSUBSIDIES,FINANCIAL"EAR1979:ITALYANNEX1
Borrower ProjectAmountofloan
NCIloans
EnteNazionaleperHydroelectric powerstation
1'Energia atAltoGesso
Elettrica
EnteNazionaleperGeotheraialenergy,Tuscanyl'Energia
Elettrica
^Cassaperil
MezzogiornoAqueduct,
PertusilloIIILIT'000million
million EUA
40,0
12.0
45-.0
97,034.2
10.3
39.8
84.3EUA
17.913
EIBloans
EnteNazionale
Idrocarburi
AGIPS.p.A.GaspipelineItaly/Algerian-
Tunisianfrontier
Hydrocarbons :
Cavone
SettaleAmelia
Entreprisemuni-Districtheating,
cipaledeBresciaBrescia
EnteNazionaleperHydroelectric powerstationat
1'Energia -AltoGesso
Elettrica
"Electricity,Friuli-Venezia
Giuilia140.0
245.0
9.0
9.0
.13,0
90.0
25,034.9
39.4
7,8
7.8
11.2
77.2
21.58.211
8.860
2.312
14.855
4,260
mCassaperil
Mezzogiorno
11
tt
TOTAL:ITALYElectricity,Mezzogiorno
ControlSystem
Aqueduct
PertusilloIII
Irrigation,Tarento
Irrigation,Poggia
1
Irrigation,Campobasso
Drinkingwater,Avellino,
Benevento
Ifcr-passroad,Western
Catania50*0
50.0
80.0
80.0
65.0
25,0
22.0
25,0
Industrialestate,SyracuseIV20,0
648,0
,745.043.0
43.3
70.3
69.4
56.2
21,6
19-1
21.6
17.2
561.5
645.8
*ofwhichanamountof3.856millionEtFAfrom198Oappropriations .
■±projectsjointlyfinancedonEIBandNCIresources.15.571J
15.728|
12.4061
I
4.771
■
'4.325j
I
3,8641'
3.6861
119.828)
137.741','
.

ΑΝΝΕΧ2
EMSINTERESTSUBSIDIES,FINANCIAL YEAR1979:IRELAND
Borrower
NCIloansProject
IrishGovernment TelephonenetworkVI
«» wRoadnetworkIIIAmountofloan
IRL-million
million EUA
12.0 18.1
13.019,6Interest
subsidy
million
EUA
4.012
4.347
y25.0 37.78,359
EIBloans
BordnaMona Peatproduction•4.8 7.11.471
Electricity Supply
Board - PowerstationatAghada 10.0 14.94.010
n 19Combustionturbines.Aghada 15.0 22.55.588
/n IIElectricitygrid 20.0 30-07.452
IrishGovernment Waterengineering,Dublin 16.5 24.96.917
n ttWaterengineering ,Westof
*Ireland 5.0 7-31.947
lt ttWaterengineering ,Galway 4.3 6.51.804
n ttWaterengineering ,SligoandMayo5.0 7.52.097
tt ηWaterengineering ,Southand
South–East -16.0 24.06.468
•• nLanddrainage7.010.62.935
tt ttTéléphonénetworkVI 18.0 26.26.692
ttRoadnetworkIII 11.0 16.64.533
II MForestrydevelopment 15-0 21.95.839
147.6 220,157.755
TOTAL:IRELAND 172,6 257.866.114
3E3EprojectsjointlyfinancedonEIBandNCIresources.