EUROPEAN COMMISSION Brussels,13.2.2018 SWD(2018) 44 final/2 CORRIGENDUM

Corrects the date of the document on the cover page.

Concerns all languages. COMMISSION STAFF WORKING DOCUMENT Accompanying the document Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the mid-term evaluation of the Connecting Europe Facility (CEF) {COM(2018) 66 final/2}



Contents 1. Introduction 2. Background to the intervention 3. Evaluation Questions 4. Methodology 5. Implementation state of play 6. Answers to the evaluation questions 6.1. Relevance 6.1.1. Relevance for EU priorities and sectoral needs 6.1.2. Resources vs. objectives and potential EU impact 6.1.3. Using the adequate support schemes to respond to market failures and policy challenges 6.1.4. Specific equity instruments (EIs) for sectoral needs 6. 2. Coherence 6.3. Effectiveness 6.3.1. CEF's effectiveness in achieving policy objectives 6.3.1.1. Progress towards the development of modern and high-performing trans-European networks and more interconnected markets 6.3.1.2. Progress towards the achievement of the sustainable developments targets by 2020 6.3.2. CEF's effectiveness in achieving operational objectives 6.3.2.1. Ensuring and accelerating investment

6.3.2.2. Exploiting sectoral synergies 6.3.3. Information, participation and monitoring 6.3.3.1. Information about the programme 6.3.3.2. Participation in the programme 6.3.3.3. Monitoring performance (indicators) 6.4. Efficiency 6.4.1. Contributing to the achievement of the CEF objectives in an efficient manner 6.4.2. Implementing and Managing CEF efficiently 6.5. EU Added Value 7. Conclusions



Glossary ACER – Agency for the Cooperation of Energy Regulators AP – Annual Work Programme BEMIP – Baltic Energy Market Integration Plan BRIS – Business Registers Interconnection System CAES – Compressed air energy storage CAPEX – Capital expenditure CBA – Cost–Benefit Analysis

CBCA – Cross–Border Cost Allocation CCI – Connected Communities Initiative CEBF – Connecting Europe Broadband Fund CEF – Connecting Europe Facility CEF DI – CEF Debt Instrument CEF EI – CEF Equity Instrument CIP–PSP – Competitive and Innovation Programme – Policy Support Programme CNC – Core Network Corridors CTF – Cleaner Transport Facility DG CNECT – Directorate General for Communications Networks, Content & Technology DG ENER – Directorate General for Energy DG MOVE – Directorate General for Mobility and Transport DSI – Digital Service Infrastructures DSM – Digital Single Market eCODE – electronic communications eCODEX – e–Justice Communication via Online Data Exchange EEPR – European Energy Programme for Recovery EESSI – Electronic Exchange of Social Security Information EFSI – European Fund for Strategic Investments eHDSI – eHealth Digital Service Infrastructure

EIB – European Investment Bank ERDF – European Regional Development Fund ERTMS – European Rail Traffic Management System eSENS - Electronic Simple European Networked Services ESIF – European Structural and Investment Funds ESPD – European Single Procurement Document epSOS – Smart Open Services for European Patients FIs – Financial instruments GHG – Greenhouse gas GIPL – Gas Interconnector Poland–Lithuania GSG – Green Shipping Guarantee HPC – High Performance Computing IA – Impact Assessment ICT PSP – ICT Policy Support Programme INEA – Innovation and Networks Executive Agency IPE – Investment Plan for Europe ITS – Intelligent Transport Systems KPIs – Key Performance Indicators LGTT – Loan Guarantee for TEN–T LNG – Liquefied natural gas

LSPs – Large scale pilots MAP – Multiannual Work Programme MFF – Multiannual Financial Framework ODR – Online Dispute Resolution OPC – Open Public Consultation PBCE – Project Bonds Credit Enhancement PBI – Project Bond Initiative PCI – Projects of Common Interest PEPPOL – Pan–European Public Procurement Online PSA – Programme Support Action R&I – Research and Innovation SDCE – Senior Debt Credit Enhancement SESAR – Single European Sky ATM Research SPOCS – Simple Procedures Online for Cross–border Services STORK – Secure identiTy acrOss boRders linKed TEN – Trans–European Network TEN–E – Trans–European Energy Network TEN–T – Trans–European Transport Network TFEU – Treaty on the Functioning of the European Union TOOP – The “Once–Only” Principle Project

TSO – Transmission System Operator

1. Introduction The Connecting Europe Facility (CEF) is a common, centrally-managed funding programme for transport, energy and telecommunications infrastructures, with an available budget of EUR 30.4 billion for the years 2014 to 2020. This mid-term evaluation responds to the legal requirement laid down in Article 27 of the Regulation: “No later than 31 December 2017, the Commission, in cooperation with the Member States and beneficiaries concerned, shall prepare an evaluation report to be presented to the European Parliament and the Council by the Commission on the achievement of the objectives of all the measures (at the level of results and impacts), the efficiency of the use of resources and the European added value of the CEF, with a view to deciding on the renewal, modification or suspension of the measures The evaluation shall also address the scope for simplification, the internal and external coherence of the measures, the continued relevance of all objectives and their contribution to the Union priorities of smart, sustainable and inclusive growth, including their impact on economic, social and territorial cohesion. The evaluation report shall include an assessment of the economies of scale made by the Commission at a financial, technical and human level when managing the CEF and, where applicable, of the total number of projects harnessing the synergies between the sectors. That assessment shall also examine how to make financial instruments more effective. The evaluation report shall take into account evaluation results concerning the long-term impact of the predecessor measures.” The evaluation addresses all forms of financial assistance under the CEF (grants, financial instruments (FIs) and procurement), as well as accompanying measures such as Programme Support Actions (PSAs). The evaluation also takes into account the independent full scale evaluation of the pilot phase of Europe 2020 Project Bonds Initiative established in 2013, also known as the pilot phase of the Project Bonds Credit Enhancement (PBCE), aimed at helping finance projects of EU added value and facilitating greater private sector involvement in the long term capital market financing of projects in the trans-European Transport Network (TEN-T), trans-European Energy Network (TEN-E) and in telecommunications. The evaluation addresses the general performance of CEF (horizontal sub-sections within each criterion) as well as the achievements within the sectors of transport, energy and telecommunications (respective sectoral sub-sections). This is neither an evaluation of the TEN policy for each sector (undertaken in the context of the respective policy areas) nor an evaluation of the performance of the Innovation and Networks Executive Agency (INEA) which is in charge of implementing the CEF grants. There is a separate legal obligation for an evaluation of the Executive Agency (responsible for the implementation of CEF, parts of Horizon 2020 and transport legacy programmes), which has to be carried out 3 years after INEA's establishment. This evaluation of INEA has commenced. The present evaluation covers parts of INEA's processes and workflows as related to CEF management only – those related to the common grant management cycle and simplification measures. Moreover, this evaluation makes use of Key Performance Indicators (KPIs) specific to CEF management as reported in the Annual Activity Reports of INEA. As it is the case for a mid-term evaluation, it takes place when the programme has been implemented only over a short period of time (3 and a half years, and 2 years in the case of the CEF Debt Instrument), which means that most projects supported have not yet delivered their results. This is particularly the case for large infrastructure works projects for which the pathway to impact is neither immediate nor linear. This report relies on official monitoring data of projects supported by CEF, which indicates their state of implementation and degree of advancement. The period covered by this evaluation is from 1 January 2014 to 31 December 2016. Where available, implementation data covering up until end August 2017 was also taken into account. The findings presented in this Staff Working Document serve as a basis to decide on the renewal, suspension or modification of the measures and aim at feeding into the preparation of the post-2020 Multiannual Financial Framework (MFF). Further detail on the process to prepare the evaluation is provided in Annex 1. 2. Background to the intervention CEF was established as part of the Europe 2020 strategy for a smart, sustainable and inclusive growth and of the European Union (EU)'s "20-20-20" objectives in the area of energy and climate policy. The programme supports the development of the TEN in the transport, energy and telecommunications sectors in line with Article 170-174 of the Treaty on the Functioning of the European Union (TFEU) and the better integration of their respective infrastructure across EU Member States to improve cohesion in the internal market as well as competitiveness in the global market. CEF was a new integrated instrument for the 2014-2020 MFF, aimed to invest in EU infrastructure priorities in the three sectors (projects of common interest (PCIs)).

As outlined in the Communication on the budget for 2020, the Commission considered that "while the market can and should deliver the bulk of the necessary investments, there is a need to address market failure – to fill persistent gaps, remove bottlenecks and ensure adequate cross-border connections. However, experience shows that national budgets will never give sufficiently high priority to multi-country, cross-border investments to equip the Single Market with the infrastructure it needs. This is one more example of the added value of the EU budget. It can secure funding for the pan-European projects that connect the centre and the periphery to the benefit of all. Therefore, the Commission has decided to propose the creation of a Connecting Europe Facility to accelerate the infrastructure development that the EU needs.” In this context, the CEF was set up to offer "opportunities for using innovative financing tools to speed up and secure greater investment than could be achieved only through public funding." Recital (2) of the CEF Regulation highlights that the "aim of the creation of the Connecting Europe Facility (CEF) […] is to accelerate investment in the field of trans-European networks and to leverage funding from both the public and the private sectors, while increasing legal certainty and respecting the principle of technological neutrality. The CEF should enable synergies between the transport, telecommunications and energy sectors to be harnessed to the full, thus enhancing the effectiveness of Union action and enabling implementing costs to be optimised." Article 5 of the CEF Regulation set out the general objectives of the CEF, which include "contributing to smart, sustainable and inclusive growth, in line with the Europe 2020 Strategy, by developing modern and high-performing trans-European networks", inter alia by "creating an environment more conducive to private, public or public- private investment through a combination of financial instruments and Union direct support where projects could benefit from such a combination of instruments and by appropriately exploiting synergies across the sectors". Market failures CEF ESIF* Market and national financing

EFSI** Priorities defined in the 3 sectorial guidelines * ESIF: European Structural and Investment Funds - ** EFSI: European Fund for Strategic Investments Figure 1 above illustrates where CEF support is targeted in the investment sphere. CEF established specific objectives for each of the three sectors that support the respective sectoral guidelines, on development of the TEN-T, the TEN-E and trans-European networks in the area of telecommunications infrastructure. For transport these objectives include removing bottlenecks, improving cross-border connections and interoperability of transport as well as enabling a sustainable and safe transport system. For energy, these objectives relate to promoting the integration and interoperability of the internal energy market, enhancing Union security of energy supply and sustainability (inter alia by integrating renewable energy and by developing smart energy networks and carbon dioxide networks). For telecoms, the objectives are the completion and functioning of the internal market in support of the competitiveness of the European economy, including SMEs, promoting trans-European digital service infrastructures and connectivity, interoperability, and efficient flow of private and public investments to stimulate the deployment and modernisation of broadband networks . The main component of a digital service infrastructure is the core service platform which is a central hub at EU level to which national infrastructures link up and thus create a link between different national infrastructures. CEF and the sectoral guidelines together make up a coherent set of measures aimed at boosting infrastructure investment across the EU, in line with wider EU policies objectives. In this respect, CEF is directly linked to the respective sectoral guidelines, on the basis of which projects are selected to be eligible for CEF support, notably through their pre-identification. This framework aims to smooth the process of project planning and construction in Member States, thus improving the overall viability of such projects and reducing the need for financial support. The CEF Regulation defines the actions eligible for financial assistance for the different sectors. For transport, works and studies that implement the Core and Comprehensive networks as well as horizontal priorities, which are listed in Annex I to the CEF Regulation, such as the Motorways of the Sea, new technologies for the decarbonisation of transport, Single European Sky and the European Rail Traffic Management System are eligible for grants and/or financial instruments. For energy, actions that support the PCIs and meet the criteria defined in the TEN-E Regulation are eligible for financial assistance in the form of grants for works and studies, procurement and, financial instruments. For the telecommunications sector, CEF support takes the form of procurement for the core service platforms, or grants to help link national infrastructures to core service platforms; while actions in the field of broadband networks can be financed by financial instruments. In view of supporting the preparation and implementation of CEF projects, at the level of the Member States, through the delivery of policy-specific studies or the enhancement of knowledge including capacity building of specific beneficiaries, PSAs in three sectors have been included in the sector-specific Work Programmes. The CEF Regulation, in line with the objectives of the sectoral guidelines sets out the Key Performance Indicators (thereafter the KPIs, or indicators) against which the defined sectoral objectives are measured. The table of indicators is reported in Annex 4.

While the Commission had proposed a total amount of EUR 50 billion in 2011, the CEF budget was set by the co-legislator at EUR 33 billion in 2013, which included a transfer of EUR 11.3 billion from the Cohesion Fund to the cohesion envelope of the transport pillar of CEF. The CEF budget was later reduced to 30.4 billion, following the reallocation of funds to finance the guarantee for the European Fund for Strategic Investments (EFSI) in 2015 (see table 1). The majority of the CEF budget is being implemented through grants to co-finance eligible projects, while the rest is set aside for use in the form of financial instruments (FIs), public procurement and PSAs. CEF is implemented via Multiannual and Annual Work Programmes (MAP and AP) which are adopted by the Commission following the vote of the Member States under the examination procedure ('comitology'). They specify the priority areas for funding, the form of assistance to be used, as well as the related budget breakdown. For grants, the co-funding rates for studies amount to 50% of eligible costs while grants for works are allocated according to specific criteria depending on the sector (between 10% and, in exceptional circumstances, 75%, while under the Cohesion envelope in the transport sector, these can go up to 85%). Operational and programme management tasks related to evaluations of the calls for proposals as well as grant management are externalised to INEA, while the European Investment Bank (EIB), as the EU reference investment bank, acts as the legal entrusted entity for implementing the FIs. The intervention logic in Annex 5 summarises the investment needs, objectives and inputs leading to the impacts and the eventual contribution of the programme to smart, sustainable and inclusive growth. Predecessor Programmes under the MFF 2007-2013 Predecessor programmes to CEF under the previous MFF (2007-2013) differed from one sector to another as well as in their comparison to CEF regarding budget, objectives, intervention logic as well as implementation mode. The highest degree of continuity in terms of relative size, implementation mode and project pipeline can be found in the transport sector: the actual size of the CEF-Transport budget (cohesion envelope excluded) represents a 51% increase of the budget allocated under TEN-T Programme and Marco Polo Programme in the 2007-2013 period and the execution of the programme was delegated to an Executive Agency (TEN-T Executive Agency, the forerunner of INEA). Multi-annual and annual work programmes also already coexisted under the TEN-T Programme. Out of 604 actions supported under CEF-Transport, 179 actions (29,6%) stem from projects (both studies and works) which have been supported under the previous TEN-T Programme . This includes important cross-border projects, a typical example being the Brenner Basis Tunnel, whose studies and preparatory activities started with TEN-T Programme support while the main works are supported by CEF. The situation in the energy sector is different: The budgetary allocation for CEF-Energy represents a step change compared to the one for the TEN-E Programme (35 times larger, not taking into account the budget allocated to trans-European infrastructure projects by the European Energy Programme for Recovery (EEPR), an ad-hoc instrument under the previous MFF). This increase in budget allowed for co-financing works under CEF, whereas the overwhelming majority of actions funded under the TEN-E programme were studies. In addition, the execution of the TEN-E Programme was managed directly by Commission services via annual work programmes. The TEN-E guidelines adopted in 2013 also represented a complete overhaul of the former TEN-E policy by introducing prioritisation via a unique list of projects of common interest (PCI), resulting in limited continuity regarding the number of projects: Out of the 111 projects funded under TEN-E only a third (37) became PCIs of which 15 have received grant support under CEF following the calls for proposals 2014-2016. A good example regarding continuity in funding related to the implementation of a single project is the Gas Interconnector Poland-Lithuania (GIPL) which twice received funding under TEN-E (in 2010 for feasibility studies and in 2013 for Environmental Impact Assessment documentation) and then was granted co-financing under CEF in 2014 (for preparatory works and construction- see box in section 6.3.1.1). In the telecommunications sector, the Competitive and Innovation Programme – Policy Support Programme (CIP-PSP) provided the means to launch large scale pilots (LSPs) which developed and validated solutions with Member State Governments. Several LSPs supported through CIP PSP have been integrated afterwards in CEF as Digital Service Infrastructures. However, CIP PSP only covered the pilot phase of a number of initiatives, deployment remaining outside its remit. CEF is the first funding programme targeting the full deployment, operation and take up in Member States of cross border DSIs (see figure on page 44). Therefore, in the telecom sector, although CIP-PSP funded services are currently supported through CEF, it cannot be considered its predecessor since it covered a different phase in the development of the services. Compared to its predecessors, CEF introduced a series of improvements albeit at a varying degree for the three sectors: a common management structure based on delegation to an executive Agency (INEA), a common coordination committee of Member State Representatives, grant agreements instead of grant decisions, common online tools for submission of applications and grant management, better monitoring, diversified funding rates closer to the investment needs as well as dedicated financial instruments with a common portfolio sharing the risk across transport, energy and telecommunications projects. Baseline For the purpose of this evaluation, the baseline as set out in the 2011 Impact Assessment (IA) which accompanied the Commission's proposal for the Regulation establishing the CEF will be used. An Interim Evaluation of the TEN-E funding programme 2007-2013 was conducted in 2010 while a Mid-term evaluation of the TEN-T Programme (2007-2013) was conducted in 2011. Both evaluations were used as inputs to the IA. The IA baseline describes a situation in which the predecessor programmes TEN-Transport and TEN-Energy, their features (e.g. lower co-funding rates and in TEN-E grants mainly for studies) and their significantly lower budgets for the two sectors (notably for TEN-E) would have continued running throughout 2014-2020. It was found that the predecessor programmes insufficiently catered for the specific needs and the heightened risks attached to projects with significant cross-border dimension, category for which also significant delays were observed.

Pre CEF (2007-2013) situation CEF proposal as in 2011 Impact Assessment (IA) CEF as it entered into force in 2014 CEF finally available, in current prices Available budget EUR 8 billion for the TEN-T Programme EUR 43 billion in the Cohesion Fund and ERDF EUR 450 million for the Marco Polo Programme EUR 155 million for the TEN-E programme EUR 2.365 billion -EEPR programme (eligibility restricted to some TEN-E projects as per EEPR regulation) EUR 1.6 billion in the Cohesion Fund and ERDF (broader eligibility scope) (Although not considered predecessor programmes) EUR 730 million from CIP ICT PSP for pilot projects; EUR 2.7 billion from Cohesion Fund and ERDF for telephone infrastructures (including broadband networks) EUR 31.7 billion for transport Including EUR 10 billion as the amount ring-fenced in the Cohesion Fund for transport infrastructures EUR 9.1 billion for energy EUR 9.2 billion for telecommunications EUR 26. 25 billion for transport Including EUR 11.3 billion as the amount ring-fenced in the Cohesion Fund for transport infrastructures EUR 5.85 billion for energy EUR 1.14 billion for telecommunications EUR 24. 05 billion for transport Including EUR 11.3 billion as the amount ring-fenced in the Cohesion Fund for transport infrastructures (Another EUR 34 billion is available from Cohesion Fund and ERDF) EUR 5.35 billion for energy (Another EUR 2.3 billion is available from Cohesion Fund and ERDF) EUR 1.04 billion for telecommunications Total CEF EUR 50 billion EUR 33.24 billion EUR 30.44 billion Co-funding rates for grants TEN-T Programme: - studies: up to 50% - works: up to 30%; Cohesion Fund and ERDF: -works: up to 85% TEN-E Programme: - studies: up to 50% - works: up to 10%; EEPR - works and project preparation: up to 50% Cohesion Fund and ERDF: -works: up to 85%(reduced in case of projects generating revenues) For CEF Transport: - studies, up to 50% - works, up to 40% (85% for projects selected under the Cohesion envelope) For CEF Energy: - studies and works, up to 50% (exceptionally up to 75% for works) For CEF telecommunications: - broadband networks actions: 20% of eligible costs; - generic services Actions: up to 75% rate of eligible costs; - actions in the field of applications: 50% of the eligible costs. For CEF Transport: - studies, up to 50% - works, up to 40% (85% for projects selected under the Cohesion envelope) For CEF Energy: - studies and works: up to 50% (exceptionally up to 75% for works) For CEF telecommunications: - actions in the field of generic services: up to75 %; - horizontal actions incl. infrastructure mapping, twinning and technical assistance: 75 %. - core service platforms (typically funded by procurement); in exceptional cases, they may be funded by a grant covering up to 100 % of eligible costs. All sectors can be topped up by 10% when addressing the synergies between the sectors. Table 1 lists funding available for telecommunications in the period 2007-2013; however, the CEF Telecommunications programme substantially differs from previous programmes, therefore they can't be considered as predecessor programmes. Cohesion spending was available for broadband and digital service infrastructures in the MFF period 2007-2013, an estimated EUR 2.7 billion funding was allocated to broadband infrastructure. CEF DSIs builds on solutions for digital service infrastructures developed within the CIP ICT PSP, supporting their scale-up and deployment . The CIP has supported broadband policy initiatives through the funding of several studies and other measures as well as a transfer of EUR 20 million to the from the CIP 2013 budget to the European Investment Bank (EIB) for the Europe 2020 Project Bonds Initiative, to fund projects for broadband infrastructure . The latter has resulted in the financing of the Axione project in France . The level of support under CIP for broadband deployments was therefore very limited, providing only direct support to one project under the Project Bonds Initiative. The final available budget for CEF was significantly lower (e.g. around 30%) than the values estimated in the Impact Assessment. In fact, the 2011 IA concluded that the predecessor instruments were overall insufficient to "deliver on time complex cross-border transport infrastructure projects". In particular it was noted that (a) the programmes in place were not delivering sufficient EU added value. The funding did not help to remove bottlenecks and enable cross-border links to develop in a satisfactory manner as these projects were not sufficiently prioritised; (b) The co-funding rates were insufficient to catalyse the investment needed in projects of EU added value due to the complexity and enhanced risk of such projects and; (c) The programmes in place were unable to leverage sufficient private sector interest in the projects and did not sufficiently focus on creating a conducive environment for such investors. Investment needs and market failures In its 2011 IA, the Commission estimated the investment needs by 2020 as follows: -in the transport sector, EUR 500 billion was estimated to be needed for the works planned until 2020 on the trans-European transport networks, including EUR 215 billion for the removal of the main bottlenecks on the transport "Core Network", and taking into account the specific needs in Member States eligible for the Cohesion Fund; -in the energy sector, the investment needs to modernise and expand Europe's energy infrastructure was estimated at EUR 200 billion until 2020 in electricity and gas transmission and storage infrastructure (including for electricity interconnectors, internal bottlenecks, electricity storage, market grids, gas interconnectors and CO2 transportation); -in the telecoms sector, a gap of between EUR 82 billion and EUR 168 billion was identified. The 2011 IA did not provide an overall estimate of how many projects would be at risk of not being fully funded nor did it provide a quantification of the expected socio-economic impacts, but it did describe in a qualitative way that many of the projects with EU added value lacked a business case and that, without CEF to bring in new investment, bridging the financing gap would be very challenging. The estimations of the investment needs for the three sectors were revised upwards when the CEF Regulation was adopted in 2013 (EUR 970 billion). While the bulk of this investment was expected to be delivered by the private sector, by public investments at national level or via regulatory measures in the energy sector, the 2011 IA identified "a need to address market failure – to fill persistent gaps, remove bottlenecks and ensure adequate cross-border connections".

The most common market failures for infrastructure projects in the three sectors are: Øcosts occur at national/local level while benefits are realised at European scale ; Øcosts and benefits of projects involving several Member States are asymmetrically distributed among them; Øbenefits are dependent on other investments in the network or entail a high first mover risk; Øsocio-economic benefits cannot be (sufficiently) internalised (for instance security of supply, contribution to modal shift); Øpublic and private investors as an alternative to incumbent operators are perceived as higher risk by private banks, which then charge higher interest, thus setting capital constraints linked to the long-term nature of infrastructure projects (broadband); Øuncertainty about the build-up of demand and, subsequently, revenue generation (broadband); Ølack of interoperability in cross-border public services (DSIs); Ømarket size: some countries lack sufficient scale to be attractive to private operators, and others are so large that regional fragmentation becomes an issue (DSIs); and Øthe value of some services is proportional to the number of users, thus it is necessary to achieve a critical mass before having the possibility to attract private operators (DSIs). The CEF rationale Within the investment priorities defined for the three sectors in their respective guidelines, the general objective of CEF is to foster the implementation of projects contributing to the completion of the TEN. It addresses the market failures, focuses on the projects of high European added-value and helps leverage further investment from the private sector. Moreover, the 2011 IA highlighted the potential added value of a common funding framework for the three sectors, which would be fourfold: -A common framework would lead to the simplification of the EU legal framework concerning TEN infrastructures funding. It would also ensure a coherent approach to EU project financing across the three sectors. -At the same time, a common EU infrastructure fund and financial framework for infrastructure would provide a coherent and transparent approach to EU funding that would offer certainty and would thus have a huge potential to attract more private sector financing. FIs would be available in a centralised and coordinated manner, attracting and improving the effectiveness of the relationship with the private investors and the partner financial institutions. -In addition, the increasing interdependency between economic infrastructure projects, networks and sectors would enable the realisation of economies of scale. An integrated EU infrastructure funding framework would allow exploiting cross-sector synergies at project development and implementation level, enabling cost savings and/or more efficient exploitation and higher returns. -A common framework would help draw on lessons learned and best practice sharing across sectors, enabling thus an enhanced effectiveness and efficiency of EU financing in all sectors. 3. Evaluation Questions In accordance with the Commission's Better Regulation Guidelines, this mid-term evaluation of CEF addresses a series of several evaluation questions, which are structured around five evaluation criteria: -Relevance: To what extent have the objectives and activities of CEF proved consistent with the needs of the EU market to date, as set out in the Europe 2020 strategy and relevant EU policy documents and market analysis in the 3 sectors, as well as with the beneficiaries' needs? How can such consistency be improved? -Coherence: How well does CEF fit with other EU/national policy objectives/ interventions? -Effectiveness: What is the main outcome of CEF so far? To what extent do the outputs and results of CEF correspond to the objectives? How effective has the use of financial instruments been so far and how could the use of CEF financial instruments be made more effective? To what extent has it been possible to leverage funding from the national public and private sectors?

-Efficiency: Are the costs resulting from the implementation of CEF proportional to the results to be achieved? How could the administration and management of the programme be improved to enhance its efficiency? To what extent are the available budget, instruments and governance model contributing to the achievement of the objectives? -EU added value: What is the EU added-value of CEF compared to what was or could be achieved by the private sector or by Member States at national and/or regional levels, and how could it be maximised? Is there still a need to continue CEF funding at EU level? If so, why? 4. Methodology The three Commission DGs responsible for CEF (Directorate General for Mobility and Transport - DG MOVE, Directorate General for Energy - DG ENER and Directorate General for Communications Networks, Content & Technology – DG CNECT) set out an evaluation scope (presented in the introduction), timeline and methodology, as defined in the roadmap adopted in 2016. The evaluation started in December 2015 and was foreseen to be finalised by 31 December 2017. An inter-service group was established to oversee the evaluation. In November 2016, the three DGs decided to shorten the general timetable by three months to ensure that the conclusions of the evaluation can feed into the preparation of the next MFF-related proposals. The Commission signed a contract with an external consultant to prepare a study providing input for the present evaluation. Data sources used for this external study and for the analysis undertaken by the Commission services include: -A review of relevant legislative documents and reports; -Monitoring data provided by INEA, EIB, and ACER (for energy); -An Open Public Consultation (OPC), with two distinct surveys, a technical one and a general one, accessible online for a period of 13 weeks between November 2016 and February 2017, with 332 complete responses (out of which 24% were not from beneficiaries of CEF); -A Targeted Stakeholder Consultation (128 detailed interviews); -Case studies. Results of the stakeholder consultation can be found in Annex 2. Further detail on the methodology is provided in Annex 3. Limitations – robustness of findings During the evaluation, the following limitations were identified:

-CEF is a funding framework which supplements the sectoral policy guidelines, therefore contributing to the TEN policy alongside other policy tools at EU and national level (other support is provided at EU or national level for related infrastructures, regulatory measures, compliance or non-compliance of the projects with the market and technical rules, etc.). Therefore it is clear that other factors also play a role in the full attainment of the general and sectoral objectives as defined in Articles 3 and 4 of the CEF Regulation. A clear attribution of the extent to which an individual factor contributed to a certain objective cannot be made. -Progress towards policy objectives could often not be quantified given the limited availability of data owing to the early stage of programme implementation, as well as to limitations concerning the lack of relevant, well-defined and robust key indicators relating to policy aspects (see also 'Effectiveness' section). While the evaluation could show that the money committed so far has been directed to priority areas for connectivity at EU level, results will not be available until after the completion of actions supported by the programme. Given the limited quantitative information, the evaluation also relies on qualitative evidence stemming from stakeholders' inputs. -Beneficiaries of CEF accounted for the majority of stakeholder inputs received during this evaluation. It could be argued that responses from at least some of these beneficiaries may be biased (e.g. in portraying CEF in a good light) due to them having a vested interest in the continuation of the programme. Given the nature of the Programme, it has to be taken into account however that those capable of responding to technical questions are for the majority stakeholders involved in the programme. -As discussed previously, due to its innovative features, comparability between CEF and predecessor programmes is different for the three sectors. The most comparable predecessor programme regards the transport programme (TEN-T 2007-2013), whose implementation is running until end 2017. It is expected that all actions supported under TEN-T 2007-2013 will be closed by end 2017, allowing for the launch of the ex post evaluation with a view to completion in 2018. Consequently, it was not possible to take into account comprehensive evaluation results concerning the long term impact of comparable predecessor measures. The evaluation used a sample of completed and ongoing projects in the three sectors' portfolios, which provided a basis for observing progress against general and specific objectives; the EU funding awarded; the extent to which the new instrument ensured that money went to the projects with the biggest need of a public intervention; whether adequate co-funding rates were chosen; whether more non-public funding was enabled and whether the allocation of EU money was more efficient than previously. This was complemented by the results of a highly relevant and knowledgeable set of stakeholder responses, although a rather small and not fully representative sample. Even though only a small share of the respondents to the targeted and open public consultations did not belong to either project promoters/beneficiaries or project managers (national or regional authorities), their input is useful for assessing the effectiveness of the procedural arrangements set up by the CEF Regulation. The stakeholder input received for the present evaluation might on its own not be representative enough in order to justify policy changes such as the decision to change or not the eligibility or spending priorities due to the lack of representativeness. Also, given that the vast majority of respondents have a vested interest in the programme as they benefit financially from it their assessment of the effectiveness and usefulness of CEF might not be completely neutral and has to be put in context. Nevertheless their input should be seen and interpreted in light of the limitation mentioned above. Such information was complemented with desk research covering the legal basis, relevant grant agreements for specific projects, interviews with stakeholders, expert groups, the Commission and Member States, as well as by taking into account the findings of the Open Public Consultation (OPC). Furthermore, the main focus of the evaluation is on the programme's implementation progress and delivery methods, i.e. on whether the conditions to fulfil its objectives are met, rather than on measuring the achievements of the projects. To conclude, the abovementioned limitations lead to a certain level of uncertainty in some findings e.g. limited data does not allow for a straightforward assessment of effectiveness; some of the findings based on stakeholder inputs may need to be put into perspective given potential bias. It is estimated however that such limitations do not significantly undermine the overall reliability of the analysis presented in this mid-term evaluation. 5. Implementation state of play The CEF Programme has three forms of assistance that can be used to achieve its objectives: grants, FIs, and public procurement. In addition, CEF supports PSAs, which are implemented by either grants or procurement with an objective of facilitating the implementation of CEF either directly in the administrations of the Member States, or, when addressed to specific groups of stakeholders, facilitating the implementation of specific policy fields, through better stakeholders' coordination, exchanges of best practices, communication, sharing of information and data. Grants Following the first three years of Calls, the CEF action portfolio has resulted in the selection of 925 actions and a corresponding actual CEF funding allocation total of EUR 23.1 billion: ·EUR 21.3 billion in transport (out of which EUR 11.3 is under the cohesion envelope) ·EUR 1.6 billion in energy ·EUR 128 million in telecom ·EUR 22 million in transport and energy synergy actions

This is expected to leverage up to EUR 45.3 billion of total investment in the European economy. Figure 2 provides a breakdown of CEF funding per sector. A breakdown of the CEF allocation per country (both Member States and third Countries) per sector (including general and cohesion envelopes in the transport sector) is provided in Annex 13. These results indicate that the awarding of CEF funding is very much on track, strongly influenced by the status of CEF Transport which accounts for approximately 80% of the total CEF envelope. Most of the initial allocated funding to signed actions refers to work-related actions or mixed actions (which combines works and studies) (93% in Transport, 83% in Energy ) rather than only studies. The figure below illustrates the states of all actions to date. The grants selected under the Multi-annual Work Programmes for CEF Transport and CEF Energy are managed through annual instalments over the period 2014-2020. The legal commitment is broken down into one or several budgetary commitments depending on the progress of the action. The total budgetary commitment is therefore lower than the total amount allocated via grant agreements (i.e. the total of the budgetary commitment represents 35% of the total amount of the grants allocated). So far, 14% of the total amount allocated to the selected grants has been paid through pre-financings and interim payment accounts. This information is broken down per sector in the table below. Sector CEF budget Actual CEF Funding (% of budget) Effective budgetary commitment (% of Actual Funding) Effective payment (% of Actual Funding) CEF Transport 24,050 21,341 (89%) 6,924

(32%) 3,037

(14%) CEF Energy 5,350 1,589 (30%) 993

(63%) 231

(15%) CEF Telecom 1,041 128 (12%) 103

(80%) 42

(33%) CEF Synergy * 22 8.1

(37%) 1.5

(7%) Total 23,081 8,028.2

(35%) 3,312.4

(14%) At sectoral level, there is a clear distinction between the budgetary front-loading approach adopted by the transport sector in comparison to the budgetary back-loading approach in the energy and telecoms sectors. This is notably explained by the fact that most of the projects funded in the transport sector in the first two years of CEF were based on a solid project pipeline stemming from the continuity of projects and studies formerly supported via the TEN-T programme or by Cohesion Policy instruments and therefore ready to be implemented during the initial period of the programme. For energy, the back loading approach is due to the fact that the majority of PCIs, particularly in the electricity sector, are due to mature only towards the end of the programming period, and only a limited number of gas projects were mature at the start as they came about in response to the 2009 security of supply crisis. For telecommunications, the back loading approach responded to the timeline needed to establish the financial instruments for the broadband investment. As for the DSIs, the lower budget allocation in the first two years of the programme suited the need to set-up the Core Service Platforms. Financial instruments (FIs)

The CEF Regulation allows for implementing projects with FIs, using up to 8.4% of the total CEF budget envelope. CEF FIs refer to the CEF Debt Instrument (CEF DI) and the CEF Equity Instrument (CEF EI). The management of the CEF DI was entrusted to the EIB, on the basis of a Delegation Agreement effective from 22 July 2015. The CEF DI portfolio also includes projects supported under legacy instruments: the Loan Guarantee for TEN-T (LGTT) and the pilot phase of the Europe 2020 Project Bond Initiative (PBI). In order to optimise the use of the EU budget contribution allocated to CEF, the first-loss provisioning provided under the pilot phase of the PBI and the LGTT were merged with CEF DI. Thus the portfolios of actions signed under PBI and LGTT effectively merged in January 2016 into a single CEF DI portfolio, thereby providing the benefits of economies of scale and diversification over the three CEF sectors. With regard to the budget of the CEF dedicated to the implementation of the CEF DI, transport committed EUR 140 million in 2014-2015, energy committed EUR 89.2 million in 2014-2015 and telecommunications committed EUR 17.5 million in 2014-2015. Under the legacy FIs the Commission has contributed EUR 205 million to the LGTT; EUR 200 million to the pilot phase of the PBI in the transport sector, EUR 10 million in the energy sector and EUR 20 million in the information and communications technology sector. The CEF DI has mainly been used in the transport sector to date (see box below). One telecommunication and one energy project have also been supported under the predecessor Project Bond Initiative and are part of the current CEF DI portfolio. Portfolio of the CEF DI in the transport sector ·Potential CEF DI projects close to signature: oProjects to be supported under the pilot phase of the Green Shipping Guarantee (GSG) Programme with an estimated total investment of EUR 3 billion; and oProject for port development. ·Legacy projects (transferred to CEF DI portfolio post-merger): oLGTT: 2 road projects: EIX Transversal C-25 PPP in Spain and A5 highway in Germany, and a high speed rail-link between Tours and Bordeaux in France (LGV Sud operational July 2017); oOne road project from the LGTT portfolio has been refinanced and supported by the CEF DI specific Senior Debt Credit Enhancement product: A8 Augsburg Ulm PPP in Germany for an total amount of capital costs of EUR 505 million; othe Port of Calais in France; oroad projects: N25 PPP in Ireland, Passante di Mestre in Italy, A11 highway in Belgium, A7 PPP in Germany The CEF EI is not yet in use by any of the sectors. However, the preparation of the CEF EI in the broadband sector is close to completion and the instrument is foreseen to be operational by the end of 2017. The Commission committed EUR 100 million to the CEF EI in 2016 aimed to provide a First Loss piece to an Equity Fund that will support Broadband investments in under-served areas. Public procurement Besides grants and FIs, a public procurement instrument is also included and is managed by the Commission. With a very limited budget (estimated as less than 1% of the total CEF budget), procurement has been mainly used in the Telecom sector for the operation and evolutive maintenance of the core service platforms (EUR 115 million allocated for 2014-2016). Transport The initial distribution of the CEF-Transport envelope between the three forms of assistance reserved a maximum of 89% for grants, a maximum of 1% for PSAs and a maximum of 10% for FIs. Following the adoption of EFSI and the slower than expected uptake of the CEF DI, in addition to the adoption of the Multi-Annual Work Programme for the Blending of financial instruments with grants in early 2017, the bulk of the financial assistance is planned to be implemented through grants, amounting to 97%, with the operational PSAs at 1.3% and the FIs at 1.7%.

The total budget available under CEF Transport for grants in the 2014-2020 period is EUR 23.4 billion (net of FIs and PSAs). 91% of this amount was already awarded following three sets of calls for proposals. The split across transport modes and the amounts awarded are illustrated in the figure below. In addition, EUR 1 billion has been allocated for the ongoing call for proposals for grants to be blended with financial instruments ('Blending' Call). The remaining budget (available for future calls in 2018-2020) is EUR 1 billion. It is important to note that the majority of CEF Transport funding was allocated to sustainable modes of transport such as railways and inland waterways (81%).The biggest share of the co-funding is allocated to actions located on the Core Network Corridors (CNC) or to other Core Network sections priorities, accounting together for EUR 16.9 billion or 79.4% of total co-funding from CEF in the transport sector as illustrated in the figure below. Additionally, EUR 279.5 million is allocated to projects on the Core and Comprehensive networks. With its remaining funding share, CEF-Transport has also supported SESAR and ERTMS, with both receiving 6.4% and 5% respectively of the total funding.



Compared to the TEN-T programme, CEF-Transport has dedicated significant efforts to Cohesion Member States (over 50% of the budget available under CEF Transport), in particular through the amount transferred from the Cohesion Fund, discharged through national envelopes and dedicated calls for proposals. Cohesion Member States were allocated through the 2014, 2015 and 2016 CEF Transport calls a total of EUR 11.3 billion in funding under the Cohesion envelope. This represents 100% of the cohesion envelope, which focuses especially on cross-border rail (road projects being limited to 10% of the national envelope amounts). Around EUR 350 million under the General Envelope has been allocated to Cohesion Member States. Finally, it should be noted that EUR 9.8 billion from the total CEF Transport budget is allocated to 20 particularly important projects from an EU value added perspective, among which 79% are rail projects, 55% are works projects and 62% are under the general envelope. The top six cross-border projects, which concern both works and studies, are Seine-Escaut (enhancing inland waterways between Belgium and France), the Brenner Base Tunnel (rail project involving Austria and Italy), the Fehmarn Belt (multimodal tunnel between Denmark and Germany), Lyon-Torino (rail project involving France and Italy), Evora-Merida (rail project involving Portugal and Spain) and Rail Baltica which improves East-West connections between several cohesion countries (rail projects between Poland, Lithuania, Latvia and Estonia). In the period 2014-2020, the Commission has funded PSAs for an amount of EUR 239 million on a multi-annual basis, divided across the General envelope, and the Cohesion envelope on the three CEF Transport Funding Objectives. PSAs were funded for an amount of EUR 85 million under the first objective, 12 million under the second objective and 125 under the third objective, while 17 million was reserved for Cohesion Member States where the Commission has supported the administrations of the Member States or bodies under their responsibility such as the railway infrastructure managers, who are in charge of preparing the projects pipelines by enhancing their administrative capacity in terms of human and technical capital to better prepare, manage and implement CEF projects particularly in Cohesion Member States. Energy

All actions have been awarded through grants, since no action has been supported by the CEF DI (one project close to approval). The sections below therefore focus exclusively on grant funding. As stated, the total budget for CEF Energy from 2014 to 2020 is EUR 5.35 billion. In the period under evaluation (2014-2016), EUR 1.6 billion of EU contribution is allocated to 93 CEF Energy actions through five calls for proposals, from a possible maximum allocated budget of 2.2 billion. The split of these actions across energy sector and the relevant amounts is displayed in the figure below. The total allocated amount following the first three years of the programme represents 34% of the total CEF Energy envelope. Out of this, EUR 1 billion has already been committed through the signature of grant agreements, and EUR 0.2 billion has been paid. In the energy sector, 11 actions have already been completed, 80 are ongoing and 2 are under preparation. Works have attracted the most significant funding, totalling EUR 1.3 billion, or 83% of funds across 17 actions. However, a higher number of projects providing for studies was supported; 76 actions for studies were allocated EUR 0.3 billion. A variety of actions have been supported for works and studies. For example, studies have varied from environmental impact assessments to support the permitting process and seabed surveys for cables to the technical specifications for the Baltic synchronous operation study. Works have varied from new gas pipelines and reverse flow engineering to new electricity lines and hydro-pumped electricity storage. Not all CEF energy project proposals have been successful. Some 160 have been submitted so far and of these, 150 (94%) were deemed eligible for funding. However, only 96 (60%) were selected for funding. The rejection of funding proposals has been due to a variety of factors (which are assessed at the proposal evaluation stage in accordance with the CEF energy award criteria), including insufficient maturity of the proposed action, proposals that do not demonstrate the need for EU financial assistance as they were deemed to be commercially viable. Given the available budget and the flexibility to move resources across the different calls over a budgetary year, budget restrictions were not a limiting factor. CEF Energy has allocated funds to electricity, smart-grid and gas projects. Gas projects have so far received the major share of funding, with EUR 1.02 billion or 64% of the currently allocated funding, via 49 actions. The electricity sub-sector has had nearly as many actions selected (43) although with a lower value of allocated funds, EUR 0.5 billion or 33% of the total. In the 2016 second call, one action was selected for funding in the smart-grid thematic area, and another action was selected, and later cancelled, in the 2014 CEF Energy call, with a total of EUR 0.04 billion (3%) currently allocated. However, looking at the 74 PCIs supported by CEF so far, 37 projects related to electricity have been supported (35 electricity lines, 1 storage project and 1 smart grids project) and 37 in gas. Of these PCIs, 40 concern physical cross-border infrastructure, while the rest concern infrastructure physically located in one Member State but with a significant cross-border impact, in line with the policy requirements of the TEN-E Regulation. A breakdown of the funding allocation by corridor shows that the Baltic Energy Market Interconnection Plan in gas has been allocated the largest share of funds, with EUR 0.51 billion or 32% of the total. This result is dominated by two multi-Member States works actions, the Poland-Lithuania interconnection “GIPL” and the Estonia-Finland “Balticconnector”. The Southern gas corridor, the NSI East (gas) corridor and the BEMIP Electricity corridors also feature prominently for funding, with the North Seas Offshore Grid corridor not far behind. Concerning the number of actions (including studies), NSI East (gas) corridor comes on top with 21 actions, followed by NSI East (electricity) and the North Seas Offshore Grid corridors. In the energy sector, programme support actions of a total amount of EUR 4.2 million have been used to support studies commissioned via public procurement on the development of TEN-E corridors. Telecommunications CEF Telecom was implemented in compliance with the methods of intervention set out by the CEF Telecom Guidelines. Specifically, for the DSIs area, grants have been mainly used to support the deployment of generic services, while the implementation and/or maintenance of the core service platforms has been funded through procurement. The only exception is represented by the core service platform of Europeana, which was supported with grants in 2014 and 2015 and through procurement in 2016.

A total envelope of about EUR 370 million, corresponding to 37% of the total budget, has been allocated within CEF Telecom over the 2014-2016 period: EUR 251 million in the DSIs area (EUR 115 million for the core service platforms and EUR 136 million for the generic services) and EUR 120 million in the broadband area. Regarding the broadband area, the forms of financial support used to date include: ·FI, specifically, Axione action has been supported under the Project Bond Initiative; and EUR 100 million is foreseen to be invested in the Connecting Europe Broadband Fund; ·Grants, which have been used to set up a technical assistance facility in cooperation with the World Bank. EUR 40 million is intended to be redeployed for the WiFi4EU initiative, which has recently reached political agreement by the co-legislators. As regards the horizontal actions related to the DSIs area, these consist mainly of studies on the deployment of CEF Telecom. Through the 2014-2016 work programmes, CEF Telecom has provided funding for the deployment of core service platforms and generic services of 15 DSIs: EUR 115 million have been allocated to the deployment of 14 core service platforms (eID, eSignature, eInvoicing, eTranslation, Public Open Data, Europeana, Safer Internet, Cybersecurity, eHealth, eProcurement, Business Registers Interconnection System (BRIS), Electronic Exchange of Social Security Information (EESSI), Online Dispute Resolution (ODR) and eDelivery ) and EUR 128.6 million have been awarded for 221 actions for generic services . A detailed breakdown is provided in the following figure. Figure 7 : Projects by DSI building block and sector specific DSI About 50% of the resources assigned to actions (including generic services and core service platforms) have been allocated to Safer Internet, Europeana, EESSI, eIdentification and eSignature. This is related to the approach adopted for the 2014 and 2015 work programmes, which paid particular attention to the technical and operational maturity of the DSIs. Indeed, Safer Internet and Europeana are classified by the Guidelines as “well-established” DSIs, since they were in operation before the beginning of CEF Telecom. 6. Answers to the evaluation questions

6.1. Relevance This section aims at addressing whether the original objectives and structure of the intervention are still relevant for the current EU priorities and objectives, as well as how they meet the sectors' and stakeholders' needs. It also addresses whether the forms of financial and technical assistance are the most appropriate to address the objectives. Main findings - The CEF general and specific objectives contribute to EU policy objectives, including its developments under the current Commission and the new EU international commitments concerning climate change (Paris Climate Agreement). In the telecommunication sector, however, the telecommunications guidelines limit the ability of the programme to take full advantage of the latest technological developments (e.g. High Performance Computing) and address the new priorities in the political agenda that have subsequently emerged. - Overall, the common programme approach can be considered relevant, notably in light of the goals and challenges that are common to the three sectors. - The investment needs remain significant in all three sectors. Given the continued existence of market failures which has led to underinvestment in key infrastructure projects, CEF remains relevant as an essential element of the EU investment strategy. The size of CEF currently makes it possible to address only some of the identified market failures in all three sectors. Therefore, potential exists for unlocking further public and private investment if additional EU budget was made available to address more market failures. - Considering the specific needs of the targeted sectors and the low bankability of related projects, a programme mainly based on well targeted grants is appropriate. - In addition, alternative sources of capital, such as those that can be accessed through FIs (CEF DI) and blending, remain relevant, especially for revenue-generating projects. Their degree of relevance, however, varies across sectors. - In the telecommunication sector, the important budget cuts during the final stages of CEF negotiations implied a reduction in the scope of the programme for the DSIs, resulting for the programme in only being able to partly address the needs of those Member States with developed DSIs at national level. As far as broadband is concerned, given resource limitations, support has been so far focused on technical assistance activities that can help projects with a difficult business case to materialise, as well as on the development of financial instruments. 6.1.1. Relevance for EU priorities and sectoral needs

CEF was proposed by the Commission in 2011 and adopted at the end of 2013, in the context of the Europe 2020 Strategy , the EU’s ten-year jobs and growth strategy. In 2014 the new European Commission came into office and its 10 priorities provided an update and focus to these goals. Of particular relevance to CEF and its sectors are the four priorities "A new boost for jobs, growth and investment" a "Connected digital single market", "A resilient Energy Union with a forward-looking climate change policy" and "Internal Market". The Commission also proposed in 2014 an Investment Plan for Europe, one of whose three Pillars is the European Fund for Strategic Investments (EFSI), which was launched in July 2015. In 2015, the adoption of the Paris Agreement by the 21st session of the Conference of the Parties (COP21) to the UN Framework Convention on Climate Change committed the EU and its Member States to a reduction in domestic greenhouse gas (GHG) emissions of at least 40% by 2030 and by 80% to 95% by 2050 compared with 1990 levels. The Commission is currently assessing what this new more ambitious agreement implies for EU policies. The CEF objectives as defined in Article 4 and 5 of the CEF Regulation continue to be in line with the most recent EU policy orientations, in particular its internal market dimension. For most respondents of the technical survey of the open consultation, CEF is fully or to a large extent aligned with other EU policy objectives and initiatives in the fields of transport (73% of respondents), energy (78%) and telecommunications (68%). For Transport, the CEF objectives and priorities were based on the objectives set by the TEN-T Regulation and wider transport policy objectives as defined in the 2011 White Paper "Roadmap to a Single European Transport Area – Towards a competitive and resource efficient transport system". The programme is also aligned with the objectives set in the European Strategy for low-emission mobility adopted by the Commission in July 2016. Indeed, connectivity within the EU and the transition to low emission mobility still depends on the ability to swiftly deliver main infrastructure missing links and to remove important bottlenecks for the most sustainable transport modes (rail, inland waterways, shorts sea shipping) and alternative fuels. Using a pan-European planning methodology, the TEN-T Regulation identifies a Europe-wide ‘Core Network’, which includes nine Core Network Corridors and serves the completion of the internal market. The ambition behind the Core Network, to be achieved by 2030, is to carry freight and passenger traffic with high efficiency and low emissions, facilitating transport flows and therefore boosting competitiveness, jobs and growth in the EU. By allocating the bulk of its envelope on the completion of missing links and removal of bottlenecks on the Core Network (either through the creation of new infrastructure or the substantial upgrading and rehabilitating of existing infrastructure), CEF represents a crucial tool to achieve the TEN-T policy objectives. This is also confirmed by the fact that it encourages more efficient and sustainable mobility services in multimodal combinations and through the use of telematics applications such as SESAR and ERTMS. The 2011 White Paper on transport has set the following targets to the TEN-T policy: 30% of road freight carried over distances of more than 300km should shift to other modes by 2030, and more than 50% by 2050; the length of existing high-speed rail network should triple by 2030 and by 2050 the majority of medium-distance passenger journeys should be undertaken by rail; by 2050, all major Core Network airports should be connected to the rail network and all seaports to the rail freight and where possible to the inland waterways system. By allocating the bulk of its envelope to rail projects (75%) and by promoting intermodal connections, CEF Transport is strongly contributing to these targets. More recently, the Commission published a communication on A European Strategy for Low-Emission Mobility, which notably aims to make the transport system more efficient, by stimulating the use of digital technologies and further encouraging the shift to lower emission transport modes, and to speed up the deployment of low-emission alternative energy for transport, such as advanced biofuels, electricity, hydrogen and renewable synthetic fuels. Being a programme that supports the development of telematics applications encouraging a seamless and efficient mobility throughout Europe and new technologies aimed at decarbonising transport, CEF remains very relevant to such a strategy. For Energy, the CEF objectives and priorities were based on the objectives set by the TEN-E guidelines and are strongly in line with at least three of the Priorities of the Juncker Commission: “Energy Union and Climate”, thanks to CEF Energy’s emphasis on security of supply, integration of renewable energies into the EU transmission networks and support on the uptake of innovative technologies; “Internal Market”, by fostering the integration of national energy markets by strengthening their physical interconnections; and “Jobs, Growth and Investment”, contributing to capital intensive investments through EU public funding, activating public and private sector resources. CEF Energy, supporting the TEN-E objectives to increase market integration and competitiveness, to enhance security of supply and to contribute to sustainable energy goals remain entirely relevant to the evolving EU policy framework as developed through the Energy Union strategy and more broadly, the priorities for the 2014-2019 Commission . CEF Energy, supporting the TEN-E objectives directly mirror three of the five dimensions of the Energy Union and are furthermore supportive of the remaining two . The second State of the Energy Union report noted that 'a resilient infrastructure is the backbone of the Energy Union' and that important interconnection projects had been put into operation. However, as stated, bottlenecks still exist and further interconnections are still needed to fully integrate the market, ensure security of supply and to enable to EU to make optimal use of its renewable resources.

Proposals from the Commission under the Energy Union in support of its objectives have also embedded an appreciation for the role of infrastructure. For example, the LNG and gas storage strategy highlighted the remaining gaps in internal market infrastructure and urged that EU funds can help to make up for the weak commercial viability of liquefied natural gas (LNG) terminals that are particularly important for security of supply. The ambition that underpins the Clean Energy Package proposals (in particular the target for at least 27% renewable energy and 30% energy savings by 2030), which was further reinforced by the EU's commitments under the Paris Climate Agreement, indicate that a step change is needed in the transition to a low carbon economy. Much evidence, also in terms of number of funded projects in the electricity and smart grids under CEF Energy (as discussed under effectiveness), points to the requirement for a reinforced electricity grid in order to absorb more variable power generation from renewable energy. This supports that due consideration should be given to electricity projects as set out in recital 57 of the CEF regulation. With regard to the expert interviews, 17 out of 30 energy experts that were asked on how CEF is in line with the climate objectives felt that adjustments might be still needed in CEF with a view to the 2030 targets. (Including a position paper from NGOs stating that CEF should "strictly refuse to finance fossil fuel based infrastructure and therefore only support renewable based energy infrastructure") The new Market Design legislative proposals under the Clean Energy Package furthermore highlight that without the ability to rely on increased flexibility and generation or demand resources from other Member States, the costs of the energy transition for consumers would increase significantly. In this respect the second horizontal objective of enabling the Union to meet its sustainable development targets also remains very relevant as well as the flexibility options included already in the specific objective of security of supply (storage). An important objective of CEF energy is to support innovation externalities, addressing the limitations of the market to support projects of common interest that take on more technology risk, in line with the fifth Energy Union dimension of 'Research, innovation and competitiveness'. CEF Energy recognises the additional cost of deploying new technologies in line with the TEN-E rules that incorporate innovation as a positive externality for (first of a kind of) commercial application, thus it can lower the risk of private investments in promising clean energy technologies, particularly in electricity transmission and innovative storage projects. Its relevance to innovation policy and to new initiatives such as the Communication on Accelerating Clean Energy Innovation in the energy sector remains therefore confirmed. For Telecommunications, the CEF objectives and priorities were based on the objectives set by the Telecommunications guidelines. They aim at supporting economic growth through improvements in the broadband and digital infrastructures and access to cross-border online services for citizens and businesses. The objectives are consistent with evolving EU priorities in the sector, particularly the Digital Single Market (DSM) and its related Strategy launched in 2015. The DSM Strategy identifies the need to increase efforts to modernise the public administration and achieve cross-border interoperability. Areas of intervention and sectors to achieve the DSM covered by the CEF DSIs include e-Government, cybersecurity and eHealth as well as an initiative to build up the interconnection of business registers (BRIS). Consistency with the DSM Strategy can also be observed for other DSIs like Safer Internet, that contributes to improve online access for kids by enhancing safety, and also to create a more inclusive society. The relevance of CEF in achieving an effective DSM is confirmed by all of the interviewed stakeholders and by the large majority of the respondents to the technical survey: 88% of them believe that CEF Telecommunications is fully or to a large extent relevant to the achievement of the DSM. The recently adopted DSM strategy mid-term review, among others, has highlighted the role of CEF in supporting solutions like eHealth, cyber-security, or the preparation of the European Data Infrastructure to put in place an adequate High Performance Computing (HPC) environment. With respect to the new political priorities stemming from technological developments identified by the DSM Strategy, CEF Telecommunications has shown however a limited degree of flexibility, as it allows the inclusion of new DSIs only if compliant with the criteria set by the Telecommunications Guidelines , and of new activities only if in support of the DSIs . To this purpose, it is worth mentioning: rigidity in the architecture of DSIs (art. 2.2.b), d) and e) of the Guidelines), the scope of the intervention in the area of DSIs that does not include Data Infrastructures (arts. 4.1.a) and 6.1), limitation to annual work programmes (art. 6.2), restrictions on the method of intervention (art 5). This lack of flexibility limits the potential of the programme to take full advantage of the latest technological developments (e.g. High Performance Computing) and address the new priorities in the political agenda that emerged after the adoption of the guidelines (e.g. cybersecurity-related challenges, infrastructure and technology needs for the data economy). There is an untapped potential of new technologies, which with a more flexible formulation of the guidelines could be fully harnessed. These limits in reflecting technological change are recognised by about 44% of respondents to the technical survey, whereas the need to update the Guidelines to increase their flexibility has also been highlighted by over 55% of the strategic stakeholders interviewed. All the interviewed stakeholders and the large majority of participants (89%) in the technical survey considered CEF Telecommunications relevant to achieve improvements in daily life for citizens, businesses and public administrations. Indeed, although the Commission has been supporting programmes to develop and promote interoperability between public administrations since 1999, cross-border interoperability has not been fully achieved yet . As a result, cross-border online services are lagging behind services offered to country nationals . For instance, an estimated 2% of entrepreneurs starting a business in their own countries face issues when trying to access the necessary online services (because these services are not available), whereas one-quarter of foreign entrepreneurs encounter this problem. Similarly, foreign start-ups suffer from lower availability/access to information on services compared to their domestic counterparts (33% compared to 39% for national start-ups); and using services cross-border is possible in 27% of cases compared to 46%. As regards CEF Broadband, the recent Commission Communication on the European Gigabit Society Strategy acknowledges the importance of Internet connectivity for a successful DSM and for Europe's digital future. The continued focus on the deployment of very high capacity broadband networks remains a key priority. Despite the various funding instruments available on the market, the Commission has identified a remaining investment gap of EUR 155 billion to reach the connectivity targets set in the Gigabit Society Strategy. Very high capacity networks are currently underfunded while they are critical for the digital economy and for many cross-sector innovations. In view of the very limited budget remaining for CEF broadband, it was essential to maximise leverage and to support projects able to deliver gigabit connectivity. No substantial demand has been demonstrated for CEF DI for broadband, possibly in the context of the emergence of EFSI. The addendum to the ex-ante assessment (see section 6.1.4) identified a clear lack of equity for relatively small projects in broadband across EU Member States. In addition, the WiFi4EU initiative, which has only recently reached political agreement by the European Parliament, the Council and the Commission, aims to promote the benefits of the Gigabit Society and stimulate demand for very high capacity networks. Finally, the technical assistance for broadband projects has proven highly relevant, as shown by the Connected Communities Initiative , ran in cooperation with the World Bank and complementary to similar support provided under the European Investment Advisory Hub. The relevance of a common programme

The TFEU sets the basis for a common programme for transport, energy and telecommunications networks by grouping the three in the same title ("Title XVI - Trans-European Networks") with a clear mission of "setting-up of an area without internal frontiers" . The CEF Regulation together with the sectoral guidelines have built on this approach and fulfilled the mandate of the Treaty by putting in place a common programme for the three TENs. The rationale for such approach was based on the observation that the three sectors are regulated by three different sectoral guidelines even though they face common challenges. The idea of a common programme is supported by a vast majority of respondents, both in the general and technical survey (where respectively 78% and 65% of respondents agree or strongly agree). In the general survey, the focus on multi-sectoral (transport, energy and telecommunications) projects and potential synergies was considered either important or very important for 79% of respondents. However, in both the technical and general surveys, opinions are split on whether having one funding instrument for the three sectors is the most appropriate approach. Also, most of the comments to this question suggest that respondents considered it as "forward looking", rather than on the current set-up, as they expressed the preference to keep e.g. separate calls and budget appropriations, which is currently the case. This might be partly explained by the fact that most respondents from each sector have no interaction with actions supported in the two other sectors and by the fact that the financing of actions involving more than one sector has been very limited to date (critical factors limiting the possibility for synergies in the current legal/budgetary framework are explained in section 6.3.2.2). On the other hand, the common programme approach allows for economies of scale and simplification, mainly as regards the management of the programme (the grant element) by a single executive agency (INEA) (see also section 6.4.2.). As stated previously, a separate mid-term evaluation of INEA (incorporating its other functions such as those relating to Horizon2020) is being undertaken. Common challenges in transport, energy and telecommunications – Stakeholders' views Stakeholders in their replies to the general survey pointed to the following common challenges experienced by the three sectors: ·"With a view toward a single European transport, energy, or telecoms market, the challenge in all of these sectors is the complexity arising from different national systems in place and their interconnection, and from the interoperability needed to establish"; ·"They have inherently common features that distinguish infrastructure from services that can operate across that infrastructure. The common challenge is to avoid the service providers owning or funding the development of that infrastructure to further their own gains, and to ensure that infrastructure is developed to meet the needs of citizens and businesses. And to ensure competitive supply of world class services"; ·"Similar challenges are related to the need of coping with an EU-wide effective, competitive and sustainable network development. On top of that, relevant synergies can be found in practical terms (e.g. supplying the transport network with energy as well as IT infrastructure")";"With the trend in technology and market development these three components are very linked"; ·"The three of them are core sectors for European economy and society. They make a key contribution to economic development and social welfare at European level, even when they show large differences entailing a differentiated treatment for each. Challenges are innovation, security and sustainability"; ·"Language barriers are significant inhibitors to successful international trading, co-operation and information exchange". 6.1.2. Resources vs. objectives and potential EU impact The investment needs in TEN exceed the resources available at national level and the structural market failures indicated previously in the 'Background to the initiative' section still exist. Therefore, even with a EUR 30.4 billion budget, the EU budget can only cover part of those market failures. In the transport sector, oversubscription rates for the calls show a very high demand for EU grant support, with the budget available constantly falling short of the sector needs. More recent estimations by the Commission, confirmed in the Core Network Corridor Coordinators work plans, reveal that investments needs in the TEN-T Core Network amount to EUR 740 billion by 2030. As public budgets are still under considerable fiscal consolidation, the implementation of CEF/TEN-T in 2014-2016 shows that financing support from Member States and private sector continues to be crucial but insufficient, for projects with a European dimension. As regards energy, the 2011 IA foresaw that some EUR 200 billion of investments would be required by 2020 in electricity and gas transmission infrastructure as well as smart grids, electricity storage and CO2 transport infrastructure by 2020 and of this, EUR 100 billion would not be covered by the private sector and was at risk. So far EUR 1.6 billion is allocated to projects, compared to EUR 2.2 billion available under the multi-annual work programmes 2014-16. This represents around 34% of the total budget across half of the MFF period. The total capital expenditure (CAPEX) leveraged by CEF so far (EUR 3.5 billion) is a fraction of the EUR 100 billion estimated by the Impact Assessment of the TEN-E Guidelines. As already indicated, CEF Energy spending has been back-loaded to the second half of the MFF period due to the need to step change the pipeline of projects, especially in the electricity sector, through the bi-annual adoption of the Union list of PCIs. Current expectations by ACER in 2016 are for a 'project commissioning peak' of PCIs between 2018 and 2020 with, for example, 22 gas PCIs being commissioned in 2020 alone ; furthermore, 89 PCIs out of the current 108 in the second PCI list are expected to be commissioned for electricity by 2023. These figures currently do not take into account the updates of the PCI Union List of 2017 and 2019 and do not count for additional projects in smart grids or cross-border carbon dioxide networks which could become PCIs in these lists. ACER estimates a total CAPEX of EUR 82 billion of investment for the list of PCIs by 2020, for which CEF Energy support would clearly not be sufficient. It is therefore too early to conclude on the amounts which CEF might cover as funding gap of regulatory mechanisms until the end of the programme. 57% of the 30 respondents to the technical survey reported that they considered budget appropriations to be “fully relevant” or “very relevant” with respect to sectoral objectives, and 13% considered budget appropriations as “moderately relevant”. Despite the difficulty to link together coherently different assessments, it can be concluded that the remaining CEF energy budget remains relevant to the potential mature demand and the remaining budget will not be sufficient to cover all the investment needs foreseen by means of potential CBCAs decisions; particularly, it will not be able to meet the increasing demand in funding for electricity and smart grids projects.

Furthermore according to current analysis based on the latest TYNDPs, EUR 125 to 148 billion is required for electricity TEN-E infrastructure and, EUR 90 billion is required in gas TEN-E infrastructure until 2030, in line with the increasing trend of investments needs in the sector. During the negotiation of the programme, the CEF Telecommunications budget was reduced from the requested EUR 9.2 billion to EUR 1.14 billion. The cuts amounted to about 98% and 50% of the initial budget for broadband and DSIs respectively. Furthermore, in 2015 EUR 100 million were redeployed for the establishment of EFSI. These budget cuts resulted in important changes in the logic of intervention and triggered reductions in the scope of the Programme. Specifically, for the DSIs the reduction affected not only their number, but also a layer of activities related to the deployment of digital infrastructures at Member State level. This is reflected in the geographic participation patterns of some DSIs, i.e. it is essentially those Member States where deployment at national level had already taken place that are able to apply for funding for generic services, as these typically cover only the connection of existing infrastructures to a core service platform. In the first years of implementation, this reduction in scope combined with the possibility to shift budget from undersubscribed DSIs to other DSIs (for generic services), allowed the available budget to partly address the needs of the Member States that had the capacity in place. However, considering the increasing subscription rates in recent calls, further cuts in budget would substantially hinder the capacity of the programme to deliver on its objectives. For example, in the case of eHealth, the available budget has not been sufficient to fund all the proposals above threshold. Furthermore, strategic stakeholders have pointed out that the envelope should be reconsidered in case the scope of CEF Telecommunications in the digital sector was to be broadened. As to the budget allocated to the broadband area, its current size is far from being proportionate to the existing challenge. Given resource limitations, support has been so far focused on technical assistance activities that can help projects with a difficult business case to materialise, as well as on the development of financial instruments (see 6.1.1). On the whole, resources available under CEF Telecommunications may most likely not be commensurate to challenges in this area. 6.1.3. Using the adequate support schemes to respond to market failures and policy challenges As indicated in the previous sections, the purpose of CEF is to enable investments with high EU socio-economic benefits but not being financially viable for the market due to market failures. It thus addresses a specific investment situation with a gradation in term of type of instrument and co-financing rate and in complementarity with other EU instruments. Grants As the large majority of CEF projects relate to cross-border projects with wider regional and EU benefits but insufficient national funding or market-based financing, grants represent the dominant support scheme. This is the case in transport, for most of the cross-border projects on the trans-European network and the horizontal priorities (notably ERTMS, SESAR, ITS and alternative fuels). These investments will not be realised without grant support, in particular where the costs are national/local and the benefits are tangible at European scale. This is also the case where the benefits cannot yet be internalised, notably through carbon-pricing. Moreover, important categories of project promoters (such as many railway infrastructure managers) have no possibility to raise debt and/or to generate revenues from single investment projects, which does not allow them to benefit from financial instrument and make them dependent on public support to invest. CEF has demonstrated the possibility to enable these investments and to modulate the EU support in relation with the needs. Support ranged from 85% co-funding grants for the cohesion envelope, to a modulation of co-funding grants (50-20%) depending on the priority and the nature of the action. The analysis provided for by the Work Plans of the Core Network Corridors shows that, due to the results of CEF and in the case of a continuation of the grant component of the programme, a very large majority of cross-border projects can be finalised within the next decade. Similarly, energy grants are needed for large scale infrastructure projects, notably for strategic priorities such as for security of supply for which the underlying actions are not considered as being bankable. In energy, the allocated co-funding rates have been sufficient to enable projects to move forward, this being a clear improvement compared to the predecessor programme where low co-funding rates had proven not to be effective as to the advancement of projects. 90% of projects that received grants for works have now taken a final investment decision or are under construction, while two projects have been already completed. Stakeholders support that CEF has been crucial in covering the funding gaps identified during the Cross-Border Cost Allocation (CBCA) process. In telecommunications, the forms of financial assistance currently provided to support the deployment of the DSIs can be considered adequate to respond to the market failures identified in the digital sector. The private sector will not replace public investment for the deployment of either the core-service platforms or generic services; additionally, Member States have little incentive in investing in cross-border interoperability. The relevance of the use of grants for supporting actions for generic services has been confirmed by about 80% of the participants in the technical stakeholder survey and 90% of the interviewed stakeholders. The need for financial support is confirmed by the preliminary results of the ongoing study to assess the long-term sustainability of the DSIs . Potential for revenue generation has not been identified for a number of DSIs (i.e. Europeana, Safer Internet, Public Open Data, ODR, EESSI, eProcurement, Cybersecurity, eSignature) due to the nature of the services provided (public service) and in some cases due to the limits set out by the relevant Regulations (e.g. the ODR Regulation specifies the access to the ODR platform shall be free of charge ). Similarly, for other DSIs it is difficult to extract revenues, either because they offer solutions that are to be open source and publicly available (e.g. eDelivery) or because this is not considered a realistic or desirable option (e.g. Health). Forms of financial assistance other than funding, such as financial instruments, are not suitable for projects that do not generate revenue.

Financial instruments Despite being developed in different years and responding to different market needs, all financial instruments established under CEF share the same purpose: increasing the level of private investment in the CEF priorities. To this extent, they are complementary to the more common grant-type of support. Indeed, CEF grants mainly aim at supporting projects where no business case exists for investors. The CEF DI uses EU budget to provide a guarantee to primarily EIB financing, through loans, guarantees, as well as support for project bonds. This in turn allows the EIB to provide financing to riskier projects ), thus crowding in other sources of private investment. As it will be explained in more detail in the Effectiveness section below, EFSI has to a certain extent substituted itself to the CEF DI. However, there remains a niche for the CEF DI to target, in particular by providing specific financing products or tools, or aiming at the development of specific markets such as alternative fuel. In the transport sector, in relation to projects that have positive expected socio-economic values, there exists a full spectrum of financing needs (in terms of the financial viability of the investment): from financially viable projects based on the income stream generated by users (e.g. bus leasing) to projects not generating revenues to cover investment and therefore being highly dependent on public sector/government support (e.g. non-PPP rail infrastructure). CEF DI support and legacy instruments are targeted at projects potentially suitable for private finance e.g. maintenance of existing infrastructure, increase of capacity at ports and airports, roads, the deployment of the most readily available alternative fuels. The provision of grants to privately financed projects e.g. through the CEF Blending Call of 2017 (and a proportion of grants made under previous CEF calls) extends EU support to privately financed projects. It is an appropriate support mechanism because many transport projects are on the margins of financial viability, and support solely through EU-budget financial instruments (as well as EFSI) would not be sufficient to deliver financial viability. The blending approach still allows the bulk of the finance to be provided privately, minimising overall public sector contribution, in line with the goals of the Investment Plan for Europe (IPE). Further the use of the CEF budget contributes to the fulfilment of the TEN-T priorities. Such an approach seems especially interesting for investment in shipping and port industries, rail connections to airports, ERTMS and retrofitting of vehicle fleets for alternative fuels. The CEF blending approach illustrates the flexibility and responsiveness of the CEF programme to supporting private finance investment In contrast to CEF grants, it is clear that the CEF DI in energy has not delivered so far and evidence indicates that project promoters do not consider this form of support when looking at the financing options available. This is likely less related to the amount of resources available under that investment and more related to its ease of use or the competitiveness of the debt market, and the impact of EFSI (which is explored in the sections on effectiveness and coherence). For the above reasons, the Commission has decided not to commit budget for CEF FI in the year 2016 for energy. With regard to the CEF EI, a telecom-specific Connecting Europe Broadband Fund was only recently put in place, and is foreseen to be operational at the end of 2017 (see section 6.1.4.). For CEF Broadband both FIs and grants are relevant in covering the investment needs in very high capacity networks, provided that the necessary flexibility is built into the programme. By combining both forms of public financing in areas with overall commercial potential for very high capacity networks – grants can be limited to the minimum necessary to build a business case in unprofitable sub-areas, while maximising private sector involvement across wider areas. Procurement With a very limited budget (estimated to less than 1% of the total CEF budget), procurement has been used so far to set-up and run the core service platforms of the DSIs in the Telecom sector; for Energy and Transport, a small fraction of the total funding is channelled through public procurement to fund programme support actions such as studies managed directly by DG ENER and DG MOVE respectively. Programme support actions (PSAs)

The use of PSAs has been quite limited given the scarce budget allocated in comparison to grants and FIs. However, PSAs have proven to be very helpful in smoothing the implementation of the programme and helping it achieve its objectives. In transport, PSAs have helped to accelerate several administrative processes at Member State level and/or lessen the burden through capacity building in Member States, while at the same representing a crucial development tool in the framework of horizontal priorities. Further detail on PSAs is provided in Section 5 Implementation state of play. 6.1.4. Specific equity instruments (EIs) for sectoral needs An ex-ante assessment on the potential use of an equity instrument under CEF was conducted in November 2015 as an addendum to the 2014 ex-ante assessment on the potential use of FIs. This ex ante assessment identified a clear market failure in the lack of available equity financing, especially smaller infrastructure deployment actions or for operations involving innovative technological solutions. A CEF EI for broadband was developed under the Connecting Europe Broadband Fund (CEBF), given that a lack of equity funds for relatively small projects had been identified across Member States. The additional ex-ante assessment and the accompanying market study, as well as the project portfolios presented by the companies which bid to become fund managers, demonstrated a clear gap in the existing possibilities to fund broadband projects. In particular, access to finance can be difficult for promoters of relatively small projects and/or in Member States which are not beneficiaries of large ESIF support. The Fund is expected to become operational in the first half of 2018 and an important portfolio pipeline has already been demonstrated. In the transport sector, while equity support needs in the transport market have been identified in smaller markets, it was estimated that these were not sufficiently relevant to put in place an EI at that stage. These needs relate to projects characterised by a strong new-technology component, as the risk associated to such projects indeed hinders the possibility for promoters to access alternative sources of financing such as banks or private investors. The use of the EI in subsequent years of CEF implementation may therefore be considered for riskier projects or for projects in immature markets. A CEF energy EI is not relevant to the needs of the sector at this time. The specific objective of the EI is to have the capacity to engage in equity finance as a last resort when the progress of a PCI is at risk, e.g. due to construction delays. However, this instrument has not yet been set up and according to the stakeholders’ feedback gathered (around a 60% of targeted interviewees who referred to the CEF EI specifically), a CEF EI is not considered relevant and necessary at the moment. The order of preference, in this case, is retained earnings, loans from banks and IFIs and only then the bond markets. Equity is only used by a minority of TSOs as many are restricted in their access to equity by the country's regulatory framework. Even when it is permitted by the framework, there is often not a need for equity within TSOs. The Marguerite Fund, an independent European fund for energy, climate change and infrastructure, is available to energy infrastructure projects throughout the period of CEF implementation. Hence an additional CEF energy equity instrument would potentially overlap with the function of the Marguerite Fund. Considering the complexity of putting the instrument in place and the time for uptake by the market, there is no space for the EI in this programming period. 6. 2. Coherence This section aims at assessing the external complementarities between CEF and other EU/national policies and interventions. Main findings - CEF is generally complementary with other EU financial interventions, with CEF having a clear stand-alone characteristic of promoting cross-border action and EU infrastructure priorities, but some adjustments have been implemented over time at operational level.

- CEF and the European Structural and Investment Funds (ESIF) are both contributing to the TEN objectives. While CEF has strongly focused on EU integration, particularly through cross-border connections and interconnections, ESIF focuses on internal sections less covered by CEF but essential for