New EU-backed infrastructure era ahead

Fri Jul 12, 2013 11:27am EDT
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* First bond under EU Project Bonds initiative

* EIB funds to lower infrastructure debt costs

* Spanish offshore gas storage first to benefit

By Owen Sanderson

LONDON, July 12 (IFR) - The first bond to be issued under the EU's Europe 2020 Project Bond Initiative was announced on Thursday, which could open a new era of capital markets access for essential European infrastructure.

European authorities have been working on ways to persuade bond investors to back infrastructure projects since 2010, when EC president Jose Manuel Barroso proposed the initiative.

But legal documents were only put in place last year, after they stumbled on how to structure their support, conflicting regulation, and the European sovereign debt crisis.

Pre-crisis, bond insurers called monolines would guarantee project finance bonds, but these institutions fell away during the crisis, leaving only struggling bank balance sheets and unwilling bond investors to fund infrastructure. The EU therefore decided to step in and risk public funds to try to reconnect the capital markets to infrastructure finance.

The new bond deal, dubbed Watercraft Capital, announced on Thursday, will raise EUR1.434bn to fund an underwater gas storage facility in Spain, replacing the bank loans that funded the construction of the project over the past two years.   Continued...