A plan to provide superfast broadband to French rural areas will receive EU funding in the form of 'project bonds', EurActiv France reports.
It is the first project bond-funded venture in France and the first used for digital infrastructure in the EU.
The French project will upgrade ADSL and fibre-optic in sparsely populated rural areas, where setting up high-speed networks is not profitable for private operators.
Three French ministers presented the €189 million of EU bonds on 23 July. Michel Sapin, minister for finance, Arnaud Montebourg, minister of the economy, and Axelle Lemaire, the secretary of state for digital affairs.
EU Commissioner for the digital agenda, Neelie Kroes, said at the signing ceremony that, "investing in digital is investing in the future. Superfast broadband supports tremendous innovation – and can benefit from innovative financing too. All those thinking of investing – be inspired by what is happening in France, learn from it, and grab the digital opportunity."
Axione Infrastructures are launching the project. The European Investment Bank (EIB) guaranteed €20 million for the project. This improved the bonds’ rating and its appeal to potential investors.
Pierre René Lemas, the CEO of Caisse des Dépots, a public investment bank which is a shareholder in Axione, described the EIB’s support as “essential for the completion of the project”.
Launched in 2012, project bonds were conceived as a way of financing large infrastructural projects in Europe. The lack of economic incentives or the length of the period of return on investments tends to put off private investors.
With an initial budget of just €230 million, the EU and the EIB worked together to provide guarantees aimed at attracting private capital to sectors that often struggle to find funding.
The EU institutions agreed in 2012 to launch the first project bonds as a pilot project to boost investment. Since, they have supported infrastructure projects in transport (€200 million), energy (€10 million) and the digital economy (€20 million). The pilot phase will come to an end on 31 December 2014, and if successful, could be rolled out at a much bigger scale in the 2014-2020 EU budget.
Montebourg slams EIB for being too slow
Bonds are essentially IOUs issued by a borrower, in this case the European Investment Bank, to a lender/investor.
Spain, Belgium and the UK have used project bond financing before. And Italy, which currently holds the EU's six-month rotating Presidency, is keen to push them further at European level.
But they have not convinced everyone in France. Despite a a strong media presence, French industry minister Arnaud Montebourg was vocal in his criticisms of the project and the EIB’s implementation during the signing ceremony.
“We cannot wait a year for projects that cost €180 million! I think we can do better than this,” said Arnaud Montebourg, adding that hostile takeovers amounting to billions of euros between multinationals rarely take more than a few weeks.
The French minister also attacked the EIB’s “excess of prudence” for choosing to invest in low-risk projects. “It is a point that France included in its programme to Jean-Claude Juncker,” he added.
In its programme to the new EU Commission, France called for a “new project bond phase”.
Project bonds could play a bigger role In the future, notably in the framework of Juncker’s €300 billion public and private investment plan for the first three years of new Commission.
“We are in talks with Jean-Claude Juncker on the matter,” said Vice President of the EIB, Philippe de Fontaine Vive, adding that, “the European Investment Bank is ready to put in place a large European development plan that goes beyond the pilot phase”.