EPOS II - The "Climate Awareness Bond"
EIB promotes climate protection via pan-EU public offering
First bond to offer:
- Proceeds earmarked for future projects in the fields of renewable energy and energy efficiency, thereby supporting climate protection
- Return linked to the performance of the new FTSE4Good Environmental Leaders Europe 40 Index
- Investor option to purchase and cancel CO2 Allowances (EUAs) in a simple and transparent way at maturity
- Public offering in all 27 domestic markets of the EU, resulting in the largest- ever syndicated index-linked bond
The European Investment Bank (EIB), the Bank promoting European objectives, owned by the EU Member States and rated Aaa/AAA/AAA (Moody's/Standard and Poor's/Fitch), plans to issue a new EUR bond that combines innovative features focused on climate protection and offers a unique investment opportunity. This issue, EIB's second 'European Public Offering of Securities' (EPOS II) is the first bond to be sold via public offering in all 27 EU Member States. The 5-year bond is capital protected and offers a return in the form of a single payment at maturity linked to an equity index, the FTSE4Good Environmental Leaders Europe 40 Index, with a minimum of 5% at maturity. Lead managers of the transaction are Dresdner Kleinwort, Merrill Lynch International and UniCredit Markets & Investment Banking.
The EU has taken a leading role in addressing climate change, as illustrated by the latest EU policy initiatives - the EU Commission publication in January 2007 of "An Energy Policy for Europe" and the Action Plan for energy policy adopted by the European Council in March 2007. The EIB, as the Bank promoting European objectives, therefore continues to be an active lender in this field, and this bond issue further highlights EIB's commitment.
Use of funds for cleaner energy
The funds raised are earmarked for investment in future EIB lending projects within the fields of renewable energy and energy efficiency. These areas are key for international climate protection and the EU has committed to taking leadership in their development.
EIB is an important and active instrument of this policy. A description of EIB's objectives in these fields, which include an annual target of EUR 600-800 million per year for renewable energies projects, can be found in EIB's Corporate Operational Plan for 2007-2009, available on EIB's website (www.eib.org).
The earmarking will be effected by allocation of the proceeds within EIB's Treasury, pending disbursement, to a specially created and segregated sub-portfolio invested in money market instruments. These arrangements will be reflected in EIB's financial statements, permitting public monitoring of disbursements.
New FTSE Index with focus on European Corporates' Environmental Responsibility
The return of the bonds will be linked to the performance of a new equity index expressly created by FTSE for this transaction - the FTSE4GOOD ENVIRONMENTAL LEADERS EUROPE 40 INDEX. The index will consist of corporates from the existing FTSE4Good Europe Index, which includes large and mid-cap European corporates. The components of the existing index will be rated by FTSE according to the FTSE4Good Environmental Scoring Methodology and selected for the new index only if they achieve a scoring of "best practice". With this index link, EIB offers investors a new means of exposure to - and the ability to follow - large European companies with leading environmental management practices.
These indices are designed and calculated by global index company FTSE Group, and overseen by an independent FTSE4Good Policy Committee. The new index will be proprietary only for 6 months. Thereafter, it will be available also for third parties, serving overall market interest. For further information, please see www.ftse.com/ftse4good.
Investor option to reduce room for carbon emissions
Investors will have the option (not the obligation) to use part of their return to buy and cancel CO2 EU allowances, reducing the room for future carbon emissions in the EU within the scope of the EU Emission Trading Scheme (referred to under EU Directive 2003/87/EC as well as relevant national implementing regulations).
The EU Emission Trading Scheme (ETS) is a cornerstone in the fight against climate change. It is the first international trading system for CO2 emissions in the world and covers over 11,500 installations in the EU, which represent close to half of Europe's emissions of CO2. The aim of the EU ETS is to help EU Member States achieve compliance with their commitments under the Kyoto Protocol. For more information on the ETS, please see: http://ec.europa.eu/environment/climat/emission.htm
European Public Offering of Securities ('EPOS') throughout the EU
Facilitated by the "passporting" established by the EU Prospectus Directive, this bond will be the first to be sold via a simultaneous Public Offering in all 27 domestic markets of the EU. The issue extends to the whole EU the 'EPOS' format used for EPOS I in the Eurozone last year. The Prospectus has already been approved and passported by the CSSF, the Luxembourg market supervisory authority. The public offering is expected to run from 29.05.2007 to 22.06.2007, allowing sufficient time for both institutional and retail investors to participate. The distribution of the bond will take place via a syndicate of 15 banks.
Largest-ever syndicated equity index-linked bond
Based on its EPOS benchmark size, the bond is expected to be the largest syndicated equity index-linked bond ever launched, providing an exceptionally liquid size for a structured bond in EUR.
The exceptionally broad syndication and the pan-European public offering are intended to enhance service, transparency and distribution to investors, delivering to a wider audience - in particular retail investors - material advantages from the increasing integration of European capital markets.
Comments
Bertrand de Mazières, Director General of Finance at the European Investment Bank, said: "The EU has taken a leading role in tackling climate change. With this bond EIB is inviting investors and the banking community to join that endeavor, further highlighting EIB's commitment to promoting EU objectives."
Pierre Blandin, Managing Director and Head of Frequent Borrowers at Dresdner Kleinwort, said: "This transaction combines a number of unique features that demonstrate once more EIB's outstanding innovation capacity in the capital markets."
Andrea Podesta, Managing Director and Head of EMEA Debt Wholesale Distribution at Merrill Lynch, said: "This bond offers a potential gain linked to the performance of Europe's most environment-friendly European companies, principal protected with the security of EIB's AAA credit, and a minimum payment of 5% at maturity. This landmark trade builds on the success of the first EPOS executed last year."
Vittorio Ricci, Managing Director, Debt Capital Markets at UniCredit Markets & Investment Banking, said: "As a truly European cross-border banking franchise, we, at UniCredit, fully understand the merits and support the concept behind EIB's EPOS: removing regional barriers across EU financial markets to deliver to retail investors the advantages of European integration. This can serve very important objectives, in this case climate protection and sustainable development".
Contacts
BEI
Enquiries on the bond:
Carlos Ferreira da Silva / Aldo M. Romani +352 4379 6218
General Media enquiries:
Sabine Parisse +352 4379 3340
Juan M. Sterlin Balenciaga +352 4379 3150
Dresdner Kleinwort
Murray Parker + 44 207 475 5828
murray.parker@dkib.com
Merrill Lynch
Alexandra Walker +44 20 7996 3496
alexandra_walker@ml.com
UniCredit Group
Francesca Palermo Patera +39 02 8862 2612 francesca.palermopatera@unicreditgroup.eu
FSTE Group
Sabrina Bhangoo +44 207 866 1821
Sabrina.bhangoo@ftse.com