The European Commission, the Member States and the EIB will share responsibility for managing the NER300 instrument. External experts will work under contract to the EIB for the evaluation of proposals (details here). Projects developers apply to the Member State in which they want to situate their project using a set of standard forms that the Commission will make available on its future NER300 webpages. Unlike in FP7 projects, only one independent legal entity is needed to mount an NER300 proposal, with no restriction on where it is headquartered. Each Member State chooses from the project applications it has received the ones to pass on to the EIB for consideration in the selection process.

The EIB’s role is to act “on request of, on behalf of and for the account of the Commission” but Recital 5 suggests that it could have a specific task in combining NER300 grants with “loan finance provided under the Risk-Sharing Finance Facility (RSFF)”, which it manages with the Commission. NER300.com asked the EIB for clarification in May 2010. Its answer, sent by e-mail, is given below.

The RSFF is mentioned in the NER300 decision mainly because it is a facility specifically dedicated to financing R&D and innovation investments including demonstration projects. The fact that NER300 projects by definition relate to commercial demonstration projects implies that these same projects in all likelihood would qualify as “eligible” for EIB financing under RSFF.

NER300 will be a totally separate programme from EIB’s lending operations, i.e. we will have Chinese walls between project teams focusing on normal lending operations and teams focusing on NER300. The selected NER300 projects receive no preferential treatment from the Bank, neither is there any penalty for not qualifying for NER300. In reality, a positive NER300 decision can of course positively contribute to the financing structure of the project and therefore make structuring of the financing easier from all financiers’ (equity, debt, grants) point of view. However, a positive NER300 decision would not pre-empt the need for lenders’ due diligence.

1. NER300.com’s commentary and recommendation:

   The EIB’s reply leaves some questions unanswered:

   • What is the EIB’s experience of working with Chinese walls and with a third party’s – in this case the Commission’s – proposal evaluation criteria?
   • When NER300 proposals arrive at the EIB for evaluation, will there be provisions for ensuring that EIB staff who have had any previous contact with the proposal are not involved in its evaluation for the purpose of NER300? In other words, will procedures be put in place to ensure that every proposal is evaluated as if it is being seen for the first time?
   • Are the criteria the EIB will use for its NER300 due diligence the same as its lending criteria for sub-investment grade normal lending?

   The technological risk that makes a project eligible for NER300 funding should not automatically make it too risky for the EIB to lend to via the RSFF. Thankfully, the EIB, in its reply, indicates that “in all likelihood” this situation would not arise. Even assuming the RSFF could support NER300 projects, there remains the question of whether it has the resources to do so. The 1 bn EUR contributed to the RSFF by FP7 and the EIB enables it to provide approximately 10 bn EUR of debt financing, but it is already subscribed to over half of this limit. To finance NER300 projects, the Commission and/or Member States must recapitalise it and if necessary allow it disproportionately to target energy projects.

Outsourcing

The EIB has hired engineering consultancies to help it perform the technical and financial due diligence assessment of NER300 proposals: Det Norske Veritas (London) and Parsons Brinckerhoff (London) for CSS and Pöyry (Espoo, Finland) and COWI Belgium (Brussels) for renewables. It seems the total amount the EIB wants to set aside for the evaluation of a possible 30 CCS and 135 RES projects over NER300’s two calls is 11 M EUR.