EIB to gauge ag loan demand through €400m bioeconomy program

The program's focus is on projects to be implemented through 2022, but EIB executives tell Agri Investor the bank hopes to replicate the entire program, if successful.

The European Investment Bank hopes to use a €400 million bioeconomy loan program as a pilot to gauge demand for such loans among private companies and cooperatives across the EU, according to a corporate lending executive.

If the program proves successful, EIB executive Ferran Minguella told Agri Investor, the bank might look to replicate or even increase the scale of the program sometime in the second half of 2019, when between 70 and 80 percent of the capital already allotted is expected to have been used.

Established through the European Fund for Strategic Investments, the bioeconomy program will offer loans of between €7.5 million and €50 million to projects ranging from €15 million to €200 million in size that can create future-oriented jobs in rural areas across the continent.

The projects are to be implemented between 2018 and 2022. Given a policy to fund less than half of any single venture, the EIB hopes the €400 program will support €1 billion in projects focused on processing of food, material and energy using renewable resources from land and sea.

Across the credit-rating scale

Minguella, the EIB’s head of corporate lending in Italy, Malta, Croatia and Slovenia, said that loans from the bioeconomy program will be offered on terms of between six and 12 years, depending on the strength of the company and market in which they are located.

Minguella declined to disclose precisely the interest rates offered on the loans.

“We may have companies that are almost investment-grade and some that are a single B, so this can move from 5 percent, down to lower than one percent,” Minguella said.

Businesses in all EU member states are eligible to apply directly to the EIB for loans from the program and facilities offered through it to both cooperative and private businesses would be the same, according to Minguella. The EIB will look to establish long-term relationships with companies receiving support from the bioeconomy program, Minguella said, with additional support possible for companies judged to have performed well.

Felipe Ortega, deputy agribusiness advisor at the EIB’s rural development division, pointed out to Agri Investor that rural-to-urban migration is a phenomenon that affects almost all 28 EU member states. He added that while mitigating the movement of rural citizens from EU member states located in Eastern Europe could be one of the effects of the program, more developed areas of the continent also have underdeveloped rural areas that could benefit from loan support.

“We believe that by supporting companies that are mainly centered in rural areas, this will also contribute to creating high-quality jobs in these rural areas to incentivize people to remain there.  In this way, indirectly, we will help to address the issue of rural to urban migration.”

Deal pipeline

Ortega added that the bioeconomy loan project aims to support agriculture in general. Aside from an exclusion of investments involving the acquisition of land, he said, each project is to be evaluated largely in terms of economic, environmental and societal value.

“In principle, any actor within the agriculture and bioeconomy value chains – from farmers and input companies to food processors, pulp and paper companies – would be eligible for consideration of financing by the bank.”

Minguella said that the EIB met with member states’ agricultural ministers last month to begin building a deal pipeline for the program. Loans have already been offered through the scheme, he said, though he declined to identify or describe specific projects.

“We identified some projects in mainly Italy, France and Spain. Now that the product itself can be offered, we have seen interest from other countries like Ireland, Romania, Bulgaria and Poland.

Ortega added that the program itself reflects the fact that bioeconomy and agriculture has emerged as an area of common understanding between the EIB and the European Commission.