FINANCIAL CLOSING 2017-01-31T02:37:50+00:00

 

Creating a major infrastructure project such as the Milan Outer Eastern Bypass (the “Tangenziale Est Esterna di Milano”), at this particularly difficult period for the global economy is a powerful and stimulating challenge for the company. The economic crisis combined with the need for a spending review to see how the government can balance the books and cut spending have made it impossible to build public infrastructure that has been needed for decades solely with public money. The spending budget for the construction of TEEM comes to €1.6 billion (€2 billion including interest charges), an investment target that can currently only be reached through private funding.

For these reasons, Tangenziale Esterna (TE) SpA has developed a robust and complex financial plan, which envisages raising funds both from company shareholders and from capital markets using a combination of proven instruments such as project financing and innovative instruments such as project bonds and securitization. It is an approach to funding that will make TEEM a trailblazer and model for other Italian infrastructure work mired in financial trouble.

In June 2013, the Letta government issued a provision allocating €350 million in public money to TEEM. When this decree becomes law it should free up public funding that will enable TE to harmonize its Economic and Financial Plan with the pay-out, by Cassa Depositi e Prestiti, of the contributions made available by the government. During the interim period before the «Decreto del Fare» or«Doing Decree», as it is known, is ratified, TE will stick to the plan whereby the capital contribution from shareholders amounts to €580 million in equity to be provided by means of a series of capital increases divided into tranches.

Consequently, TE has appointed Banca IMI (Intesa-San Paolo Group), Banca Popolare di Milano and Centrobanca-UBI as the arranger banks in charge of structuring the €1.4 billion in project financing. On 2 August 2012, these leading banks provided a bridging loan worth €120 million divided into equal quotas. This sum, together with an initial capital increase of €120 million, has guaranteed that the company can keep operating and that work on TEEM will proceed.

The inclusion of the Milan Outer Eastern Bypass in the list of the works forming part of the Trans-European Transport Network (TEN-T) gives the project importance on an EU scale, and opens the door to possible funding from the European Investment Bank. Indeed, TEEM is one of the leading European projects that fulfils all the requisites for financing through EU-backed project bonds, while the prestigious and entirely Italian financial institution, Cassa Depositi e Prestiti, has already granted a fast-track lending procedure and is in the process of agreeing on the exact nature of its funding. Moreover, the total cost for private investment will be recovered from the toll revenues from the new road. The operating licence granted to TE by Concessioni Autostradali Lombarde (Lombardy Motorway Concessions) is for fifty years, and starts from the date the Bypass is opened to traffic. This makes it the longest concession ever granted in Italy.