The European Commission and Banco Português de Fomento signed on Tuesday a guarantee agreement for 210 million euros, to unlock 3.6 billion in Portugal. The agreement was signed by the Portuguese Minister of Economy, Pedro Reis, and the European Commissioner in charge, Paolo Gentiloni, at the headquarters of the European Commission, in Brussels.
“The maximum amount of financing for the Lines results from the guarantee agreement signed between the European Commission and Banco Português de Fomento (BPF) within the scope of the InvestEU Program. This agreement includes a guarantee granted by the European Commission to BPF up to 210 million euros, allowing BPF to mobilize more than 3.6 billion euros in financing for companies, through four support measures for micro, small and medium-sized companies, as well as mid-capitalization companies (small mid-caps), research, innovation and digitalization, sustainable infrastructure projects and social infrastructure projects”, explains Banco Português de Fomento (BPF) to SAPO24.
“The sharing of risk between the different participants in each credit operation with mutual guarantee allows the amount invested in the BPF InvestEU lines, by virtue of the guarantee agreement signed, complemented with the capitalization of BPF itself, to reach more than 3.6 billion euros of financing for Portuguese companies”.
The BPF also highlights “the multiplier effect underlying these conditions”. “In addition to social benefits (such as taxes paid by companies, the volume of supported employment, taxes on their workforce and the reduction in social benefits due to lower unemployment), it will allow each euro capitalized in these lines to translate, on average, into in more than 12 euros of financing for companies. This leverage effect would not be possible without the sharing of risk between the Portuguese mutual guarantee system and the financial system, resulting in very significant support targets for the business sector”.
Regarding the importance of this financing for the country, it is emphasized that “it provides substantial support to Portuguese companies, reinforcing their development and innovation capacity. It will make essential resources available to the economy, so that a greater number of viable companies and projects have the conditions necessary to grow and compete in an increasingly challenging global economic scenario.”
In this way, “by boosting sustainable economic recovery, this support promotes job creation and increases the competitiveness of SMEs. Furthermore, by directing investments to strategic areas such as the green and digital transition, the country will be better prepared to face future challenges , contributing significantly to economic, social and territorial cohesion”.
What will this money be used for?
Banco Português de Fomento will “use the European Union guarantee to mobilize investments from the InvestEU Program in Portugal, under three of its “strategic windows”: Sustainable Infrastructures, SMEs and Social Investment and Skills”.
In practice, “the financing will cover sustainable transport, support for SMEs and small mid-capsincluding its research, innovation and digitalization activities, as well as social infrastructure projects”.
To the SAPO24the BPF releases some data regarding the projects in question:
Through the BPF InvestEU Guarantee lines
At issue are “three Guarantee lines, to be distributed by retail banks and benefiting from guarantees provided by Mutual Guarantee Societies that are counter-guaranteed by the Mutual Counter-Guarantee Fund (FCGM), managed by BPF”:
- SMEs and Small Mid-Caps (2,560 million euros) – support for SMEs and small mid-caps
- Sustainable Investment (1,280 million euros) – aimed at supporting the reduction of the carbon footprint and the adoption of circular economy principles in company activities;
- Investment (640 million euros) – aimed at supporting companies’ financing needs;
- Working capital (640 million euros) – intended to finance structural working capital needs.
- Sustainable Urban Mobility (284 million euros) – support for investment in the adoption of sustainable forms of passenger transport
- fleet renewal and vehicle acquisition (taxis, cars, buses, etc.), adopting 100% electric or hydrogen vehicles, as well as the necessary adaptation of energy networks.
- Research, Innovation and Digitalization (711 million euros) – support for investment in research, innovation and digitalization in line with InvestEU policy objectives.
In these investments, the BPF states that “the terms of operations vary between measures, with a maximum of 20 years in the Urban Mobility Line”.
It is further explained that these are “lines without the need for funds to be made available from other public donors or State guarantees: they are financed by BPF capital (increased with PRR funds) and InvestEU guarantee”.
Through the BPF InvestEU Credit Line, aimed at social infrastructure
The BPF states that this is a “line developed within the scope of the European Union InvestEU Programme, under the Social Investment and Skills Window (SISW)”.
In this case, the “global amount of the credit line is up to 115 million euros (financing of up to 40 million euros granted by BPF plus financing of up to 75 million euros granted by other Credit Institutions, under a Bank Syndicate regime)” and “the operations will have a maturity of up to 25 years”.
Possibilities for projects developed in this line:
- Nursing homes – “improve and adapt the national network of social facilities and improve the provision of services in the areas of social and health support, adapting them to existing, current and future needs, and to promote increased coverage rates of social and of health”.
- Student Accommodation – “improve student accommodation conditions and facilitate access to teaching spaces”.
- Health and Social Assistance – “establish or improve health care and related infrastructure, including the construction, rehabilitation and modernization of infrastructure such as hospitals, health centers (including those specializing in serving vulnerable populations), university hospitals or specialized health care centers for disabled people”.
What is the criteria for selecting projects for investment and when will work begin?
According to a response from Banco Português de Fomento, “the analysis of operations, which in a first phase involves commercial banking and, in the case of BPF InvestEU Guarantee lines, in a second phase by the mutual guarantee society, is based on strict criteria established by the InvestEU Program and by the BPF”.
“These criteria are transposed into the conditions of eligibility and access to the lines, and it is also necessary to ensure compliance with the prudential regulations to which these measures and participating entities are obliged”, he adds.
“Recognizing the importance of these measures for companies and, consequently, for the Portuguese economy, BPF has been carrying out, over the last few months, all the necessary processes for the lines in question. The Bank is prepared to start making them available to the market, which is expected to happen soon, right after the signing of contracts with participating financial intermediaries”, it is also mentioned.