Publication
International arbitration report
In this edition, we focused on the Shanghai International Economic and Trade Arbitration Commission’s (SHIAC) new arbitration rules, which take effect January 1, 2024.
The new SACE guarantee to boost green transition investments
Italy | Publication | junio 2024
Content
The Archimede Scheme
Law no. 213 of 30 December 2023 (Budget Law 2024) has introduced, among others, a new 60 billion Euro guarantee (Archimede Guarantee) to be issued by Sace S.p.A. (SACE) to support infrastructure investments (including in relation to public services), the green transition, sustainable mobility, the mitigation of climate change and digital technology innovations in Italy (Archimede Scheme).
In this article, we look at the detailed requirements of the Archimede Scheme, including which entities can benefit from it and under which conditions.
The Archimede Scheme is scheduled to remain in force until 31 December 2029 and will support investments in sectors that are characterised by high levels of risk, that do not operate in standard market conditions and/or that are linked with a limited availability of financial instruments. An important difference between the Archimede Scheme and other guarantees previously issued by SACE is that this measure is not temporary and ‘extraordinary’, but rather is aimed at providing a stable mechanism to support investments in “green” sectors, without any specific limits relating to the underlying transaction.
The guaranteed entities
The entities guaranteed under the Archimede Scheme are:
- entities implementing InvestEU programme pursuant to Regulation (EU) 2021/523 of the European Parliament and of the Council of 24 March 2021 (such as the European Investment Bank, the Council of Europe Development Bank and Cassa Depositi e Prestiti S.p.A.);
- banks, national and international financial institutions, and other entities authorised to carry out financing activities in Italy;
- national and international insurance companies that are authorised to issue guarantees and sureties in Italy; and
- for guarantees relating to debt instruments (including debt instruments of subordinated ranking), holders of bonds, promissory notes, debt securities and other convertible financial instruments.
Entities that have been subject to sanctions, restrictive measures, or other economic and financial measures, including commercial embargoes imposed by Italian, EU, US, or other international authorities, as well as entities in countries that do not cooperate with Italy/with those authorities from a tax perspective cannot qualify as guaranteed entities.
The beneficiaries
The Archimede Guarantee is available to companies (i) with their registered office in Italy or (ii) with their registered office overseas but with a permanent establishment in Italy, provided that they:
- are not qualified as small and medium-sized companies (PMI)1 . However, given that the group in its entirety has to be taken into account when calculating the threshold to qualify as a PMI, if the Italian company belongs to a larger group it may still be eligible for the Archimede Guarantee;
- are not companies facing financial instability;2
- are not qualified as companies having non-performing financial exposure; and
- have a ratio between the total amount of actual cash indebtedness (totale sconfinamenti per cassa) and the total amount of the agreed cash indebtedness (totale accordato operativo per cassa) not exceeding 20%.
In addition, the legal representative and the management of the beneficiary must meet the good standing requirements provided for by the antimafia regulations (i.e. Legislative Decree no. 159/2011).
Procedures for the issuance and conditions of the Archimede Guarantee
The obligations arising from the Archimede Scheme are borne 80% by the State and 20% by SACE itself.
According to Budget Law 2024: Euro 60 billion will be available for the Archimede Scheme until 31 December 2029. Until 1 January 2025, SACE cannot issue guarantees beyond the overall maximum amount of Euro 10 billion and the guarantees issued in favour of national and international insurance companies cannot exceed 10% total value of the Archimede Scheme.
The insurance premium to be paid to SACE following the issuance of the Archimede Guarantee is proportional to the level of risk of the underlying transaction and cannot exceed the costs borne by SACE for the issuance, management, and recovery of the amounts of the relevant guarantee.
Maximum covered amount
The Archimede Guarantee is limited to the maximum coverage set out below for each category of transaction:
|
Guarantees of financing agreements |
70% |
|
Sureties (fideiussioni), guarantees and bonds to be provided during the performance of public contracts and/or to obtain advance payments |
60% |
|
Guarantees of subordinated ranking |
50% |
|
Tranche of financing agreements (irrespective of the fact that the amount of each tranche is not the same) |
50% |
|
Tranche of financing agreement if the tranche covers up to 50% of the relevant financing |
100% |
|
Tranche of “junior” or “mezzanine” financing (which cannot exceed 15% of the financing agreement) |
50% |
Procedure for the issuance of the Archimede Guarantee
There are two different procedures for the issuance of the Archimede Guarantee:
- ordinary procedure: this requires the approval of the board of SACE; and
- extraordinary procedure: if the maximum guaranteed capital amount exceeds (i) Euro 600 million and 25% of the turnover of the beneficiary (or the consolidated turnover of the relevant group) resulting from the latest approved financial statements; and in any case (ii) Euro 1 billion, clearance by the Ministry of Economy and Finance (MEF) is also required in addition to SACE’s own due diligence.
In relation to financing portfolios, the relevant threshold must be evaluated taking into account the single financing and the turnover of the single beneficiary (and of the relevant group). If the guaranteed amount in relation to the single portfolio exceeds 3 billion, the clearance of MEF is also required.
To issue the Archimede Guarantee, SACE requires compliance with the organisational, supervisory, capitalisation and operational principles set forth under Regulation (EU) 2015/1017 of the European Parliament and of the Council of 25 June 2015. These principles are not relevant if the Archimede Guarantee is to be issued in the context of debt instruments.
Terms and conditions of the Archimede Guarantee
The Archimede Guarantee is subject to the following conditions:
- maximum coverage period: 25 years;
- maximum exposure threshold of the beneficiary: 25% of the maximum amount of the guarantees that can be issued;
- maximum exposure threshold on a group of beneficiaries: 30% of the maximum amount of guarantees that can be issued;
- maximum exposure threshold per business sector: 40% of the maximum amount of guarantees that can be issued; and
- minimum rating of the beneficiary: not lower than the equivalent "B" rating of the Standard & Poor's scale.
Implementation of the Archimede Scheme
On 29 May 2024, following proposals by the MEF, the Interministerial Committee for the Financial Budget and Sustainable Development (Comitato interministeriale per la programmazione economica e lo sviluppo sostenibile - CIPESS) approved the budget of the Archimede Scheme and the Raf Appetite Framework (RAF) of SACE for the 2024 year in relation to the guarantees to be issued in accordance with Budget Law 2024.
SACE is expected to publish implementing rules in the coming months in order for the Archimede Scheme to become fully operational. These rules will also specify additional requirements (if any) that the beneficiaries will be required to meet to benefit from the Archimede Guarantee.
Footnotes
1
Pursuant to Commission Recommendation 2003/361/EC of 6 May 2003, to qualify as a PMI, the company or group of companies must comply with the following size criteria:
- the value of the balance sheet must not exceed Euro 43,000,000,
- the net turnover must not exceed Euro 50,000,000 or
- the average number of employees employed during the financial year must not exceed 250.
2
Pursuant to Communication from the Commission 2014/C 249/01, to consider that a company is facing financial instability, one of the following circumstances must exist:
- in the case of a limited liability company, more than half of its subscribed share capital has disappeared as a result of accumulated losses. This is the case when the deduction of accumulated losses from reserves (and all other elements generally considered as part of the own funds of the company) leads to a negative cumulative amount that exceeds half of the subscribed share capital;
- in the case of a company where at least some members have unlimited liability for the debt of the company, where more than half of its capital as shown in the company accounts has disappeared as a result of accumulated losses;
- where the undertaking is subject to collective insolvency proceedings or fulfils the criteria under its domestic law for being placed in collective insolvency proceedings at the request of its creditors; and
- in the case of an undertaking that is not a PMI, where, for the past two years: (a) the undertaking's book debt to equity ratio has been greater than 7,5 and (b) the undertaking's EBITDA interest coverage ratio has been below 1,0.
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