Question ID: 1834
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Article: 164
Status: Final
Date of submission: 14 Aug 2019
Question
I'm trying to understand whethet I can classify part of the underlying investments of infrastructure fund, that have a "Take or Pay" - contarct, as "qualifying infrastructure".
I have paid a special intention into Chapter 2a of Articla 164. It says, that "cash flows generated for debt and equity providers shall not be considered predictable, unless all except immaterial part of the revenue satisfies the criteria (specified later...)".
How should one judge the percentage of revenue that can be considered immaterial ?
Does this mean, that for each "qualifying infrastructure investment", a major part (95-99%...?) of revenue should be generated by a "Take or Pay" - contract ?
EIOPA answer
1) According to Article 164a(2) of Delegated Regulation (EU) 2015/35, the cash-flows generated for debt investors and equity investors by an infrastructure entity that are not predictable should not be material in relation to all to all cash-flows generated for debt investors and equity investors by that infrastructure entity. The legal framework does not set out a specific percentage threshold for the materiality.
2) The requirements of Art. 164a of Delegated Regulation (EU) 2015/35, including the predictability of cash flows generated for debt providers and equity investors, need to be met for each infrastructure entity in order for the investments in those infrastructure entities to benefit from the treatment as ‘qualifying infrastructure investments’. For instance, the cash-flows generated by an infrastructure entity would meet the predictability criterion where all except an immaterial part of the revenues of an infrastructure entity are subject to a take-or-pay contract and the requirement in point (b) of Art. 164a (2) is met. However, predictability of the cash-flows can also be achieved the other types of revenue as listed in point (a) of Art. 164a (2).