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Experts and knowledge
We can now put a name to NextGen funds: four success stories.
Are European funds actually reaching companies? How have they managed it?
The “Renewable energies and European funds: keys to seizing the moment” forum, organised by Bankinter and the La Vanguardia newspaper in the Port of Tarragona, presented four success stories and the experience of experts who have been working with companies benefitting from NextGen funding. These are their conclusions.
Where are the funds?
This question is widespread in public debate. The forum helped to answer this question, providing clarity with data and timescales. It also addressed points for improvement and harvested the feelings of the sectors most concerned about the slow pace of the processes. Some of the most common comments included:
- Two years ago, hopes were raised that these funds would help improve Spain's business fabric, which was so hard hit by the pandemic. But the slowness in publishing funding rounds and the very short timescales for presenting projects have discouraged companies. It was as if the money was not ending up in specific projects and was heading more towards the public sector.
“Very high expectations were generated, but the time that has passed has led to some frustration among companies. This seemed like it was going to be a new Marshall Plan, but it's hard to see that now.”
Emma Montserrat, Deputy General Director and Head of European Funds at Bankinter
- The volume of funds, with 180 billion euros awarded to Spain, and the transformative ambition involved implied a logical degree of complexity, and the funding rounds have been a learning curve. Nothing like this had ever been done in the European Union before. This is the case, for example, with the Strategic Project for Economic Recovery and Transformation (PERTE) for electric vehicles, which was updated in a second round. This involved correcting earlier errors and improving its adaptation to the needs of the Spanish industry. “Formulas must be found to make it easier for companies to access the funds,” said Emma Montserrat,“ and to improve understanding of the realities so that the funding rounds attract some interest. If this is not done, the funds would have to be returned”.
- What will happen in 2023? According to the experts who spoke at the forum, this will be a decisive year for allocation of the funds, as was 2022, when over 280,000 companies benefitted directly. The calls for proposals have multiplied; there is a very long list of pending lines; many funds are yet to be allocated; and major projects such as those related to decarbonisation and "hydrogen valleys" are expected in the coming months.
“2022 ended with more than 22 billion euros allocated to Spain and 4.6 billion euros to the Autonomous Communities. This means 13 billion euros for the business community, with 280,000 companies benefitting from the funds.”
Gerard Brinquis, Strategy & Grants Director of NextGen EU at FI Group
- One of the long-term effects of the funds is that they have obliged competing companies to create partnerships, bringing together companies of different sizes for specific projects, and making the entire value chain work together in numerous sectors. This is particularly true through the innovative PERTE mechanism. Consortiums have become established as a formula that will outlive NextGen, as this chimes with the new collaborative-economy model. “This formula of consortiums is helping spread the effects of the funds to the entire ecosystem,” said Emma Montserrat.
Why are consortiums working?
- The government likes them. It sees them as an ideal way for companies to work together. It brings together large, medium, small and startup companies, in collaboration with universities and other research bodies. These transformative alliances provide an additional element in the selection process for receiving funding.
- The governance model has been well established. Identifying roles and responsibilities is crucial: from who retains the intellectual and industrial property rights to who will exploit the results and who will coordinate the consortium. Everything is analysed and discussed in a process that, in the words of FI Group, is extremely enriching. This is particularly true of “the monitoring meetings, where you can see how the project is going and how everyone is working together to move it forward”, said Gerard Brinquis of FI Group.
- They represent a cultural shift. As we have seen, these projects are very enriching. For example, large companies can profit from the innovation of startups, and small companies can benefit from technology that would take them years to achieve without such an alliance. The companies identify what they are best at, how they should leverage themselves, and who they can partner with. “We are seeing that companies are willing to work together and share. Five years ago, opening the channel was more difficult depending on the technology”, Mr Brinquis added.
- Monitoring methodologies are taken care of. Consortiums can last for years, with the situation changing month by month throughout the process. The projects, therefore, need continuous monitoring. The methodology behind the funds does not object to changes to the project, as long as there are contingency plans and the risks are assessed, because risks exist and they always will.
“Consortiums are helping companies accelerate their growth. Is it complicated? Yes, it is. It is a challenge? Completely. Is it viable? That is what we are seeing.”
Gerard Brinquis, Strategy & Grants Director of NextGen EU at FI Group
Four companies that have received funds
Four companies from various sectors - energy technology, green hydrogen, microprocessors and agri-food - that have already received funds took centre stage at the Port of Tarragona event. We also considered four of the most common questions companies ask themselves as a result of the experience of these years with NextGen funds. This is the testimony of Spanish companies about the arrival of funds:
“I was awarded the aid. But a year has passed and I haven't received the funds. How can I undertake the investment and meet the deadlines?”
This is one of the biggest concerns for companies: the slowness in processing the aid anduncertainty about its receipt. This is why Bankinter has partnered with FI Group and created specific credit facilities in relation to NextGenerationEU funds.
L. Pernia is an agri-food company that needed a photovoltaic installation to supply energy for its intensive process of dehydrating bagasse and other byproducts of the agri-food industry, which converts about 300 tonnes a day into feed for livestock. The cost of the project was 8 million euros. They were awarded 4 million euros in aid, and the plant is already operational. But the money has not yet arrived.
“We did the hardest thing: we achieved success. The challenge has been finding out when they will give us the money. We have not received it and this is where Bankinter came in. It helped us by advancing the funds”, said Alfonso Pérez Carballo, general manager of L. Pernia, at the forum.
This financial assistance has enabled the company to multiply its turnover by four. It can now even undertake the construction of a new plant. “The funds enabled a two-for-one. We were going to do the photovoltaic project whatever happened, but now we can consider setting up another factory with the money they have given us”, he added.
“I have an idea and I need to invest. But the application process, technical report and subsequent follow-up are holding me back. I don't have the clout of a big company”
Balantia, an energy-efficiency company with a strongly digital approach, has known what applying for European funding involves since 2018, when it started working with FI Group.
Because if we know anything about European public funds, it is that help from specialists never hurts. The choice of the investment, the preparation of the report and the subsequent monitoring are so important, Gerard Brinquis told the session. It is not just about going up to a desk and asking for help. It is a process that takes years.
At the forum in Tarragona, Francisco Cordero, head of innovation and transformation at Balantia, presented the projects with which they bid for NextGen funds. These projects are related to the application of AI to the new energy model. Balantia's digital solutions are aimed at both individuals and companies.
The funds it has accessed include 1.5 million euros from the IA Missions rounds of the Centre for Industrial Technological Development (CDTI), which are funded by European funds. The funds are already fostering its IA4TES project, which has been developed by a consortium that includes research centres and universities, and the FLEXNER programme, which brings together complementary companies of various sizes.
“The goal is to provide the current electricity system with AI within the new renewables paradigm, both centralised and distributed, with a demanding consumer. We research AI-based solutions and their application in generation, grids and consumption”, said Balantia's head of innovation.
“The funds want to transform my sector, but I'm not sure whether there will be a market and if the customer will join us in this revolution”
There was a lot of talk about green hydrogen at the event. This is not surprising, as the Port of Tarragona is the epicentre of the planned Catalonia Hydrogen Valley. The Hydrogenizing BCN consortium plans to build a production, storage and distribution plant for this new energy source in Barcelona. This involves investment of 50 million euros, with award of a European subsidy of 12.8 million euros.
The promoters of the project considered that it would only be viable if the entire value chain was involved: from production to the final consumer. The important thing is to check whether the circumstances are right for a transformation towards the hydrogen economy.
“It is obvious that the end consumer is not going to consider a transformation of their fleets to hydrogen-powered electric vehicles if there is no guaranteed supply of such products. But who is going to make multi-million dollar investments, like our first plant, which cost 50 million euros, if there are no guarantees of consumption?”, asked the developer Jeffrey Dost.
The market will be ripe for supplying that hydrogen when the plant is operational, in 2026. That is why the project, led by the gas company Redexis and companies such as Técnicas Reunidas, has not gone it alone. It has worked with the metropolitan transport system, the Port of Barcelona and the various administrations involved. The consortium has some twenty members in total, including firms from the Netherlands, Belgium, Luxembourg, Denmark and Germany.
“Make microchips in Spain? Manufacture batteries? It will take decades. No country can compete against the Asian giants by starting from scratch”
The PERTEs for electric vehicles, renewable energy and microchips are fuelling the European dream of industrial and energy independence. The ambition is focussing on the most cutting-edge technologies - artificial intelligence, semiconductors and batteries - to supply the industry as a whole, and the new models of mobility and energy self-consumption, in particular. Are we ready to make that leap in Spain?
Marc Fernández, manager of Openchip, could have thought that it was unfeasible to set up a“ foundry” (a microchip factory) in Spain like those already operating in Taiwan, Korea and China, which would require 20 billion euros. He thought about it. That is why his proposal, which was created in 2020, takes a very specific approach, “competing by focusing on one part of the chip: acceleration functions. Accelerators are being used increasingly in AI, which is demanding faster and faster response speeds”, he explained at the Port of Tarragona event.
To achieve this, Openchip turned to the engineering and software company GTD and the public-sector Barcelona Supercomputing Center (BSC) as partners for its journey. These partners, like the EU, which approved the Barcelona project along with proposals from 14 countries as part of its incentives policy for the European chip industry, understand that this is a long term plan.
“Our project extends for 10 years. We will produce our first four chips in those 10 years. They are aimed initially at high performing computing, for extreme computing needs”. The first customer is the BSC supercomputer, which needs such microprocessors. The project will cost 500 million euros. NextGen is contributing 138.
This pan-European project attracted the involvement of 56 companies and injected 8.1 billion euros. In Spain, this investment is channelled through instruments such as the Chip PERTE. “If you have a dream, you need to go for it. Our dream was to achieve a very high-performance chip. This is no easy task, but we are lucky to have partners with a steadfast belief in the project. It can be handed down to future generations” Marc Fernández predicted.
