Most EU funding schemes advertise aid intensities: 50% of eligible costs, 70% for SMEs. IPCEI works differently. It calculates, project by project, how much money is genuinely missing. That number is the funding gap, and aid may cover up to 100% of it.
Two scenarios, one number
The funding gap is the difference in net present value between two futures. The factual scenario: your company carries out the IPCEI project. The counterfactual scenario: what your company would credibly do without aid. That could be a smaller alternative project, a delayed one, or none at all. If the project’s discounted lifetime cash flows fall short of the counterfactual’s, that shortfall is the funding gap.
Illustrative. The aid ceiling equals the NPV shortfall of the project versus its credible alternative.
What goes into the model
The Commission’s funding-gap template requires financial projections over the entire product lifecycle, through mass production, discounted at your company’s weighted average cost of capital, with a terminal value where projections do not cover the full lifecycle. Every input must trace to evidence, and the counterfactual must be substantiated with authentic internal documents: board papers, investment committee minutes, strategy memos.
The catches
– Co-financing: your company must make an important contribution from own resources or market financing. In practice, IPCEI never funds a project wall-to-wall.
– Claw-back: if the project turns out more profitable than projected, part of the aid is repaid. Optimistic modelling is not free.
– Consistency: the narrative in your project portfolio and the numbers in your funding-gap template must match line by line. In our experience preparing these files, inconsistencies between the two are the fastest way to attract Commission questions.
The takeaway:
The aid amount is an output of your financial model, not a negotiating position. The quality of the model, and of the evidence behind the counterfactual, directly determines the money. We know how to tell the story right.
Sources
– IPCEI Communication, OJ C 528, 30.12.2021 (EUR-Lex)
– European Commission – IPCEI overview and templates (DG Competition)