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Bulgaria Fund of Funds Investment Strategy – Operational Programme

“Regions in Growth” 2014-2020

Final Version

2nd December 2015

European Investment Bank

2

Disclaimer Any disclosure of this Report to a third party is subject to this disclaimer.

This Report has been drafted by the European Investment Bank (“EIB”) and InfraLinx Capital at the

instruction and under the supervision of the EIB, for use by the Ministry of Finance of the Republic of

Bulgaria. The contents and layout of this Report are subject to copyright owned by the Ministry of

Finance of the Republic of Bulgaria, save to the extent that copyright has been legally licensed to the

EIB in accordance with the terms of the Advisory Services Agreement concluded on 8th October 2015

between the EIB and the Ministry of Finance of the Republic of Bulgaria (the “Agreement”).

Any views expressed herein reflect the current views of the author(s), and may not in any circumstance

be regarded as stating an official position of the Ministry of Finance of the Republic of Bulgaria.

Opinions expressed herein may differ from views set out in other documents, including other research

published by EIB or the Ministry of Finance of the Republic of Bulgaria.

The content of this Report is based on market conditions prevailing, and on data and information

obtained by the author(s) from various external sources and assumed to be accurate, correct, and

reliable at the date they were published or obtained, therefore changes affecting such matters after the

time of submission of the Report may impact upon its content.

Nothing in this Report constitutes investment, legal, or tax advice to the Ministry of Finance of the

Republic of Bulgaria or to any other person, nor shall be relied upon as such advice. Specific

professional advice should always be sought separately before taking any action based on this Report.

The EIB cannot be held liable for any loss or damage howsoever arising from the use of this Report or of

the information contained herein by the Ministry of Finance of the Republic of Bulgaria or by any person

other than the Ministry of Finance of the Republic of Bulgaria.


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Contents

1 INTRODUCTION 5

2 STRATEGIC CONTEXT 7

2.1 MARKET CONTEXT 7

2.2 OPERATIONAL PROGRAMME CONTEXT 10

2.3 THE EU AND NATIONAL STRATEGIC DOCUMENTS CONTEXT 12

3 EXPECTED IMPLEMENTATION ARRANGEMENTS 14

3.1 IMPLEMENTATION OPTIONS CONSIDERED 14

3.1.1 RECOMMENDED IMPLEMENTATION STRUCTURE 17

3.1.2 FINANCIAL INTERMEDIARIES SELECTION PROCEDURE 18

3.1.3 UDF CORPORATE GOVERNANCE 19

3.1.4 TECHNICAL SUPPORT 20

3.2 STATE AID CONSIDERATIONS AND THEIR IMPLICATIONS ON THE IMPLEMENTATION STRUCTURE 22

4 FINANCIAL PRODUCTS 26

4.1 LOANS 26

4.1.1 LOAN PARAMETERS 26

4.1.2 MANAGEMENT FEES 28

4.2 GUARANTEES 29

4.2.1 GUARANTEE PRODUCTS AND IMPLEMENTATION STRUCTURES 29

4.2.2 MANAGEMENT FEES 31

4.3 OTHER FINANCIAL PRODUCTS 32

4.4 FINANCIAL PRODUCTS RECOMMENDED - SUMMARY 33

4.5 IDENTIFICATION OF POTENTIAL CO-FINANCING SOURCES FOR THE OPRG FUNDS 33

4.6 PROVISIONS FOR THE UPDATE AND REVIEW OF THE INVESTMENT STRATEGY 35

5 FINAL RECIPIENTS 36

5.1 ENERGY EFFICIENCY 36

5.2 URBAN DEVELOPMENT 37

5.3 TOURISM & CULTURAL HERITAGE 39

6 RESULT AND OUTPUT INDICATORS 40




6.4 MONITORING SYSTEM 43

7 ENVISAGED COMBINATION WITH GRANT SUPPORT 45





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7.4 APPLICATION PROCEDURE FOR FINANCING WITH FIS COMBINED WITH GRANTS 46

8 EXIT STRATEGY 48

APPENDIX 1 PROJECT TYPES ELIGIBLE FOR FIS IN THE URBAN DEVELOPMENT SECTOR UNDER OPRG 50

APPENDIX 2 GLOSSARY AND LIST OF ABBREVIATIONS 52

APPENDIX 3 ALTERNATIVE IMPLEMENTATION OPTION FOR GUARANTEES 54

APPENDIX 4 REGIONAL ALLOCATION TARGETS FOR THE UDFS 56

APPENDIX 5 CONTRIBUTION TO THE OPRG INDICATORS 58

APPENDIX 6 LIST OF STAKEHOLDERS INTERVIEWED 65


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1 Introduction

Acknowledging the role of financial instruments (“FIs”) in achieving the objectives of the Europe 2020

Strategy, the European Commission (“EC”) seeks to promote the use of FIs in the 2014-2020

programming period, alongside grant financing. To define a framework for application of FIs under

European Structural and Investment Funds (“ESIF”) the Common Provisions Regulation (“CPR”), Title

IV (Articles 37 to 46), lays down provisions on the use of ESIF through FIs towards specific Thematic

Objectives (“TOs”) defined in the CPR (Art.9)1.

Additionally, the Commission Delegated Regulation (EU) No 480/2014 lays down provisions on uniform

conditions regarding the detailed arrangements for the transfer and management of the Operational

Programme’s (“OP”) contributions managed by the bodies implementing FIs, including rules on the

role, liabilities and responsibility of bodies implementing FIs, the management and control of certain FIs,

withdrawal of payments made to FIs, the criteria for determining management costs and fees on the

basis of performance and the applicable thresholds.

Bulgaria has gained some experience in using FIs (in the form of loans), directly applicable to the OP

Regions in Growth 2014-2020 (“OPRG”) under the JESSICA initiative implemented through two Urban

Development Funds (“UDFs”), under a holding fund structure established as a separate block of finance

managed by the EIB, in the 2007-2013 programming period. Given some initial experience, the Managing

Authority (”MA”) decided to set up of a new Fund of Funds (“FoF”) which will invest, through financial

intermediaries, into eligible projects promoted by final recipients.

The OPRG, co-financed with the European Regional Development Fund (“ERDF”), is one of the OPs

which envisages the use of FIs. The OPRG, with total financial allocation of EUR 1,543.2 m (including EUR

1,311 m as the ERDF contribution), focuses on sustainable regional development and gives priority to:

• Improving energy efficiency (“EE”) in buildings and urban transport (TO4, 31.2% of the OPRG

allocation),

• Improving urban environment and development of tourism promoting cultural heritage sites (TO6,

22.1% of the OPRG),

1 According to the CPR: • the usage of the FIs should be preceded by the ex ante assessment which should establish evidence of market

failures or suboptimal investment situations, and the estimated level and scope of public investment needs, including types of FIs to be supported,

• the FIs can be implemented to support investments which are expected to be financially viable and do not give rise to sufficient funding from market sources,

• the FIs should be specifically designed to achieve the specific objectives (“SOs”) set out under the relevant priority axis of the OP,

• the FIs may have different forms (loans, guarantees, equity, quasi-equity) and may be combined with grants under certain conditions,

• the FIs may be implemented by the EIB, an international financing institution, a body governed by public or private law (selected on the basis of open, transparent, proportionate and non-discriminatory procedures, avoiding conflicts of interest) or directly by the MA (loans and guarantees only) and

• the terms and conditions for contributions from the OP to FIs should be defined in the funding agreement as defined in the Annex IV of the CPR.


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• Upgrading social, healthcare and educational infrastructure (TO9 and TO10, 17.8% and 12.9% of the

OPRG respectively) and

• Developing regional road infrastructure (TO7, 12.6% of the OPRG).

Most of the OPRG’s allocation is devoted to sustainable urban development projects, which form part

of Integrated Plans for Urban Regeneration and Development (“IPURDs”).

The intended use of FIs under the OPRG should stimulate public and private partnerships and motivate

financial institutions to increase their lending level to the projects supporting public policies for regional

and urban development. It should also encourage stakeholders active in regional urban development

(including municipalities and municipal companies) to apply an entrepreneurial approach when setting

up and performing feasible investments which lead to a substantial contribution to sustainable regional

economic and social development.

Pursuant to Article 96.2(b) of the CPR, each Priority Axis (“PA”)2 should outline the intended use of FIs -

the OPRG approved by the EC in July 2015 envisages the use of FIs for the following PAs:

• PA 1 Sustainable and Integrated Urban Development covering interventions in urban development

(especially: EE in single-family housing and student dormitories, urban transport and environment,

sport and cultural infrastructure and zones with economic potential) concentrated in 39 cities with

largest potential for growth3 and

• PA 6 Regional Tourism covering tourism and cultural heritage (“T&CH”) development across

Bulgaria.

An indicative allocation for FIs has been estimated4 at EUR 189.1 m (including the ERDF and national co-

financing), being:

• EUR 138. 7 m for urban development in the 39 largest cities (16.5% of PA1’s allocation) and

• EUR 50.4 m for T&CH (50% of PA6’s allocation).

2 With the exception of technical assistance. 3 According to the National Spatial Development Concept (“NSDC”) which promotes polycentric development model cities of tier 1, 2 and 3. 4 On the basis of the Ex-ante assessment carried out in 2014 and further analyses carried out by the MA.


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2 Strategic context

The Bulgarian economy has been facing economic slowdown since 2008. Over recent years, Bulgaria

has been experiencing an unstable political situation and an economic crisis. The banking system

remained liquid; while a fiscal consolidation process was initiated, and helped the country recover from

the initial negative effects of the crisis. Despite this, institutional and structural weaknesses are still

limiting the inflow of foreign investment and the financing for growth-promoting capital investments.

The commercial banks remain reluctant to finance projects, especially in regional urban development

due to political risk, shortage of sufficient collateral and uncertainty related to the longer-term financial

standing of municipalities and their entities. In addition, a lack of relevant capacity and experience

discourages municipalities and municipal companies, especially the smaller ones, from using FIs.

There is a strong need to unlock financing for municipalities and other entities (including municipal

companies) to boost economic growth, reduce inter-regional and intra-regional disparities, and

contribute to urban development by:

• providing tailored-made and flexible support5 including FIs (i.e. (long-term) guarantees and loans),

potentially in combination with grants,

• carrying out intensive promotion of FIs among potential final recipients, and

• providing technical support to develop and implement financially viable urban development

projects, and encourage public sector borrowers (like municipalities and municipal companies) to

use loans for capital investment.

This FoF Investment Strategy is designed to support:

• sustainable and integrated urban development in the 39 cities with highest potential for growth

through:

the increase of EE in housing (single-family housing and student dormitories),

the improvement of living and environmental conditions in the cities,

the improvement of infrastructure for sustainable urban transport,

the improvement of business infrastructure to attract investments, and

• regional tourism development promoting cultural heritage sites.

2.1 Market context

In the context of regional development6, Bulgaria faces regional disparities between large urban

centres and the rest of the country. Many rural municipalities and smaller cities are declining

economically as they experience an outward migration of their population towards larger

agglomerations like Sofia and Varna. Current policy is driven by the moderate polycentric development

model, which seeks to empower these smaller urban centres and specifically aims to stop any increase

in regional disparities. Simultaneously, special attention has been paid to the urban development of the

largest cities, where the majority of national GDP is generated and where most people live. Continuous

5 There is also a need for clear guidelines on eligibility, State aid and other key implementation rules both for the financial intermediaries and final recipients to be issued by the MA to ease the implementation of the FIs. 6 Ex-ante, p. 23.


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inflow of population, social inclusion and climate change are key challenges faced by the cities which

require a sustainable approach to their development – in particular, through their IPURDs. The main

areas of development include: EE in housing, urban public transport, urban environment, economic

zones and sport and cultural infrastructure that may use FIs as their primer or additional form of

funding. Additionally, education, social and health infrastructure need improvement, but this will be

supported with grants.

In terms of EE, the country performs poorly compared to other EU countries. Bulgaria’s energy intensity

is almost 5 times higher than the European average which indicates the need to finance EE projects in

the current programming period. As many of the EE investments can be financially viable (i.e. financial

savings cover required investments), the use of FIs should be considered (possibly in combination with

grants should the financial savings in case of some types of projects be insufficient to encourage

potential final recipients to undertake EE projects). Households7 are the third largest energy user, with

practically constant consumption of around 2.1–2.2 Mtoe/y. The sector’s share of final energy

consumption (“FEC”) also remains constant at 25-26 %. The unresolved challenges for the EE sector in

housing continue to be the low efficiency of domestic stoves and fireplaces fuelled with wood and coal,

as well as underdeveloped household gasification. EE is an increasingly important issue in the housing

sector: energy prices weigh heavily on household budgets and there is a drive to save energy in the

context of sustainable development and the European climate change commitments8, since heating

accounts for nearly 70% of the household energy consumption. A key priority for the National

Renovation Programme for Residential Buildings in Bulgaria 2006–2020 is to target multi-family

residential buildings9 that will be supported with grants. However, single-family houses and student

dormitories also require EE investments and they are foreseen to be supported by FIs (possibly in

combination with grants).

Due to the natural and historical diversity10 of the country11, Bulgaria has significant potential to develop

both mass and alternative forms of tourism. For the last few years, tourism in Bulgaria has established

itself as a gradually growing economic activity which contributes to the diversification of the economy,

creates employment and mobilizes local and foreign investments. Alternative types of tourism,

including cultural excursions, have established themselves as important activities that generate gross

value added for the regions and enable a better use of local advantages – natural resources, favourable

weather and rich cultural and historical heritage. Compared to the well-known tourist destinations in

the EU, indicators of tourist development and the quality of tourist services in Bulgaria are relatively

low, thus the re-orientation of tourism products towards higher-income segments is required to

restructure the sector and to improve its long-term competitive position in the EU market.

7 National Energy Efficiency Action Plan 2014-2020, p. 64. 8 The “20/20/20” targets in terms of reduction of greenhouse gas emissions, renewable energy production, and energy efficiency. 9 With the average expected energy savings at the level of 25-35 kWh/m2 TFA/y, i.e. ca.35.5% of the actual energy consumption before renovation. 10 “The rich history of the country and its religious and ethnic diversity has resulted in important cultural and historic sites that also play an important role in the development of the tourist industry of the country. Cultural heritage is spread across the country thus creating growth opportunity in the tourism sector in every region. Currently, most of the tourism and cultural inflows are focused in Sofia, a few large cities, three major winter resorts and the seaside” (Ex-ante, p. 45-46). 11 National Development Programme - Bulgaria 2020, p. 50, 282.


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The low quality or lack of infrastructure and the wide imbalances in quality of life, including the

challenge of social inclusion as well as a climate change call upon a solid, sustainable and environment-

friendly urban development measures. In this context, areas such as EE, urban development, culture

and tourism provide opportunities for investment. Significant investment needs in these areas that

cannot be fully addressed with limited public resources, call for well-structured FIs, potentially in

combination with grants if needed.

The ex-ante assessment carried out in 201412 (“Ex-ante assessment”) has provided the rationale for

launching FIs in EE in housing, urban development and T&CH in different forms including loans,

guarantees and equity instruments. In some areas of interest (i.e. EE in dormitories, T&CH and cultural

infrastructure and urban transport) combination with grants has been recommended to optimise

effectiveness and efficiency of public interventions under the OPRG.

The Ex-ante assessment has identified the following market failures and suboptimal investment

situations:

• administrative barriers faced by applicants when applying for EU funding,

• asymmetry of information, especially among smaller municipalities, on available support schemes,

• inefficient public procurement practice and project preparation processes used by public

promoters,

• general unwillingness of commercial banks to lend to municipalities,

• a shortage of long-term financing,

• a lack of capacity and relevant skills in municipalities, especially in the smaller ones,

• underdeveloped project pipeline, especially in EE and T&CH,

• underdeveloped market and institutional framework to attract certain private supply providers (e.g.

operating in a PPP model),

• limited predictability of future public income, and

• legal provisions that establish a cap in the municipalities’ debt levels, which may limit the financing

of investments.

However, current debt levels are in most of the 39 municipalities relatively low13, which should not

substantially limit the use of FIs. Notwithstanding this, the investment decisions to use FIs that will

increase public debt should ideally be made on the basis that only those projects that leverage

additional public revenue streams (directly or indirectly) and/or significantly contribute to the OPRG

objectives are implemented to avoid unnecessary pressure on future public spending.

The estimation of the investment gap in the Ex-ante assessment presented below was indicative.

However, it is evident that demand outweighs supply significantly in the sectors of interest, except for

T&CH.

12 Ex-ante Assessment of Financial Instruments for the Operational Programme ‘Regions in Growth’, October 2014 13 Only 5 of 39 municipalities exceed 15%-threshold defined in the Art. 32 of Law on Public Finance, additional 5 exceed 10% and 18 do not exceed 5% (based on the data provided by the MoF in October 2015).


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Figure 1. The indicative investment gap in the Bulgarian market

Source: Ex-ante Assessment of Financial Instruments for the Operational Programme ‘Regions in Growth’, October 2014, p. 106

As far as T&CH demand (included under urban development in Figure 1 above) is concerned the Ex-ante

assessment identifies a demand from the municipalities at only EUR 7.6 m and a potential project

pipeline of EUR 20 m. This sector has been indicated in the Ex-ante assessment as a potential driver for

economic activities resulting in growth and job creation. Notwithstanding the potentially positive

impact of T&CH, the actual demand for projects in this sector seems low in comparison with the current

FIs allocation of EUR 50.4 m, together with an additional EUR 50.4 m in the form of grants. Following

the Ex-ante assessment, the MA broadened the scope for supporting the T&CH sector, including

expanding the territorial coverage of eligible projects (now open to more than 2,500 sites) which may

result in a higher project demand. No supporting analyses or data are available at this stage to

understand whether such broadening will indeed result in significant additional demand for FIs in the

T&CH sector. Also, the actual project demand in the area of urban development will be known only once

the Municipal Investment Programmes are submitted by mid-2016.

Therefore, while the general project demand is likely to outweigh supply, as indicated in the Ex-ante

assessment, the exact allocations to specific sectors may need to be revised based on the Municipal

Investment Programmes and other documents (in particular those concerning T&CH projects outside of

the urban areas) and monitored throughout the implementation period. It is for this reason also that

the Investment Strategy should be as flexible as possible to allow for these reallocations to take place,

ideally without the need to re-procure financial intermediaries.

2.2 Operational Programme context

As the main financial resources to be allocated through FIs have already been outlined in the OPRG, FIs

will directly contribute, along with complementary grants schemes, to the achievement of two out of

seven14 PAs of the OPRG, namely:

• PA 1 Sustainable and Integrated Urban Development and

• PA 6 Regional Tourism.

14 Without including technical assistance priority axis.

Urban development (based on nascent projects)

EUR 165 m EIB portfolio

EUR 72.5 m

EERSF portfolio

EUR 22.4 m

Urban development (based on the

survey)

EUR 1,901 m

EE in public and private buildings (acc. to EE National

Plan)

EUR 1,530 m

EE in public and private buildings (based on the

survey)

EUR 446 m

Elements of demand Elements of supply

EBRD portfolio

EUR 49.5 m


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The use of FIs under the Investment Strategy will correspond with the selected TOs, Investment

Priorities (“IPs”) and Specific Objectives (“SOs”) indicated in the PAs, which should lead to the

achievement of the results presented in Table 1 below.

Table 1. The OPRG context of the Investment Strategy

PA

Indicative FIs allocation/

total PA allocation (in EUR m)

Thematic Objective

Investment Priority Specific Objective Result indicator from the OPRG

Sust

ain

able

an

d in

teg

rate

d u

rban

dev

elo

pm

ent

138.7/840.4

TO4 Support the shift

towards a low-carbon

economy in all sectors

Supporting EE, smart energy management and renewable

energy use in public infrastructures, including in public buildings, and in the

housing sector (IP4c)

Raising energy efficiency in the housing sector

(contributing to SO1.4c.1)

Final energy consumption in

households

Promoting low-carbon strategies for all types of

territories, in particular for urban areas, including the

promotion of sustainable multi-modal urban mobility, and

mitigation and relevant adaptation measures (IP4e)

Developing ecological and sustainable urban

transport (SO1.4e.1)

Public urban transport share

TO6 Protecting the environment

and promoting resource efficiency

Acting to improve the urban environment, to revitalise cities, regenerate and decontaminate

brownfield sites (including conversion areas), reduce air pollution and promote noise-

reduction measures (IP6e)

Improving the quality of the urban environment

(SO1.6e.1)

Share of population

benefiting from an improved urban

environment Improving investment

activity in cities through regeneration

of zones with potential for economic

development (SO1.6e.2)

Expenditures on acquisition of tangible fixed

assets

TO9 Promoting

social inclusion and combating

poverty

Investing in health and social infrastructure which contribute to national, regional and local

development, reducing inequalities in terms of health

status, promoting social inclusion through improved access to social, cultural and recreational services and the

transition from institutional to community-based services

(IP9a)

Improving the access for practising sports

for all and cultural services in cities

(SO1.9a.3)

Share of modernised

cultural/sport objects

Reg

ion

al

tou

rism

50.4/100.8

TO6 Protecting the environment

and promoting resource efficiency

Conserving, protecting, promoting and developing the

natural and cultural heritage (IP6c)

Increasing the tourist frequentation of cultural sites of

national and world importance (SO6.6c.1)

Internal tourism consumption


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The investments in urban development (located in the 39 largest cities) should support the

implementation of the IPURDs and result, in particular, in a reduction of final energy consumption,

increase of public transport usage, improved air quality and more attractive infrastructure for living,

including social inclusion of vulnerable groups and doing business.

Under the PA1, a wide range of investments such as: (1) EE in single-family buildings and student

dormitories, (2) urban transport, (3) urban environment, especially green areas and public open space,

public parking, bicycle trails, low-energy street lighting, (4) sport and cultural infrastructure and (5)

economic zones infrastructure will be supported. Financially viable projects will be offered FIs in the

form, initially, of loans and/or guarantees. Due to relatively high costs of some of investments they may

be complemented with grants (i.e. in EE in dormitories, urban transport or cultural infrastructure). The

indicative allocation for FIs under PA1 is EUR 138.7 m (including the ERDF and national contribution),

which constitutes ca.16.5% of the PA allocation.

It is assumed that PA1 will be implemented in accordance with Art. 7 of the ERDF Regulation 1301/2013.

This approach has a number of consequences in terms of FI implementation (for details see Section 3.1.3

UDF corporate governance).

With regard to PA6, the FIs’ support provided across the whole territory of Bulgaria will contribute to an

increase in attractiveness and a number of tourist visits to cultural monuments of national and

international importance. Each of the projects supported should focus on cultural heritage site’s

restoration, conservation and promotion and may additionally include tourism elements such as small

infrastructure and services related to cultural heritage sites. FI interventions in T&CH should result in the

development of integrated tourism products (and contribute to internal tourism consumption) and

mitigate seasonal pressure on the Black Sea coast and at mountain resorts. As the investment

expenditures on conservation and preservation of cultural heritage sites may be high in relation to their

generated revenues, grant support will most likely be needed and would be provided by the MA/IB

(implementation body) but only if rigorous analysis of the projects’ business plans justifies it. At the

aggregated level, the OPRG stipulates a combination with grant support of up to 50% at the PA level

(EUR 50.4 m – FIs and EUR 50.4 m – grants).

2.3 The EU and national strategic documents context

The implementation of FIs under the OPRG will contribute to the objectives and priorities of the Europe

2020 Strategy, especially to the following priorities:

• Sustainable growth: promoting a more resource-efficient, greener and more competitive economy

and

• Inclusive growth: fostering a high-employment economy delivering social and territorial cohesion

and consequently to achievement of the 20/20/20 climate/energy targets, increase of employment and

prevention/reduction in the number of people being at risk of poverty.

At the national level, the Investment Strategy implementation will contribute to the objectives and

priorities of the documents presented in Table 3 below.


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Table 3. Strategic documents related to the Investment Strategy

Source: InfraLinx studies on the basis of the OPRG and other strategic documents available on the websites

Additionally, FIs implementation under the OPRG will enforce activities presented in the National

Reform Programme, especially National Target 3 under the Climate-Energy Package, i.e. 16% share of

renewable energy sources (“RES”) in the gross final consumption of energy and increasing the EE by

25% by 2020.

Area

National Development

Programme - Bulgaria

2020

National Regional

Development Strategy

2012-2022

Sector-specific

national/regional/local

strategies

Priority 3: Achieving

sustainable integrated

regional development and

use of local potential

Sub-priority 1.2 :

Development of

sustainable forms of

tourism and the cultural

and artistic industries in

the regions

National Action Plan for

Energy Efficiency 2014-

2020

Sub-priority 3.2:

Stimulating the

development of cities and

improving the integration

of the Bulgarian regions at

national level

Priority 4.1: Integrated

sustainable urban

development and

strengthening the

polycentric network of

urban centres

Integrated Plans for Urban

Regeneration and

Development (municipal

level)

Sub-priority 3.4: Support

for efficient and

sustainable utilization of

tourist potential of the

regions and the

development of cultural

and creative industries in

the regions

Strategy for Sustainable

Tourism Development in

Bulgaria with Horizon 2030

Priority 8: Improving

transport connectivity and

access to markets

Energy Strategy of Bulgaria

and Energy Efficiency

Strategy

Priority 7: Energy security

and increasing resource

efficiency

Priority: Integrated urban

development and the

improvement of the urban

environment

National Action Plan for

Energy Efficiency 2014-

2020

7.2: Increasing energy

efficiency

Energy Strategy and

Energy Efficiency Strategy

Integrated Plans for Urban

Regeneration and

Development (municipal

level)

Urban

development and

tourism & cultural

heritage

Energy efficiency

Partnership Agreement

Strategic priority 3:

Connectivity and green

economy for sustainable

growth

Sub-priority Transition to a

low carbon economy,

energy and resource

efficiency

Sub-priority Environment

and protection of natural

richness and cultural and

historic heritage

Strategic Priority 3

Connectivity and green

economy for sustainable

growth

Sub-priority Transition to a

low carbon economy,

energy and resource

efficiency


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3 Expected implementation arrangements

This Section outlines the recommended implementation option, selected typology of FIs and their

structure, including the proposed leverage levels. It also presents State aid considerations with the

recommended option to be applied and its implications at the level of (1) the FoF, (2) financial

intermediaries, (3) private investors, and (4) final recipients (detailed sectorial restrictions at the level of

the final recipients are presented in Section 5 Final recipients).

3.1 Implementation options considered

To design the most efficient and effective structure for the implementation of FIs under the OPRG, the

Ex-ante assessment and the MA’s subsequent adjustments to the implementation structure (as

presented in Table 3 below) have been carefully analysed.

Figure 3 The implementation structure for FIs under the OPRG as envisaged by the MA

Based on some further market testing undertaken, further refinements to the implementation structure

presented by the MA have been introduced to arrive to the implementation structure proposed in this

Investment Strategy. These refinements taken into account the following main elements:

• Separate UDF for T&CH – the Ex-ante assessment indicated, based on a survey of municipalities,

that the project demand in this sector was at the level of just EUR 7.6 m, and with an estimated

potential project pipeline at EUR 20 m. This potential limitation in pipeline of viable projects has

been confirmed by some of the banks interviewed in preparing this Investment Strategy15. As

15 The interviewed banks confirmed a rather limited interest in lending in the sector, especially following an extensive lending in the tourism sector before the financial crisis which created a problem of high level of non-performing loans in the banking sector. In addition, one intermediary interviewed indicated that there is an

Managing Authority

New Fund of Funds

Project portfolio

T&CH (EUR 50 m)

Guarantee Fund

Project portfolio Project portfolio

Sofia UDF + EE (30% of allocation

for loans)

South Region UDF + EE

(35% of allocation for loans)

North Region UDF + EE

(35% of allocation for loans)

Project portfolio


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discussed before, following the Ex-ante assessment, the MA broadened the scope for supporting

the T&CH sector which may result in a higher project demand but no supporting evidence is

available at this stage to understand whether such broadening will indeed result in significant

additional demand for FIs in the T&CH sector. In addition, the specifics of T&CH projects do not

seem to be significantly different from urban development projects in general, and therefore do

not seem to justify establishing a dedicated financial instrument, with specific management skill

sets and the associated additional costs, specifically for this sector. In addition, some more

complex and integrated projects might fall within both sector categories (i.e. T&CH and UD),

creating unnecessary confusion at final recipients’ level concerning the FI application process.

Finally, it is believed that potential reallocation of funds to urban development will be easier to

achieve within the same UDF than between different UDFs, should there be the need for this due

to insufficient demand in T&CH. Therefore, UDFs targeting both urban development and T&CH

projects (without geographical limitation in respect of T&CH and with separate accounting for the

relevant contributions from the different Priority Axes for UD and T&CH) are recommended at this

stage, to maximise flexibility and to avoid duplication of capacities and fund management costs.

• Separate guarantee fund – as indicated in the Ex-ante assessment, there is a need for the OP

contributions to guarantee the commercial loan exposures of certain types of projects or final

recipients, in order to stimulate more FI support for projects having difficulties accessing finance

from the market. Feedback from initial market testing done in preparing this Investment Strategy

suggests that financial intermediaries have a preference for an implementation option where the

guarantee is integrated with the funding provided to the financial intermediaries, with no apparent

need to establish a separate guarantee fund, at least at the initial implementation stage. The

respective advantages of both approaches have been presented in this Investment Strategy, with

an “embedded” guarantee option recommended.

Areas that may need to be further considered during implementation of the FIs, and which may result in

a further refinement of the Investment Strategy:

• Should demand for projects in T&CH prove insufficient, the MA might need to consider a reduction

in the allocation to FIs in T&CH and shifting these resources to urban development (which should be

easier to do within the same UDF) and/or grants for T&CH16.

• Lessons learnt from the JESSICA initiative in other EU Member States, and interviewed commercial

financial institutions17, suggest that a narrowed geographical focus for UDFs runs the risk that, with

insufficient competition from other UDFs and/or too narrow a geographical focus with insufficient

demand, underperformance in terms of deployment of funds can be expected. In order to mitigate

this risk somewhat, the performance of the UDFs should be closely monitored by the FoF manager

which should seek, during the selection process, to “hold back” or cancel a portion of the funding

commitments to potentially re-allocate to other UDFs based on their actual performance. A

proposal could be, for example, to first allocate an initial tranche of resources (e.g. 70% of potential

total allocation) to respective UDFs, with a subsequent performance-related allocation to be

existing grant programme for rural development which was likely to “cannibalise” some project demand in this respect. 16 Such re-allocation(s) would require an amendment of the OPRG to re-allocate funds between PAs and/or within the PA6 (from FI(s) to grants) respectively. 17 Especially, the manager of the existing regional UDF did not note significant, if any, differences in interest, quality of preparedness between borrowers from the cities in either the north or south with whom they work.


16

decided only once certain agreed performance milestones are reached. The potential allocation

proposed by the MA are broadly in line with the economic rationale presented in Appendix 4 taking

into account the OP’s overall objective to promote development in the regions, therefore slightly

reducing the allocation to Sofia.

• Absorption capacity – the FIs allocation of EUR 189.1 m, planned for the current programing period,

is significantly higher than in the previous one. Based on the market feedback and the key

conclusions from the Ex-ante assessment, this significantly higher allocation to FIs will need to be

absorbed by potentially less experienced final recipients (only 7 out of the 39 municipalities have

working experience in using the JESSICA funding and some municipalities have limited experience in

using external funding in general)18. These two factors should be addressed by implementing a

comprehensive technical support programme (see Section 3.1.4 Technical support below) to

facilitate the use of FIs by less experienced final recipients. It also explains the rationale for only a

moderate level of leverage required in the recommended implementation structure.

Taking into account the Ex-ante assessment, the final version of the OPRG approved by the EC in July

2015, in-depth interviews with representatives of public administration (i.e. MA and MoF), other entities

active in the areas of interest (i.e. the BDB, commercial banks, the EERSF and the FLAG), as well as the

above-mentioned observations, the revised recommended implementation structure is presented

below, and is considered to be still broadly in line with the proposed investment strategy included in the

Ex-ante assessment.

18 Lessons learnt by the financial intermediary of the Regional Urban Development Fund AD show a slow learning curve of final recipients, especially in the case of public entities and the need for a significant capacity building support and technical assistance. It can be assumed that this need will be greater in case of potentially less experienced 32 municipalities and their companies.


17

3.1.1 Recommended implementation structure

Figure 4. The recommended implementation structure for FIs under the OPRG

This recommended implementation structure envisages the FoF and three financial intermediaries

(“UDFs”): Sofia, Northern Bulgaria and Southern Bulgaria, each covering all three sectors: UD, T&CH

and EE.

All UDFs will be offering: 1) loan facilities that will use private co-financing (either from financial

intermediary own funds or external sources) with a leverage level 1:1.15; and 2) “imbedded” guarantee

facilities to lower the risk levels for the private co-financing and which will be funded with OPRG funds

only. Therefore, the total leverage at the UDF level is expected to be 1:1.

The recommended implementation structure envisages the guarantee products to be available to the

UDFs to lower the risk levels of their exposures, and not to the banking sector in general. This approach

is in line with the lessons learnt across EU Member States. The guarantee “embedded” in the UDF

should offer more efficient implementation, minimising and avoiding duplication of time and effort for

project due diligence which will effectively be performed by the same entity (and not separately by the

UDF and the guarantee fund) and should ensure the maximum alignment of interest. It should also

significantly lower the implementation and management costs for the MA in comparison to having an

additional, and separate, guarantee fund.

Given the State aid options for T&CH as presented in Table 6, the implementation structure needs to

ensure that no preference is given to private investors. Therefore, the recommended guarantee

product for T&CH will have to either: 1) be at market terms (which could still be potentially feasible and

attractive to the final recipients as it addresses existing market gaps as potential lack of collateral

and/or long-term funding) or 2) ensure that all financial advantages are passed to final recipients. This

Managing Authority

New Fund of Funds

Project portfolio Project portfolio

UDF+EE+T&CH Sofia UDF+EE+T&CH North UDF+EE+T&CH South

Project portfolio

OPRG allocation: EUR 56.7 m

Leverage 1:1 OPRG allocation: EUR 66.2 m

Leverage 1:1 OPRG allocation: EUR 66.2m

Leverage 1:1

Possible UDF funding partners:

- EIB lending

- Private investors

- Leveraged with bank own resources

Co-financing

Guarantee facility

OPRG only

Loan facility

OPRG + private

Leverage 1:1.15

EUR 7.6 m EUR 49.1+ 56.7 m =

105.8m

Guarantee facility

OPRG only

Loan facility OPRG + private

Leverage 1:1.15

EUR 8.9 m EUR 57.4 +

66.2 m =

123.6 m

Guarantee facility

OPRG only

Loan facility OPRG + private

Leverage 1:1.15

EUR 8.9 m EUR 57.4 +

66.2 m = 123 m

Guarantee Fund

Potential implementation,

at a later stage


18

area should be closely monitored and possibly adjusted once the final parameters for loans and

guarantees are known.

The EIB or other IFIs may provide a long-term funding line to financial intermediaries to fund their own

contributions to the UDF, hopefully providing lower cost and/or longer term funding for the benefit of

final recipients. IFIs will probably expect their loans to be repaid by financial intermediary, regardless of

the performance of the underlying projects – which will therefore be at the risk of the financial

intermediary. In this way, the financial intermediaries will still remain “exposed”, albeit at a reduced

level due to the guarantees, with interests aligned with respect to credit risks of the underlying final

recipients. The IFIs will also probably extend funding only to financial intermediaries complying with

specified minimum criteria. Whilst the guarantee will potentially cover a relatively high proportion of

each individual loan provided by the UDFs, and hopefully thereby lower the cost of financing to the

underlying projects, the guarantee facility should be limited, in total (i.e. will be “capped”), to a certain

percentage of the total private funding provided by the financial intermediaries. For the purposes of

this Investment Strategy, this is assumed to be at a maximum of 15%, but further market testing or UDF

selection process should determine more precisely what this level should be.

In addition, should the performance of the UDFs with the “embedded” guarantee structure prove to be

suboptimal, the establishment of a separate guarantee fund that would be available for all market

participants (e.g. for the banks not being the UDFs) could be considered at a later stage, especially in

respect of any particular market gaps that are not being addressed by the UDFs.

3.1.2 Financial intermediaries selection procedure

The FoF will select the financial intermediaries on the basis of open, transparent, proportionate and

non-discriminatory procedures, avoiding conflicts of interest (in compliance with applicable law

including State aid, public procurement19 and Delegated Regulation 480/2014). When preparing the call

for financial intermediaries, the FoF must take into account both the minimum requirements and the

selection criteria20 as defined in Art. 7 of the Delegated Regulation 480/2014. In addition, taking into

account previous experience in implementing FIs in urban development areas in Bulgaria and other

countries, the following additional selection criteria could be considered in order to ensure that the

selected financial intermediaries will have:

• relevant experience of the financial intermediary – in particular in UD, EE and T&CH in various

capacities (financing/lending, advising, structuring, monitoring, auditing), for greenfield and

brownfield projects,

• experience in using various financial products, including guarantee structures with special emphasis

on larger projects in UD, T&CH, EE,

19 Bulgarian public procurement law assumed. 20 - Robustness and credibility of the methodology for identifying and appraising final recipients - The level of management costs and fees for the implementation of the FIs and the methodology proposed for their calculation - Terms and conditions applied in relation to support provided to final recipients, including pricing - The ability to raise resources for investments in final recipients additional to programme contributions - The ability to demonstrate additional activity in comparison to present activity - In cases where the body implementing the financial instrument allocates its own financial resources to the financial instrument or shares the risk, proposed measures to align interests and to mitigate possible conflicts of interest.


19

• ability to ensure additional co-financing,

• team capacity (including subcontractors and advisors) and technical support offered to

municipalities in project identification and structuring – including relevant experience of key team

members and team structure, and

• strategy to ensure adequate presence/coverage in the target cities/regions.

The period of funding agreements to be signed between the FoF and financial intermediaries should

take into account the maximum loan tenors (i.e.20 years) and the expected investment period for the

UDFs of up to 5 years. Based on these assumptions, the maximum duration of the funding agreements

should cover 25 years. Over such a long period, the FoF should have the right, based on material

underperformance and/or negligence/default of the UDFs, to terminate the contract with the UDF

managers and transfer/novate the loan agreements with final recipients, to the FoF or

another/replacement financial intermediary.

In order to facilitate implementation of FIs, the MA and other relevant Bulgarian authorities should

identify and address all potential legal barriers that may prohibit longer tenors of loans and funding

agreements. In particular, the restriction of the financial intermediaries to be contracted for a period no

longer than 10 years, resulting from the Public Procurement Act21, should be removed. Also, other

potential legal barriers to an efficient implementation of FIs resulting from the local regulations should

be eliminated or reduced. In particular, in relation to the municipalities and public authorities as

borrowers, an obligation to use the public procurement procedure to take debt, for example, should

not apply the FIs from the ESIF in general (not only limited to the FLAG and UDFs) and should not be

limited up to 10 years. Also, the FIs should ideally enjoy a similar treatment to the FLAG instruments in

respect of Art. 32 of Public Finance Act22, i.e. to be excluded from the calculation of indebtedness levels.

3.1.3 UDF corporate governance

As the FIs under the PA1 are to be used within the context of Article 7 of the ERDF Regulation, the urban

authorities should be represented in the governance bodies of the FIs (such as advisory committees).

Given that there will be 38 relevant urban authorities across two regional UDFs, representing their

particular interests, there needs to be a corporate governance model in place that will ensure:

• that the individual investment decisions of the financial intermediary (e.g. project selection and

pricing) will be taken on the basis of business plans that demonstrate financial viability according to

market standards, with appropriate independence and no political interference,

• operational efficiency of UDF structure, including the streamlined decision-making process,

• risk management and quality procedures based solely on the agreed investment strategy, adopted

by the financial intermediary.

Therefore, the MA recommends that the requirements of Article 7 be satisfied by the way of the urban

authorities be represented on the advisory committees of the financial intermediaries that will advise

on the general direction of UDFs’ policy and activity but with no operational interference or individual

project selection authority. Each urban authority representative would only confirm the eligibility of

any submitted project applications relevant to their particular IPURD and the OPRG23 eligibility criteria.

21 State Gazette No. 28/ 6.04.2004 with further amendments and supplements 22 State Gazette No. 15/15.02.2013, 23 Provided that the MA delegates this task to the IBs (urban authorities).


20

This corporate governance structure should still allow for financial intermediary to maintain

independence and professionalism needed to make sound investment decisions.

Figure 5. UDF’s Corporate Governance structure with the advisory committee

3.1.4 Technical support

The demand side analyses (including Ex-ante assessment), in-depth interviews with various

stakeholders as well as lessons learnt in the previous programming period show the need for an

intensive technical support for potential final recipients (“FRs”), in particular, municipalities, especially

the smaller ones and municipal companies in order to encourage them to use FIs to finance their

investments.

Some technical support will be provided by financial intermediaries as part of their normal operation,

and covered with their management fees. This will include potential advice and review of project-

specific areas, including:

Table 4. Technical support provided by financial intermediaries to final recipients

• Verification of project affordability in relation to municipality/other final recipients-specific budgeting;

• Sanity check of assumptions adopted;

• Verification of revenue streams;

• Technical due diligence;

• Legal due diligence;

• Financial structuring;

• Risk mitigation;

• Compliance with the eligible activities under OPRG 2014-2020;

• Compliance of procurement procedures at project level;

• State aid implications at project level;

• Some support in grant application preparation (for projects with grant co-financing).

Promotion of specific FIs among FRs

Advisory committee

Intermediary Body (urban authority)

Financial intermediary

(1)

Appointment of the IB representative

(3) Presentation of project

applications positively assessed by the

financial intermediary

(4) Eligibility / non-eligibility

confirmation for project application on individual

project / member basis

(2)

Decision on project financing

Credit committee (other decision-making

body within the financial intermediary)

(5) Confirmation of

project eligibility

Final project approval


21

General information – including: general information meetings, leaflets with case studies of successful

projects / lessons learnt

One-on-one project presentation and review

Taking into account the need for capacity building that goes beyond project-specific support, the MA

should consider hiring experienced professionals or consultants to provide advisory services aimed at

improving potential final recipients’ capacities in using FIs in general. Professional advisers with

adequate knowledge and practical experience should be engaged to ensure the high quality and

independence of the services to potential final recipients.

Table 5. Technical support for general capacity building

Thematic scope to be covered:

• Affordability assessment and project scoping;

• Business plans;

• Funding structure;

• Financial modelling, including calculation of NPV, IRR and FRR;

• Risk identification and mitigation;

• Due diligence (technical, legal, financial);

• Public procurement – including approach to assessment criteria, competitive dialogue;

• Cooperation with lenders;

• Loan and guarantee products;

• Combination of grants and FIs;

• Project Finance / PPP;

• Value-for-Money assessment;

• Methods of financial gap calculation, affordability (EE, sport and cultural infrastructure access for vulnerable groups), including option of applying flat rate;

• General guidelines on eligibility criteria;

• General guidelines on application preparation;

• Corporate governance;

• Project marketing;

• Project management.

For the following types of projects:

• Revenue-generating projects to be developed directly by municipalities, their companies or other financial recipients; and

• PPP (hybrid) projects.

Case studies of successful projects

Training/seminars/workshops covering above-mentioned areas

(Optional) technical assistance in critical review of investment programmes and development of viable

project pipeline.


22

3.2 State aid considerations and their implications on the implementation structure

Based on a preliminary analysis, State aid may be present in the proposed implementation structure at

all levels, i.e.:

• FoF,

• Financial intermediaries,

• Private investor(s) and

• Final recipients.

The FoF is treated as an intermediary vehicle for transfers of the resources of the OPRG to other

financial intermediaries and therefore there should be no State aid for the FoF. We assume that as long

as the FoF manager is remunerated within the management cost/fee caps prescribed in the CPR, there

would be no aid going to the FoF manager.

With regard to financial intermediaries, as long as they perform the role of the financial intermediary of

the UDF, and have been selected in a competitive, open, transparent and non-discriminatory procedure

(which implies that their remuneration is on a market level), no State aid for them should occur.

Since it is foreseen that the OP contributions should leverage additional private funding, potential State

aid for private investor(s) should also be assessed. This includes situations when the financial

intermediary engages its own funds, acting in a dual role of the manager and private investor. If the

investment is arranged on a pari passu basis between public and private investors, no State aid for

private investors normally would occur. The option in which private investor(s) may enjoy preferential

treatment, admissible from the perspective of State aid, is application of the Art. 16 of the GBER (for

details please refer to Footnote 25).

Finally, State aid presence and its compatibility must be verified at a final recipient level. In general, in

the case of a lack of economic activity of final recipients or no impact of the projects supported on the

EU trade no State aid is granted.

Based on the analysis of possible solutions that exclude the necessity to notify aid to the Commission

under Art. 108 (3) TFEU, the following options presented in Table 6 below can be contemplated.


23

Table 6. State aid options for urban development and tourism and cultural heritage

Urban development Tourism & cultural heritage

Option 1 Option 2 Option 3 Option 4

Projects realized under IPURD (Art. 2 (60) GBER) Projects realized outside IPURD

Fin

anci

al in

term

edia

ries

No aid (or compatible aid) - Art. 16 GBER or conditions from section 2.1.2 of

the Guidelines on State aid to

promote risk finance

investments fulfilled

No aid admissible - conditions from section 2.1.2 of the Guidelines on State aid to promote risk

finance investments fulfilled. Only for

investment aid for EE in buildings (Art. 39 GBER)

some deviations are admissible

No aid - Art. 16 GBER (or compatible aid) or conditions from section 2.1.2 of the Guidelines on State aid to promote risk

finance investments fulfilled

No aid admissible - conditions from section 2.1.2 of the Guidelines on State aid to

promote risk finance investments fulfilled

Pri

vate

inve

sto

rs

Aid under Art. 16 GBER24 or no aid

under section 2.1.1. of the

Guidelines on State aid to

promote risk finance

investments

No aid admissible - conditions from section 2.1.1 of the Guidelines on State aid to promote risk

finance investments fulfilled. Only for

investment aid for EE in buildings (Art. 39 GBER)

some deviations are admissible

Aid under Art. 16 GBER25 or no aid

under section 2.1.1. of the Guidelines on State aid to promote

risk finance investments

No aid admissible - conditions from section 2.1.1 of the Guidelines on State aid to

promote risk finance investments fulfilled

Fin

al r

ecip

ien

ts

Art. 16 GBER

Depending on the project: Art. 14 GBER (regional

investment aid), Art. 53 (Aid for culture and

heritage conservation), Art. 55 (Aid for sport and

multifunctional recreational

infrastructures), Art. 56 (Investment aid for local

infrastructures), Regulation No. 1370/2007 -

urban transport under PSO26, de minimis aid

Art. 16 GBER

Tourism - Art. 14 GBER (regional

investment aid) or Art. 56 GBER

(Investment aid for local infrastructure,

de minimis aid

Cultural heritage - Art. 53 GBER (Aid

for culture and heritage

conservation) de minimis aid

24 In the case of State aid granted under Art. 16 GBER private investors may enjoy preferential treatment, i.e. asymmetric profit and loss sharing – cf. Art. 16 (8) (c)-(d) GBER (i.e. (c) in the case of asymmetric loss-sharing between public and private investors, the first loss assumed by the public investor shall be capped at 25 % of the total investment or (d) in the case of guarantees to private investors in urban development projects, the guarantee rate shall be limited to 80 % and total losses assumed by a Member State shall be limited to at max. 25 % of the underlying guaranteed portfolio). 25 Op. cit. 26 Public Service Obligation.


24

Recommended solutions have been indicated in bold, i.e. Option 1 for urban development and Option 4

for T&CH27. They allow for a uniform treatment of the projects and are relatively simple in

implementation.

Aid amounts cannot exceed thresholds28 established in Art. 4 of the GBER. If the threshold is to be

exceeded (which is rather unlikely, given the results of market assessment and potential project

pipeline in the Ex-ante assessment), individual notification under Art. 108 (3) TFEU is required29.

Should the guarantees be used, they must not cover more than 80% of the underlying transaction costs

or of the underlying portfolio – generally this requirement applies both to non-aid guarantees and to

guarantees with an aid element30.

In order to avoid a detailed assessment of incentive effect with respect to aid granted to large

enterprises (for example municipal companies), an appropriate State aid scheme may need to be

prepared (cf. Art. 6 (2) and (3) of the GBER) by the MA and/or FoF, however with no need for

notification to the EC.

In the case of projects combining FI and grants, different compatibility bases will probably have to be

applied with respect to aid in the form of grants (see: alternative options presented in Table 6 above)

and the rules on the cumulation of aid will have to be respected, as defined in the Art. 8 of the GBER.

Selecting one of the options presented above by the MA will impact the criteria and rules to be applied

when selecting financial intermediaries and projects to be financed and will have to be taken into

account in calls for financial intermediaries/private investors and projects. State aid and its implications

should be verified, on a case-by-case basis, when assessing the offers submitted by financial

intermediaries and subsequently, individual project applications submitted by the final recipients.

The State aid scheme(s) defining rules of granting the State aid in the form of the FIs under the PA1 and

PA6 of the OPRG will be prepared by the aid granting authority and submitted to the MoF with the

request for its opinion on the State aid scheme(s)’ compliance with relevant regulation(s) (as defined in

the Art. 9 of the State aid Act31). The FoF and financial intermediaries will observe the adopted State aid

scheme(s) and fulfil the provisions of the State aid Act. The FoF manager is responsible for signing the

funding agreements with financial intermediaries, which include the responsibility of the financial

intermediaries to assess compliance with the State aid rules before granting aid to the relevant final

recipients. The guidelines on the State aid compliance with the applicable national and European

legislation should be defined by the entity issuing State aid scheme(s) and the internal procedures for

assessment of the existence of State aid at the project application level will be prepared by the relevant

financial intermediary . The financial intermediary, according to its internal rules, should document the

eligibility check on the State aid granted. The control functions of the FoF manager towards financial

27 In the case of T&CH a hybrid option is also possible – i.e. the combination of options 3 and 4 depending on the area where the T&CH investments are located (i.e. option 3 for projects under the IPURD and option 4 outside the IPURD). This option is not recommended due to its relative complexity. 28 Please note that thresholds are presented as gross grant equivalents. Only for State aid granted under Art. 16 GBER, the threshold is established as an absolute value (total investment in an urban development project under any urban development aid measure shall not exceed EUR 20 m). 29 There are different restrictions with respect to de minimis aid or aid granted under the Regulation No. 1370/2007. 30 See: Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees, point 3.2.c (also for exceptions from 80% rule) and point 4.1.c. 31 State Gazette, No. 86/24.10.2006.


25

intermediaries on State aid compliance at project level should also be envisaged in the funding

agreements. Information with respect to the aid granted and its compatibility with the rules on State

aid has to be included in the regular monitoring reports submitted by the financial intermediary. This

information will be made available to the MA in order for the MA to perform its reporting obligations on

State aid.

The proposed actions32 to be undertaken in respect of State aid by the stakeholders are presented in

Table 7 below.

Table 7 The proposed actions on State aid to be undertaken by the stakeholders

Responsible entity Action

MA, in cooperation with the FoF manager

Preparation of the State aid scheme(s)

MoF Delivery of the opinion on compliance of the scheme(s) with relevant legal provisions

MA

Issuing the State aid scheme(s) and framework guidelines on the State aid for the FoF / financial intermediaries

Preparation of the State aid reports and their submission to the MoF

FoF manager

Issuing guidelines for preparing financial intermediary procedures on State aid

Carrying out checks on the State aid issues in financial intermediaries

Preparation of monitoring reports on the State aid granted by financial intermediaries

Financial intermediary

Execution of tasks on the State aid delegated by the FoF manager as defined in the funding agreement, esp.:

• preparation and application of procedures on State aid

• granting State aid to final recipients

• preparation of monitoring reports on State aid granted to final recipients

32 The list of actions is not exhaustive and may be adjusted by the MA.


26

4 Financial products

The Ex-ante assessment recommended the use of various FIs, including: loans, guarantees, mezzanine

instruments and equity. This Section provides the rationale behind the choice of financial products to be

offered by FIs, as well as key characteristics of these products.

Key characteristics of financial products proposed below reflect the following factors:

• Market needs and gaps identified in the Ex-ante assessment,

• Key objectives to be addressed by the OPRG,

• Current market circumstances and capacities of potential financial intermediaries, and

• Lessons learnt from the previous programming period.

4.1 Loans

Loans have been the most popular financial product supporting urban development in the previous

programming period, both in Bulgaria as well as in other countries. Both Bulgarian UDFs provided only

loans which are the most popular and most easily understood financial instrument among all categories

of final recipients. Loans are therefore assumed to continue being the basic financial product to be

offered by the UDFs also in the current programming period.

4.1.1 Loan parameters

Specific parameters of loans to be granted by UDFs should be subject to a competitive procedure of the

financial intermediary selection. Key indicative parameters presented below could form part of financial

intermediaries’ selection criteria, with minimum or maximum values indicated in the call. Key

parameters of loan products recommended in the current programming period have been presented in

Table 8 below, along with the relevant parameters applied by the FSUDS and RUDF for the JESSICA

initiative in the previous programming period.

It should be noted that this Investment Strategy envisages the use of guarantees that should potentially

improve lending terms and conditions to be offered to final recipients and broaden the group of

potential eligible final recipients which should result in a faster absorption of loans.


27

Table 8. Indicative key parameters of loan products*

Parameter Previous programming period Recommended in the current programming period

Borrowers own equity

Varying levels, with minimum equity contribution of 20% for individual projects.

Minimum 25% of eligible project costs (with potential reduction to min. 15% for projects with highest social impact, and guarantee cover) and 0% in the case of municipal borrowers (in the cases where the provision of own contribution by the municipality is considered impossible and would effectively hinder project development / financing).

Interest rates 0.00% - 0.25% for FSUDS 1.00% - 2.00% for RUDF

Subject to UDF competitive procedure and/or independent expert verification, given the current market interest rate environment and lessons learnt from JESSICA in the previous programming period. The interest rate level may be revised based on the demand for FIs, absorption levels, as well as changes in corresponding market interest rates. One option would be to fix the interest rate offered on OPRG funding as a percentage of the interest rate offered by the UDF on its own co-financing.

Interest rates of the UDF co-financing should take into account any guarantee cover to be offered.

Fees Commitment fee: 0.50% for FSUDS 0.50% for RUDF

Commitment fee: 0.50% Commitment fees discipline final recipients to undertake efficient project development and to some extent mitigate the risk of loan agreements being signed without the subsequent fund disbursement. For municipal borrowers, commitment fees for an initial period of time might be waived to allow for project procurement and staged drawdown of the loans.

Tenor

Average maturity for both UDFs –

11.25 years

Sofia UDF – average maturity – over

14 years

Maximum tenors to reflect maximum repayment periods in

various sectors, with specific tenors reflecting project-specific

business models.

Maximum tenors:

• UD – up to 20 years (for projects with an important social

component that is not reflected in their revenue-generating

capacities and projects under PPP model)

• EE – up to 15 years (for projects performing deep thermo-

modernisation that justifies longer payback period)

• T&CH – up to 20 years (for projects with high capital intensity and potential impact to develop integrated tourist products, and projects under PPP model).

Impact of a potential guarantee cover to be taken into account.

Grace period

Grace periods to reflect the development and construction (potentially ramp-up) periods of individual projects. Maximum grace periods are expected to be: • UD – up to 3 years

• EE – up to 1.5 years

• T&CH – up to 3 years

Collateral requirements

Standard collateral package, with limitations on collateral to be offered by municipalities/public entities and their bodies due to restrictions resulting from regulations

Standard collateral package, depending on the sector, project type and sponsor. The use of guarantees should address potential lenders’ restrictions on securing sufficient collateral, esp. due to restriction on pledge of municipalities’ and other public entities’ assets.


28

* more favourable conditions may be offered to the final recipients from northern region, given the OPRD objective to apply territorial

approach to the interventions, i.e. to support less developed regions and more favourable conditions may be needed. The funding agreements

with UDF managers should reflect the need for a more preferential treatment of final recipients from less developed regions, especially in the

UDF Northern Bulgaria and allow for flexibility to potentially adjust the conditions to support the most vulnerable recipients from northern

regions.

Indicative allocation for loans is estimated taking into account the leverage level at 1:1.15, with allocation

for each UDF at (1) Sofia UDF - EUR 105.8 m (EUR 49.1 m – OPRG contribution and EUR 56.7 m – private

co-financing), (2) Northern Bulgaria UDF - EUR 123.6 m (EUR 57.4 m – OPRG contribution and EUR 66.2

m – private co-financing) (3) Southern Bulgaria UDF - EUR 123.6 m (EUR 57.4 m – OPRG contribution and

EUR 66.2 m – private co-financing).

All final recipients eligible in various sectors as described in Section 5 Final recipients below should be

eligible for loans.

4.1.2 Management fees

Management fees should take into account the regulations of Art. 13 of the Delegated Regulation

480/2014, i.e.:

• Base remuneration – 0.5 % per annum of OPRG contributions paid to the UDF,

• Performance based remuneration - 1 % per annum of OPRG contributions paid to33 final recipients in

the form of loans.

Apart from the management fee types and levels prescribed in the Delegated Regulation 480/2014,

additional performance based remuneration structures could be envisaged. It is especially

recommended that a fee linked to repayments from final recipients also be established, to ensure

alignment of interest of UDF managers in ensuring repayment of loans extended to final recipients.

Experience from the JESSICA initiative in the previous programming period, suggests that a fee level of

up to 5% of amounts repaid/recovered could be envisaged. In addition, and to encourage the attainment

of the OPRG outputs, a portion of the performance based remuneration outlined above, could be ring

fenced and paid only when minimum levels of outputs are achieved. It is important to set this

remuneration level appropriately and in terms of what is realistically achievable. This could be

determined through the financial intermediary selection process as a “scoring” criterion.

The aggregate amount of management costs and fees over the eligibility period shall not exceed 8% of

the total amount of OPRG contributions34 paid to the UDF. Given these limitations, the management

fees might be subject to a competitive procedure while selecting financial intermediaries, however

given the need for financial intermediaries’ involvement in providing advice and support to final

recipients to bridge the capacity gaps, it is not recommended to give this criterion high weighting in the

overall score. Additionally, general capacity building measures should be undertaken by the MA, as

described in Section 3.1.4 Technical support above.

Given that the management fees may be paid from the OPRG sources only to the financial instrument

until the end of the eligibility period, the repayment to the MA, or to the FoF, or the date of winding up,

whichever is earlier, and some of the proposed loan tenors are longer, the funding agreement with the

33 Within the meaning of Article 42(1)(a) of Regulation (EU) No 1303/2013. 34 The caps presented above may be exceeded if they are charged by a financial intermediary which has been selected through a competitive tender in accordance with the applicable rules and the competitive tender proved the need for higher management costs and fees (Art. 13.6 of the Delegated Regulation 480/2014).


29

financial intermediary will need to address the management fees to be paid after the eligibility period

from resources returned, and should be designed to encourage repayment of the underlying loan

investments. The detailed provisions on the management costs and fees will be defined in the funding

agreements.

4.2 Guarantees

FI guarantees have not been used to support urban development in the previous programming period

in Bulgaria but they are known as financial products to the market (e.g. guarantees granted by the

National Guarantee Fund or under the JEREMIE scheme).

The guarantee products to be established under the OPRG will cover several market gaps:

• Banks’ limited interest in lending to municipalities and other public bodies due to various reasons,

e.g. political risk, perceived indebtedness levels, credit risk and concerns by parent banks with

lending to sub-sovereigns,

• Restrictions faced by municipalities and other public bodies resulting from collateral requirements

imposed by banks that cannot be offered by municipalities,

• Commercial banks’ capital requirements that impact the pricing for higher risk PPP, municipal

companies or private entities, and

• Restrictions on commercial long-term lending that do not correspond to a possible return period of

most of the urban development projects.

4.2.1 Guarantee products and implementation structures

The recommended option for implementation of the guarantee instruments is the so-called

“embedded” option. As mentioned previously a “separate” guarantee fund might be considered at a

later stage and have been presented in Appendix 3.

The recommended guarantee option is slightly different from what is recommended in the Ex-ante

assessment. The recommended option proposes that OPRG funding be used for guaranteeing loan

exposures – such capital to be ring fenced and either deposited within the financial intermediary (i.e.

funded), or callable from the FoF, and used by the financial intermediary to cover losses that might be

incurred on its own funding contributions. It is likely that the financial intermediaries will prefer the

“funded” option for the guarantee, since it is believed that this would provide the financial intermediary

with the optimal solution with respect to regulatory “capital relief”.


30

Figure 6. Recommended Option – Guarantee facility “embedded” in the UDF

Financial intermediaries will, in this way, benefit from both a funding contribution from the OPRG (as

described under the loan product above) and the “embedded” guarantee facility to also effectively

“risk share” on their own funding contribution. The guarantee will therefore be funded from the OPRG

funds only. Again, in order to provide maximum “capital relief” benefits to the financial intermediaries,

the guarantee will need to cover defaults/non-payment, after an appropriate market standard “cure

period”, on a scheduled payment (comprehensive guarantee). The guarantee facility will participate in

up to 80% of each individual loan exposure but should be limited to a maximum percentage (believed to

be not more than 15%) of the UDFs private / own funding contribution. It is important that this overall

cap be kept at a sufficiently low level (limited to 25% maximum under GBER requirements) in order to

ensure a combination of leverage and alignment of interests with the UDFs who should remain diligent

in assessing the underlying credit risk of the final recipients.

It is important also to note that the combined instrument proposed in this Investment Strategy is meant

to achieve a combination of long-term preferential rate funding (provided through the loan component

from the FoF) with a moderate level of leverage from, and alignment of interest with, the UDFs. It

should be appreciated that, in this way, the OPRG funding is taking the majority of the risk on final

recipients, but this is believed to be needed in order to catalyse project investment in line with the

OPRG and thereby ensure quicker absorption of the funds by also targeting a wider range of, potentially

more risky, final recipients.

Proposed terms and conditions:

• Different guarantee parameters for different sectors, as follows:

EE in housing (up to 80% of each loan, tenor of up to 15 years, pricing of up to 2% p.a.);

UD (70% of each loan, tenor of up to 20 years, price of up to 1% p.a.);

T&CH (70% of each loan, tenor of up to 20 years, pricing of up to 2% p.a.).

Feedback from the initial market testing done in preparing this Investment Strategy, suggests that the

guarantee facility should be priced in a way to ensure pricing benefits to final recipients. Therefore, the

guarantee fee level of up to 2% (or 1% for UD sector), recommended above, may be reduced to ensure

Urban'Development'Fund'

Guarantee''Facility'

Loans'

Borrower'

Debt%fin

anci ng%

Credit%risk%coverage%

Fund'of'Funds'

Guarantee%investment,%either%funded%or%callable%

Debt%service%

Possible'UDF'funding'partners'

• IFI'lending'• Private'investors'

• Leveraged'with'

bank'own'resources'on'pari'

passu"basis"

Co;financing'


31

continued attractiveness to final recipients. Since it will be embedded, the pricing of the guarantee may

also be done on a “blended” basis (along with the loan facility) and could therefore be below those of a

stand-alone guarantee fund to again encourage a broader use of guarantees and support lower cost of

funding. It should be also noted that the use of guarantee would be optional depending on the

underlying risk and final recipient’s credit rating. Therefore, not all UDF’s exposures would use the

guarantee product.

Another benefit of the embedded guarantee is that there is no need to build additional capacities for

guarantee products, as is the case in the “stand alone” guarantee fund alternative where the costs of

separate guarantee fund set-up and operation will need to be incurred. In addition, this recommended

option potentially provides for a quicker decision-making process in the UDF, with no need to involve an

additional financial institution (i.e. separate guarantee fund). In this way, the benefits of the

“combined” package of funding and risk mitigation for UDFs and final recipients should be achieved.

There are a number of areas that should be addressed during the implementation phase:

• There is a potential conflict of interest if guarantees and loans are managed by same entity, i.e.

financial intermediary (albeit significantly mitigated due to portfolio guarantee caps proposed). The

funding agreement therefore needs to require the measures to further mitigate these risks,

including implementation of standardised/predefined guarantee mechanics (including pricing and

events of default, etc.), as well as adequate and regular monitoring and reporting requirements.

The embedded guarantee should act effectively as a risk sharing instrument and hence the

importance of “capping” the overall losses of the guarantee facility, as outlined above.

• If the callable capital option is selected, political risk could be viewed as high (the FoF that is

managed by a government-related entity could potentially be seen by the financial intermediary as

eventually withholding the guarantee payment or delay the recovery process). Unless this point is

properly addressed, this option is unlikely to allow banks to benefit from capital relief (which would

result in a lack of interest in this product and/or lack of pricing and/or tenor benefits for the final

recipients).

• If the funded option is selected, the funding agreement between the FoF and financial intermediary

should define in detail how the financial intermediary could use the guarantee funding, with clear

restrictions/ring fencing on the use of these funds by the financial intermediary. Credit risk could

also be mitigated by “paying out” the guarantee amounts in tranches as and when minimum levels

of underlying loan exposures are built up by the UDF.

Indicative allocations for guarantees (to be funded only from the OPRG resources with no private co-

financing expected) is estimated at (1) Sofia UDF EUR 5.3 m, (2) UDF Northern Bulgaria – EUR 6.2 m, (3)

UDF Southern Bulgaria – EUR 6.2 m.

All final recipients eligible in various sectors as described in the Section 5 Final recipients below should be

eligible for guarantees.

4.2.2 Management fees

Management fees should take into account regulations of Art. 13 of the Delegated Regulation 480/2014,

i.e.:

• Base remuneration - 1.5% p.a. of the OPRG contributions paid to the UDF, and


32

• Performance based remuneration - 1.5% p.a. of the OPRG contributions paid to35 final recipients in

the form of loans.

The aggregate amount of management costs and fees over the eligibility period shall not exceed 10% of

the total amount of OPRG contributions36 paid to the UDF. It is expected that should the guarantee be

“embedded” in the UDF (as recommended in this Investment Strategy), then synergies and costs

savings should be achieved, compared with the option of having a separate guarantee fund. Therefore,

the FoF may reduce the maximum allowed management fees to those of a loan instrument, for

example, and even allow for these to be reduced further through the UDF procurement/selection

process.

Given that the management fees may be paid from the OPRG sources only to the financial instrument

until the end of the eligibility period, the repayment to the MA, or to the FoF, or the date of winding up,

whichever is earlier, and some of proposed loan tenors are longer, the funding agreements need to

address the management fees to be paid after the eligibility period. The detailed provisions on the

management costs and fees will be defined in the funding agreements.

4.3 Other financial products

The OPRG provides indicative allocations for equity instruments from the ERDF (in PA1 – EUR 2.85 m and

in PA6 – EUR 4.28 m). The Ex-ante assessment indicated potential use of mezzanine and equity

instruments only in transport and road infrastructure and energy production, without any in-depth

analyses. The Ex-ante assessment also refers to a market gap resulting from the weak development of

local private equity market in Bulgaria. Given the discussions with market participants as well as

diagnosis from the Ex-ante assessment, there are limited capacities in the market to manage equity or

mezzanine (subordinated debt) instruments by potential UDF managers, especially for such limited

allocation amounts. Offering these instruments under the UDF structures along with loans and

guarantees would require building additional new capacities and risk procedures in place. The

equity/mezzanine subordinated debt-type instruments carry very different risk profiles and would

ideally need to be addressed by a separate investment committee (and credit committee) in order to

avoid conflict of interest (in terms of which product is offered, pricing, terms, etc.) which presents an

additional challenge in terms of the UDF management. This does not seem to be justified given very

small allocations for equity under the OPRG. This may also result in unacceptably high management

costs of equity instruments. In addition, very few projects that have been financed or submitted to

UDFs in the previous programming period were structured in a Project Finance / PPP model that would

benefit from the equity instruments.

Therefore, this Investment Strategy does not recommend the implementation of equity instruments at

this stage. The MA and FoF manager should monitor, during the FI implementation phase, if sufficient

demand for an equity-type instrument emerges and potentially adjust the Investment Strategy to

unlock equity products or a separate FI in this regard if necessary (possibly with higher allocations than

currently envisaged in the OPRG).

35 Within the meaning of Article 42(1)(a) of Regulation (EU) No 1303/2013 36 The caps presented above may be exceeded if they are charged by a financial intermediary which has been selected through a competitive tender in accordance with the applicable rules and the competitive tender proved the need for higher management costs and fees (Art. 13.6 of the Delegated Regulation 480/2014).


33

4.4 Financial products recommended - summary

Below, all financial products, together with their recommended allocations per each UDF and respective

contributions from the OPRG funds and private co-financing have been presented.

Table 9. Recommended allocation for financial products – summary

As discussed in Chapter 3.1. Implementation options considered, the FoF may decide to firstly allocate an

initial tranche of resources (e.g. 70% of a potential total allocation) to the respective UDFs, with a

subsequent “performance-related” allocation to be decided only once certain amounts from initial

tranche are disbursed to final recipients. To ease administration, this process of allocating additional

funding should probably coincide with the “tranching” mechanics/phased draw down provisions

contained in the CPR. If such an approach is adopted, the initial allocation could be made as presented

in Table 10 below, with circa EUR 57 m retained by the FoF in a performance-related allocation reserve.

Table 10. Recommended initial allocation for financial products and geographies

4.5 Identification of potential co-financing sources for the OPRG funds

Potential co-investment and co-financing of the OPRG funds by leveraging them with private funding

may occur at three levels: FoF, financial intermediary and final recipient.

This Investment Strategy does not envisage leveraging the OPRG funds at the FoF level. The identified

co-investment and co-financing for the OPRG funds would therefore be provided at:

• the financial intermediary level (co-investment), and

• the individual project level (co-financing).

Loan/Guarantee

Facility

Total allocation

(in EUR m)

The OPRG

contribution

Private

investor(s)

contribution

Leverage

level

Loan 105.8 49.1 56.7 1:1.15

Guarantee 7.6 7.6 0.0 1:0

Total 113.4 56.7 56.7 1:1

Loan 123.6 57.4 66.2 1:1.15

Guarantee 8.9 8.9 0.00 1:0

Total 132.4 66.2 66.2 1:1

Loan 123.6 57.4 66.2 1:1.15

Guarantee 8.9 8.9 0.00 1:0

Total 132.4 66.2 66.2 1:1

Total 378.2 189.1 189.1 1:1

Southern

Bulgaria UDF

Sofia UDF

Norhern Bulgaria

UDF

Loan/Guarantee

Facility

Total allocation

(in EUR m)

The OPRG

contribution

Private

investor(s)

contribution

Leverage

level

Loan 74.1 34.4 39.7 1:1.15

Guarantee 5.3 5.3 0.0 1:0

Total 79.4 39.7 39.7 1:1

Loan 86.6 40.2 46.4 1:1.15

Guarantee 6.2 6.2 0.00 1:0

Total 92.7 46.4 46.4 1:1

Loan 86.6 40.2 46.4 1:1.15

Guarantee 6.2 6.2 0.00 1:0

Total 92.7 46.4 46.4 1:1

Total 264.8 132.5 132.5 1:1

Sofia UDF

Norhern Bulgaria

UDF

Southern

Bulgaria UDF


34

This Investment Strategy envisages a moderate leverage level of the OPRG sources at 1:1 at the financial

intermediary level, with the 1:1.15 leverage ratio for loans and no leverage for guarantees. The private

co-investment is to be provided either from the sources of financial intermediary and / or other private

entity/ies or with the support of IFIs in the form of a long-term funding line to fund financial

intermediary’s own contributions to the UDF. The funds to be provided by the IFIs would be expected

to be repaid by financial intermediary, regardless of the performance of the underlying projects – which

will therefore be at the risk of the financial intermediary. The IFIs will therefore probably extend funding

only to financial intermediaries complying with their specified minimum criteria.

Irrespective of the source of funding of financial intermediary’s own contribution to the UDF (own or

other private investor(s) sources or loans from the IFIs), market testing performed in preparing this

Investment Strategy indicated a significant interest in co-funding the OPRG sources by potential

financial intermediaries. It is believed that the use of integrated guarantee instrument from the OPRG

resources at the financial intermediary level will further encourage potential financial intermediaries

and / or other private investor(s) to provide their own funds to be co-invested along the OPRG funds in

the UDFs.

Further leverage will be achieved at the final recipient / project level. The financial products’ parameters

recommended in this Investment Strategy proposed the minimum own funds contributions (i.e co-

financing) to be provided by projects’ sponsors / borrowers. The minimum of 25% of eligible project

costs (with potential reduction to min. 15% for projects with highest social impact, and/or guarantee

cover) should be provided by the final recipients, with an exception of municipal final recipients. The

leverage to be achieved at a project level will depend on project-specific financial structure and financial

strength of project’s sponsor. The potential sources of leverage at the final recipient level would be:

equity investors, bank debt (also at a corporate level), or final recipients’ own resources.


35

4.6 Provisions for the update and review of the Investment Strategy

Given that the proposed Investment Strategy is heavily dependent on external/market conditions that

could be subject to change, an update and review of the Investment Strategy should allow for

adjustments if and when needed during the programming period 2014-2020. The triggers for such a

review of the Investment Strategy should be linked with the FIs results achieved during the

implementation by the relevant financial intermediaries, and with specific events in the market, both in

the regulatory environment and the relevant economic conditions in the sectors of interest to the

OPRG.

Table 11 below proposes possible triggers for the review of the Investment Strategy which could require

an update or a verification of the expected results of the FIs proposed.

Table 11. Potential triggers for the review of the Investment Strategy

Review trigger Timing

1. Adoption of relevant national strategies (e.g. National Energy Efficiency Strategy and Energy Strategy)

on-going

2. Amendments of relevant legal provisions (e.g. Municipal Debt Act, Public Procurement Act) on-going

3. Amendments of the OPRG on-going

4. Monitoring of the market gaps and failures on-going

5. Adoption by the MA of the Municipal Investment Programmes 2Q 2016

Besides the triggers for verifying the Investment Strategy and potentially adjusting the FIs proposed,

the update and review of the Investment Strategy may result from the on-going control and

monitoring, including:

• Regular reporting/monitoring of the FIs,

• Trigger values achieved (actual vs. planned) by the FIs, particularly a significantly faster or slower

take-up of the FI allocation than originally envisaged,

• Conclusions from the ad-hoc or planned controls and evaluations.

Notwithstanding the need for a monitoring and review of the Investment Strategy and its adjustments

due to the changes in the regulatory environment and the relevant economic conditions or the

amendments to the OPRG, any adjustments to the Investment Strategy should be implemented only if

necessary. This is of key importance to create a stable environment for the financial intermediaries with

consistent objectives to support them in a long-term planning of their business development and

operations.


36

5 Final recipients

The Investment Strategy presents a catalogue of target final recipients, in line with the current OPRG. It

should be noted that while it is important to clearly define target final recipients in terms of:

• Geographical area,

• Size and sector of operations,

• Type of eligible investments,

• Sector restrictions resulting from State aid requirements, and

• Any other specific criteria,

there should be sufficient flexibility built into the UDFs’ procedures to accommodate any future market

changes.

5.1 Energy efficiency

Final recipients and geographical area

The final recipients are:

• Owners of single-family residential buildings and

• Higher education institutions and legal entities managing student dormitories,

located in 39 cities of the 1st, 2nd and 3rd tiers of the polycentric development system defined in the

National Concept for Spatial Development 2013-2025 (“NSDC”).

Operations need to be in line with the Investment Programme complying with the IPURD.

Size and sector of operations

EE operations carried out by the final recipients.

Types of eligible investments

• Implementation of EE measures37 in the buildings and construction works related to the

implementation of EE measures, including construction reinforcement (when it is deemed

mandatory in the construction survey),

• Implementation of the above EE measures accompanied by deep renovation38 of buildings, if they

achieve energy savings for the building of more than 60%,

• EE audits and construction surveys of existing buildings,

• Commissioning of RES installations for the buildings listed above to cover their own energy

consumption.

Sector restrictions resulting from State aid requirements

In the case of owners of residential buildings used exclusively for residential purpose, no State aid

should be present as no economic activity is usually carried out in buildings supported under the OPRG.

37 EE measures cover: insulation of envelopes of the buildings, replacement of windows, renovation of the systems for maintaining microclimate, technical installations, local installations and/or connections to heat supply, gas supply, installation of individual meters in accordance with the requirements of Directive 2012/27 /EU (where applicable). 38 Deep renovation includes construction works, construction reinforcement (when prescribed mandatory in construction survey) as well as repair and reconstruction of different parts of the building (roof, exterior walls, staircase cells, elevators, etc.)


37

With respect to higher education institutions and legal entities managing student dormitories, State aid

should be excluded as long as these entities operate within the national educational system,

predominantly or entirely funded by the state and supervised by the state. If the dormitory is

owned/used by a private educational institution and such an institution operates within the national

educational system, predominantly or entirely funded by the state and supervised by the state, no State

aid should occur. If such a private educational institution conducts economic activity however, any

advantage granted from state resources will in principle constitute State aid. In such a case relevant

rules of the GBER would have to be applied. Depending on the project details, art. 14, 16, 39 or 56 of the

GBER may be considered as an option.

Any other specific criteria

• Residential buildings designed/built before 1999,

• Minimum EE standard to be achieved by existing buildings equivalent to C-class of energy

consumption,

• In the case of projects with an element of deep renovation, reduction of energy consumption

should be higher than 60%.

Taking into account the results of the interviews with market participants (including in particular the

EERSF) as well as lessons learnt in other countries (in particular in the CEE region), the use of FIs to

promote EE in single-family buildings may represent serious challenges. Firstly, the projects will be of

very low value (often below EUR 2 thousand) which will require simplified procedures and a portfolio

approach to encourage UDF managers to engage their resources in these projects that contribute to a

very limited extent to the overall absorption level. Secondly, given that FIs that have been made

available to this group of final recipients in the past with a rebate (20%) have enjoyed rather limited

interest, the combination with higher levels of grants should therefore be considered.

5.2 Urban development


The final recipients are:

• Urban transport – entities generating income from providing public transport services and/or the

provision of infrastructure for paid use,

• Urban environment – entities carrying out eligible projects,

• Zones with potential for economic development – entities carrying out eligible projects,

• Entities generating income from services rendered at or from the provision of eligible

sports/cultural infrastructure for paid use,

located in 39 cities ( 1st, 2nd and 3rd tier).

In the case of urban transport, eligible projects should be located in the 39 cities including functional

links with neighbouring settlements, which represent part of the public urban transport system and

which are included in the integrated sustainable urban transport plans/programmes. Operations need

to be in line with the Investment Programme complying with the IPURD. Furthermore, additional

territorial parameters might be introduced like the minimum allocations for intervention zones or

functional links, with some degree of flexibility throughout the implementation period.


38


Operations will be carried out in:

• Urban transport,

• Urban environment (covering public areas such as parks and other green areas, squares, car parks),

• Zones with potential for economic development,

• Sports infrastructure,

• Cultural infrastructure.

No investments in large-scale sites of sport and cultural infrastructure will be supported.

Type of eligible investments

A list of eligible investments is presented in Appendix 1 to the Investment Strategy.

The eligible investments cover development of new and refurbishment / improvement of existing

infrastructure in the eligible sub-sectors.


As far as State aid under the GBER39 is concerned few sector restrictions40 apply, (i.a. aid to

undertakings in difficulty as defined in Art. 2 (19) of the GBER) (Art. 1 (4) (c) of the GBER)).

Restrictions resulting from the State aid rules may not apply if no State aid is granted, i.e. due to lack of

economic activity or no impact on EU trade. With respect to infrastructure, no aid is usually present if

supported infrastructure is not used for economic purposes.

If State aid is present, solutions for ensuring its compatibility are presented in Table 6 above (depending

on the adopted approach, Art. 14, 16, 55, 56 GBER, de minimis aid or Regulation No. 1370/2007 may be

taken into consideration).


Preference will be given to development of multimodal transport systems and providing functional links

of the city with its periphery as planned in the respective IPURD.

Operations in sport and cultural infrastructure will be implemented in the intervention zones defined in

the IPURDs. Operations in sport and cultural infrastructure should contribute to improvement of EE and

environment. The sport and cultural infrastructure should also be available for vulnerable groups,

including disadvantaged groups which should lead to their social inclusion in sport and cultural life of

the cities.

39 Please note that different restrictions may apply with respect to de minimis aid and aid granted under Regulation No. 1370/2007. 40 The GBER does not apply to: • aid to export-related activities towards third countries or Member States, namely aid directly linked to the

quantities exported, to the establishment and operation of a distribution network or to other current costs linked to the export activity (Art. 1 (2) (c) GBER);

• aid contingent upon the use of domestic over imported goods (Art. 1 (2) (d) GBER); • sectors mentioned in Art. 1 (3) GBER (please note that there are additional sectorial restriction with respect to

regional aid, ie. Aid granted under Art. 14 and 16 GBER); • aid schemes which do not explicitly exclude the payment of individual aid in favour of an undertaking which is

subject to an outstanding recovery order following a previous Commission decision declaring an aid illegal and incompatible with the internal market/ ad hoc aid granted to such undertaking (Art. 1 (4) (a)-(b) GBER);

• aid to undertakings in difficulty as defined in Art. 2 (19) GBER (Art. 1 (4) (c) GBER).


39

5.3 Tourism & cultural heritage


Public and private organisations and public-private partnerships (legal or natural person), including

representatives of religious institutions, carrying out eligible projects with elements related to cultural

heritage restoration and conservation and which result in viable tourism products.


Total value of small-scale projects for cultural and sustainable tourism should not exceed EUR 5 m and in

the case of projects related to infrastructure concerned as world cultural heritage41 – EUR 10 m.

Type of eligible investments

• Development of cultural heritage sites of national and world importance, including conservation

and restoration, regeneration, protection, exhibiting, socialising, promotion, equipping, introducing

techniques and programmes for interpretation and animation, etc.,

• Development of tourist infrastructure and integrated tourist products related to visiting the

attractions (cultural heritage sites), including promotion activities,

• Small-scale income-generating investments in trade and food areas, accommodation, leisure and

recreational facilities, within the cultural site or directly linked to it within an integrated tourist

product,

• Additional small-scale non-infrastructure activities directly related to promotion of attractions

supported under the OPRG.


If State aid is present (i.e. if final recipient carries out economic activity with the usage the infrastructure

supported and which impacts on the EU trade), potential solutions for ensuring its compatibility are

presented in Table 6 in Section 3.2 State aid considerations and their implications on the implementation

structure above (depending on the adopted approach, Art. 14, 53 and 56 of the GBER or de minimis aid

may be taken into consideration).

For sector restrictions see Section 5.2 Urban development above.


Restoration and conservation of cultural heritage site of national and world importance should be

coordinated and approved by the Ministry of Culture and the National Institute for Immovable Cultural

Heritage. Specific monitoring and controls of the project implementation should be envisaged by the

financial intermediary (to ensure compliance with issued permits and legal provisions).

Each project must include both actions for: (1) restoration and conservation of the cultural heritage site

of national and world significance and (2) all other identified eligible activities that will lead to the

formation of a comprehensive, integrated viable tourism product which attracts enough visitors to

cultural sites to ensure financial stability and return on investments in the long term and at the same

time ensure sustainable preservation of cultural heritage.

41 As defined in Article 1 of the 1972 Convention concerning the protection of the world cultural and natural heritage listed by UNESCO.


40

6 Result and output indicators

With regard to the performance framework of the OPRG, it is assumed that the FIs will contribute to the

milestones42 to be achieved by 2018. Table 12 below gives data on the FIs contribution and the

Appendix 5 contains the assumptions to the calculations. As achievement of the OPRG indicators (both

financial and non-financial) in due time is of significance to the performance framework and the

commitments of the financial intermediaries, the estimations of the indicators’ values presented below

should be subject to further verification before being assigned to the dedicated UDFs and defined in the

funding agreements.

Table 12. The FIs contribution to the performance framework of the OPRG

Type of indicator

Definition Unit Milestone for

2018

Contribution of the FIs to

milestone

PA1

Financial indicator

Certified amount EUR 242,467,439 36,006,415

Output indicator

Open space created or rehabilitated in urban areas (ref. to the SO 1.3.1 (1.6e.1))

m2 598,728 99,095

Public or commercial buildings built or renovated in urban areas (ref. to the SO 1.4.3 (1.9a.3))

m2 4,060 2,670

PA6

Financial indicator

Certified amount EUR 14,861,493 6,687,672

Key implementatio

n step

FI for tourism development established FI 1 1

Mechanism for combination of support through FI and grants developed

mechanism 1 1

Started construction works for some investments construction

works in progress

yes yes

The estimation of result and output indicators for FIs have been based on:

• aggregated data on the indicative allocations to grants;

• estimation of indicative contributions of all types of the OPRG instruments (grants and FIs) to

SOs (with no detailed information about methodologies of calculations of the OPRG indicators);

• indicative allocation to FIs provided by the MA (see Appendix 5, Table 2); and

• best practices and experience in defining output indicators for FIs in various countries in the

previous and current programming periods.

The estimations presented in this Section are indicative and should be subject to verification at further

stages of the OPRG implementation, especially after final decision on the allocations of FIs, leverage

levels and adoption of Investment Programmes prepared by the 39 municipalities (which will provide

42Data based on The METHODOLOGY on establishment of performance framework under the Operational Programme “Regions in Growth” 2014-2020, provided by the MA in October 2015.


41

more detailed information on types and indicative values of projects to be supported only with grants

and with FIs and grants combination).The assumptions applied to estimate the FIs contribution to the

indicators have been presented in detail for each indicator in Appendix 5.


The operations will contribute to SO1.1.1 (1.4c.1) Raising EE in the housing sector including single-family

buildings and student dormitories and consequently to achieving the national target for increasing EE

(25% higher EE by 2020) and indirectly - to reduce green house gases (“GHG”) emissions.

They will contribute to achieving targets of the OPRG indicators to the extent as presented in Table 13

below.

Table 13. The OPRG indicators in EE

The OPRG result indicator

No. Indicator FI Target / total

OPRG target Unit

1. final energy consumption from households (decrease)

7.1 - 7.9 of 2,248

thousand tonnes of oil equivalent (toe)

2.

final energy consumption from public administration, commerce and services (assumed not relevant due to characteristics of final recipients)

0 of 975 thousand tonnes of oil equivalent (toe)

The OPRG output indicator

1. annual decrease of GHG emissions 45,558– 48,757

of 89,054 tonnes of CO2 eq.

2. number of households with improved energy consumption classification (increase)

6,394 – 7,185 of 10,585

household - single family buildings/dormitories


The operations in urban transport will contribute to SO1.2.1 (1.4e.1) Development of ecological and

sustainable urban transport and consequently to improvement of air quality and environment in the

eligible cities.


below.

Table 14. The OPRG indicators for urban transport



OPRG target Unit

1. public urban transport share (increase) 8.41

of 43 %

2. quantity of fine particles in cities (decrease) 0.31

of 1.57 μg/m3


1. estimated annual decrease of GHG 2,725

of 13,927.73 tonnes of CO2 eq.

2. total length of new or improved public transport lines (not relevant)

0 of 30.47

km


42

The operations in urban environment will contribute to SO1.3.1 (1.6e.1) Improving the quality of the urban

environment and SO1.3.2 (1.6e.2) Improving investment activity in the cities through regeneration of zones

with potential for economic development.


below.

Table 15. The OPRG indicators for urban development



OPRG target Unit

1. increase of share of population benefiting from improved urban environment

10.12 of 55.03

%

2. quantity of fine particles in cities (decrease) 7.58

of 41.22 μg/m3

3. expenditure on acquisition of tangible fixed assets (increase) if relevant

974,567 of 5,300,000

EUR m


1. open space created or rehabilitated in urban areas (increase)

585,609 of 3,184,724

m2

2. total surface area of rehabilitated land (increase) 31.6

of 172 ha

3. public or commercial buildings built or renovated in urban areas (increase)

27,274 of 27,274

m2

The operations in sport and cultural infrastructure will contribute to SO1.4.3 (1.9a.3) Improving the

access for practicing mass sport and cultural services in cities.


below.

Table 16. The OPRG indicators for sport and cultural infrastructure


No. Indicator FI Target / total OPRG

target Unit

1. share of modernized cultural/sport sites (increase) 4.63

of 6.33 %


1. public or commercial buildings built or renovated in urban areas* (increase)

69,352 of 94,911

m2

*It is assumed that the output indicator refers only to sport and cultural infrastructure (no social infrastructure included).


43


The operations in T&CH will contribute to the SO6.1.1 (6.6c.1) Increasing the tourist frequentation of

cultural monuments of national and world importance and consequently to preservation and

development of cultural heritage. They should mitigate seasonal pressure on the Black Sea coast and

mountain resorts and improve tourism competitiveness.


below.

Table 17. The OPRG indicators for T&CH



OPRG target Unit

1. internal tourism consumption (increase) 1,859* – 3,700**

of 3,700 EUR m


1. developed tourism products for cultural heritage of national and world importance (increase)

9* - 18** of 18

product

2. expected number of visits to supported sites of cultural and natural heritage and attractions (increase)

241,017* – 482,034** of 482,034

visit/year

* Optimistic option: 50% of the indicators values are assigned to FIs. ** Simplified option: As (1) all the tourism products related to cultural heritage sites are developed with the use of FIs43, (2) grant may be only a separated component of the project, it is difficult to assign concrete values of the indicators to separate project’s elements as only project as a whole delivers outputs and results. Therefore, it is assumed that all the indicators will be delivered by FIs to simplify the calculation of the FIs contributions to the OPRG indicators.

The indicators presented above will be allocated to the selected financial intermediaries in accordance

to the funding agreements that will contain indicative financial allocations per each area of interest to

ensure the commitments, disbursement and indicators will be delivered in due time, in line with the

MA’s assumptions. It is recommended however that these allocations are closely monitored and

adjusted in line with the market dynamics to support the achievement of the OPRG objectives rather

than focusing on individual indicators; albeit considering Bulgarian commitments towards the EC under

the OPRG.

6.4 Monitoring system

In regard to the monitoring of financial and non-financial progress in FIs implementation, including

output, performance and result indicators, the FoF in collaboration with financial intermediaries will

establish a system to monitor regularly their performance.

This system will include:

• Procedures to ensure transparency in the operation of FIs,

• Indicators of socio-economic benefits arising from projects invested into,

• Indicators of non-financial/physical monitoring,

• Indicators of financial monitoring.

43 According the OPRG (section 2.A.6.1) the projects will be funded with FIs as well as a combination of grant funding and FI(s), depending on the business plan of the project.


44

In terms of financial monitoring, the FoF and financial intermediaries will produce regular transaction

monitoring reports and transmit them to the management and expenditure control organisation at the

beginning of the accredited programme period (Article 34(1) of the CPR) and will contribute to the

preparation of reports on the activities related to FIs (as an attachment to the Annual Reports

submitted to the MC and EC) as defined in Articles 40 and 46 of the CPR.

Detailed monitoring rules and obligations of the FoF and financial intermediaries will be as defined in

the funding agreements and incorporated into the internal procedures of the FoF and financial

intermediaries.


45

7 Envisaged combination with grant support

According to the OPRG, a combination of FIs with grants has been envisaged in order to maximise

efficiency of intervention and ensure minimum intensity of grant support in some areas. In the case of

combination of FI(s) and grants (in other forms than technical support, interest rate subsidy or

guarantee fee subsidy), a clear distinction between costs eligible for FIs and for grants should be ear-

marked to ensure separation of the operations (Article 37(7) and (8) of the CPR).


In the case of EE, a combination with grants has been envisaged only for student dormitories projects in

the OPRG. The EU grant component may be used to cover a financial gap between: the CAPEX to

refurbish student dormitories to a desired energy standard44 and energy savings generated from an EE

project. Based on the lessons learnt, it is recommend to provide a maximum grant contribution allowed

at the level of support for individual projects.

In addition to a combination with grants proposed in the OPRG for student dormitories, it is

recommended to ensure grant component in the case of single-family residential buildings to

encourage owners to invest in EE. Given their limited interest in EE in the past, an additional incentive

(for example in the form of grant contribution to cover a financial gap or to reduce project’s payback

period) and a simplified support schemes should be offered (mitigating administrative burden and

costs). A standardised portfolio approach (with standardised support levels, potentially with additional

incentive to be offered to final recipients from least affluent urban areas) at a UDF level is highly

recommended to control unitary management costs given a very small size of individual projects.


In the case of urban transport operations, combination with grants may be envisaged. Road

infrastructure will be supported only with grants.

For operations in cultural infrastructure a combination of FI with grants is planned.

No grant support is envisaged for sport infrastructure.

For some types of projects in economic zones and urban environment, combination with grants is not

excluded.


According to the OPRG, projects that intend to use grants, shall firstly apply for FIs. Grants will be made

available at a project level only after a rigorous review of the project business plan is completed by the

relevant financial intermediary, which identifies a financial market gap that needs to be filled with

grants in order to provide financial viability of the project.

However, due to a relatively a high level of investments required in restoration and conservation of

cultural heritage sites and relatively low returns from this type of investments, it is highly probable that

the projects may need substantial grant contribution.

44 While designing the support scheme, it should be envisaged that the scope of EE measures that offers the highest financial efficiency in most cases does not achieve deep thermo-modernisation. Therefore, the OPRG may provide financial preferences for projects with higher EE results by combination of FIs with grants.


46

7.4 Application procedure for financing with FIs combined with grants

For the projects looking for support with FIs in combination with grants (other than urban development

projects under the PA1 implemented in the context of the Article 7 of the ERDF Regulation), the MA is

contemplating an application procedure where the final recipient submits an integrated application for

grant and FI components, as illustrated in the Figure 6 below. This option ensures a one-stop-shop

approach for the applicants which should reduce an administrative burden seen as one of the most

important barriers in using FIs in the past. However, involving two entities (i.e. financial intermediary for

FI(s) contribution and the MA/IB for grant contribution) may delay financial decisions in the event of

their divergent positions. There is also the risk of excessive requirements/expectations of financial

intermediaries and/or applicants to grant’s contribution to a project in order to mitigate their credit risk

by reducing FIs’ contribution to a project. Therefore if this approach is applied, a clear definition of costs

eligible for FIs and grants as well as other rules ensuring transparency, simplicity and separation of

support schemes (such as maximum grant contribution to a project) should be defined for the financial

intermediary/final recipients. Additionally, involvement of the financial intermediary in the dual-

mechanism – i.e. FIs and grants will require an additional remuneration which may be challenging given

the caps on overall management fees to be applied.

Figure 6. One-stop-shop application approach for projects financed with FIs combined with grants

Alternatively, in the case of urban development projects under the PA1 implemented in the context of

the Article 7 of the ERDF Regulation, the IB (i.e. urban authority) can play a coordinating role in the

structure, as presented in the Figure 7. below.

MA/IB (Grant scheme)

Application for Grant component and FI component

UDF (FI scheme)

(1) Submission of application

(5) Loan/guarantee credit

decision

(2) Grant application

(3) Grant decision information

(4) Grant decision

Beneficiary of grant/ Final recipient of FI


47

Figure 7. Application approach for urban development projects financed with FIs combined with grants

In addition to a simplified application procedure, there is a strong need for technical support for the

benefit of final recipients, as most of eligible final recipients, especially small municipalities and

municipal companies have no or very modest experience in using FIs and also still limited in using

grants. It should cover both: (1) intensive promotion of new support instruments in the form of FIs

and/or complementary grant scheme(s) to attract potential final recipients’ attention and in parallel (2)

technical assistance to improve final recipients’ capacity both in preparing applications and using FIs.

The detailed scope of potential technical support has been presented in Section 3.1.4 Technical support

above.

UDF (FI scheme)

Application for Grant component and FI component

IB (urban authority)

(Grant scheme)

(1) Submission of application

(2) FI application

(3) FI decision information

Beneficiary of grant/ Final recipient of FI

(5) Grant decision

(4) Loan/guarantee credit

decision


48

8 Exit strategy

Exit strategies to be applied by the FoF and financial intermediaries should reflect on the one hand

market needs and expectations (in particular, longer tenors reflecting longer repayment periods for

most of urban development projects), and on the other hand, the limitations resulting from the

regulations as well as the objective of the funds to be recycled efficiently, delivering maximum outputs.

The CPR envisages45 that over the eligibility period, i.e. the end of 2023, the resources paid back to FIs46

will be re-used for the following purposes, up to the amounts necessary and in the order agreed in the

relevant funding agreement(s):

• further investments through the same FIs or other FI(s) if applicable, in accordance with the SOs

under the PA1 and/or PA6 of the OPRG,

• where applicable, preferential remuneration of private investors or public investors operating under

the market economy principle, who provide counterpart resources to the support from the ESIF to

the FI or who co-invest at the level of final recipients,

• where applicable, reimbursement of management costs incurred and payment of management fees

of the financial instrument.

The resources paid back after the eligibility period47 during a period of at least eight years after the end

of the eligibility period (i.e. at least till 2031), which are attributable to the support from the OPRG to FIs,

will be used in accordance with the objectives of the OP either within the same FIs or, following the exit

of those resources from the FI, in other FIs provided that, in both cases, an assessment of market

conditions demonstrates a continuing need for such investment, or in other forms of support.

An exit strategy (involving winding up all FIs and transferring all funds available to the MA) will be

defined between the MA and FoF in the funding agreement to reflect envisaged market needs and the

regulations. The exit strategy will be influenced by several factors, including:

• The commencement date of operations;

• The commencement dates of disbursements of individual financial products offered by the financial

intermediaries;

• The tenor of financial products offered; and

• Potential delays in repayments resulting from financial products’ defaults/recoveries.

Based on the conclusions of this Investment Strategy (see Sections 4.1 Loans and 4.2 Guarantees), the

exit strategy should accommodate the following maximum tenors (both for loans and guarantees):

• UD – up to 20 years,

• EE – up to 15 years,

• T&CH – up to 20 years.

An exit strategy should envisage regular repayments (with maximum grace periods) until full

repayment of loans and guarantees reaching their maturities up to the maximum tenors stated above.

45 Art. 44 of the CPR. 46 From investments or from the release of resources committed for guarantee contracts, including capital repayments and gains and other earnings or yields (such as interest and guarantee fees) which are attributable to the support from the OPRG. 47 Art. 45 of the CPR.


49

This means that the maximum UDF’s life span should not exceed 25 years since its inception (adopting

the assumption that the financing agreement with the final recipients may be signed up to 5 years after

the UDF inception, with a maximum maturity of 20 years). As part of the UDF investment strategy, the

financial intermediary should outline principles that will guide its follow-on investments.

The following four possible scenarios for an exit strategy could be considered:

• Reappointment scenario: The FoF/MA decides to reinvest all or part of the OPRG resources back

into the UDF and enter into a further funding agreement with the financial intermediary. The UDF

will continue to operate investment activity under an investment strategy agreed with the FoF/MA.

• MA exit scenario: The UDF will have to repay all OPRG resources to the FoF/MA. The remaining

investment resources (private co-investment) may be used at the discretion of the financial

intermediary (to invest in similar projects or not).

• Co-investor exit scenario: The UDF has to repay all the resources to its private co-investors. The

remaining OPRG resources will be treated as in the reappointment scenario.

• UDF closure scenario: All resources (OPRG and private) will be returned to its investors and the UDF

closes. The MA will decide how to re-use the funds in line with Art. 44 and 45 of the CPR.

Depending on the dynamics and success of the FoF operations, the MA could decide along the way if it

wanted to recycle the funds flowing back into the FoF, or wind the FoF up and cease its operations,

within the scenarios presented above.

The funding agreements with the financial intermediaries should define how/if the resources paid back

to the UDF from loans or from the release of resources committed for guarantee contracts, including

capital repayments, interest paid and guarantee fees should be re-used for the further investments until

the end of eligibility period (i.e. till 2023).


50

Appendix 1 Project types eligible for FIs in the Urban Development

sector under OPRG

Urban transport

• Development of traffic management plans and establishment of Intelligent Transport Systems,

• Improvement of the accessibility of the stations of urban public transport and the infrastructure

leading to them (underpasses and overpasses),

• Renovation of the transport infrastructure, such as the socket and catenary cable network,

improving stations and stops, depots, repair and maintenance facilities and equipment,

• Development of infrastructure and route network with new destinations to remote residential

areas,

• Provision of noise-reduction systems, such as construction of tram tracks with anti-vibration and

anti-noise elements,

• Development and improvement of urban public transport systems, incl. purchase of new rolling

stock for urban transport, that is compliant with the European legislation on harmful emissions

from engines and measures to increase the use of RES in urban transport,

• Construction/ renovation/reconstruction of street networks and transport infrastructure together

with the adjoining structures (bridges, tunnels, overpasses, underpasses etc. as an elements of the

technical infrastructure),

• Construction/reconstruction/renovation of pedestrian streets, sidewalks and pedestrian areas,

cycling tracks and lanes, bicycle parking lots, underpasses, overpasses, transport infrastructure,

including related activities such as installation of road signs, information boards, street marking etc.,

as part of the integrated urban transport system,

• Improving the connections between integrated urban transport, intercity bus, rail, air, inland

waterways and marine transport, as part of realisation of intermodal transportations – renovation

of municipal bus stations and relevant areas in front of the stations owned by municipalities, stops

for the public transport,

• Construction/reconstruction/renovation of parking spaces and other measures related to parking

arrangements in proximity to public urban transport nodes outside the city centre.

Urban environment

• The construction and rehabilitation of public recreation spaces, e.g. parks and other green areas,

children’s playgrounds, zoos and city squares,

• Construction, reconstruction, rehabilitation of the physical elements of the urban environment, e.g.

pedestrian alleys and sidewalks, bicycle trails and lanes, pedestrian areas, underpasses and

overpasses for pedestrians and cyclists,

• Construction, rehabilitation and reconstruction of streets and public parking,

• Installation of energy saving street lighting and security and crime prevention measures,

• Introducing systems for control of motor vehicle access into pedestrian areas.


51

Zones with potential for economic development

• Improvement/upgrading and reconstruction of existing, or construction/development of new

technical infrastructure related to business and entrepreneurship,

• Construction, renovation, rehabilitation, reconstruction and repair of business and industrial areas,

including both public or commercial buildings,

• Cleaning, regeneration/reclamation, decontamination and other activities to prepare the existing

polluted and obsolete industrial and brownfield sites for economic activity,

• Landscaping, places for recreation, bicycle lanes, parking spaces for workers in the zones with

potential for economic development.

Sports infrastructure

• Construction, reconstruction, renovation, equipment and furnishing of sport infrastructure for

sports for all, such as sports halls, swimming pools, football fields, stadiums for public use,

combined volleyball/basketball playgrounds, tennis courts, etc.

Cultural infrastructure

• Development of cultural infrastructure through construction, reconstruction, renovation,

equipment and furnishing of cultural centres, theatres, community centres, libraries, opera houses,

galleries, cultural exhibition halls and other cultural institutions.

In case of discrepancies between the activities listed in the Investment Strategy and the OPRG, the

correct activities are those within the OPRG.


52

Appendix 2 Glossary and list of abbreviations

CAPEX Capital expenditure

CF Cohesion Fund

CPR Regulation (EU) No 1303/2013 of the European Parliament and of the Council

of 17 December 2013 laying down common provisions on the European

Regional Development Fund, the European Social Fund, the Cohesion Fund,

the European Agricultural Fund for Rural Development and the European

Maritime and Fisheries Fund and laying down general provisions on the

European Regional Development Fund, the European Social Fund, the

Cohesion Fund and the European Maritime and Fisheries Fund and repealing

Council Regulation (EC) No 1083/2006 (“Common Provisions Regulation”)

De minimis Regulation Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the

application of Articles 107 and 108 of the Treaty on the Functioning of the

European Union to de minimis aid

EBA European Banking Authority

EC European Commission

EE Energy Efficiency

EIB European Investment Bank

EIB Group EIB and EIF

EIF European Investment Fund

ERDF European Regional Development Fund

ERDF Regulation Regulation (EU) No 1301/2013 of the European Parliament and of the Council

of 17 December 2013 on the European Regional Development Fund and on

specific provisions concerning the Investment for growth and jobs goal and

repealing Regulation (EC) No 1080/2006

EERSF Energy Efficiency and Renewable Sources Fund

ESIF European Structural and Investment Funds

EU European Union

Ex-ante assessment Ex-ante assessment of financial Instruments for the OPRG, PwC, October

2014

FEC Final Energy Consumption

FI(s) Financial Instrument(s)

FLAG Fund for Local Authorities and Governments

FoF Fund of Funds


53

GBER Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain

categories of aid compatible with the internal market in application of

Articles 107 and 108 of the Treaty (“General Block Exemption Regulation”)

GHG Greenhouse gas

Guidelines on risk finance Guidelines on State aid to promote risk finance investments (2014/C 19/04)

HF Holding Fund

IB Intermediary Body

IP Investment Priority

IPURD(s) Integrated Plan(s) for Urban Regeneration and Development

JEREMIE Joint European Resources for Micro to Medium Enterprises – an initiative of

the EC and the EIB Group aimed at using FIs to support access to finance for

SMEs during the 2007-2013 programming period

JESSICA Joint European Support for Sustainable Investment in City Areas – an

initiative of the EC, the EIB and the CEB aimed at using FIs to support

investments in sustainable urban development

MA Managing Authority

MoF Ministry of Finance

NCSD National Concept for Spatial Development 2013-2025

NGF National Guarantee Fund

OP Operational Programme

OPRG Operational Programme “Regions in Growth 2014-2020”

PA Priority Axis of an Operational Programme

PPP Public-Private Partnership

Regulation 1370/2007 Regulation (EC) No 1370/2007 of the European Parliament and of the Council

of 23 October 2007 on public passenger transport services by rail and by

road and repealing Council Regulations (EEC) No. 1191/69 and 1107/70

RES Renewable energy source(s)

SO(s) Specific Objective(s)

T&CH Tourism and cultural heritage

TO(s) Thematic Objective(s)

UDF(s) Urban Development Fund(s)


54

Appendix 3 Alternative implementation option for guarantees

Alternative Option – Separate guarantee Fund

Figure 1. Separate Guarantee Fund

* Guarantee funding could come from the MA directly or through the FoFs (as presented).

The guarantee will cover default on a scheduled payment (i.e. comprehensive guarantee).

This alternative option envisages blending the OPRG financial resources with financial intermediary co-

financing 1:1, on a pari passu basis as already exists in the JESSICA structure, and creating a separate

guarantee fund to provide guarantees to UDFs for eligible projects to be funded through loans from

UDFs. The advantage with this approach is that one specialised body will manage guarantee products,

with no need to build additional capacity at the UDF level. Also, the allocation of guarantee funds to a

separate entity addresses the problem of conflict of interest within the UDFs, in comparison with the

recommended “embedded” guarantee option (albeit this risk would be significantly mitigated by

adopting maximum loss caps at the UDF level).

The guarantee fund manager could be either a local entity (e.g. the National Guarantee Fund, “NGF”) or

an independent financial institution (international commercial institution or IFI). The option of using a

local entity such as NGF results in minimal disruption by using an existing entity to deliver guarantee

products (albeit in a different market segment as it has provided mainly low-value guarantees for

SMEs)). Also, the NGF is known in the local market and can therefore play a role.

Proposed terms and conditions:

• Guarantee fee: 1-2%,

• Grace period: 1-3 years,

• Different guarantee parameters for different sectors, as follows:

EE in housing (80% of each loan, portfolio loss cap of 15%, tenor of up to 15 years, pricing

of 2% p.a.),

Urban'Development'Fund'

Loans'and'other'products'

Borrower'

Debt%fin

anci ng %

Possible'UDF'funding'partners'

• IFI'lending'• Private'investors'

• Leveraged'with'

bank'own'resources'on'pari'

passu'basis'

Fund'of'Funds'

Co;financing'

Guarantee'Fund*'

Debt%service%

Credit%risk%coverage%


55

UD (70% of each loan, portfolio loss cap of 10%, tenor of up to 20 years, price of 0.5% - 1%

p.a.),

T&CH (70% of each loan, portfolio loss cap of 15%, tenor of up to 15 years, pricing of 2%

p.a.).

There are a number of potential issues or concerns with this alternative option:

• The guarantee (if the Guarantee Fund is managed by NGF or other Bulgarian public body) is unlikely

to be able to obtain a higher rating than that of the sovereign (BB+);

• The guarantee issued by the body other than the sovereign is unlikely to allow banks to benefit

from a full capital relief (which would result in a lack of interest in this product and/or lack of pricing

and/or tenor benefits for the final recipients);

• If the Guarantee Fund is managed by NGF or other Bulgarian public body, there could be a number

of governance issues (perceived or real) that would need to be addressed (earmarking of funds

within NGF, political interference in the issuing of guarantees and in the resolution of claims at the

municipal level for example), and as a result, political risk could be viewed as unacceptably high;

• Feedback from initial market testing done in preparing this Investment Strategy suggests that

financial institutions, based on their previous experience with guarantee facilities managed by

public bodies, may have concerns about operational efficiency of the Guarantee Fund (if it is

managed by NGF or other Bulgarian public body);

• The implementation and management costs of this separate guarantee fund will be significantly

higher in comparison to the recommended “embedded” guarantee option.


56

Appendix 4 Regional allocation targets for the UDFs

While estimating the regional allocation targets to be implemented by the UDFs, the following criteria

should be in particular taken into account:

• Macroeconomic and social data (including contribution to GDP and population, socio-economic

situation and development potential),

• The SOs of the OPRG (in particular on the one hand supporting less developed regions and on the

other further development of Sofia as the most important driver in Bulgaria’s economy),

• Lessons learnt from using FIs in the previous programming period.

The tables below present population, GDP per capita and total GDP per region and aggregated potential

allocations for each of the three UDFs.

Table 1. Population and GDP per region (2011)

Population %

Population in ths.

GDP per capita (EUR)

GDP (EUR 000)

% in GDP

North-western 11.3% 823 3,243 2,668,989 7.0% North-central 11.6% 844 3,496 2,950,624 7.7% North-eastern 13.1% 957 4,241 4,058,637 10.6% South-western (including city of Sofia) 29.2%

2,128 8,779 18,681,712 48.9%

Central-southern 20.1% 1,462 3,630 5,307,060 13.9% South-eastern 14.7% 1,067 4,282 4,568,894 11.9%

100% 7,281 38,235,916 100.0% Source: Infralinx based on the Ex-ante assessment

Table 2. Population and GDP in Sofia

Allocation per GDP

Allocation per population

Sofia region 48.9% 29.2%

Southern region 25.8% 34.8%

Northern region 25.3% 36.0% Source: Infralinx

Taking into account the SOs of the OPRG and the allocation criteria identified above, the proposed

minimum, maximum and recommended allocations48 per each region have been proposed.

48 The final decision of the financial allocations assigned to the UDFs should be taken after the adoption of the Investment Programmes by the MA (planned for mid-2016).


57

Table 3 The indicative allocations

Minimum Maximum Recommended

Recommended

allocation from the

OPRG (EUR m)

Sofia region 30% 50% 40% 75.1

Southern region 25% 35% 30% 57

Northern region 25% 35% 30% 57

Source: Infralinx

Figure 1. Regional division of Bulgaria under the NUTS 2 and typology of districts according to their socio-economic

situation and development

Source: Ex-ante assessment, p. 41

Such an allocation reflects a clear division between less developed northern regions and more

developed southern regions.

The geographical allocation proposed by the MA of 30% for the Sofia UDF and 35% for each of the

regional UDFs (Southern and Northern Bulgaria) respectively is in line with the indicative allocations

proposed above, especially taking into account the OP’s overall objective to promote development in

the regions and therefore adopting the lower allocation value to Sofia.


58

Appendix 5 Contribution to the OPRG indicators

Appendix 5 presents the methods of calculation of FIs’ contributions to the OPRG output and results

indicators. These estimations must be treated as indicative subject to further verification as presented

in Section 6 Result and output indicators. Note that the assumptions have been applied without detailed

knowledge of the methodology applied by the MA when estimating the OPRG indicators’ values and

should therefore be cross-referenced for consistency.

The assumptions and the values of the FIs contribution to the performance framework of the OPRG

have been given Table 1 below.

Table 1. The FIs contribution to the performance framework of the OPRG

The calculations of the values of indicators have been done with the application of the following

indicative allocations for the areas of interest.

Type of

indicatorDefinition Unit

Milestone for

2018

Contribution of

the FIs to

milestone

Comment

Financial

indicatorCertified amount EUR 242,467,439 36,006,415

The FIs contribution constitutes 16.5% of the

OPRG target value, reduced by 10% due to the

possibly later than initially planned launch of the

Fis by the MA (beginning 2016 vs. H2 2016).

Open space created or

rehabilitated in urban areas (ref.

to the SO 1.3.1 (1.6e.1))

m2 598,728 99,095





Public or commercial buildings

built or renovated in urban areas

(ref. to the SO 1.4.3 (1.9a.3))

m2 4,060 2,670





Financial

indicatorCertified amount EUR 14,861,493 6,687,672

The FIs contribution constitutes 50% of the OPRG

target value, reduced by 10% due to the possibly

later than initially planned launch of the Fis by

the MA (beginning 2016 vs. H2 2016).

FI for tourism development

establishedFI 1 1

Mechanism for combination of

support through FI and grants

developed

mechanism 1 1

Started construction works for

some investments

construction

works in

progress

yes yes

Output

indicator

Key

implement

ation step

PA1

PA6


59

Table 2. Indicative allocations for FIs under PA 1 and 6 of the OPRG

Area Indicative allocations* of FIs (ERDF +15%

national contribution (in EUR)

Priority Axis 1

EE in single-family houses and dormitories 23,293,027

Urban environment 12,455,811

Urban transport 21 454 879

Economic zones 21,073,342

Sport infrastructure 47,679,076

Cultural infrastructure 12,714,420

Total PA1 138,670,555

Priority Axis 6

Tourism & cultural heritage 50,377,941

Total PA6 50,377,941

Total for FIs (PA1&6) 189,048,496

Source: InfraLinx calculations based on the data from the MA and the OPRG

*Indicative allocations of FIs may be referred to in the funding agreements with financial intermediaries and subsequently verified and

potentially adjusted over the implementation period should the actual project demand across the sub-sectors differ from these intended

indicative allocations.

Energy efficiency


60

Table 3. The assumption applied to FIs contribution to the target values of the OPRG indicators for EE

Assumptions Value Comments

1 Allocations of FIs for EE (EUR m) 23.3 Indicative allocation presented by the MA of the OPRG

2 Assumed division of allocation between dormitories and single-family houses

20% / 80% Expert assumption

3 dormitories (1) x (2) 4.7

4 single-family houses (1) x (2) 18.6

5 Total allocation and private co-financing for dormitories 9.3 Leverage 1:1 of OPRG funds

6 Total allocation and private co-financing for single-family houses

37.3 Leverage 1:1 of OPRG funds

7 Grant support necessary for dormitories 20% Based on experience of Bulgarian EE fund (EERSF, co-funded by EBRD) - 20% of grant component and Polish Thermo-modernisation Fund - up to 20% grant component

8 Dormitories - technical assumptions

9 average CAPEX for renovation of one dormitory (EUR

m) 0.250

Experience of EERSF fund in Bulgaria - thermo-modernisation of 4 student accommodation houses covering e.g. insulation of envelope, roof and floor and solar installation

10 UDF loan 80.0% Expert assumption - up to 100% of support (FIs and grant) for dormitory

11 grant 20.0%

12 average UDF loan (9) x (10) (EUR m) 0.20

13 average number of households per dormitory 100 Technical assumption based on average dormitory (block of flats)

14 average annual energy savings per dormitory 950 MWh

p.a./81,68toe

Experience of EERSF fund in Bulgaria - thermo-modernisation of 4 student accommodation houses covering e.g. insulation of envelope, roof and floor and solar installation; 1toe=11,63 MWh

15 average annual CO2 emission decrease in dormitory 699 t CO2e Experience of EERSF fund in Bulgaria - per dormitory

16 Single-family houses - technical assumptions

17 average CAPEX for basic renovation of one single-

family house (EUR m) 0.020

Estimation of Polish Fund for Environmental Protection and Water Management (“NFOŚiGW”) and technical advisors (investment covering: insulation of envelope, roof and floor, replacement of windows)


61

18 average CAPEX for deep renovation of one single-

family house (EUR m) 0.029

Estimation of Polish NFOŚiGW and technical advisors (investment covering: mentioned above plus replacement of heating system and mechanic ventilation with heat recovery)

19 required owner's contribution 25% Expert assumption

20 UDF loan 75% Expert assumption

21 average UDF loan for basic renovation (16) x (19) (EUR

m) 0.015

22 average UDF loan for deep renovation (17) x (19) (EUR

m) 0.022

23 average annual energy savings per household - single-

family house and dormitory

19MWh/p.a./1,633toe – 22.5MWh p.a./1,93toe

Estimation of Polish NFOŚiGW and technical advisors, estimated FEC savings – 19MWh/year (basic renovation) and 22.5 MWh/year (deep renovation); 1toe=11.63 MWh

24 average annual CO2 emission decrease 6,4 tCO2e - 7,5

tCO2e

Estimation of Polish NFOŚiGW and technical advisors, estimated annual GHG emission decrease: 6.4 t CO2e per basic renovation of 2,485 single-family houses and 7.5 t CO2e per deep renovation of 1,694 single-family houses

25 Output and results indicators

26 Number of households with improved energy consumption classification, including:

min. 6,394 - max. 7,185

min. 1694 - max. 2485 single-family houses + 4,700 households in dormitories

27 in dormitories i.e. in 47 dormitories - (5)/(12) 4,700 47 dormitories x 100 households = 4,700

28 single-family houses = (6)/(21) and (6)/(22) min. 1,694 - max.

2,485 37,269/0,015=2485 and 37,269/0,022=1694, depending on the type of renovation

29 Final energy consumption from households, including: min. 7,108 - max.

7,897 toe (30)+(31)

30 dormitories (14) x (27) 3,839 toe 81,68 toe x 47 dormitories

31 single-family houses (21) x (28) and (22) x (28) min. 3,269 - max.

4,058 toe. 1,694 x 1,93 toe = 3269,4 and 2,485 x 1,633 toe = 4058 toe

32 Annual decrease of GHG emissions, including: min. 45,558 - max.

48,757 (33)+(34)

33 dormitories (15) x (27) 32,853 tCO2e 699 t CO2e x 47 dormitories

34 single-family houses =(24) x (28) min. 12,705 - max.

15,904 min. 6.4 t CO2e per basic renovation of 2,485 single-family houses and max. 7.5 t CO2e per deep renovation of 1,694 single-family houses

Source: InfraLinx calculations on the basis of data from the MA, the OPRG and lessons learnt (Bulgaria and Poland)


62

Urban transport

Table 4. The OPRG indicators for urban transport


1 Allocation of FIs for urban transport (EUR m)

21.46 Indicative allocation of the OPRG

2 Total allocation for FIs including private investors financing for urban transport (EUR m)


3 Allocation of grants for urban transport (EUR m)

121.58 As presented by the MA

4 Total allocation for urban transport (EUR m)

164.49 (2)+(3)

5 Contribution of FIs in total allocation for urban transport 26.09%

6 FIs contribution to the OPRG indicators (5)*0.75 19.57%

Expert assumption - 0.75 is a correction parameter used due to more complexity of the usage of FIs and lower willingness of the final recipients to use them


8 Public urban transport share (%) 8.41 target value of the OPRG indicator - 43*(6)

9 Quantity of fine particles in cities (μg/m3)

0.31 target value of the OPRG indicator - 1.57*(6)

10 Estimated annual decrease of GHG (tCO2e)

2,725 target value of the OPRG indicator – 13,927.73*(6)

Source: InfraLinx calculations on the basis of data from the MA and the OPRG

Urban development

Table 5. The OPRG indicators for urban development


1 Allocation of FIs for urban development (EUR m)

33.5 Indicative allocation of the OPRG, including: 21.073 m for economic zones and 12.456 m for urban environment from the OPRG

2 Total allocation for FIs including private investors financing for urban development (EUR m)


3 Allocation of grants for urban development (EUR m)

206.5 As presented by the MA (allocation for grants for urban environment minus 3.12 for grants for cultural infrastructure)

4 Total allocation for urban development (EUR m)

273.5 (2)+(3)

5 Contribution of FIs in total allocation for urban development (EUR m)

24.52%

6 FIs contribution to the OPRG indicators (5)*0.75

18.39% Expert assumption - 0.75 is a correction parameter used due to more complexity of the usage of FIs and less willingness of the final recipients to use them


8 Share of population benefiting from improved urban environment (%)



63

9 Quantity of fine particles in cities (μg/m3)


10 Expenditure on acquisition of tangible fixed assets if relevant (EUR m)

975 target value of the OPRG indicator - EUR 5,300 m*(6)

11 Open space created or rehabilitated in urban areas (increase) (m2)

585,609 target value of the OPRG indicator - 3,184,724*(6)

12 Total surface area of rehabilitated land (ha)

31.6 target value of the OPRG indicator - 172*(6)

13 Public or commercial buildings built or renovated in urban areas (m2)

27.274

According to the MA position, this indicator includes trade/industrial buildings and they will be supported only by FIs, thus target value of the OPRG indicator - 27,274 will be delivered by FIs.


Sport and cultural infrastructure

Table 6. The OPRG indicators for sport and cultural infrastructure


1 Allocation of FIs for sport and cultural infrastructure (EUR m)

60.39

Indicative allocation of the OPRG, including: EUR 47.679 m for sport infrastructure and EUR 12.456 m for cultural infrastructure from the OPRG

2 Total allocation for FIs including private investors financing for sport and cultural infrastructure (EUR m)


3 Allocation of grants for cultural infrastructure (EUR m)

3.19 Expert assumption - 20% of grant support for cultural infrastructure

4 Total allocation for sport and cultural infrastructure (EUR m)

123.98 (2)+(3)

5 Contribution of FIs in total allocation for urban development

97.4% (2)/(4)

6 FIs contribution to the OPRG indicators (5)*0.75 73.1%

Expert assumption - 0.75 is a correction parameter used to reflect higher complexity of FIs and lower willingness of the final recipients to use them


8 Share of modernized cultural/sport sites (%) 4.63 target value of the OPRG indicator - 6.33%*(6)

9 Public or commercial buildings built or renovated in urban areas (m2) 69,352 target value of the OPRG indicator - 94,911*(6)



64

Tourist & cultural heritage

Table 7. The OPRG indicators for T&CH


1 Allocation of FIs for T&CH (EUR m) 50.38 Indicative allocation of the OPRG

2 Total allocation for FIs including private investors financing for T&CH


3 Allocation of grants for T&CH (EUR m)

50.38 Indicative allocation presented in the OPRG

4 Total allocation for T&CH 151.13 (2)+(3)

5 Contribution of FIs in total allocation for urban development (EUR m)

66.7%

6 FIs contribution to the OPRG indicators (5)*0.75

50.0% Expert assumption - 0.75 is a correction parameter used to reflect higher complexity of FIs and lower willingness of the final recipients to use them


8 Internal tourism consumption (EUR m)

min. 1,859 - max. 3,700

min. target value of the OPRG indicator - 3,700*(6) and max. 100%

9 Developed tourism products for cultural heritage of national and world importance (increase)

min. 9 - max. 18

min. target value of the OPRG indicator - 18*(6) and max. 100%

10

Expected number of visits to supported sites of cultural and natural heritage and attractions (increase)

min. 241,017 - max. 482,034

min. target value of the OPRG indicator - 482,034*(6) and max. 100%



65

Appendix 6 List of stakeholders interviewed49

Stakeholder Representative consulted

Bulgarian Development Bank

Mr. Bilian Balev, Executive Director

Ms. Zaharina Todorova, Head of Division, International Financial Institutions and EU Funds

CIBANK Frank Jansen, CFO

Kiril Velitchkov (Head, EU Projects & Financial Instruments)

Energy Efficiency and Renewable Sources Fund (EERSF)

Mr. Dimitar Doukov, Executive Director

Mr. Emil Pashov, Financial and Marketing Coordinator

Mrs. Lilyana Yoncheva Financial Analyst

FLAG, FSUDS Nadia Dankinova, CEO

Iva Petkova, Expert

Ministry of Regional Development Mr. Ivan Popov, Head of Programming, Evaluation, Information and Publicity Department, DG Programming of Regional Development

Ministry of Finance Ms.Katya Dimitrova, State Expert

Ms. Vanya Stavrova, State Expert

Unicredit Bulbank

Ms. Tatyana Dimova, Business Development Manager

Mr. Nikolay Naidenov – Senior Manager

Ms. Vanya Buchova, Manager

Ms. Rumyana Pavlova, Manager

Ms. Stanka Gantcheva, Expert, Lon-Term Funding & FTP/CFO Division

Ms. Anelia Haradinova, European Funds Expert

National Guarantee Fund Mr. Samul Shiderov, Executive Director

Societe Generale Expressbank (manager of the RUDF)

Mr. Martin Zaimov, CEO

Ms. Alis Magardichyan, Investment Manager

Ms. Ralitsa Grueva, Investment Manager

49 Over the period of October-November 2015

bulgaria fund of funds - fi-compass · private law (selected on the basis of open, transparent,...

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