Bulgaria Fund of Funds Investment Strategy – Operational Programme
“Regions in Growth” 2014-2020
Final Version
2nd December 2015
European Investment Bank
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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
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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
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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.
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the information contained herein by the Ministry of Finance of the Republic of Bulgaria or by any person
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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
6.1 ENERGY EFFICIENCY 41
6.2 URBAN DEVELOPMENT 41
6.3 TOURISM & CULTURAL HERITAGE 43
6.4 MONITORING SYSTEM 43
7 ENVISAGED COMBINATION WITH GRANT SUPPORT 45
7.1 ENERGY EFFICIENCY 45
7.2 URBAN DEVELOPMENT 45
7.3 TOURISM & CULTURAL HERITAGE 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.
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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.
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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
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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.
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• 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).
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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* 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).
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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”.
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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'
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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
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• 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).
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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
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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.
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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.
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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.)
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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
Final recipients and geographical area
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.
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Size and sector of operations
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.
Sector restrictions resulting from State aid requirements
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).
Any other specific criteria
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).
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5.3 Tourism & cultural heritage
Final recipients and geographical area
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.
Size and sector of operations
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.
Sector restrictions resulting from State aid requirements
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.
Any other specific criteria
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.
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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.
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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.
6.1 Energy efficiency
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
6.2 Urban development
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.
They will contribute to achieving targets of the OPRG indicators to the extent as presented in Table 14
below.
Table 14. The OPRG indicators for urban transport
The OPRG result indicator
No. Indicator FI Target / total
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
The OPRG output indicator
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
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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.
They will contribute to achieving targets of the OPRG indicators to the extent as presented in Table 15
below.
Table 15. The OPRG indicators for urban development
The OPRG result indicator
No. Indicator FI Target / total
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
The OPRG output indicator
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.
They will contribute to achieving targets of the OPRG indicators to the extent as presented in Table 16
below.
Table 16. The OPRG indicators for sport and cultural infrastructure
The OPRG result indicator
No. Indicator FI Target / total OPRG
target Unit
1. share of modernized cultural/sport sites (increase) 4.63
of 6.33 %
The OPRG output indicator
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).
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6.3 Tourism & cultural heritage
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.
They will contribute to achieving targets of the OPRG indicators to the extent as presented in Table 17
below.
Table 17. The OPRG indicators for T&CH
The OPRG result indicator
No. Indicator FI Target / total
OPRG target Unit
1. internal tourism consumption (increase) 1,859* – 3,700**
of 3,700 EUR m
The OPRG output indicator
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.
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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.
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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).
7.1 Energy efficiency
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.
7.2 Urban development
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.
7.3 Tourism & cultural heritage
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.
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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
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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
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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.
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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).
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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.
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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.
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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
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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)
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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%
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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.
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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).
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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.
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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
The FIs contribution constitutes 18.39% 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).
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
The FIs contribution constitutes 73.07% 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).
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
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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
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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)
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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)
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Urban transport
Table 4. The OPRG indicators for urban transport
Assumptions Value Comments
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)
42.91 Leverage 1:1 of OPRG funds
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
7 Output and results indicators
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
Assumptions Value Comments
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)
67.1 Leverage 1:1 of OPRG funds
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
7 Output and results indicators
8 Share of population benefiting from improved urban environment (%)
10.1 target value of the OPRG indicator - 55.03*(6)
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9 Quantity of fine particles in cities (μg/m3)
7.6 target value of the OPRG indicator - 41.22*(6)
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.
Source: InfraLinx calculations on the basis of data from the MA and the OPRG
Sport and cultural infrastructure
Table 6. The OPRG indicators for sport and cultural infrastructure
Assumptions Value Comments
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)
120.79 Leverage 1:1 of OPRG funds
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
7 Output and results indicators
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)
Source: InfraLinx calculations on the basis of data from the MA and the OPRG
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Tourist & cultural heritage
Table 7. The OPRG indicators for T&CH
Assumptions Value Comments
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
100.76 Leverage 1:1 of OPRG funds
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
7 Output and results indicators
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%
Source: InfraLinx calculations on the basis of data from the MA and the OPRG
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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