The Role of the JESSICA Holding Fund              in Bulgaria   Implementation of the JESSICA Initiative in Bulgaria      ...
What is JESSICA?    JESSICA: Joint European Support for Sustainable Investment in City Areas      MISSION: To assist Europ...
JESSICA implementation model                                                             European Commission        Level ...
UDFs as "impact funds" for urban transformationThe terms “impact funds” or “impact investors” refer to investors and inves...
Which types of UDFs? Urban regeneration funds                     Energy-focused funds  (mainly area-based)             ...
State of play of existing JESSICA mandatesEIB Holding Fund mandate                                       Implementation pr...
State of play of existing JESSICA mandates      62 Evaluation Studies (national, regional, sectoral)      18 Memoranda o...
Global challenges in urban transformation1. EU & globalization => “single market for cities” (1200 – 2000 functional urban...
The Central EU demographic scenario                                                                                       ...
Functional urban areas and metropolitan areasIntegrated urban investment strategyfor highly dense functional areas   Holis...
Ageing impacts on city infrastructure functionality and publicfinance Retirement Dependency Ratio          (65%+ / 15-64) ...
Raising “financial resources” for cities What drove growth in 1970-2010? What will happen to these (largely financial) dri...
Global challenges: Conclusions A macroeconomic conclusion for urban policy: • For 30 years, (urban) expansion took place n...
Implementation of the JESSICA Initiative             in Bulgaria
Current status of JESSICA in Bulgaria Completed pre-implementation phase Funding Agreement between the EIB and the Gover...
The role of the EIB at the current stage in Bulgaria Operating the JESSICA Holding Fund for Bulgaria on the basis  of Reg...
Flow of funds within JESSICA in Bulgaria                            Directorate General “Programming of Regional          ...
Call for EoI – Structural Elements (1/2)   2 Lots    Amount to be invested - EUR ca. 31.3 m - divided into two lots:     ...
Call for EoI – Structural Elements (2/2)    Annex 3 – Terms of Reference        Background of JESSICA and its operationa...
EoIs Evaluation Principles Exclusion criteria    Being in bankruptcy or analogous situation    Proof of professional mi...
Detailed Business Plan1.   Investment Policy2.   Financial forecasts and operational budget of the UDF3.   Portfolio of po...
Offers Evaluation Principles – Award Criteria                                                                      Maximum...
Call for EoI indicative timetableEIB                                                        UDF      Call for expressions ...
Next steps   For cities        Discuss the main aspects of the project with Managing Authority (interactive process…)   ...
Thank you for your attention              JESSICA and Investment Funds                European Investment Bank           1...
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jessica stara zagora

  1. 1. The Role of the JESSICA Holding Fund in Bulgaria Implementation of the JESSICA Initiative in Bulgaria JESSICA and Investment Funds European Investment Bank Stara Zagora, 7 April 2011 1
  2. 2. What is JESSICA? JESSICA: Joint European Support for Sustainable Investment in City Areas MISSION: To assist European cities in defining long-term, sustainable and viable patterns of development through investment activity financed with the utilization of “revolving” financial instruments. Initiative of the European Commission (DG REGIO) launched beginning of 2006, supported by EIB & CEB, to establish a common approach for financing urban development and strengthening the urban dimension in cohesion policy through the “transformation of grants” in repayable/recyclable assistance Applying “financial engineering” techniques to EU Structural Funds More efficient and effective utilisation of Structural Funds through tailor made “non-grant financial instruments” and mobilising additional financial resources Financial and managerial expert support of international financial institutions (EIB, CEB) 2
  3. 3. JESSICA implementation model European Commission Level EU National /or ERDF – DG Regio € regional Managing Authority Level Holding Fund (« HF ») HF Manager € € € Regional /Local National/regional € /Local Level Urban Development Funds € € € € Projects Level Sustainable Urban Development Plan 3
  4. 4. UDFs as "impact funds" for urban transformationThe terms “impact funds” or “impact investors” refer to investors and investment vehicles that have an interest, in addition to achieving remuneration to theirinvestment, in achieving measurable “impacts” (in our definition “sustainable ERR target”) on policy-defined, non-financial objectives, constituting a key dimension in the investment vehicle performance assessment. Urban Development Fund (UDF) as an urban impact fund:  a specific policy tool within the wider financial engineering concept in the programming period 2007-2013  to promote, by employing Structural Funds in close cooperation with DG-REGIO, the development of a system of financial engineering instruments (so-called Urban Development Funds) for urban development  policy-driven, geographically-focused and planning-led investment vehicle supporting the sustainable transformation processes of city areas  impact investing to be seen as a new asset class requiring specific investment skills, organisational structures, metrics and benchmarks. 4
  5. 5. Which types of UDFs? Urban regeneration funds  Energy-focused funds (mainly area-based) (regional or city-based)  “Place making” locations / incubators /  EE / RE and energy / emission audit creative class attractors /certification systems  Brownfield locations, mostly in inner  Climate action strategies (EU 20/20/20 city areas targets in urban areas)  Deprived city districts, urban sprawl  Regional upgrade of green technology and voids transmission systems City infrastructure transformation funds (for city systems)  Addressing infra / urban imbalances from changes in city hierarchy  Focusing on the provision of capital in less competitive areas  Focusing on transformation of strategic urban infrastructure  IT broadband, waste to energy, water, electric public transport, etc. 5
  6. 6. State of play of existing JESSICA mandatesEIB Holding Fund mandate Implementation progress Volume (EURManaging Authority HF FA 0 1 2 3 4 5 6 m)HF - Wielkopolska (PL) 67 II/09HF - Andalucía (ES) 86 II/09HF - Lithuania (LT) 227 II/09HF - Portugal (PT) 130 III/09 Key implementation stages:HF - WestPomerania (PL) 33 III/09HF - London (UK) 110 IV/09 Pre-negotiation Stage/ HF 0 Agreement to be signed in 2010HF - NorthWest England (UK) 110 IV/09 HF Agreement signed/ InvestmentHF - Sicily (IT) 148 IV/09 1 strategy/ Investment boardHF - Moravia Silesia (CZ) 20 I/10 Call(s) for Expression of Interest 2HF - Campania (IT) 100 I/10 in preparationHF - Scotland (UK) 55 II/10 Call(s) for Expression of Interest 3 launchedHF - Greece (GR) 258 III/10 Call(s) for Expression of InterestHF - Silesia (PL) 60 III/10 4 closedHF - Pomerania (PL) 57 III/10 5 UDF(s) selectedHF - Bulgaria (BG) 33 III/10 Operational agreements in place 6Total signed 2010 1,494 (HF/ UDF)HF - Energy Efficiency (ES) 142 II/11HF - Galicia (ES) 15 II/11HF - Sardenia (IT) 60 II/11HF - Masovia (PL) 40 II/11 Stage AchievedHF - Abruzzo (IT) 25 III/11 Legend Implementation of the stage imminentHF - Czech National Fund (CZ) 40 III/11 Signature expected in coming monthsHF - Hungary (HU) 50 III/11HF - Slovakia (SK) 20 III/11HF - North East (CZ) 20 IV/11Total expected 2011 412Total 2010 + 2011 1,906 6
  7. 7. State of play of existing JESSICA mandates 62 Evaluation Studies (national, regional, sectoral) 18 Memoranda of Understanding on cooperation in JESSICA implementation By the end of 2010, EUR 1.65 billion of Structural Funds has already been legally committed to 19 JESSICA HF / UDF vehicles in 11 Member States (and nearly 50 NUTs-2 regions):  15 Holding Fund agreements signed by EIB (EUR 1.49bn)  1 Holding Fund set up with a national financial institution (Estonia)  3 Urban Development Funds established without Holding Fund (Brandenburg/DE, East Midlands/UK and Wales/UK) 7 fund structures out of 19 have an energy component, committed to invest amounts of up to EUR 784m in energy efficiency and renewable energy infrastructure UDF selection and disbursements to final recipients take place in all JESSICA countries 7
  8. 8. Global challenges in urban transformation1. EU & globalization => “single market for cities” (1200 – 2000 functional urban areas compete for scarce resources: Human capital, Economic activity, Budgetary transfers, etc.)2. MS and regions face difficult challenges in ensuring the transformation of the urban systems due to both market and institutional factors3. New modes of interaction with the private sector to achieve public goals4. National budget discipline ( pressure on sovereign and municipal debt levels; limits on transfers from national to local level; lower expenditure capacity of cities for investment without taking on additional debt5. De-leveraging of banking activity (financial markets offer less co-financing for investment activity)6. Highly volatile real estate economic cycle (from overinvestment & over-aluation to under-investment and under valuation )7. Impact on viability of private investments (PPPs) in urban infrastructure and urban development8. Reduced collateral value of land and buildings in non-core areas9. Institutional investors reshuffling their sovereign and sub-sovereign portfolios10. End of baby-boomers’ era => from asset accumulation to management of existing property and infrastructure 8
  9. 9. The Central EU demographic scenario Births & Deaths in Bulgaria Livebirths in Germany and Central-Eastern Europe, 1970-2007 140,0001100000 120,000 1980 DE 100,0001000000 PL + Baltics 1989 80,000 CZ + SK + HU Births Deaths RO + BG 60,000 900000 40,000 2005 20,000 800000 0 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 700000 -21% Population in Bulgaria 9,000,000 600000 8,000,000 7,000,000 500000 -47% 6,000,000 5,000,000 4,000,000 400000 3,000,000 2,000,000 300000 -45% 1,000,000 0 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 200000 -36% According to Eurostat, Bulgaria is expected to illustrate the sharpest 70 73 76 79 82 85 88 91 94 97 00 03 06 decline among EU Member States between 2008-2060: 19 19 19 19 19 19 19 19 19 19 20 20 20 2008-2035: -14.5% 2008-2060: -28.2% 9
  10. 10. Functional urban areas and metropolitan areasIntegrated urban investment strategyfor highly dense functional areas Holistic Approach Urban wealth (Natural, Fixed, Human, Economic) Jobs & economic activity Financials / Fiscal Population density in Bulgaria Sustainability Capital & enterprise transfers Human capital ageing / migration Asset value creation processes … focus on the functional urban area (Urban Labour Market Areas, ULMAs) and the role of European Metropolitan areas over the next 20 years Development of Sofia area, Bulgaria 10
  11. 11. Ageing impacts on city infrastructure functionality and publicfinance Retirement Dependency Ratio (65%+ / 15-64) 11 11
  12. 12. Raising “financial resources” for cities What drove growth in 1970-2010? What will happen to these (largely financial) drivers in 2010-2030? City Operating cash flows, Geography matters: Technological progress, Banking leverage Foreign Direct Investment  Transform your city areas into growth Efficiency/Reprocessing poles2030 (?)  Focus on latent capital 2010  Keep your cities “slow”/ “low cost” (maintenance, obsolescence)  Think new ways to finance inner city areas, housing stock refurbishmentPublic debt 1970 Pension rights  Attraction from external sources is crucial (investment, capital…)  For all this, combine various sources 2010 of leverage 2030 (?) – Regions: SF Increasing value of – Cities: land & buildings land rent and Inflation – Banks: financial resources buildings – Private: additional resources Urban sprawl 12
  13. 13. Global challenges: Conclusions A macroeconomic conclusion for urban policy: • For 30 years, (urban) expansion took place naturally, because of market forces and demographic (baby boom) factors • Cities initially built on revenue generation, later expanded via debt/consumption • In the next 30 years (ageing process), the process of urban transformation must be guided in a completely different way as compared to the past • What will additional debt be used for? Not for debt-addict structures • The core element is to have efficient, productive, attractive and livable cities characterized by low maintenance/management costs and low “break-even point” on fixed assets • Competitive cities in a shrinking/restructuring environment • Can be achieved by rationalization, reprocessing, restructuring and optimization at the urban level with a focus on sustainability Cities need clear objectives, strategic planning, a roadmap, governance, technical data and systems to tackle market distortions/ long-term risks - managed through strategic impact investors. 13
  14. 14. Implementation of the JESSICA Initiative in Bulgaria
  15. 15. Current status of JESSICA in Bulgaria Completed pre-implementation phase Funding Agreement between the EIB and the Government of the Republic of Bulgaria signed on 29 July 2010 JESSICA Holding Fund for Bulgaria organised as a separate block of finance within EIB established UDFs selection procedure launched (call for the EoI) 15
  16. 16. The role of the EIB at the current stage in Bulgaria Operating the JESSICA Holding Fund for Bulgaria on the basis of Regulations specifically providing for EIB involvement and in line with the Funding Agreement:  Launching and managing of one or more calls for EoI to identify and select one or more UDFs for submission for approval to the Investment Board  Negotiating of the Operational Agreements with UDFs  Monitoring and controlling of the UDFs operations in accordance with the terms and conditions of the applicable Operational Agreement 16
  17. 17. Flow of funds within JESSICA in Bulgaria Directorate General “Programming of Regional Development” in the Ministry of Regional Development and Public Works Contribution from OP (2010) JESSICA HF for Bulgaria (managed by the EIB) Investment into UDF (2011) EUR ca. 31.3 m Urban Development Funds (UDFs) selected through the Call for EoI Loans, equity or guarantees Resources repaid from for projects projects to UDF (2011-2015) (2015  ) Urban projects conform to the criteria of the Investment Strategy and are compliant with eligibility and state aid rules 17
  18. 18. Call for EoI – Structural Elements (1/2) 2 Lots Amount to be invested - EUR ca. 31.3 m - divided into two lots:  Lot 1: EUR ca.12.5 m earmarked for investments in Urban Projects in Sofia  Lot 2: EUR 18.8 m earmarked for investments in Urban Projects in the six major cities of Bulgaria (Plovdiv, Stara Zagora, Burgas, Varna, Ruse and Pleven) Structure of the Call for EoI  Annex 1 – General Information about the Applicant  Annex 2 – Declarations to be made by the Applicant  Entry in trade register, representative, representations on not being subject to insolvency proceedings, conflict of interest as well as on compliance with public law obligations (tax, social security)  Statement of relevant experience (execution of different types of Urban Projects and different roles held by the applicant in the project)  Supporting documents 18
  19. 19. Call for EoI – Structural Elements (2/2)  Annex 3 – Terms of Reference  Background of JESSICA and its operational characteristics  Amount allocated to the Call for EoI  Selection procedure and criteria (exclusion and selection criteria)  Business Plan template  Characteristics of potential Urban Projects  Financial model  Conditions for the financial products  Management fee  Award criteria (Appendix A)  Selected Terms of the Operational Agreement (Appendix B)  Instructions on Financial Forecasts and Operational Budget of the UDFs, incl. financial statements template (Appendix C)  Instruction on Economic Analysis of Urban Projects (Appendix D)  Definitions and Abbreviations (Appendix E) 19
  20. 20. EoIs Evaluation Principles Exclusion criteria  Being in bankruptcy or analogous situation  Proof of professional misconduct  Non-fulfilment of social security and tax payment obligations  Criminal conviction  Proof of misrepresentation Selection criteria  Proper submission of the relevant documentation and supporting material, according to the specifications of the Call for EoI  Possession of adequate experience  Completion of declarations (Annex 2) to the satisfaction of EIB  Minimum co-financing 20
  21. 21. Detailed Business Plan1. Investment Policy2. Financial forecasts and operational budget of the UDF3. Portfolio of potential Urban Projects4. Methodology for the identification and evaluation of Urban Projects5. The policy of the UDF concerning exit from Urban Projects6. Legal and ownership structure of the UDF7. The by-laws of the UDF8. Governance structure and key experts9. Annual management fee10. Interest rate on Available Funds11. Co-financing – leverage12. Winding-up provisions of the UDF 21
  22. 22. Offers Evaluation Principles – Award Criteria Maximum Criterion scoringInvestment Policy 0-15Financial forecasts and operational budget of the UDF 0-10Projects portfolio 0-10Methodology for the identification and evaluation of urban projects 0-10Governance structure 0-20Key experts 0-5Annual management fee 0-10Interest rate 0-5Co-financing leverage 0-15Total Score 0-100 22
  23. 23. Call for EoI indicative timetableEIB UDF Call for expressions of interest candidates April 2011 Evaluation of the offers: Offers -exclusion criteria (incl. business plan) -selection criteria May 2011 -award criteria May / June 2011 Presentation of the successful bidders to the IB Signature of the Operational UDF selection – June 2011 Agreement July 2011 23
  24. 24. Next steps For cities  Discuss the main aspects of the project with Managing Authority (interactive process…)  Prepare / elaborate the project (in cooperation with private investors) in order to ensure recyclability  Ensure that these projects constitute a part of an Integrated Plan for Sustainable Urban Development. According to the Funding Agreement, each JESSICA project shall be in compliance with the relevant Urban Master plans/detailed spatial plans and the Municipal Development Plans, which are considered as Integrated Urban Development Plans according to Article 43, 1(b) of Regulation 1828/2006  Initiate immediately project preparation procedures For candidate UDFs  Familiarize themselves with the Operational Programme  Create a project portfolio which will constitute a basic part of the business plan which will be submitted in the context of the tendering procedure  Discuss with municipalities/cities their Integrated Plans for Sustainable Urban Development and the potential to incorporate revenue generating projects For project promoters  Familiarize themselves with the requirements of the OP  Prepare properly the revenue generating projects - Feasibility study / project business plan  Discuss with municipalities/cities the potential to incorporate their project into Integrated Plans for Sustainable Urban Development  Initiate immediately project preparation procedures 24
  25. 25. Thank you for your attention JESSICA and Investment Funds European Investment Bank 100 Bvd Konrad Adenauer, L-2950 Luxembourg www.eib.org/jessicaGianni Carbonaro, Economic Advisor, g.carbonaro@eib.orgElias Papageorgiou, Holding Fund Officer, papage@eib.org 25
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