The European Investment Bank (EIB), in its capacity as Manager of the JESSICA Holding Fund Bulgaria, has concluded an agreement establishing an Urban Development Fund (UDF) to invest in urban projects in Sofia.
The UDF (Fund for Sustainable Urban Development of Sofia) is being established as a joint stock company by the Fund for Local Authorities and Governments (FLAG) to invest approximately EUR 12.5 million of JESSICA funds, combined with additional co-financing of an at least equal amount provided by FLAG. Investments will be financed over the next three and a half years.
EIB Vice-President Wilhelm Molterer commented: “In addition to lending operations, the EIB provides professional expertise under the JESSICA initiative, an innovative instrument focused on more efficient utilisation of EU Structural Funds, which aims to create revolving funds investing in sustainable urban development projects”.
The main objectives of the UDF are to support the implementation of EU cohesion policy within the context of urban regeneration in the city of Sofia, as well as to identify urban needs and provide funding for sustainable urban projects and/or public-private partnerships. The JESSICA investment portfolio in the city of Sofia may include projects for purposes such as the rehabilitation of deprived urban areas, basic infrastructure works, energy networks and energy efficiency in the context of a wider urban development plan.
The Ministry of Regional Development and Public Works (the Managing Authority) established a JESSICA Holding Fund (HF) within the EIB with the aim of deploying EU Structural Funds for investments focusing on the revitalisation of city areas. The relevant Funding Agreement was signed on 29 July 2010.
The Fund for Local Authorities and Governments was established in 1997 as a state-owned enterprise aimed at facilitating the implementation of local authorities’ investment projects eligible under and funded by EU Structural Funds. Its remit is to support Bulgarian municipalities and municipal companies in the process of preparing and implementing eligible projects for improving municipal infrastructure and creating more sustainable urban communities.
Background notes:
JESSICA (Joint European Support for Sustainable Investment in City Areas) is one of the Cohesion Policy Joint Initiatives that were developed by the European Commission to contribute towards making EU Cohesion Policy more efficient and sustainable. The JESSICA mechanism is based on cooperation between the Commission, the EIB and the Council of Europe Development Bank (CEB) and supports investments in sustainable urban development and regeneration.
This initiative, which is designed to increase the use of financial engineering instruments, enables Managing Authorities to use part of their European Structural Funds allocations to invest in revolving funds rather than providing one-off grant financing. By so doing, the Authorities can recycle financial resources in order to enhance and accelerate investment in urban areas. These investments, which may take the form of equity, loans, and/or guarantees, are delivered to projects via Urban Development Funds and, if required, Holding Funds.