News and Analysis
The Fund of Funds provides EUR 115 million in Financing for Upgrading the Water Sector in Bulgaria
Today, 4 October 2018, the Fund of Funds (FoF) signed an operational agreement for cooperation in implementing the Financial Instrument for Upgrading the Water Sector with the European Bank for Reconstruction and Development (EBRD). The instrument is financed under Operational Programme Environment 2014-2020 (OPE) and is co-financed by the European Union in the framework of the cohesion policy, and from the national budget. The Fund of Funds provides public resources in the amount of EUR 115 million and mobilises additional resources from the EBRD in an amount that, as a minimum, matches that amount. Thus the amount to be made available to final recipients will reach EUR 230 million.
The financial instrument is designed to support investment in the water and wastewater sector in Bulgaria. The Fund of Funds’ intermediary of choice is the EBRD because it is an international financial institution with extensive experience in financing infrastructure projects, including in the Water sector in the region.
On the occasion of the signing, Corina Crețu, EU Commissioner for Regional Policy, said, ‘This agreement comes to show that financial instruments leverage the benefits from investments in the EU cohesion policy and in the area of public services. Thanks to this agreement, 220 000 Bulgarian citizens will have access to better water supply and 1.5 million to improved waste water treatment.’
Support will be made available by way of long-term lending to Water and Wastewater Operators (WWOs), as well as loan guarantees for commercial banks, to finance eligible WWO projects. The maximum loan term is 15 years, with a grace period of up to 3 years.
The financial instrument (FI) aims to top up the grant support provided by OPE as financing for eligible projects run by the Water and Wastewater Operators. Financing through the FI is expected to cover up to 20% of total project costs.
Currently, companies in the sector are being consolidated in a major effort to improve the performance of Water and Wastewater Operators, and it is expected to bring down their number to one operator per administrative district. This FI is targeted at the companies that have already been consolidated.
In addition, there will be funding available for technical assistance and streamlining WWO operations, to improve their efficiency and financial health. Another factor ensuring the successful implementation of the instrument is the impressive experience of the EBRD, which the FoF selected as the financial intermediary, in structuring and financing projects in the sector.
The Financial Instrument for Upgrading the Water Sector will contribute to improving the environment as well. Future investments take account of the plans to cut water losses, in consideration of investment plans for the reconstruction and upgrade of old infrastructure. Implementing the financed projects will contribute to achieving compliance with EU environmental law .
At the signing Mrs. Svetoslava Georgieva, Executive Director and member of the Management Board of the Fund of Funds, said, ‘This is an important milestone in leveraging public resources with additional private financing to improve infrastructure in the water sector and the quality of life in Bulgaria’.
Susan Goeransson, Director for Municipal and Environmental Infrastructure, EBRD, added, ‘This cooperation is a great example of how EU member states can use resources from the European Structural and Investment Funds in a smart and efficient way. By managing EU funds and mobilising own resources, the EBRD will support investments that bring long-term, sustainable benefits to the water sector and the people of Bulgaria’.
With today’s signing of the operational agreement concerning the Financial instrument for Upgrading the Water Sector and by awarding management of the Urban Development Fund in September, the Fund of Funds has successfully made available for investing half of the funds it manages in the current programming period.