The Fund of Funds (FoF) and the FLAG Fund signed an Operational Agreement for the implementation of a financial instrument under Priority 1 "Water" of the Environment Program (EP) 2021-2027. The financial instrument is structured as a risk-sharing loan financing. Its main objective is to attract additional resources to European funding and increase opportunities to support the water and sanitation sector by providing more favorable conditions for final beneficiaries in the implementation of eligible investments.
The executive directors of the Fund of Funds and the FLAG Fund, experts from the teams of both institutions, and representatives of the water and sanitation holding company attended the signing.
The funds amounting to BGN 37.37 million (EUR 19.10 million) from The Environment Programme 2021–2027, co-financed by the European Union through the Cohesion Fund and the European Regional Development Fund, will be supplemented by a minimum of 20% from FLAG for each financing. The total available resources are expected to reach nearly BGN 50 million (EUR 25.6 million).
Support will be directed primarily towards financing the mandatory own contribution to approved projects for which a grant is provided under The Environment Programme 2021–2027. Priority should be given to projects targeting agglomerations with more than 10,000 population equivalents in the country's regions that coincide with the separate territories of the consolidated water and sanitation operators under the Water Act, including:
- Projects of the six newly consolidated water and sanitation operators (WSOs) - Veliko Tarnovo, Gabrovo, Pleven, Sofia Province, Targovishte, Haskovo, and Dobrich, which have been approved for grant under the Environment Programme, and
- Projects of consolidated WSOs that are phased between the 2014-2020 and 2021-2027 programming periods (including Plovdiv, Varna, Burgas, Sliven, Pernik) and have been approved for grant under the Environment Programme, and
- Other eligible investments under the program of the above-mentioned or other consolidated water supply and sewerage systems.
Under the Financing Agreement of 16 December 2024, the Managing Authority of the 2021-2027 OP assigned the management of the Water IF to the Fund of Funds, taking into account the need to overcome the identified funding gap for key water infrastructure projects. The structured interinstitutional cooperation between the FLAG Fund and the Fund of Funds is a response to the need to provide additional funding for the implementation of infrastructure interventions defined as key for Bulgaria in the Water sector of the Environment Program 2021-2027.
FLAG is a proven partner in financing projects in the water sector, having provided both bridge financing and loans for own contribution for the implementation of projects under OP Environment 2007-2013 and OP Environment 2014-2020. The fund, created as an instrument of state policy for regional development, is 100% owned by the state, represented by the Minister of Regional Development and Public Works. Since the start of its operations in 2009 until the end of 2024, FLAG has granted over 1,500 loans for nearly BGN 2.3 billion. The fund also has the necessary experience and expertise to manage financial instruments, having participated in the management of urban development funds under OPRG 2007-2013 and OPRG 2014-2020 for two programming periods.
The FLAG Fund is ready to start implementing the instrument in the short term, with the first financing agreements expected to be signed by the end of 2025. The deadline for the absorption of funds is by the end of the investment period – December 31, 2029.
