State aid: Commission clears support for urban regeneration projects in Greece and Bulgaria

Brussels, 26-12-2012 — /europawire.eu/ — The European Commission has approved, under EU State aid rules, a Greek and a Bulgarian scheme aimed at supporting urban regeneration projects through the Joint European Support for Sustainable Investment in City Areas (JESSICA) initiative. The Commission found the schemes to be in line with EU state aid rules that allow supporting the development of certain economic areas, in particular because they address market failures affecting urban regeneration projects without unduly distorting competition in the EU Single Market.

The JESSICA holding fund Greece, with a budget of €258 million until 31 December 2015, is financed partly from EU structural funds and partly from national public funding. Five funds, selected in an open and transparent procedure, will provide loans and equity at sub-commercial terms to urban development projects.

The JESSICA holding fund Bulgaria, with a budget of €33 million until 31 December 2015, is financed partly from EU structural funds and partly by national public funding. Two funds, selected in an open and transparent procedure, will provide sub-commercial loans, guarantees and equity to urban development projects.

The Commission found the two schemes to be in line with Article 107(3)(c) of the Treaty on the functioning of the EU (TFEU), which allows state aid for the development of certain economic areas, provided that it does not adversely affect trade between Member States.

The aid is both necessary and proportionate, in line with the requirements of the so-called “Fair Rate of Return” methodology which determines the level of incentives required to attract private investors to participate in urban development projects. Moreover, each project must have a business plan to ensure the repayment of the public investment. Professional and independent fund managers will ensure prudent investment decisions and guarantee the financial sustainability of the funds on the basis of an approved investment strategy. Furthermore, private investors will finance at least 30% in Greece and 50% in Bulgaria of each project’s costs, thus creating a leverage effect.

Background

JESSICA is a financial instrument set up by the Commission in cooperation with the European Investment Bank (EIB). It is aimed at supporting, in cooperation with private investors, urban regeneration projects that would not have been implemented through market forces alone. It introduces an alternative and less distortive mechanism to the traditional allocation of EU Structural Funds through grants.

Under the schemes, urban development funds selected by the EIB, who acts as a holding fund, will grant repayable investments to projects aimed at improving the urban environment, in line with the requirements of the EU structural funds regulation. In particular, projects need to be carried out in areas that have established an integrated sustainable development plan. Projects can support activities like revitalising degraded areas, improving local infrastructure or creating renewable energy solutions.

The Commission’s assessment of the measures was based on the principles applied in its two previous decisions regarding JESSICA schemes, namely the UK Northwest Urban Investment Fund (see IP/11/876) and the Andalucia Jessica Holding Fund (see case SA.32147).

The non-confidential versions of the decisions will be made available under case numbers SA.34405 and SA.35040 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.