JESSICA Joint European Support for Sustainable Investment in City Areas Horizontal Study European Investment Bank From evaluation to operation The Handbook on JESSICA Holding Funds Conference on JEREMIE and JESSICA Towards successful implementation Brussels, 30 November 2010 1
Content Introduction Structure of the Holding Fund Handbook Questions This presentation has been produced with the financial assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union. Sole responsibility for the views, interpretations or conclusions contained in this document lies with the authors. Neither the European Commission, the European Investment Bank nor Managing Authorities of Structural Funds Operational Programmes can be held responsible for the accuracy, completeness or use that may be made of the information contained herein. 2
Introduction Objectives • Explain the variety of features that Managing Authorities can implement • Provide guidelines that are compliant with EU Regulations • Guide the various parties involved through some of the main JESSICA implementation paths and decision making processes 3
Introduction An approach toward a successful implementation From practices to principles: building from the bottom-up. Up: Provide guidance on how to: · Conduct pre-appraisals and feasibility studies where necessary · Develop an investment strategy and make informed investment decisions · Set up and manage Holding Funds, with or without the EIB; · Exercise investment control and audit and · Perform other activities related to JESSICA Holding Fund and UDF operations Bottom: Expressed need by the Member States to better understand the regulatory and operational requirements for establishing and managing Holding Funds, as well as their integration within the well-known Structural Funds (SF) mechanisms. 4
Structure of the Holding Fund Handbook 5
Structure of the Holding Fund Handbook Rationale for a holding fund • Role and structure of a Holding Fund • Added value of a Holding Fund Prelimary steps to JESSICA implementation • Evaluation / feasibility studies • Formulation of the investment strategy • Integrated Urban Development Plans • State aid considerations • Selection of options to establish a HF • …. HOLDING FUND PROCESSES • Pre-investment process • The set-up phase • Formulation and signature of the funding agreement • HF governance rules and set-up of the Investment Committee • Investment decision-making • Step 1: Selection of the procurement procedure for the UDF • Step 2: Selection process of UDF(s) • Establishing a UDF shortlist • Launch of Call for Tenders • Awards attribution • Step 3: Risk management • Credit risks and related processes • Information requirements • Determination of acceptable counterparts • Delegation approach • Step 4: Authorisation and Signature 6
Structure of the Holding Fund Handbook Post Investment Process
Structure of the Holding Fund Handbook Added Value of the HF • Provides MAs with the necessary infrastructure and human capital to manage lending operations, equity investments and guarantee schemes in the highly regulated financial market of the European Union • Ensures the best fit between the investment of the HF resources in the UDF and the financial products offered by the UDF to the urban projects, with a view to stimulating co-financing by private operators • Constitutes a flexible tool that enables diversification of investments in several types of UDFs with different features and investment goals 8
Structure of the Holding Fund Handbook Holding Fund: Pros and Cons Holding Fund’s advantages: • Ensures independent and professional management of funds by performing a variety of functions and tasks (Treasury management, Risk management, Monitoring, Reporting) • Enables diversification of investments in several types of UDFs and more effective controls • Where plans and projects are at an early development stage, it invests the funds to generate interest income • It achieves significant economies of scale and acts as centralised manager for payments and a catalyst in the investment process Holding Fund’s drawbacks: Decreased added value when: • UDF-type structures are already active in the market and ready to be mobilised by the MA • Only one UDF with well-established objectives and structure is targeted • The MA already holds in-house expertise in urban planning, publicprivate partnerships, EU fund management and financial engineering instruments 9
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Contacts Fabio D’Aversa +352. 49 48 48 54 54 fabio. daversa@lu. pwc. com www. pwc. com 11
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