Transcript of Assessment of potential target sectors and project types for the … · 2018. 8. 8. · CSF Common...
FINAL Report energy urban_EIB 06.03.2015 FINALand project types for
the use and the
operation of EU Financial Instruments
for urban development in Romania in
the 2014-2020 programming period
March 2015
Final Report
Investing in your future! Project selected within the Regional
Operational Programme and co-financed by the European Union through
ERDF
2
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Development and Public Administration of Romania.
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Version v.02
Deloitte Consultanta SRL (Romania)
Deloitte Tax & Consulting (Luxembourg)
Notes
3
EXECUTIVE SUMMARY
...............................................................................................................................................
8
1. INTRODUCTION
....................................................................................................................................................
10
2. GENERAL CONSIDERATIONS ON THE USE OF FINANCIAL INSTRUMENTS IN
ROMANIA .......................... 13
2.1. RATIONALE FOR THE USE OF FINANCIAL INSTRUMENTS
..........................................................................................
13
2.2. GENERAL OVERVIEW OF THE PREVIOUS PROGRAMMING PERIOD
2007-2013............................................................
15
2.3. CONSISTENCY OF REGIONAL OPERATIONAL PROGRAMME 2014-2020 WITH
PRIORITY EU INVESTMENT AREAS AND
OVERARCHING DOCUMENTS
.........................................................................................................................................
18
2.4. ANALYSIS OF INVESTMENT PRIORITY AREAS SELECTED FOR URBAN
DEVELOPMENT .................................................
22
2.5. FUNDING ENVIRONMENT FOR THE USE OF FIS IN URBAN SECTOR IN
ROMANIA
.............................................................
38
3. ANALYSIS OF MARKET FAILURES, SUB-OPTIMAL INVESTMENT SITUATIONS
AND INVESTMENT
NEEDS
...................................................................................................................................................................
40
3.1. MARKET FAILURES AND SUB-OPTIMAL INVESTMENT SITUATIONS IN THE
SECTORS OF INTEREST .................................. 40
3.1.1. Energy Efficiency
......................................................................................................................................
41
3.1.2. Urban Transport
.......................................................................................................................................
49
3.1.3. Urban Renewal
.........................................................................................................................................
57
3.2.2. International financial institutions and national schemes
..........................................................................
67
3.2.3. Summary of the supply side analysis
.......................................................................................................
73
3.3. DEMAND SIDE ANALYSIS
.....................................................................................................................................
73
3.3.1. Energy Efficiency in Residential Sector
....................................................................................................
74
3.3.2. Energy Efficiency in Public Buildings
........................................................................................................
77
3.3.1. Energy Efficiency in Public Lighting
..........................................................................................................
84
3.3.2. Urban Transport
.......................................................................................................................................
88
3.3.3. Urban Renewal
.........................................................................................................................................
93
3.3.4. Balneal Tourism
.......................................................................................................................................
97
3.4. GAP ASSESSMENT
..........................................................................................................................................
104
3.4.4. Urban Transport
.....................................................................................................................................
106
3.5. CONCLUSIONS
................................................................................................................................................
109
4. ASSESSMENT OF THE VALUE ADDED OF THE FINANCIAL INSTRUMENT
................................................. 113
4.1. HORIZONTAL VALUE ADDED ELEMENTS OF FIS
....................................................................................................
114
4.2. VALUE ADDED IN ENERGY EFFICIENCY
..............................................................................................................
117
4.2.1. Energy Efficiency in public buildings
......................................................................................................
117
4.2.2. Energy Efficiency in residential
buildings................................................................................................
125
4.3. VALUE ADDED IN PUBLIC URBAN TRANSPORT
....................................................................................................
138
4.4. VALUE ADDED IN URBAN RENEWAL
...................................................................................................................
139
4.5. VALUE ADDED IN BALNEAL TOURISM
.................................................................................................................
140
4.6. CONSISTENCY WITH OTHER FORMS OF PUBLIC INTERVENTION
..............................................................................
140
4.7. STATE AID IMPLICATIONS
..................................................................................................................................
141
5. ADDITIONAL PUBLIC AND PRIVATE RESOURCES TO BE POTENTIALLY RAISED
BY THE FINANCIAL
INSTRUMENT
......................................................................................................................................................
145
5.2. ADDITIONAL RESOURCES IN ENERGY EFFICIENCY SECTOR
...................................................................................
148
5.3. ESTIMATING THE LEVERAGE OF THE FINANCIAL INSTRUMENT
................................................................................
151
5.3.1. Leverage for energy efficiency in public buildings
..................................................................................
151
5.3.2. Leverage for energy efficiency in residential buildings
...........................................................................
152
5.3.3. Leverage for energy efficiency in public lighting
.....................................................................................
153
5.4. ASSESSMENT OF THE NEED FOR PREFERENTIAL REMUNERATION
..........................................................................
155
5.4.1. Banks and financial institutions
..............................................................................................................
155
5.4.2. ESCO companies
...................................................................................................................................
155
5.4.3. Market testing
.........................................................................................................................................
156
6. LESSONS LEARNT
.............................................................................................................................................
158
6.1. LESSONS LEARNT FROM PREVIOUS IMPLEMENTATION OF FINANCIAL
INSTRUMENTS AND OTHER SCHEMES IN
ROMANIA
.................................................................................................................................................................
158
6.1.1. Transversal lessons learnt regarding financial instruments
in Romania .................................................
158
6.1.2. Lessons learnt from the JESSICA evaluation study for Brasov
- Romania............................................. 159
6.1.3. Lessons learnt from the JEREMIE experience in Romania
....................................................................
163
6.1.4. Lessons learnt from other financing programmes in Romania in
the focus areas .................................. 164
6.2. LESSONS LEARNT FROM IMPLEMENTATION OF JESSICA FUNDS IN THE
SECTORS OF INTEREST ............................... 167
6.2.1. Transversal lessons learnt regarding JESSICA financial
instruments ....................................................
168
6.2.2. Lessons learnt for Energy Efficiency sector
............................................................................................
172
5
6.3. CONCLUSIONS
................................................................................................................................................
180
7.1.1. Energy Efficiency in residential sector
....................................................................................................
184
7.1.2. Energy Efficiency in public
buildings........................................................................................................
190
7.1.3. Energy Efficiency in public lighting
..........................................................................................................
195
7.1.4. Common aspects to consider in the implementation of all
three energy efficiency FIs ........................... 198
7.2. MULTIPLIER RATIO
...........................................................................................................................................
199
7.3.1. Implementation vehicle
...........................................................................................................................
200
7.3.2. Implementation structure
........................................................................................................................
202
8. SPECIFICATION OF EXPECTED RESULTS CONSISTENT WITH THE REGIONAL
OPERATIONAL
PROGRAMME
.....................................................................................................................................................
205
8.1. ESTABLISHING AND QUANTIFYING THE EXPECTED RESULTS OF THE
FINANCIAL INSTRUMENT .....................................
205
8.2. MONITORING AND REPORTING
..........................................................................................................................
209
8.2.1. Operational Reporting
............................................................................................................................
209
8.2.2. Financial Reporting
................................................................................................................................
210
8.2.3. Good governance practices to be implemented by the FI
......................................................................
211
9. CONCLUSIONS AND NEXT STEPS
...................................................................................................................
212
9.1. OVERALL CONCLUSIONS
..................................................................................................................................
212
9.3. NEXT
STEPS...................................................................................................................................................
217
9.3.1. Energy Efficiency
....................................................................................................................................
217
9.3.2. Urban Transport
.....................................................................................................................................
218
9.3.3. Urban Renewal
.......................................................................................................................................
219
9.3.4. Balneal Tourism
.....................................................................................................................................
219
9.4. PROVISIONS ALLOWING FOR THE EX-ANTE ASSESSMENT TO BE REVIEWED
AND UPDATED ........................................ 220
BIBLIOGRAPHY
........................................................................................................................................................
222
Intercommunity Development Association eligible for urban
development projects
CPR Regulation (EU) No 1303/2013 of the European Parliament and of
the
Council of 17 December 2013 laying down common provisions on
the
European Regional Development Fund, the European Social Fund,
the
Cohesion Fund, the European Agricultural Fund for Rural
Development
and the European Maritime and Fisheries Fund and laying down
general
provisions on the European Regional Development Fund, the
European
Social Fund, the Cohesion Fund and the European Maritime and
Fisheries
Fund and repealing Council Regulation (EC) No 1083/2006
(Common
Provisions Regulation)
EC European Commission
EE Energy Efficiency
ERDF European Regional Development Fund
ERDF Regulation Regulation (EU) No 1301/2013 of the European
Parliament and of the
Council of 17 December 2013 on the European Regional
Development
Fund and on specific provisions concerning the Investment for
growth
and jobs goal and repealing Regulation (EC) No 1080/2006
ESCO Energy Service Company
ESIF or ESI Funds European Structural and Investment Funds, namely
the European
Regional Development Fund, the European Social Fund, the
Cohesion
Fund, the European Agricultural Fund for Rural Development and
the
European Maritime and Fisheries Fund
EPC Energy Performance Contract
FoF Fund of Funds
JASPERS Joint Assistance for Supporting Projects in the European
Regions
Programme
JESSICA Joint European Support of Sustainable Investments in the
Urban Areas
Programme
OP Operational Programme
Executive summary
The following study examines 4 main sectors (energy efficiency,
urban transport, urban renewal
and balneal tourism) for potential deployment of a financial
instrument (“FI”) dedicated to
optimising the use of ESIF funding in Romania. By increasing the
use of FIs, ESIF financing moves
away from traditional grants and towards funding of greater
longevity and impact.
The study was written in line with the ex-ante assessment
methodology developed on behalf of
the European investment Bank (“EIB”) and approved by the European
Commission (“EC”)1 and
involved a synthesis of desk research, on-site visits and
face-to-face interviews. The rationale of
the study was to examine the overall strategy for ESIF funding in
Romania, and then
progressively narrow down to the most viable sectors for deployment
of an FI.
The most important conclusion that can be drawn from this study is
that there is nothing
inherently unsuitable regarding the appropriateness of using FIs to
optimise ESI Funds in the
Romanian market. However, for an FI to be sustainable, it must be
able to secure return-on-
investment. At this point in time, only the energy efficiency
sector is well positioned to
confidently support the launch of an FI. This study proposes a
guarantee fund as the appropriate
FI, as it can catalyse private sector investment, stimulate the
ESCO market and contribute to the
reduction of CO2 emissions in line with national and EU priorities
and alleviate likely future energy
price rises.
Such an FI has many advantages, including a relatively good data
environment, prior knowledge
in the market on how to administer and execute such an FI, a
favourable policy framework,
strong and favourable macroeconomic trends and a past willingness
by beneficiaries to engage
with energy efficiency improvements (including public, private and
commercial stakeholders).
The successful delivery of such an FI would additionally contribute
strongly to other FIs in terms
of understanding the relevant support mechanisms, governance,
execution etc.
However, although well positioned, it is the opinion of the study
that such an FI will also need
strong support to successfully roll-out the FI to interested
stakeholders. Dedicated
communications and technical support will be needed to underpin the
FI and gain stakeholder
buy-in. ESCOs, municipalities, banks and private citizens will all
need support to understand the
benefits and the processes involved when seeking support from the
FI.
1 Ex-ante assessment methodology for financial instruments in the
2014-2020 programming period, April 2014.
9
While the study does not propose FIs for the other sectors at this
point in time, the study
additionally critiques the observed issues in the other sectors and
attempts to put forward
recommendations which can also position these other areas for
future potential FIs. In some
cases, the major barriers are not lack of finance, but rather
incomplete frameworks or a lack of
technical knowledge. Such barriers can be overcome with commitment
and dedicated resources.
There are many examples of intermediate steps that can be taken to
develop knowledge and
capacity regarding FIs and Romania should make the fullest use of
these. These include:
• In-depth studies or projects aimed at quantification of potential
markets. It is noted in this
study that a number of these are ongoing.
• A thorough investigation on the potential legal vehicles which
could underpin public-private
partnership investments is required. Stakeholders to this study
(particularly in the areas of
urban development) cited that the lack of a mechanism to allow the
use of PPPs restricted
their ability to engage with this type of project finance. It may
be that there is an existing
mechanism which will allow this to occur, in which case national
legal guidance and/or
clarifications should be issued to resolve this point.
• Concerted capacity building is required within municipalities to
assist them to look on their
various project pipelines as potentially revenue generating. A
common theme in this study
was a lack of information and granularity in terms of potential
projects which could
potentially be packaged or exploited as revenue generating (and
then in turn, suitable for an
FI to develop and support). Very little data was received from
municipalities on projects, and
more granular data per project was not available.
• A national approach which addresses the specific needs of
different stakeholders is required.
There was wide difference in the interest levels of various
stakeholders with respect to the
use of financial instruments and the financing of potentially
revenue generating projects.
This suggests wide variances in understanding and capacity, and
this should be addressed via
a national strategy in order to raise awareness, but also to assist
stakeholders to be able to
pool projects nationally.
• Test cases in all potential sectors should be prioritised with a
view to building practical skills
as well as showcasing what is potentially possible. Such projects
do not have to be backed
by FIs, but should at least be in line with the priorities of such
FIs in the future.
In line with these, it is recommended that the Romanian authorities
invest more into their overall
knowledge and ability in relation to financial instruments if they
are to gain wider use. However,
the benefits of FIs are such that, once deployed in the correct
conditions, the recurring revenue
should more than offset any preliminary investments made. Once
technical capacity has been
established in relation to the use of FIs, it becomes an effective
national asset which has broad
potential advantages and can be used to accentuate the value and
impact of ESIF funding overall.
10
1. Introduction
The key objective of the present study is to provide analysis and
guidance to the Ministry of
Regional Development and Public Administration of Romania
(“MRDPA”), acting as the
Managing Authority (“MA”) of the Regional Operational Programme
(“ROP”), to support the use
of Financial Instruments for urban development in the 2014-2020
programming period.
Financial Instruments that support urban development projects have
not been implemented in
Romania in the 2007-2013 programming period despite interest in the
JESSICA initiative at the
level of the Managing Authorities and at the level of local
administration2. This study is therefore
aimed at identifying ways how to address implementation gaps for
such FIs and thus to assist the
MA in defining priorities where public resources could be used
through FIs in accordance with
programme objectives and priority axes.
In line with Article 37.2 of the Common Provision Regulation
(“CPR”)3, this study covers the
following elements:
• In Section 3 – An analysis of market failures, sub-optimal
investment situations, and
investment needs for Thematic Objectives (“TOs”) and Investment
Priorities (“IPs”) of
interest of this study with a view to contribute to the achievement
of specific objectives set
out under a priority and to be supported through FIs;
• In Section 4 – An assessment of the value added of the FIs
considered to be supported by
the European Structural and Investment Funds (“ESI Funds”),
consistency with other forms
of public intervention addressing the same market and possible
State aid implications;
• In Section 5 – An estimate of additional public and private
resources that could be
potentially raised by the FI down to the level of the final
beneficiary (expected leverage
effect), including as appropriate an assessment of the need for,
and level of, preferential
remuneration to attract counterpart resources from private
investors;
• In Section 6 – An assessment of lessons learnt from similar
instruments and studies carried
out in Romania and other Member State in the past, and how these
lessons should be
applied going forward;
2 See JESSICA Evaluation Study for the Brasov Region – Final
Report, December 2010. 3 Regulation (EU) No 1303/2013 of the
European Parliament and of the of 17 December 2013 laying down
common provisions
on the European Regional Development Fund, the European Social
Fund, the Cohesion Fund, the European Agricultural Fund
for Rural Development and the European Maritime and Fisheries Fund
and laying down general provisions on the European
Regional Development Fund, the European Social Fund, the Cohesion
Fund and the European Maritime and Fisheries Fund
and repealing Council Regulation (EC) No 1083/2006 (OJ L 347,
20.12.2013).
11
• In Section 7 – The proposed investment strategy, including an
examination of options for
implementation arrangements within the meaning of Article 38 of the
CPR, financial
products to be offered, final recipients targeted and the envisaged
combination with grant
support as appropriate;
• In Section 8 – A specification of the expected results and how
the envisaged FIs are
expected to contribute to the achievement of the specific
objectives set out under the
relevant ROP priorities;
• In Section 9 – Provisions allowing for the ex-ante assessment to
be reviewed and updated
when it is considered that the results of the ex-ante assessment no
longer accurately
represent the market conditions existing at the time of FIs
implementation.
The approach of this study followed closely the “Ex-ante assessment
methodology for financial
instruments in the 2014-2020 programming period” commissioned by
the EIB on behalf of the EC
services and published on the EC website4.
The following operational tools were used in order to gather
relevant information for the study:
• A review of existing documentation for the sectors of interest,
i.e. energy efficiency in
public buildings, energy efficiency in housing, energy efficiency
in public lighting, urban
transport, urban renewal and balneal infrastructure;
• Interviews with the representatives of the ROP Managing Authority
to establish the
stakeholders for consultation phase and collect relevant
information;
• Consultations with relevant stakeholders covering both the
demand-side and the supply-
side through personalised interviews and/or surveys.
The findings of the above data collection were then synthesized in
the present study.
The study methodology follows a progressive filtering approach that
gradually moves from the
target areas of the Regional Operational Programme to the choice
and analysis of specific sectors
which may be able to support an FI. It then choses the key areas
and performs a deep-dive on
the suitability and potential FI approach. Finally it defines the
FI and the relevant set-up and
governance arrangements.
Filtering process
envisaged investment areas.
Sectors which can be developed for FIs focussed on revolving funds
are
identified
Analysis of Market
Failures and Investment
needs
The study examines the market failures and sub-optimal investment
situations and
investment needs.
Of the sectors identified, which are in need of public
intervention?
Of these, can the public intervention create a sustainable
financial instrument?
These sectors are taken forward as areas for a potential FI
Value Added The ability of the FI to improve the sector is
considered.
The quantitative value addition is considered
The qualitative value addition is considered
Additional Resources The ability of the FI to unlock additional
public and private sector resources is examined.
Additional public sector funds are evaluated
Additional private sector funds are evaluated
Lessons Learned The FI concept is tested against previous similar
FIs, as well as similar market conditions.
The experience of similar FIs are examined
The market reaction to other similar interventions is
examined
Specific proposals on the new FI development are considered
for
incorporation to the new FI design
Investment Approach The FI is described in more detail,
specifically:
Design
Operation
Deployment
Expected Results The monitoring and evaluation of the FI is
described, specifically:
Outputs
Impacts
Key performance indicators
Conclusion The report gives its conclusions on the potential for FI
deployment.
How the envisaged FI(s) can impact on the achievement of policy
objectives?
What steps should be taken to prepare other areas for eventual
FI
deployment?
13
2. General considerations on the use of Financial Instruments
in
Romania
As a first step to assess the environment for FIs in Romania, this
section briefly presents a
rationale for the use of these instruments in achievement of the
Cohesion Policy objectives. An
overview of the previous programming period 2007-2013 and guidance
and changes for the next
financial perspective 2014-2020 are then outlined. Finally, the
consistency of the ROP 2014-2020
with priority EU investment areas is examined by describing several
priority axes that may be
potentially used for developing FIs with reference to investment
needs, eligible beneficiaries and
financing activities, and types of projects that are to be financed
by the respective priority axis
and investment priority.
2.1. Rationale for the use of Financial Instruments
The European Commission, based on the outcomes of implementing FIs
in the programming
period 2007–2013, intends to promote the expansion of, and widen
the scope to use, FIs in the
2014–2020 programming period, as a means to better deploy Common
Strategic Framework
policies and to help to achieve the Europe 2020 objectives. From
this perspective, the use of FIs is
seen as a valuable complement to traditional grant-only
financing.
The Common Provision Regulation provides a legal framework to allow
the implementation of
financial instruments supported by all the European Structural and
Investment Funds. The legal
framework also indicates the forms that the financial instruments
may have: equity or quasi-
equity investments, loans or guarantees, or other risk sharing
instruments5.
The main reasons reported6 for establishing FIs are their revolving
nature and the ability to
attract additional capital from financial institutions and other
providers (i.e. leverage effect). FIs
are considered to have been particularly valuable during the recent
financial crisis as mainstream
banks have ceased lending to both SMEs and urban projects, and the
established FIs have
plugged a financing gap, thereby supporting the proposition that
FIs are well placed to address
market failure.
5 Article 2(p) of Regulation (EU, EURATOM) No 966/2012 of the
European Parliament and of the Council of 25 October 2012
on the financial rules applicable to the general budget of the
Union and repealing Council Regulation (EC, Euratom) No
1605/2002 (OJ L 298, 26.10.2012). 6 See Financial Instruments: A
Stock-taking Exercise in Preparation for the 2014-2020 Programming
Period - Final Report,
Mazars LLP, 2013.
14
The use of FIs is considered to hold a number of benefits for
policy makers in preference to grant
funding so as to increase the scale, effectiveness and efficiency
of policy measures:
• Firstly, FIs can reuse operational programmes resources for
future use as opposed to non-
repayable grants. This allows for a much greater efficiency in the
allocation of public capital
and the long-term sustainability of public investment. Their
revolving nature implies that the
projects have to generate enough income to pay back the capital
from the FIs plus interest.
This particular aspect generally is all the more instrumental under
conditions of economic
uncertainty, fiscal deficits and constraints on bank lending.
• Secondly, FIs aim for a leverage effect. By unlocking other
public sector funding and private
sector resources through co-financing and co-investment, FIs aim to
increase the overall
capital available to achieve policy objectives with the
corresponding impact of the
investments made.
• Thirdly, private sector participation enables policymakers to
make use of private sector skills
and expertise in areas such as identifying investment areas,
decision-making, management
of commercial operations and the ability to achieve returns.
• Fourthly, repayable assistance can also act as an incentive for
better quality investments as
investments need to be economically viable and self-sustainable in
the long run.
Collectively, these attributes potentially lead to greater
value-added for policy interventions, as
well as greater effectiveness and efficiency in terms of the use of
public sector resources,
enabling policymakers to achieve more with fixed or limited
resources. Moreover, FIs can be
tailored to local, regional and national circumstances with inbuilt
flexibility and can be adapted if
these needs change.
Finally, as well as satisfying demand-side pressures, FIs can also
make significant long-term
contributions to market development through supply-side development
and support, through
the use of public sector capital, capacity building and knowledge
exchange, which can help
stimulate and support financially viable propositions.
As already mentioned above, the legal framework governing the use
of FIs has already extended
the use of FIs to all ESI Funds, but it also provides greater
flexibility in relation to establishing and
implementing FIs:
• There is wider scope for using FIs;
The scope for FI use has been expanded and enlarged to cover all
ESI Funds and all Thematic
Objectives and priorities in the Operational Programmes.
• There are new geographic options;
Options have been expanded to allow MAs to set up FIs at national,
regional, transnational
or cross-border level.
Two new implementation options have been introduced:
– Contributions can be made to EU-level instruments which are
managed directly or
indirectly by the European Commission. Funds can be channelled to
initiatives such as:
Horizon 2020 (equity and risk-sharing instruments), COSME (equity
and guarantees),
15
and the Connecting Europe Facility (e.g. project bonds), SME
initiative. This relieves the
Managing Authority of much of the administration associated with
design, tendering,
reporting and compliance issues, including ensuring State aid
compatibility.
– Managing Authorities or financial intermediaries can use
pre-determined terms and
conditions or templates for implementation of FIs – these are known
as off-the-shelf
instruments.
• Additional flexibility has been introduced for national
co-financing of FIs;
Significant additional flexibility has been introduced whereby
national public and private co-
financing contributions may be provided at the level of the
financial instrument (fund of
funds or financial intermediary) or at the level of the final
recipient (including in-kind
contributions where relevant). National co-financing does not have
to be paid to the
financial instrument upfront but may be provided at later stages of
financial instrument
implementation. It has to be provided before the end of the
eligibility period. However, the
provisions on payments allow for the full reimbursement of ESIF
contributions even when
material co-financing is provided at a later stage.
• There are incentives for dedicating a whole OP priority to FIs,
and for contributing to an EU-
level instrument;
Managing Authorities who decide to devote an entire OP priority to
FIs will benefit from the
incentive of a 10 percentage points increase in EU co-financing
rate for the priority. Where
Managing Authorities decide to dedicate a whole priority to support
an EU-level FI, they can
apply a 100 percent co-financing rate to that priority (i.e. they
do not need to find additional
public or private co-financing).
More advisory support is now available for the Member States. The
European Investment Bank
(“EIB”) is to set up, implement and manage the Technical Advisory
Platform for ESI Funds (“fi-
compass”7), which will play a role in preparing methodological
guidance, developing and
delivering capacity building services, designing and delivering
awareness raising campaigns and
disseminating information.
2.2. General overview of the previous programming period
2007-2013
Romania has registered the lowest rate of European funds absorption
in the 2007-2013
programming period. The main reasons directly linked to the low
absorption are considered to be
low efficiency, effectiveness and independence of public
administration and high structural
deficit of the consolidated budget, as pointed out in the National
Reform Programme (2011-2013)
7 See: www.fi-compass.eu.
of Romania8. The European Commission also highlighted that poor
administrative capacity
contributed to Romania ranking last in absorption of EU Funds9.
Other weaknesses identified by
a research paper10 refer to the legal framework for financial
management, length of public
procurement procedures and the availability of appropriate funding
lines in the national budget.
Many challenges remain thus to be tackled in terms of absorption of
EU Funds; however, recent
data show that Romania succeeded in restoring macroeconomic
stability, significantly improved
EU Funds absorption and the business environment has been
strengthened11.
A recent evaluation report of the Regional Operational Programme
2007-201312 (reporting as of
December 2013) shows that among the investment priorities with high
popularity, calculated as
requested non-reimbursable financing divided by allocated
financing, the following popularity
rates have been registered for in relation to urban
development:
• PA1 Urban development, IP 1.2: Supporting investments in energy
efficiency in the residential
sector of blocks of flats, with a popularity rate of 151.23%.
• PA 4 Business environment, IP 4.1: Sustainable development of
structures supporting local
and regional businesses, with a popularity rate of 347.51%.
• PA 5 Tourism, IP 5.1: Sustainable restoration and valorisation of
the cultural patrimony, as
well as creation and modernisation of adjacent infrastructure, with
a popularity rate of
182.4%.
• PA 5 Tourism, IP 5.2: Creation, development, and modernisation of
tourism infrastructure for
valorising natural resources and increasing quality of touristic
services, with a popularity rate
of: 291.89%.
The high popularity rates observed for each of the above Investment
Priorities clearly indicates
that there is a strong interest of potential beneficiaries in
implementing urban development
projects.
8 National Reform Programme of Romania, Government of Romania,
2011, available online at:
http://ec.europa.eu/europe2020/pdf/nrp/nrp_romania_en.pdf 9
Commission staff working document, Assessment of the 2013 national
reform programme and convergence programme for
Romania, 2013, European Commission, available online at:
http://ec.europa.eu/europe2020/pdf/nd/swd2013_romania_en.pdf 10
Zaman Gh., Cristea A., EU Structural Funds absorption in Romania:
obstacles and issues, 2011, Institute of National
Economy, available online at:
http://www.revecon.ro/articles/2011-1/2011-1-4.pdf 11 Europe 2020
in Romania, available online at:
http://ec.europa.eu/europe2020/europe-2020-in-your-country/romania/country-
specific-recommendations/index_en.htm 12 Evaluation report, Update
of the intermediary evaluation of the Regional Operational
Programme 2007-2013, April 2014.
17
According to the evaluation study of another Programme13, the main
factors for one of the
lowest levels of absorption were:
• the small number of employees in the Managing Authorities and
Intermediate Bodies
compared to the large number of applications received at one
point;
• the specificity and technical aspects of the energy efficiency
projects which were difficult for
evaluators to understand;
• lack of correlation between, on the one hand, launching calls for
proposals, appraisals and
contracting projects versus technical assistance on the other
hand;
• public procurement legislation which affected the ability of the
MA in procuring the
necessary technical assistance as well as the beneficiaries
implementing their projects;
• the effects of the financial crisis, including the EUR-RON
currency exchange, interest rate,
market potential etc.
These factors sometimes lead to situations where potential
beneficiaries received confirmation
of their project approval two years after the date of submitting
the application.14
In terms of payment requests the absorption rate of EU funds was
43.58% at 30 October 201415,
just one year before closing the eligibility period. This
absorption rate is slightly improved in ROP
2007-2013, where the MRDPA achieved a rate of 55.13% by the same
date16.
In terms of type of beneficiaries, according to the same ROP
evaluation report17, local public
authorities were the eligible beneficiaries for:
• Urban development (PA1);
• Transport infrastructure (PA2);
• Social infrastructure (PA3);
• Development of sustainable business support structures of
regional and local importance
(PA 4.1); and
• Rehabilitation of the unused polluted industrial sites and
preparation for new activities (PA
4.2).
13 Intermediary Evaluation of Sectorial Operational Programme
Increase of Economic Competitiveness, Deloitte Consultanta
SRL, July 2013. 14 For example, the call of proposal no. 2 on
Renewable energy resources for green energy producing within
Priority axis 4.2 of
Increasing Economic Competitiveness Operational Programme was
launched in 2010 and projects were contracted between
years 2012 - 2013. 15 Official website of the Ministry for European
Funds, see: http://www.fonduri-ue.ro/stadiul-absorbtiei 16
Absorption status, see: http://www.fonduri-ue.ro/stadiul-absorbtiei
17 Evaluation report, Update of the intermediary evaluation of the
Regional Operational Programme 2007-2013, April 2014.
18
(PA5, IP5.2)18.
EU investment areas and overarching documents
In this sub-chapter, a brief assessment of the consistency of the
Regional Operational
Programme 2014–2020 is conducted based on the current stage of
development of the
programming document (as of August 2014) with the overarching
documents, namely: Europe
2020 Strategy, Common Strategic Framework, Council’s Country
Specific Recommendations and
Partnership Agreement with Romania on using ESI Funds for growth
and jobs in 2014–2020. This
assessment and analysis has been carried out in conjunction with
the Managing Authority for the
ROP.
The Common Strategic Framework (“CSF”) sets out the EU investment
priorities allowing for
better integration of the ESI Funds in order to maximise impacts
and outcomes and thereby
contribute to the Europe 2020 strategy for smart, sustainable and
inclusive growth. The Europe
2020 strategy was translated for programming purposes into 11
operational Thematic Objectives,
which will be supported through the ESI Funds, as outlined
below19:
1. Strengthening research, technological development and
innovation;
2. Enhancing access to, and use and quality of, information and
communication technologies;
3. Enhancing the competitiveness of small- and medium-sized
enterprises;
4. Supporting the shift towards a low-carbon economy in all
sectors;
5. Promoting climate change adaptation, risk prevention and risk
management;
6. Preserving and protecting the environment and promoting resource
efficiency;
7. Promoting sustainable transport and removing bottlenecks in key
network infrastructures;
8. Promoting sustainable and quality employment and supporting
labour mobility;
9. Promoting social inclusion, combating poverty and any
discrimination;
10. Investing in education, training and vocational training for
skills and life-long learning by
developing education and training infrastructure; and
18 Ibidem.
19
11. Enhancing institutional capacity of public authorities and
stakeholders and efficient public
administration.
Financial instruments can be established to support Investment
Priorities in any of the above
Thematic Objectives.
All the 11 Thematic Objectives were addressed in the Partnership
Agreement 2014–2020 with
Romania, which was approved by the European Commission in August
2014. Based on the
Thematic Objectives set at the EU level in the CPR and on the
Thematic Objective concentration
defined in the Partnership Agreement, the Ministry of Regional
Development and Public
Administration developed the Regional Operational Programme for
2014–2020.
Although an ex-ante evaluation20 of the Regional Operational
Programme is currently under
implementation, a preliminary conclusion has been reached that the
ROP is generally coherent
with the above mentioned overarching documents.
As a general comment, the Regional Operational Programme already
comprises a well-structured
and consistent strategy approach built on 9 specific objectives,
which contribute to the overall
objective of the programme, which is to increase the economic
competitiveness and improve living
conditions for local and regional communities by supporting the
development of the business
environment, infrastructure conditions and service conditions, that
ensure the sustainable
development of regions, able to efficiently manage resources,
capitalize on their innovation
potential and assimilate technological progress21.
A matrix showing the relationship of the Priority Axes, the
Thematic Objectives and the
Investment Priorities is provided below. It has to be underlined
that the definitions of the
Investment Priorities are fully aligned with the provisions of the
relevant EU legislation22.
Provisional ERDF financial allocations for each Priority Axis are
also presented.
20 Ex-ante Evaluation of the Regional Operational Programme
2014-2020 (including an initial analysis of Questions 1, 9 and
10,
and some elements of Q2 and Q4) prepared by Ecorys and Lideea
association. 21 Regional Operational Programme 2014-2020, version
January 2015, page 17. 22 As defined in Article 5 of the ERDF
Regulation.
20
Table 1: Information on priority axes, corresponding TOs and
investment priorities, and financial allocation in ROP
2014-2020
Priority Axis Thematic Objective Investment Priority
ERDF allocation (EUR M)
TO 1: Strengthening research, technological development and
innovation
Promoting business investment in R&I, developing links and
synergies between enterprises, research and development centres and
the higher education sector, in particular promoting investment in
product and service development, technology transfer, social
innovation, eco- innovation, public service applications, demand
stimulation, networking, clusters and open innovation through smart
specialisation, and supporting technological and applied research,
pilot lines, early product validation actions, advanced
manufacturing capabilities and first production, in particular in
key enabling technologies and diffusion of general purpose
technologies.
175.53
TO 3: Enhancing the competitiveness of small and medium-sized
enterprises
Promoting entrepreneurship, in particular by facilitating the
economic exploitation of new ideas and fostering the creation of
new firms, including through business incubators.
Supporting the creation and the extension of advanced capacities
for product and service development.
744.68
PA 3: Supporting the shift towards a low-carbon economy
TO 4: Supporting the shift towards a low-carbon economy in all
sectors
Supporting energy efficiency, smart energy management and renewable
energy use in public infrastructure, including in public buildings,
and in the housing sector.
Promoting low-carbon strategies for all types of territories, in
particular for urban areas, including the promotion of sustainable
multimodal urban mobility and mitigation-relevant adaptation
measures.
2,121.8
TO 6: Preserving and protecting the environment and promoting
resource efficiency
Taking action to improve the urban environment, to revitalise
cities, regenerate and decontaminate brownfield sites (including
conversion areas), reduce air pollution and promote noise-reduction
measures.
PA 4: Supporting sustainable urban development
TO 4: Supporting the shift towards a low-carbon economy in all
sectors
Promoting low-carbon strategies for all types of territories, in
particular for urban areas, including the promotion of sustainable
multimodal urban mobility and mitigation-relevant adaptation
measures.
1,170.21
TO 6: Preserving and protecting the environment and promoting
resource efficiency
Taking action to improve the urban environment, to revitalise
cities, regenerate and decontaminate brownfield sites (including
conversion areas), reduce air pollution and promote noise-reduction
measures.
TO 10: Investing in education, training and vocational training for
skills and lifelong learning
Investing in education, training and vocational training for skills
and lifelong learning by developing education and training
infrastructure.
PA 5: Conserving, protecting and sustainable valorisation of
TO 6: Preserving and protecting the environment and promoting
Conserving, protecting, promoting and developing natural and
cultural heritage. 276.59
21
PA 6: Improving road infrastructure with regional impact
TO 7: Promoting sustainable transport and removing bottlenecks in
key network infrastructures
Enhancing regional mobility by connecting secondary and tertiary
nodes to TEN-T infrastructure, including multimodal nodes.
957.45
PA 7: Diversification of local economy by tourism sustainable
development
TO 8: Promoting sustainable and quality employment and supporting
labour mobility
Supporting employment-friendly growth through the development of
endogenous potential as part of a territorial strategy for specific
areas, including the conversion of declining industrial regions and
enhancement of accessibility to, and development of, specific
natural and cultural resources.
101.06
TO 9: Promoting social inclusion, combating poverty and any
discrimination
Investing in health and social infrastructure which contributes to
national, regional and local development, reducing inequalities in
terms of health status, promoting social inclusion through improved
access to social, cultural and recreational services and the
transition from institutional to community-based services.
425.53
PA 9: Supporting economic and social regeneration of deprived
communities from urban areas
TO 9: Promoting social inclusion, combating poverty and any
discrimination
Undertaking investment in the context of community- led local
development strategies. 95.74
PA 10: Improving the educational infrastructure
TO 10: Investing in education, training and vocational training for
skills and lifelong learning
Investing in education, training and vocational training for skills
and lifelong learning by developing education and training
infrastructure.
255.32
PA 11: Geographical extension of the system of Cadastre and
property registration
TO 11: Enhancing institutional capacity of public authorities and
stakeholders and efficient public administration
Enhancing institutional capacity and an efficient public
administration 265.96
PA 12: Technical assistance N/A23 N/A 110.64
23 The Technical Assistance Priority Axis is a horizontal axis
which is supported by the ERDF according to Article 59 of the
Common Provisions Regulation.
22
The total ERDF amount allocation within the Regional Operational
Programme is of EUR 6.7
billion. The allocation for PA4 Sustainable Urban Development
consists of EUR 1,170.2 million.
However, because urban development can be seen as a transversal
objective where Managing
Authorities are able to address numerous sectorial policy goals, it
is also worth looking at other
priority axes within ROP that could potentially contribute
resources to Financial Instruments,
namely:
• PA 3 Supporting the shift towards a low-carbon economy with ERDF
allocation of EUR
2,121.8million;
• PA 5 Conserving, protecting and sustainable valorisation of the
cultural heritage with ERDF
allocation of EUR 276.59 million; and
• PA 7 Diversification of local economy by tourism sustainable
development with ERDF
allocation of EUR 101.06 million.
A rationale for selecting the above mentioned Priority Axes for
further analysis is provided in the
following section.
2.4. Analysis of Investment Priority areas selected for Urban
Development
Significant levels of investment are required in the near future
for regional development
according to the strategic sectorial and territorial analysis.
While many of the objectives could be
financed by the private sector, substantial support is still needed
from the public sector and the
EU budget. Below we show our approach to finding the appropriate
areas for financial
instruments.
With regards to the 12 Priority Axes presented above, together with
the Managing Authority for
ROP an analysis has been performed to identify which of these Axes
are more suitable for FIs for
urban development. Although grant financing will remain the main
type of public financial
11 Thematic Objectives
Programme
3)
(Section 3)
23
support for most of the activities in the ROP, technical assistance
will be necessary to ensure the
successful implementation of FIs. Due to the lack of relevant
previous experience with FIs in
urban development, it is considered that in many areas more
experimentation and pilot-testing
will be necessary before FIs are more widely used. In addition, the
scope of the present study
does not include those interventions to be undertaken by SMEs, this
being covered in a separate
study. Consequently we have not examined the relevant axes
providing financing support to
SMEs.
Set out below we have examined the Priority Axes looking only at
those types of
interventions/projects that are able to generate income sufficient
to repay the investment and/or
generate sufficient revenue to cover interest repayments.
Within this framework, our assessment is as follows:
Priority Axis Adequacy for FIs
YES/NO Subject To Analysis Regarding
Adequacy Of FIs / Rationale
PA1: Promoting technological transfer NO Subject of another study
on SMEs financing
PA2: Improving SMEs competitiveness NO Subject of another study on
SMEs financing
PA 3: Supporting the shift towards a low- carbon economy
YES Could generate sufficient revenues to repay the
investments
PA 4: Sustainable urban development YES Could generate sufficient
economies to repay the investments
PA 5: Conserving, protecting and sustainable valorisation of the
cultural heritage
YES Could generate sufficient revenue to repay the
investments
PA 6: Improving road infrastructure, with regional impact
NO Could not generate sufficient direct revenue or economies to
repay the investments
PA 7: Diversification of local economy by tourism sustainable
development
YES Could generate sufficient economies to repay the
investments
PA 8: Development of the health and social infrastructure
NO Could not generate sufficient direct revenue or economies to
repay the investments
PA 9: Supporting economic and social regeneration of deprived
communities from urban areas
NO Could not generate sufficient direct revenue or economies to
repay the investments
PA 10: Improving the educational infrastructure
NO Could not generate sufficient direct revenue or economies to
repay the investments
PA 11: Cadastre and property registration in rural areas in
Romania
NO Not in the field of urban development
PA 12: Technical Assistance NO Not in the field of urban
development
With some notable exceptions we have tended to ignore projects that
come under the category
of a ‘public good’. In the economic literature, public goods are
described as:
“…a good that, once produced, can be consumed by an additional
consumer at no additional cost. A
second characteristic is sometimes added, specifying that consumers
cannot be excluded from
consuming the public good once it is produced. Goods with these
characteristics will be
underproduced in the private sector, or may not be produced at all,
following the conventional
24
wisdom, so economic efficiency requires that the government force
people to contribute to the
production of public goods, and then allow all citizens to consume
them” 24.
In the context of this report, the notion of public good has been
interpreted more widely and
includes those goods and services which have some or all of the
following characteristics:
• public amenities for which no direct payment is requested from
users, such as parks,
historical monuments, public benches, town squares, etc.;
• basic infrastructure such as roads etc. which are not revenue
generating;
• public assets where the maintenance is not dedicated and can be
ad-hoc in its application
(e.g. budgets to maintain roads, streets, pathways etc.); and
• are generally serviced from taxes.
The reason for this exclusion is that, even though it may be
theoretically possible to package such
services and outsource them, the services would be fragmented and
difficult to bundle to
achieve critical volume. This is not to say that upgrading public
amenities cannot provide
economic or financial return, but rather to point out that
either:
• no investors are likely to be ready to support them, or
• even in cases where willing investors are potentially available,
it would be very difficult
(either in general or at the current time) to package projects into
sufficient volume.
The general conclusion is that in practice public goods of this
type can be more easily funded (in
full or in part) by the public sector. While it is possible to
create a financial instrument which is
based on capturing cost reductions or other benefits to the public
sector generated by superior
technology or more efficient service, the target areas for such
investment must be predictable
and available (we explore these concepts in more detail in Section
3). Therefore it is
recommended that at this point in time funding requests for
projects such as, for instance,
upgrading specific local or tourist amenities (monuments, pathways,
roads etc.) are best
reserved for grant funding25.
Following the analysis set out in Section 2.3, carried out in
conjunction with the Managing
Authority for the ROP26, the current section considers the urban
development related priorities
within the ROP that respond to Thematic Objective 4 (energy
efficiency, public urban transport &
24 Randall G. Holcombe A., Theory of the Theory of Public Goods,
Review of Austrian Economics, 1997 10(1), pp. 1-22. 25 It is
important to point out that JESSICA projects in urban renewal often
conduct exactly this activity of group revenue and
non-revenue generating projects into larger scale projects which
can attract private capital. We discuss the maturity of such
approaches in the Romanian market in Section 3. 26 Communicated
during the meeting held on 23rd of May 2014.
25
cultural heritage rehabilitation of unused and/or degraded public
spaces and buildings) and
Thematic Objective 7 (natural and cultural resources,
tourism).
Thus, the analysis will focus on the following four Priority
Axes:
• PA 3: Supporting the shift towards a low-carbon economy;
− IP 3.1 Supporting energy efficiency, smart energy management and
renewable energy
use in public infrastructure, including in public buildings, and in
the housing sector;
− IP 3.2 Promoting low-carbon strategies for all types of
territories, in particular for urban
areas, including the promotion of sustainable multimodal urban
mobility and mitigation-
relevant adaptation measures; and
− IP 3.3 Taking action to improve the urban environment, to
revitalise cities, regenerate
and decontaminate brownfield sites (including conversion areas),
reduce air pollution
and promote noise-reduction measures;
• PA 4: Sustainable urban development;
− IP 4.1 Promoting low-carbon strategies for all types of
territories, in particular for urban
areas, including the promotion of sustainable multimodal urban
mobility and mitigation-
relevant adaptation measures;
− IP 4.2 Taking action to improve the urban environment, to
revitalise cities, regenerate
and decontaminate brownfield sites (including conversion areas),
reduce air pollution
and promote noise-reduction measures; and
− IP 4.3 Investing in education, training and vocational training
for skills and lifelong
learning by developing education and training infrastructure;
• PA 5: Conserving, protecting and sustainable valorisation of the
cultural heritage; and
• PA 7: Diversification of local economy by tourism sustainable
development
For each of the above PAs and IPs a detailed analysis was made to
identify investment needs,
eligible beneficiaries and financing activities, and types of
indicative actions that are to be
financed by the respective PAs and IPs in the following
sectors:
• Energy efficiency,
• Urban transport,
• Urban renewal,
• Balneal tourism.
IP 3.1 Supporting energy efficiency, smart energy management and
renewable energy use in
public infrastructure, including in public buildings, and in the
housing sector.
26
This Priority Axis will finance investments in energy efficiency in
public buildings under the
administration of, and occupied by, local public authorities as
well as central public authorities, in
the housing sector and in public lighting systems, in particular
those which register high energy
consumption.
Several factors make the need for energy efficiency investments
particularly high for Romania, as
outlined below:
• The energy intensity of the economy in 2011 was one of the
highest in Europe (392.1
kgoe/1000 EUR) and almost three times higher than the EU-27 average
(144.7 kgoe/ 1000
EUR). This is despite significant improvement since the beginning
of the 1990s and especially
between 2000 and 2010.
• The energy performance of public buildings is very low and the
sector registers one of the
highest energy consumption. In Romania, the building sector
(residential, tertiary and
public) accounts for 45% of the total energy consumption27.
• Romania has a significant stock of buildings from the 1960-1990
period with insufficient
thermal insulation, due to the lack of regulation. As a
consequence, it is estimated that the
energy saving potential is between 40-50%, for both public
buildings and the housing sector.
• Related to public lighting, statistics show that in 2012 the
final electricity consumption for
public lighting was of 669 Gwh. The estimated potential in energy
efficiency is between 20-
40%28.
• A key aspect is that in addition to environmental benefits
resulting from reducing the energy
consumption, the thermal rehabilitation of buildings can contribute
to economic growth,
developing the local construction industry and also influencing the
fields of construction,
innovation, research and development29.
• The investments promoted under this PA, IP 3.1 will contribute to
achieving the obligations
of Romania to renovate annually 3% of the surface of the central
authorities’ buildings in
accordance with the stipulations of the Energy Efficiency
Directive30 .
Energy Efficiency in Public Buildings
27 Regional Operational Programme, version as of January 2015,
p.81. 28 Idem, p.82 29 Regional Operational Programme, version as
of January 2015, p. 63-65. 30 Directive 2012/27/EU of the European
Parliament and of the Council of 25 October 2012 on energy
efficiency, amending
Directives 2009/125/EC and 2010/30/EU and repealing Directives
2004/8/EC and 2006/32/EC (OJ L 315, 14.11.2012).
27
Eligible beneficiaries as specified in the ROP are central and
local authorities and public
institutions.
Eligible financing activities are addressed to all types of public
buildings under the administration
and occupied by local and central authorities such as: hospitals,
educational institutions,
administrative buildings, clinics, penitentiaries, etc.
Overall, the interventions under this Priority Axis aim at deep
renovation, including thermal
isolation, rehabilitation and modernisation of heating systems and
of installations network,
lighting and energy management of the building.
The specific types of indicative actions to be supported by this
investment priority for energy
efficiency in public buildings as specified in the ROP are:
• Improving the thermal insulation of building envelopes (exterior
walls, windows, woodwork,
upper platform, platform above the basement), framing and coating,
including measures for
the consolidation of buildings;
• Rehabilitation and modernization of preparation and
transportation of thermal agent
installations, domestic hot water installation and ventilation and
air conditioning
installations, including passive cooling systems and the purchase
and installation of related
equipment and connection to central heating systems, where
applicable;
• Using renewable energy to provide the necessary thermal energy
for heating and
preparation of hot water for consumption;
• Implementation of energy management systems aimed at improving
energy efficiency and
energy consumption monitoring (e.g. purchase and installation of
intelligent systems for the
promotion and management of electric energy);
• Replacing fluorescent and incandescent light fixtures with high
energy efficiency and longer
life lighting luminaires;
• Any other activities that lead to the achievement of project
objectives (replacement of
elevators and electrical circuits - stairs, basement, works related
to the dismantling of
installations and equipment, repairing works to facades
etc.).
After screening the potential of the aforementioned types of
interventions to generate sufficient
revenue to repay the loans/ credits/ guarantees etc., the following
types of projects31 are
considered for FIs. This is based on the premise that the energy
savings can repay the
investment, but also because the solutions are based on relatively
standard ‘off-the-shelf’
31 Integrated projects that combine both type of interventions
(thermal insulation, windows and internal lighting).
28
technologies which will have a predictable revenue return. New or
highly tailored technological
solutions are more difficult to map savings/revenues from.
2.4.1.1. Improving the thermal insulation of building envelopes
(exterior walls, windows,
woodwork, upper platform, platform above the basement), framing and
coating, including
measures for the consolidation of public buildings.
2.4.1.2. Replacing fluorescent and incandescent light fixtures with
high energy efficiency and longer
life lighting luminaires.
The other interventions are recommended to be financed by grant to
the public authority due to
the following reasons:
• They will be difficult to group together into a coherent package
that would allow enough
scale to justify an FI based on revolving funds (e.g. thermal
agent, air conditioning and
central heating systems may differ greatly across Romania, while at
the same time the
ownership would be fragmented across municipalities);
• They are secondary investment considerations, which may be
premature in the face of more
basic investment needs (e.g. energy management systems would
normally have less priority
than basic thermal insulation).
Residential Buildings & Public lighting
This Priority Axis and the Investment Priority will finance
investments in energy efficiency
projects for residential buildings, as well as public lighting
projects in the urban areas.
Investment needs:
The target of this Investment Priority is the residential sector
which accounts for almost 84% of
the energy consumption in buildings. It is estimated that the
implementation of a set of energy
efficiency measures in this sector would result in a 40% decrease
in energy consumption.
Regarding public lighting it is estimated that the energy saving
potential would range from 10-
40%32.
The most recent statistics33 show an indicative number of 4.6
million residences in the urban
areas, out of which 1.4 million apartments are linked to the
centralised system for thermal energy
supply.
32 Regional Operational Programme, version January 2015, p. 82. 33
National Census, October 2011, see:
www.recensamantromania.ro/rezultate-2/
29
owners’ associations (for measures for energy efficiency in the
residential sector) and local public
authorities (for public lighting measures).
Eligible financing activities:
The main interventions under this PA and IP will target:
• Actions to improve the thermal insulation of residential housing
stock and hydro-insulation
of the buildings’ roofs;
• Modernising the heating system;
• Actions for replacement/improvement of lighting systems in the
public realm, particularly in
urban areas.
Specific types of indicative actions to be supported by this
investment priority:
Related to specific types of projects, an important aspect
mentioned in the ROP for selecting
operations within PA3 is that projects need to be part of an
integrated strategy for urban
development.
The types of projects for energy efficiency in housing sector and
public lighting specified in the
ROP are:
windows, woodwork, upper platform, platform above the basement),
framing and coating,
including measures for the consolidation of buildings;
• Rehabilitation and modernization of installations for
distribution of thermal agent - heating
and domestic hot water, common part of block of flats buildings,
including the installation of
thermostatic valves etc.;
• Modernisation of heating system: repairing / replacement of
central heating boilers in a
block of flats; purchase and installation of alternative systems of
energy production from
renewable sources - thermic solar panels, electric solar panels,
heating pumps and/or
biomass central heating boilers etc.;
• Replacing fluorescent and incandescent light fixtures in common
areas with high energy
efficiency and longer life lighting luminaires;
• Implementation of management systems for operating energy
consumption, purchase and
installation of intelligent systems for the promotion and
management of electric energy;
• Any other activities that lead to the achievement of project
objectives (replacement of
elevators and electrical circuits in common areas - stairs,
basement, works related to the
dismantling of installations and equipment, repairing works to
facades etc.);
• Replacing incandescent public lighting systems with high energy
efficiency, longer life light
fixtures that ensure the adequate comfort level, including through
rehabilitation of electrical
installations - poles, networks etc.;
• Extension / reunification of public lighting systems in urban
localities; and
• Any other activities that lead to the achievement of project
objectives.
After screening the potential of the aforementioned types of
interventions to generate sufficient
revenue to repay the loans/ credits/guarantees etc. the following
types of projects have been
considered the most suitable for FIs:
2.4.1.3. Improving the thermal insulation and waterproofing of
building envelopes (exterior walls,
windows, woodwork, upper platform, platform above the basement),
framing and coating,
including measures for the consolidation of residential
buildings
2.4.1.4. Replacing fluorescent and incandescent light fixtures in
common areas with high energy
efficiency and longer life lighting luminaires
2.4.1.5. Replacing incandescent public lighting systems with high
energy efficiency, longer life light
fixtures that ensure the adequate comfort level, including through
rehabilitation of
electrical installations - poles, networks etc.
Similar to the investments in public buildings, the other
interventions are recommended to be
financed by grant to the public authority due to the following
reasons:
• They will be difficult to group together into a coherent enough
package that would allow
enough scale to justify an FI based on revolving funds (e.g.
thermal agent, air conditioning
and central heating systems may differ greatly across Romania,
while at same time
ownership would be fragmented across municipalities); and
• They are secondary investment considerations, which may be
premature in the face of more
basic investment needs (e.g. energy management systems may be
premature in the face of
more pressing basic investments, such as thermal insulation).
Public urban transport is to be financed under Priority Axis 3 and
4, Priority Investment 4.2. This
includes promoting low-carbon strategies for all types of
territories, in particular for urban areas,
including the promotion of sustainable multimodal urban mobility
and mitigation-relevant
adaptation measures. The specific objective of these IPs is to
reduce greenhouse gas (“GHG”)
emissions in medium and small towns, especially through investments
in infrastructure for non-
motorised transport and transit traffic.
Investment needs:
PA 4: Sustainable urban development & PA 3 Supporting the shift
towards a low-carbon
economy
IP 4.1: Promoting low-carbon strategies for all types of
territories, in particular for urban
areas, including the promotion of sustainable multi-modal urban
mobility and mitigation-
relevant adaptation measures
31
Urban transport is responsible for more than 18% of GHG emissions
as set out in studies34 aimed
at identifying the main factors for air pollution and their
estimated impact at European level,
which together with housing and industry are the main threat for a
healthy urban environment.
The development of sustainable multi-modal mobility is one of the
key challenges for European
cities and functional urban areas in the 2014-2020 programming
period. In addition to EU
financing, the urban mobility project benefits from public sector
assistance through support
payments and through user charges.
Romania is committed, in the context of the EU 2020 strategy, and
through its National Reform
Programme35, to reduce GHG emissions by at least 20% in 2020 with
respect to 1990 levels, in line
with EU objectives. The most recent National GHG Inventory of
Romania, released in 2013, reveals
that since the year 1989 to year 2011, the GHG emissions from the
transport sector increased by
92.46%36.
Urban transport assets in Romanian cities are obsolete and reliant
on bus and minibus services37.
The rehabilitation and renewal of urban transport systems,
potentially covering trams, trolley
buses and the introduction of intelligent transport, is expected to
be a feature of integrated
sustainable urban development projects in several cities.
Sustainable mobility plans also include
measures to discourage car use. Improving the energy efficiency of
transport, including urban
transport systems are among the main development needs38.
Eligible beneficiaries specified in the Regional Operational
Programme are local public authorities
from urban localities (in possible partnership with the public
transport operator).
Eligible financing activities:
It has to be mentioned that sustainable mobility includes several
dimensions and components,
such as:
• Sustainable, energy-efficient, accessible and affordable public
transport systems;
• A friendly environment for soft transport modes such as cycling
and walking;
• Easy access to all neighbourhoods, on foot, by bike, and by
public transport;
• Local transport networks that need to be well connected to
regional networks;
34 Smarter, greener, more inclusive? Indicators to support the
Europe 2020 strategy, Eurostat – Statistical Book, 2013
edition,
p. 78. 35 Romanian National Reform Programme, April 2014,
see:
http://ec.europa.eu/europe2020/pdf/csr2014/nrp2014_romania_ro.pdf).
36 http://unfccc.int/resource/docs/2013/arr/rou.pdf. 37 Commission
Services Position Paper, October 2012, p. 7 38 The Partnership
Agreement, July 2014, p. 106 - 109.
32
• Peri-urban networks that need to be planned within the context of
overall land-use and
spatial development; and
• Transport nodes that need to be well integrated with social,
cultural and economic activities.
Specific indicative actions to be supported by these investment
priorities for public urban transport
specified in the ROP are:
• Purchase of rolling stock / ecological vehicles (EEV or Enhanced
Environmentally friendly
Vehicles) including for pilot projects;
• Modernization/ rehabilitation / extension of electrical transport
routes;
• Building the necessary infrastructure for electric transport;
modernization of existing
electrical rolling stock (tramways);
• Modernization / rehabilitation of depots related to public
transport and related technical
infrastructure , including building depots for electric
transport;
• Implementation of separate routes exclusively for public
transport vehicles;
• Improving existing public transport stations, including building
new stations and intermodal
terminals for public transport;
technical infrastructure (points of rental);
• Creating pedestrian areas and routes, including measures to
reduce car traffic in certain
areas;
• Implementation of video monitoring systems based on innovative
and efficient traffic
management tools;
• Construction/ modernization/ rehabilitation of road
infrastructure (corridors served by public
transportation) to improve the safety level and efficiency in the
movement and operation of
the transport network , including introducing routes for cyclists
and pedestrians where it is
possible;
• Implementation of sustainable urban mobility plans/ strategies to
reduce carbon emissions;
• Implementation of forest shelter-belts, alignment of trees (with
high capacity of CO2
retention); and
• Implementation of ring roads in small and medium towns, under an
urban street status, to
divert transit vehicles and heavy traffic.
After screening the potential of the aforementioned types of
interventions to generate sufficient
revenue to repay the loans/ credits/ guarantees etc., the following
type of project could be
considered the most suitable for FIs:
2.4.1.6. Purchase of rolling stock / ecologic vehicles
It is recommended that other interventions are financed by grant to
the public authority as they
fall almost entirely into the area of “public goods” as described
at the beginning of Section 1.4
33
above. This means that although the infrastructure improvements may
indirectly enable the
development of a revenue generating business, they do not by
themselves generate revenue,
and therefore are of little interest to investors. By contrast,
rolling stock can be resold or moved
to a different location or operation and represents an asset
investment (albeit depreciating).
Urban regeneration is to be financed under Priority Axis 4,
Investment Priority 4.3 Taking action
to improve the urban environment, to revitalise cities, regenerate
and decontaminate brownfield
sites (including conversion areas), reduce air pollution and
promote noise-reduction measures. The
specific objective of this IP is to increase the quality of public
spaces in urban areas.
Investment needs:
The process of deindustrialisation and reduced investment capacity
of local authorities resulted
in degraded, abandoned or non-used areas with negative consequences
on the quality of the
urban environment39. The first development priority mentioned in
the National Strategy for
Regional Development 2014-2020 relates to integrated sustainable
urban development. In order
to support economic development of cities and fight against
population reduction and
population density through actions at territorial level, one
strategic area of intervention refers to
transforming undeveloped and unused fields in attracting points for
economic and social
activities. This can be done through the rehabilitation of previous
industrial areas and
brownfields as well as through urban regeneration of historical
centres from cities and
municipalities40. Inner city areas such as historical areas,
neighbourhoods, industrial areas,
various public spaces can develop new functionalities through
rehabilitation and generate
39 Regional Operational Programme 2014-2020, version as of January
2015, p. 109
40 National Strategy for Regional Development 2014-2020,
2013.
PA 4: Sustainable urban development & PA 3 Supporting the shift
towards a low-carbon
economy
IP 4.2: Taking action to improve the urban environment, to
revitalise cities, regenerate and
decontaminate brownfield sites, reduce air pollution and promote
noise-reduction
measures
IP 3.3 Taking action to improve the urban environment, to
revitalise cities, regenerate and
decontaminate brownfield sites (including conversion areas), reduce
air pollution and
promote noise-reduction measures.
creating a favourable attractive socio-economic
environment41.
The eligible beneficiaries specified in the ROP are local public
authorities and institutions in urban
areas.
Eligible financing activities and types of indicative actions to be
supported by these investment
priorities for urban regeneration specified in the ROP under this
IP are:
• Construction/ rehabilitation/ modernization of buildings to
accommodate various social,
community, cultural, recreational and sports activities etc.;
• Creation/ rehabilitation/ modernization of urban public spaces
(unmodernised streets,
including rehabilitation/ modernization of public utilities,
undeveloped green areas,
abandoned lands, pedestrian and shopping areas etc.), treatments,
etc.
These type of interventions are recommended to be financed by grant
to the public authority as
the screening did not indicate the potential of the aforementioned
types of interventions to
generate sufficient revenue to repay the loans (and as such will
not attract investors). This is not
due to any inherent unsuitability of investment (quite the opposite
in fact), but more due to a
lack of sophistication in terms of how these investment areas are
currently served in urban
development plans as well as the prevailing legal and financial
framework. It is still possible for
local authorities to engage in more simplified revenue generation
via improvement and sale of
lands, however, these are relatively basic asset disposal
transactions which are only revenue
generating in the short-term. Please see section 3 for more
discussion of these points.
Cultural heritage is to be financed under Priority Axis 5 of the
ROP. The specific objective of this
PA is conserving, protecting and valorising the cultural patrimony
and cultural identity in view of
boosting local development.
As stated in the draft ROP, cultural heritage (including cultural
infrastructure) has an important
role in preserving local identity, the specificity of rural areas
and maintaining traditions for the
future generations. Compared to other European countries, the
cultural heritage in Romania
faces greater challenges given the deterioration of the physical
condition of historical
41 Regional Operational Programme 2014-2020, version as of January
2015, p. 110
PA 5: Conserving, protecting and sustainable valorisation of the
cultural heritage
35
monuments. This is the result, on the one hand, of actions
undertaken in the years before 1990
that aimed at creating a new city landscapes unrelated to the
traditional urban fabric and
influenced negatively the attitude towards the cultural built
heritage. On the other hand, the
economic growth and significant real estate pressure on cultural
patrimony have threatened the
identity and existence of these cultural sites.
Romania has a competitive advantage due to the high density of
cultural patrimony objectives
with touristic potential. For Romania, it is very important that
the cultural patrimony is restored,
protected and conserved but also managed more efficiently.
According to the Strategy for
Culture and Patrimony 2014-202042, there are 30,108 historical
monuments, of which 75% are
endangered and 35% having a high degree of degradation. According
to the same document, only
17,575 historical monuments are, in fact, architectural monuments,
while the others are
archaeological, memorial or funeral monuments or even public forum
monuments43. Therefore,
due to the fact that the focus of the present analysis should be on
the potential use of FIs, only
the architectural monuments could offer some scope for revenue
generation. It is highlighted in
the ROP that such initiatives shall aim at a consistent planning
for conserving and where possible
restoring the historical cent