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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Notes
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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
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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.
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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
PA 9: Supporting economic and social regeneration of deprived communities from urban areas
PA 10: Improving the educational infrastructure
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.
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.
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

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