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JESSICAJoint European Support for Sustainable Investment in City Areas

Horizontal StudyEuropean Investment Bank

From evaluation to operation

The Handbook on JESSICA Holding Funds

Conference on JEREMIE and JESSICA

Towards successful implementation

Brussels, 30 November 2010

Introduction

Questions

Structure of the Holding Fund Handbook

This presentation has been produced with the financial assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union. Sole responsibility for the views, interpretations or conclusions contained in this document lies with the authors. Neither the European Commission, the European Investment Bank nor Managing Authorities of Structural Funds Operational Programmes can be held responsible for the accuracy, completeness or use that may be made of the information contained herein.

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Content

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• Explain the variety of features that Managing Authorities can implement

• Provide guidelines that are compliant with EU Regulations

• Guide the various parties involved through some of the main JESSICA implementation paths and decision making processes

IntroductionObjectives

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IntroductionAn approach toward a successful implementation

From practices to principles: building from the bottom-up.Up: Provide guidance on how to:

· Conduct pre-appraisals and feasibility studies where necessary

· Develop an investment strategy and make informed investment decisions

· Set up and manage Holding Funds, with or without the EIB;

· Exercise investment control and audit and

· Perform other activities related to JESSICA Holding Fund and UDF operations

Bottom: Expressed need by the Member States to better understand the regulatory and operational requirements for establishing and managing Holding Funds, as well as their integration within the well-known Structural Funds (SF) mechanisms.

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Managing Authority

Funding Agreement

with HF

Funding Agreement

with HF

Holding Fund (optional)

Urban Development Fund 1

Direct contract awarded to

another financial institution

Direct contract awarded to the

E.I.B

Funding Agreement

with HF

Procurement Procedure

Open Procedure

Restricted Procedure

Urban Development Fund 2

Urban Development Fund n

Urban Project 1

Urban Project 2

Urban Project n

Urban Project 1

Urban Project 2

Urban Project n

Urban Project 1

Urban Project 2

Urban Project n

Scope of the HF

Handbook

Structure of the Holding Fund Handbook

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Structure of the Holding Fund Handbook

HOLDING FUND PROCESSES

Compliance

Soundness

Performance

European Commission

Management Authorities

Holding Fund

Urban Development

Funds

Projects

MONITORINGEXTERNAL AUDIT

European Court of Auditors and

external auditorsOn the spot audit

of functions of the chain of command

in the cascading structure

• Quarterly/ semi annual, annual reports

• Allocation reports• Quarterly/semi annual, annual reports

• Legal and proceduralverifications•Field visits

Monitoring committee

Corrective actions

Corrective actions

Corrective actions

Post Investment ProcessStructure of the Holding Fund Handbook

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• Provides MAs with the necessary infrastructure and human capital to manage lending operations, equity investments and guarantee schemes in the highly regulated financial market of the European Union

• Ensures the best fit between the investment of the HF resources in the UDF and the financial products offered by the UDF to the urban projects, with a view to stimulating co-financing by private operators

• Constitutes a flexible tool that enables diversification of investments in several types of UDFs with different features and investment goals

Structure of the Holding Fund HandbookAdded Value of the HF

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Holding Fund’s advantages:

•Ensures independent and professional management of funds by performing a variety of functions and tasks (Treasury management, Risk management, Monitoring, Reporting)

•Enables diversification of investments in several types of UDFs and more effective controls

•Where plans and projects are at an early development stage, it invests the funds to generate interest income

•It achieves significant economies of scale and acts as centralised manager for payments and a catalyst in the investment process

Holding Fund’s drawbacks:

Decreased added value when:

•UDF-type structures are already active in the market and ready to be mobilised by the MA

•Only one UDF with well-established objectives and structure is targeted

•The MA already holds in-house expertise in urban planning, public-private partnerships, EU fund management and financial engineering instruments

Structure of the Holding Fund HandbookHolding Fund: Pros and Cons

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Fabio D’Aversa

+352.49 48 48 54 54

fabio.daversa@lu.pwc.com

www.pwc.com

Contacts