05/13/11 Marshal Office of the Wielkopolska Region 1 Implementation of the JESSICA initiative in the Wielkopolska Region Radosław Krawczykowski Director of Managing Authority Wielkopolska Region Poland

What is the JESSICA initiative? JESSICA stands for Joint European Support for Sustainable Investment in City Areas Under new procedures: Council Regulation (EC) 1083/2006, 1828/2006 and 1080/2006, Member States are being given the option of using some of funding from Structural Funds to make repayable investments in projects forming part of an integrated plan for sustainable urban development. These investments may take the form of equity, loans or guarantees and be delivered to projects via Urban Development Funds.

What is the general context of revitalization in Wielkopolska? Wielkopolska Region Second region in Poland in terms of area sq. km (9.53%) Third region in Poland in terms of population m (8.9%) 55.5% of population live in cities 109 cities Poznań – capital of Wielkopolska (580 thou inhabitants)

05/13/11 Marshal Office of the Wielkopolska Region 4 1. Why did Wielkopolska decide to set up the JESSICA initiative? In the years the resources available for revitalization activities were very limited In the programming period the total amount devoted to revitalization activities is more significant but still insufficient Revitalization activities are included in the General Strategy of the Development of the Wielkopolska Region Objectives of the JESSICA initiative are implemented under 2 Measures: Measure 4.1. „Revitalisation of urban areas” and Measure 1.4. „Support for the investments linked to Regional Strategy for Innovation”, Scheme III „Investments in support of business environment institutions in urban areas” of the Wielkopolska Regional Operational Programme for the years (WROP)

05/13/11 Marshal Office of the Wielkopolska Region 5 What are resources for the JESSICA initiative? RESOURCES for the implementation of the JESSICA initiative come from the ERDF (75%) and State Budget (25%) Total sum for the Jessica initiative: € 66 m –60% for large cities (over 50 thou inhabitants) –40% for smaller cities –€ 10 m for urban projects strengthening institutions that support the business environment

05/13/11 Marshal Office of the Wielkopolska Region 6 JESSICA is implemented by: Managing Authority – Marshal Office in Wielkopolska Board of Directors of the Wielkopolska Region Holding Fund – European Investment Bank Urban Development Fund Bank Gospodarstwa Krajowego Urban Projects

2. EIB as the Manager of JESSICA HF EIB is indicated in Regulation No 1083/2006: „ When such operations are organized through holding funds, (…) the Member State or the managing authority shall implement them through one or more of the following forms: (…) c) the award of a contract directly to the EIB or the EIF ”

What are main activities of the Manager of JESSICA HF? identification of urban projects in Wielkopolska in cooperation with PWC a list of potential projects State aid programme – cooperation between EIB, MA and the Ministry for Regional Development -first draft submitted to the EC in September directly based on the Treaty -proportional intervention -net present value of projects with JESSICA funding and without it -conditions for funding investments under JESSICA shall be better than market conditions -financial beneficiaries shall be able to repay loans over long periods of time - selection of UDFs

3. BGK as the Urban Development Fund Bank Gospodarstwa Krajowego was selected as the Urban Development Fund on the basis of the appraisal of offers conducted by a panel of experts of the European Investment Bank. Wielkopolska Urban Development Fund: is a vehicle investing in one or more urban projects as defined in Art.44 Reg.1083 functions as a separate block of finance within BGK (Bank Gospodarstwa Krajowego) actively searches possible urban projects and selects them supports in a legislative process in Polandsupports in a legislative process in Poland offers financial products → preferential loans

4. What are conditions of a financial product in revitalization programmes? Conditions of financial products are based on: - regional investment aid in the framework of regional operational programmes -aid is given for a new investment in a region - share of loans in investment costs: maximum 75% of the total eligible investment cost New investment includes: -investments in fixed assets and intangible assets connected with: a) setting up a new enterprise, b) extension of an existing eneterprise c) diversification of production d) purchase of fixed assets directly connected with an enterprise which was closed or would be closed

5. Why are loans preferential? social indicator is taken into account loan maturity: maximum 20 years grace period: maximum 4 years (for capital); loan interest rate (currently 4%): set on the basis of the reference rate of the National Bank of Poland possibly reduced by„social indicator – max. 2%”

6. Social indicator Social indicator makes loans more preferential than commercial Social indicator is maximum 2 % Social indicator is estimated on the basis of:  superiority of economic elements over the commercial nature of the project  non-measurable / non-financial (descriptively presented future benefits): - influence on the social sphere, - on the economic sphere - on the sphere of natural environment and spatial planning

7. What are urban projects? Urban projects mean a public private partnership or other project included in an integrated plan for sustainable urban development as described in Article 44 Reg.1083

8. Revitalization programmes Requirement for developing revitalization programmes-according to Art.43 of the Commission Regulation (EC) No 1828/2006 the JESSICA Initiative funds investments in public and private partnerships as well as other urban projects included in the Integrated Development Plan for Urban Areas Guidelines regarding the rules of developing revitalization programmes enabling to apply for support within the framework of the JESSICA Initiative were adopted by the Managing Authority in September 2009.

9. Urban Projects (expected by MA) Revitalization projects are expected to combine: commercial components designed to yield return on investments and social components leading to: improvements of life quality, reduction of adverse social factors and having a favourable environmental impact. Revitalization projects should be aiming at strengthening of local development potential in dysfunctional city areas. The assistance of these projects will include such problems as: social exclusion, high level of crime total decrease of life level in dysfunctional city areas.

10. Dysfunctional areas in Poznań

11. Who are potential Investors? Potential Investors: -local governments, -municipal companies, -private investors, -public-private partnerships, -non-governmental institutions - others (entities conducting business activity)

12. First urban projects to be financed – shopping mall

Urban project to be financed – shopping mall Three-level shopping mall with about 120 retail and service premises (total area about m2) The investment situated in the post- industrial facilities area in the city centre (near the old town market) Total investment value approx.: PLN 219 m Loan: approx. PLN 50 m Social elements: improving the image of the old town, bike path, parking, the place for a city library and tourist information in the old tenement house to be bought by the Investor

Urban project to be financed - office building Creation of a modern office building for rent by general overhaul and modernization of post-industrial property Creation of a park (on adjacent public land), construction or modernisation of access roads and pedestrian crossings Creation and maintaining of a visual monitoring system Creation of professionally equipped lecture room, free lectures and trainings for the local population Creation of permanent and temporary workplaces Loan: PLN 22.5 m Total investment value: PLN 30 m

Urban project – technological park Need for loan approx.: PLN 18,5 m Total investment value approx.: PLN 30,3 m Public Investor - each building will include a separate technological part and typical offices Institution supporting business environment – the three-stage investment including renovation of historic buildings Social elements: business incubator

13. What are the first observations? High interest of investors (both private and public) but considerable project development usually required before loan can be agreed Diverse scope of planned projects: bowling centre, shopping mall, business incubator, office spaces, hostel, hotel, underground car parks, municipal market place… Diverse size of projects: from PLN 1 million (€ ) to nearly PLN 220 million (€ 55.4 m) and value of expected JESSICA financing: from a few hundred thousand zlotys up to the PLN 50 m Private investors underestimate the loan pricing advantage brought by revitalization effects of urban projects and simultaneously have high expectations in relation to the preferential interest of loans

Rather small influence of projects on cities in comparison to the scale of integrated plans for sustainable urban development Insufficient cooperation of private investors with city authorities on revitalization elements of investments Lack of projects in the form of the public-private partnership ready to be financed, not even at early stages of preparation

05/13/11 Marshal Office of the Wielkopolska Region Summary Schedule of the Implementation 16 October 2008Signing of the Memorandum of Understanding between the EIB and the Managing Authority – October 2008 November 2008Preliminary identification of potential urban projects 29 April 2009Signing of the Funding Agreement between the Board of Directors of the Wielkopolska Region and the European Investment Bank. September 2009Guidelines regarding the rules of developing revitalisation programmes

22 March 2010Call for expression of interest to select urban development fund(s) – launched by the EIB. 29 September 2010Signing of the Agreement between the European Investment Bank and Bank Gospodarstwa Krajowego. October 2010Call for applications for loans for urban projects - launched by BGK (UDF). 18 May 2011First agreement with the Investor.

Thank you for your attention Radosław Krawczykowski