ELIGIBLE PROJECTS

According to the requirements of the financial instrument, projects must be sustainable and financially viable.

Priority should be given to projects targeting agglomerations with more than 10,000 population equivalent in the regions of the country, as defined by the Law on the Administrative-Territorial Structure of the Republic of Bulgaria, which coincide with the territories of the consolidated water and sewerage operators (WSS operators) under the Water Act, including:

  • Projects of the 6 newly consolidated WSS operators – Veliko Tarnovo, Gabrovo, Pleven, Sofia Region, Targovishte, Haskovo, as well as Dobrich – which have been approved for grant funding under the OP Environment (OPE); and
  • Projects of consolidated WSS operators that are phased between the 2014–2020 and 2021–2027 programming periods (including Plovdiv, Varna, Burgas, Sliven, Pernik), and have been approved for grant funding under OPE; and
  • Other financially viable projects implemented at the level of final recipients, in line with the objectives and eligible activities included in the current version of OPE 2021–2027 and the applicable State aid rules.

TYPE OF LOAN

The type of loan is determined depending on the client’s request, the analysis and assessment of its return, and the credit policy of FLAG. Under this instrument, FLAG may provide:

  • Investment loans for tangible and intangible assets, including:
    • ensuring the necessary co-financing for eligible investments in the WSS sector supported by OPE 2021–2027;
    • stand-alone loans (without combined grant funding) for the implementation of WSS sector investments;
  • Working capital financing, linked to the implementation of the respective investment project and not exceeding the size of the investment financing.

The maximum repayment period must not exceed 240 months (20 years), in line with FLAG’s policy. The term of each loan is determined by the FLAG Board of Directors based on the structure, phasing, deadlines, and size of the project financing.

The maximum grace period, according to the Technical Specification, is 36 months, with the possibility for extension in justified cases and subject to explicit approval by the FLAG Board of Directors.

Own contribution – There are no requirements for mandatory own contribution from the final recipient for the respective project.

Collateral – Borrowers must secure their obligations under the loan agreements with acceptable collateral in line with FLAG’s applicable rules and procedures. The value of the collateral must be sufficient to cover the principal, interest, and any potential costs related to enforcement of the collateral, in connection with the approved financing.

ELIGIBLE AND INELIGIBLE ACTIVITIES

Eligible activities under Eligible Projects include:

  • Infrastructure measures for the collection, conveyance, and treatment of wastewater;
  • Infrastructure measures for water supply contributing to reducing water losses in the supply network and improving the quality of drinking water;
  • Other investments implemented at the level of final recipients, in accordance with the objectives and eligible activities included in the current version of OPE 2021–2027 and the applicable State aid rules.

Support under the Financial Instrument cannot be provided for:

  • Refinancing of existing loans;
  • Financing elements of investments that are physically completed or fully implemented by the date of the investment decision;
  • Decommissioning or construction of nuclear power plants;
  • Investments aimed at reducing greenhouse gas emissions from activities listed in Annex I to Directive 2003/87/EC;
  • Primary production of agricultural products, fisheries, and aquaculture;
  • Production, processing, and sale of tobacco and tobacco products;
  • Purchase of second-hand tangible fixed assets;
  • Enterprises in difficulty, as defined in Article 2, point 18 of Regulation (EU) No 651/2014, unless support is allowed under de minimis aid rules;
  • Investments in airport infrastructure, except for investments in existing regional airports (Article 2, point 153 of Regulation (EU) No 651/2014), in cases of:
    • environmental mitigation measures; or
    • security, safety, and air traffic management systems arising from the air traffic management system;
  • Investments to increase the capacity of residual waste treatment facilities, except for investments in material recovery technologies for circular economy purposes;
  • Investments in landfills;
  • Investments linked to the production, processing, transport, distribution, storage, or combustion of fossil fuels, except for:
    • replacing solid fossil fuel-based heating systems (coal, peat, lignite, oil shale) with gas heating systems, in order to:
      • modernize district heating and cooling systems to the status of “efficient district heating and cooling systems” as defined in Directive 2012/27/EU;
      • upgrade combined heat and power plants to “high-efficiency cogeneration” status as defined in Directive 2012/27/EU;
      • replace coal, peat, lignite, or oil shale heating systems in residential buildings with natural gas boilers;
    • investments in expanding, repurposing, or retrofitting gas transmission and distribution networks, provided they prepare the system for renewable and low-carbon gases (hydrogen, biomethane, synthetic gas);
  • Investments in clean vehicles for public purposes, as defined in Directive 2009/33/EC;
  • Investments in vehicles, aircraft, and vessels designed or adapted for use by civil protection or fire services.

Other ineligible activities include:

  • Production or trade of products or activities considered illegal under the laws or regulations of the host country or under international conventions and agreements;
  • Any economic activity related to pornography or prostitution;
  • Activities forming a substantial part of the main operations of the final recipient related to:
    • production or trade of weapons and ammunition;
    • production of distilled alcoholic beverages;
    • gambling, casinos, and equivalent enterprises;
  • R&D or technical applications of electronic data programs specifically intended to:
    • support excluded sectors mentioned above;
    • enable illegal intrusion into electronic data networks; or
    • enable illegal downloading of electronic data;
  • R&D or technical applications related to:
    • human cloning for research or therapeutic purposes; or
    • genetically modified organisms (GMOs).
  • Ineligible activities and costs under the applicable State aid regime, as outlined in Annex No. 2 Guidelines for implementation of the applicable State aid and de minimis aid rules for the financial instrument.

ELIGIBLE AND INELIGIBLE COSTS

Eligible costs are those incurred for Eligible Activities and for management remuneration, in line with Council of Ministers Decree No. 86/01.06.2023 and Regulation 2021/1060, as well as in compliance with State aid rules.

VAT costs are eligible for investments made by final recipients in the context of the financial instrument. When these investments are supported by both the financial instrument and the Programme in the form of grants, VAT is not eligible for the share of investment costs corresponding to the grant support under the Programme.