Тhe Public Sector Loan Facility – another way of financing the just transition in regions

Meeting climate target objectives requires a lot of money, in addition to other things – there is no going around that simple fact. That reality is even more pronounced in regions with carbon-intensive economies where the main source of income generation is gradually turning into a liability thanks to the new phase of the Industrial Revolution where the focus lies on smarter and cleaner production and carbon emissions have become an expense.

The Just Transition Fund (JTF) is quickly gaining a more prominent profile as the main financing instrument of the EU’s Cohesion Policy to regions eligible for support. However, the JTF is just one of the three funding pillars through which the Just Transition Mechanism (JTM) is providing such support.

There is also the Public Sector Loan Facility (PSLF), which has been described as the third pillar of JTM. It generates funding differently since it combines European Investment Bank loans and European Commission grants that candidate authorities can apply for as a package.

The application process for the grant-loan mix is a one-stop-shop experience managed by CINEA (The European Climate, Environment and Infrastructure Executive Agency) on behalf of DG REGIO.

Experts, authorities and media reps got together at one of the European Week of Regions and Cities sessions to discuss and learn more about this financing instrument.

Nantes is already benefitting 

Pascal Lamanda, Director General of Nantes Metropole shared his city’s experience with the PSLF. The facility lined up well with the mission of the French metropolis to accelerate its ecological transition, especially in the field of mobility.

The successful application mobilized 400 million euros for the plan, of which 50% in the form of an EIB loan and 15% as a CINEA grant. The scope of the project focuses on boosting sustainable mobility through 4 major investment points: the purchase of 46 new tram units, construction of new tech and maintenance centre with a parking lot, modernization of the regional railway network and construction of 38 km of new cycling lanes.

It provides (a sense of) security in terms of financing for the future,” said Pascal Lamanda.

Applicants can rely on advisory support

Krasimir Nenov, the Deputy Minister of Energy of Bulgaria, was also present at the talk. He delved into the advisory support service offered by the PSLF.

Until only a couple of years ago, 40% energy in Bulgaria came from locally mined lignite. This proved important for strategic reasons, such as the 2022 energy crisis when Bulgaria exported electricity to meet regional demand. Two years later, though, energy production has fallen by half, one of the main coal-powered plants has already shut down because energy transition is happening much faster than anticipated.

We managed to complete the 3 territorial plans just before Christmas 2023 thanks to support from DG Regio, so we could submit them for approval. The challenge was to identify the most meaningful economic opportunities for 12,000 people facing an uncertain future,” explained Nenov.

The Bulgarian government reached out to EIB Advisory to get ideas about the most promising solutions that can lead to new economic opportunities and benefits.

There’s a need to identify meaningful sources of income for the transition. PSLF can certainly be one of these important facilities for finance this transition,” added the Bulgarian deputy minister.

In that regard, he had the following advice for prospective applicants: “Make sure that the project is aligned with the objectives, such as sustainability, that it provides value for the community and that it makes commercial sense. It’s good to bring early on competent advisory to make sure that all the elements are covered.”

The quality of application is also important, the structuring of the investment case must be properly done. However, it is still a good option to have for local authorities as traditional financing may not be available for transition projects.

Awareness is still lacking

As useful as the PSLF is the fact is that it has gotten off to a rocky start, in part due to the lesser awareness around it on part of the potential beneficiaries.

Last year, 7 projects had been approved for funding. This year, 12 have already been signed with 5 more projects already approved for finalization next year. DG REGIO, however, informed that in the second call of the facility (for the years 2026 and 2027) there will be a change in the way the grants will be assigned on a “first come, first serve” basis. That’s why, its imperative that applicants hurry up and prepare their applications as soon as possible as there are three cut-off application dates in 2025 to close the first call of the facility.

There has been a marked geographical concentration in terms of applications and approved projects, according to Emma Toledano from DG REGIO. Some countries, such as France, have been quicker to apply and get funding, but the European Commission wants all countries to benefit from PSLF. EIB and CINEA promised to launch an outreach campaign in the coming months to inform the public about the last window of opportunities for this call.

There is one important quality, however, that prospective applicants need to develop when embarking upon this funding generation journey – it’s called anticipation.

As Pascal Lamanda, from Nantes Metropole, explained it: “You have to prepare one and a half years waiting time for approval of loan”.

There are some other particularities that make the application process more complex. Apart from expenditure justification, project plans must clearly show what the expected social impact will be. For example, Nantes Metropole included free weekend use of the trams to be bought as a way of boosting SME businesses in the centre of the city.

The plans must make provisions for close collaboration between technical and financial departments, as there’s a lot of data exchange. In the words of Deputy Minister Krasimir Nenov:

It’s not just a loan, it’s a vision for a project”

It pays to acquaint oneself with the information and to be prepared. CINEA employees are there to provide support in addition to EIB advisory services.

Co-Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the Managing Authority. Neither the European Union nor the Managing Authority can be held responsible for them.