AES Telasi

complete

Post-privatisation renovation, modernisation and provision of working capital for AES Telasi's distribution network servicing the capital city of Tbilisi. The EBRD will provide debt financing to AES Telasi to finance initial working capital and critical investments in consumer re-metering, billing and information technology, and network components to create a modern, efficient and commercial electricity distribution company. The project is expected to improve efficiency of distribution to the consumer and greatly improve collections necessary for reinvestment and modernisation in the sector as a whole. The project will support private sector investment within the newly developed regulatory framework and is expected to demonstrate the benefits of private management. In addition, the project provides opportunities to contribute to the evolving regulatory framework in Georgia. It should improve sector finance by raising collections to commercial levels, leading to efficient consumption decisions. Financial stability in the distribution sector should improve prospects for existing and future upstream investments. AES Telasi, the newly privatised electricity distribution company servicing the capital city of Tbilisi and the surrounding region, provides electricity at the retail level (medium and low voltage) to approximately 370,000 customers. Telasi is 75 per cent owned by AES Silk Road BV, a subsidiary of AES Corporation of Arlington, Virginia (United States). The EBRD expects to lend US$ 30.0 million (EUR 28.8 million) for a 13-year corporate loan, together with US$ 30.0 million (EUR 28.8 million) in loans from the International Finance Corporation (IFC). US$ 147.0 million. The project was screened as B/0, requiring an environmental analysis of the proposed investment. The analysis was completed by an environmental consultant retained by AES, and included an environmental audit of Telasi’s facilities. The report and due diligence were reviewed and accepted by both EBRD and IFC environmental specialists. The EBRD carried out on-site environmental due diligence and conducted interviews with Telasi management. The main issues identified during the environmental investigations relate to oil leaks from transformers, inadequate safety provisions and high accident risk at the distribution points. Most of the problems are the result of inadequate management in the past and are being addressed by AES Telasi. Two samples of transformer oils were collected by the consultant and analysed for PCB-contamination. PCB concentrations in both samples were within the level accepted in the European Union and the United States. The sponsor agreed to carry out PCB tests of oil during planned transformer maintenance and repair. An Environmental Action Plan (EAP) has been developed based on the Bank’s due diligence, as augmented by the consultant’s findings. The EAP has been discussed and agreed with AES Telasi management. Its implementation will bring the company’s operations in line with accepted international environmental and health and safety standards. The EAP includes the following actions: The project will also assist in introducing best industrial environmental and health and safety management practice to the Georgian electricity distribution industry. None.