Banat & Dobrogea Electricity Distribution Privatization Partial Risk Guarantee

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The Partial Risk Guarantee (PRG) for the Privatization of the Banat and Dobrogea Electricity Distribution Companies (Discoms) Project seeks to support Romania's energy sector privatization program, by enabling the Government of Romania and Enel S.p.A. of Italy, implement their Privatization Agreements regarding both distribution companies, under the new regulatory framework for electricity distribution. The proposed terms are: PRG of up to a maximum of seven years, with a proposed risk coverage as follows: the PRG will backstop the Government of Romania's debt obligation to a commercial bank (the L/G Issuing Bank) to compensate Banat and Dobrogea Discoms for loss of revenues resulting from a change, or repeal by the Government, or Romania's National Energy Regulatory Authority (ANRE) of, or a non-compliance by ANRE with, the provisions of the pre-agreed regulatory framework. Pursuant to the privatization strategy, the Government agreed to sell its majority shareholding in each of the two Electrica-owned distribution companies, to the strategic investor Enel, although a minority shareholding will be retained by Electrica. Under the Concession Agreement, the Discoms will be granted a 49-year concession for the purpose of : 1) Planning and performing the operations and maintenance, construction, repairing, renewal, refurbishment, modernization, and development of the distribution networks; 2) Planning, forecasting and scheduling the dispatch of electricity; and, 3) Ensuring third party access to the distribution network and services, and the management of customers. The key performance indicators that would be used to assess the fulfillment of the project's development objectives in terms of outcomes and outputs have been defined accordingly to: a) Transactions effective by the January 12, 2005 deadline of the Privatization Agreements; and, 2) Price-cap tariffs effective - target dates are January 2005 (for the first, 3-year regulatory period), and January 2008 (for the second, 5-year regulatory period) - and maintained by ANRE without deviations.