E.ON Energie Romania

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The project is a purchase of minority equity stake in a Romanian holding company from E.ON Energie Group, the indirect owner of 51% of the shares in E.ON Moldova, an electricity distribution company supplying north- eastern Romania. Through this transaction EBRD shall have an indirect 5 per cent stake in E.ON Moldova (formerly Electrica Moldova), the operating company which was privatised to E.ON Energie Group in October 2005 through a transparent, public, international, and competitive tender. The objective of the project is to support and facilitate the efforts made by E.ON Energie Group to realise technical and operational improvements to develop best international practices (including all necessary measures in respect to restructuring and improvements of the local business) over time in the two operating companies. The Government of Romania pre-approved EBRD as a permitted transferee to which investors interested in the privatisation of electricity distribution companies could sell shares. The indirect participation of EBRD in E.ON Moldova S.A would therefore be in accordance with the terms and conditions set forth in the privatisation agreements between the Government of Romania and and E.ON Energie Group. Bank's potential participation will support the on-going privatisation, liberalisation and modernisation of the power sector in Romania, in line with the EU directives on Power and with the South East Europe Regional Energy Market. Specifically the Bank will: support private participation in electricity distribution sector; support the establishment of a transparent tariff methodology, based on pass-through of unavoidable costs, fair return on invested capital, and adequate incentives to improve operational efficiency and its monitoring; provide a degree of support against regulatory risk; facilitate modernisation of assets and improvements in operational and financial efficiency of distribution companies; indirectly, catalyse competition and further private participation in the electricity industry. The electricity distribution company E.ON Moldova S.A is based in Bacau and supplies 1.3 million customers in the north-eastern part of the country. This transaction involves the purchase of 9.8% equity stake in E.ON Energie Romania, a holding company established by E.ON Energie Group to hold 51 % of E.ON Moldova – the balance of 49% ownership is held by the Government of Romania. Approximately EUR 11million The project was screened C/1 requiring an environmental audit of the two existing distribution networks and facilities to identify the current environmental, health and safety policy and practices and potential environmental, health and safety liabilities. The environmental due diligence will (i) review existing pre-privatisation audits and other environmental data (ii) address corporate environmental, health and safety issues (iii) review selected facilities to identify potential liabilities (iv) establish the current status of compliance with Romanian and EU environmental health, safety and public consultations requirements. There are likely to be considerable environmental opportunities associated with this project given the environmental experience and track record of the investors. None. Manfred Wirsing Head Corporate Development - Europe E.ON Energie AG Email: manfred.wirsing@eon-energie.com