Graanul Invest Phase II

complete

The EBRD is considering a EUR 24.0m corporate loan to AS Graanul Invest (“Graanul”) to finance part of the construction cost of two new biomass combined-heat-and-power (CHP) plants located in Incukalns, Latvia (the project). The EBRD is also considering a EUR 6.0m second-secured corporate loan to act as a stand-by facility during the construction phase. The new CHP plants would increase the Company’s renewable energy production capacity and bring substantial benefits for the Incukalns pellet plant through operational synergies in wood pellet production. Most Latvian electricity generation capacity is ultimately state-owned. The project will lead to an increase in privately held energy and heat generation capacity in Latvia by a total of about 8 MWe. The project will allow Graanul to produce higher quality wood pellets for residential use in the adjacent Incukalns pellet mill, which in turn will allow the company to increase its sales in the residential segment in Western European markets. The project is expected to be accompanied by a technical cooperation project to assist Graanul in the improvement of its corporate governance practices. AS Graanul Invest, an existing client of the EBRD, is a fast-growing Tallinn-based company primarily engaged in the production of wood pellets. In 2012 Graanul successfully commissioned two new biomass CHP plants in Estonia and in Latvia, which were partly financed by the EBRD. A EUR 24.0m senior secured corporate loan and a EUR 6.0m second-secured corporate loan. EUR 33.0m The Project has been categorised B in accordance with the EBRD Environmental and Social Policy (2008). Environmental and social impacts of the construction and operation of two new small size combined heat and power (CHP) plants are mainly positive due to introduction of renewable energy capacity. Potential adverse impacts are site-specific and efficiently mitigated through introduction of a modern technology, appropriate management and mitigation measures as well as ensuring the woody biomass fuel for the CHPs is of legal and sustainable origin. The environmental and social due diligence has expanded on the independent environmental and social due diligence undertaken for the Bank’s previous project with the Company in 2011, which is summarised in this EBRD Project Summary Document. The investigations showed that the project is structured to meet the Bank’s Performance Standards. The Company has ISO 9001, 14001 and OHSAS 18001 certifications covering its existing operations and plants and is in the process of obtaining these certifications for its Incukalns operations and bringing them under the same corporate management system. The CHPs are designed to meet relevant EU environmental standards including Best Available Techniques (BAT). The existing Environmental and Social Action Plans is being amended to include specific mitigation and management measures for the proposed two new CHP projects in Incukalns. The Company will undertake public disclosure and consultation for the project in accordance with its corporate stakeholder engagement plan. The Company is systematically monitoring and reporting on its environmental, social and health and safety performance under its certified management systems. The EBRD will evaluate the Project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing annual reports prepared by the Company and conducting periodic supervision visits when deemed appropriate. None to date. The Bank is exploring TC funding for an associated project to assist Graanul in improving its corporate governance practices. Rain Silivask, Chief Financial Officer Tel. (372) 669-9876 Web: www.graanulinvest.com