Moldova Power Distribution Equity Investment

complete

The project consists of a minority equity investment alongside Union Fenosa Internacional of Spain (UFISA), a strategic investor, in three power distribution companies located in Chisinau and the central and southern regions of Moldova. Purchase from UFISA minority interests in three power distribution companies. EBRD involvement has been requested by UFISA to help mitigate political risk. The project supports the continuing privatisation of the electricity sector in Moldova and the development of management know-how and technology, which should lead to collection and performance improvements. UFISA. (Spain), the sponsor, is a wholly owned subsidiary of Union Electrica Fenosa S.A., a major private Spanish utility with electricity distribution experience in emerging markets. In February 2000, UFISA purchased a 100 per cent stake in three Moldovan power distribution companies (RED Chisinau, RED Centru and RED Sud). UFISA has requested that the EBRD becomes a minority co-investor in these three companies. The EBRD has purchase from UFISA shares in the three power distribution companies for an aggregate price of US$ 5 million (€5.16 million) for an equity stake of up to 18.6 per cent in each of the companies. US$ 5 million (€5.16 million). The project was screened C/1, requiring an environmental audit of the three regional electricity distribution companies (REDs). The audit, carried out by independent consultants, did not reveal any major environmental, health and safety concerns. The issues identified included possible PCB use, safety upgrades of the sites, improvements to fuel storage areas, hazardous waste handling and "housekeeping". Measures have been included in Environmental Action Plans (EAPs) for the REDs to address these issues. In addition, recommendations were made regarding general environmental management at the REDs. The EAPs will be agreed with UFACEX in the Share Purchase and Shareholders’ Agreement. The project offers the opportunity to steer the companies towards environmental management practices in line with Western standards. This includes, over and above compliance issues, improved resource use, energy efficiency at facilities, reduction of distribution losses and improved materials and waste management. The implementation of the project would result in the reduction of carbon dioxide emissions by approximately 30,000 tons per annum after 2005. Legal due diligence (€149,130 from Japan; €50,000 from Canada); financial and technical due diligence (€133,621 from Greece; €57,940 from Japan).