Nelja Energia (f. Freenergy)

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The EBRD is considering an equity investment of EUR 22.5 million in Freenergy AS (the “Company”) as part of a two-stage EUR 45 million capital increase, to fund the equity needs for development , construction and operation of the Company’s current portfolio of wind power projects in Estonia, Latvia and Lithuania. The Company may also use the proceeds to acquire and develop further wind farm projects in the Baltic States, Russia or the Eastern Europe. EBRD is proposed to take up to 35% stake in the Company. The investment will support the expansion of the renewable energy markets in the Baltic States through the development and commissioning of the portfolio of wind farms owned by Freenergy. By financing one of the largest and hence most visible wind farm portfolios in the Baltic States the EBRD’s investment will provide comfort to project developers and other private investors and will demonstrate confidence in the renewable legislation thereby solidifying the regulatory regime. Freenergy AS is a company registered in Estonia and is governed by the Estonian Law. The Company is an investment holding vehicle for wind energy assets in the Baltic States and Eastern Europe. The Company’s wind farm assets are developed and managed by Nelja Energia OÜ which is an Estonian project management company partially owned by Freenergy. Equity investment of EUR 22.5 million in Freenergy in two phases as part of a two-stage EUR 45 million capital increase, to fund the equity needs for development and construction of wind projects. EBRD to take up to 35% equity stake in the Company. The proposed exit strategy is an IPO or trade sale within 5 to 7 years, following commissioning of the Company’s existing wind farm portfolio. Confidential. Categorisation and due diligence undertaken: The project has been classified C/1. An environmental and social due diligence covering the Company’s corporate management systems and procedures as well as its wind energy portfolio has been undertaken by the Bank’s environmental specialist and an independent consultant. The due diligence consisted of a questionnaire, review of environmental studies and development documentation, meetings with the Company management as well as site visits to four operating wind farms and to seven wind farms, which are under various stages of development. Impacts: Although the operation of wind farms provide significant environmental benefits in terms of renewable energy and, therefore, carbon reductions, the construction and operation of wind farms may have significant adverse impacts on the local environment and population, depending on the location of the wind farms. The key impacts are associated with avifauna, notably migratory birds, as well as amenity of local communities resulting from landscape changes, noise and vibration. The due diligence showed that these impacts are being or have been identified, assessed and mitigated through Environmental Impact Assessments (EIAs), inclusive public consultations, as required under national environmental law and permitting procedures. The potentially significant impacts of the Company’s operating wind farms are being monitored as determined in EIAs and planning and building permits. This includes periodic monitoring of impacts on migratory birds and bat populations as well as local flora. Mitigation: Based on the due diligence, an environmental and social action plan (ESAP) has been developed to ensure that all projects are structured to meet national law, EU environmental standards and good international practice. Furthermore, given that the Bank’s proceeds will be primarily used for financing of future development of wind and other renewable energy projects in the Baltic Sea region, the Company will adopt and implement environmental and social due diligence procedures based on good international practice that will cover pre-acquisition due diligence, as well as EIA practice and public disclosure procedures. Monitoring: The Bank will evaluate the Company's ongoing environmental and social performance by reviewing annual reports prepared by the Company environmental and social impacts and implementation of mitigation measures on operating wind farms as well as implementation of the due diligence procedures on new projects. The Bank’s representatives will also conduct site supervision visits to both existing wind farms and new projects, when deemed appropriate. None. Mr. Kalle Kiigske Member of the Board Nelja Energia OÜ Estonia pst 1/3 10143 Estonia Tallinn, Estonia Tel: +372 640 9099 Mob: +372 509 2660 Fax: +372 640 9093 Email: kalle.kiigske@4energia.ee