Transgaz Carbon Credit Transaction

complete

The proposed transaction aims at supporting the on-going privatisation and liberalisation of the Romanian energy sector in accordance with best practice for this class of asset. The Bank participation as equity owner in Transgaz will support the Company in its role as guarantor of the competitive non-discriminatory third-party access in the domestic gas market. The proposed project will build capacity in Transgaz to generate what will be the single largest carbon emission projects in Romania to date demonstrating the possibility to use carbon credits as a new financing mechanism (cash flow enhancement mechanism). The transition impact comes from the demonstration of carbon financing as a new financing mechanism: the proposed transaction will be the first carbon credits transaction in the gas sector in Romania, and will introduce a product, the Emission Reduction Purchase Agreement (“ERPA”) for purchase of Transgaz’s Emission Reduction Units. This would therefore contribute to demonstrate the possibility to use carbon credits as a cash flow enhancement mechanism. The Bank’s participation in the proposed IPO will continue the on-going Bank’s support to the Romanian gas sector unbundling and privatisation. The Bank will continue to assist Transgaz with project implementation. S.N.T.G.N. Transgaz SA (“Transgaz”) is the Romanian natural gas transmission company that was undergoing a partial privatisation through capital increase at initial public offering, for 10 per cent (post capital increase) of the company’s shares. It is headquartered in Medias, Romania. Equity investment in the Company for RON 2,565,202 post allocation at initial public offering stage. Total value of the shares offered for subscription under the IPO is RON 2.26bn, representing 10% of Trangaz’s share capital post capital increase. Screened C/1. During an environmental due diligence visit an environmental specialist of the Bank reviewed the current compliance status and planned improvement programmes. Environmental issues are associated with gas emissions due to leakages and noise at the compressor and distribution stations. An energy audit has been conducted on Transgaz, which resulted in a list of actions to reduce emissions and improve efficiency. The implementation of these actions will result in significant green house gas emission reductions. The company has an ISO 14001 certified environmental management system and has developed a programme to bring its operations into compliance with EU environmental standards and implement an OHSAS 18000 certified health and safety management system by 2013. A EUR 25,000 project preparation grant was made available by the “Industrial Energy Efficiency Programme” sponsored by the Dutch Government.