UF Moldova Distribution Company

completed

The project involves making a $25 million loan on IFC''s own account to three electricity distribution companies in Moldova. These companies were privatized in early 2000 and UFACEX was selected as the new owner as a result of an international competitive tender process. The Government of Moldova has made the reform of the power sector a high priority. The basis for the reform is a new energy law that came into effect in 1999. The law sets the stage for the transformation of the sector from a vertically integrated structure into an unbundled structure with various private generators and distributors. The transmission system is expected to remain in government hands. The sector will be regulated by an independent entity that was set up in 1999 under the guidance of the World Bank.The project involves: (a) rehabilitating existing fixed assets to increase reliability and reduce technical losses; (b) improving billing, metering and internal control systems to increase collections and reduce non-technical losses; and (c) providing working capital requirements. The project includes the capital investment programs of the borrowers. The total estimated project cost is $132 million over a five year period, of which $78 million is for the five-year investment program and the remaining $54 million is for working capital and other financing requirements. IFC and the European Bank for Reconstruction and Development (EBRD) plan to finance $25 million each with the balance provided by the borrowers and UFACEX. Thereby, IFC and EBRD are providing long-term financing currently unavailable in Moldova due to the transitional nature of the economy while, also, encouraging much needed foreign direct investment in Moldova.The project’s beneficial impacts are: (i) Better cost efficiency due to a significant reduction in technical and commercial electricity loss;(ii) Improved service to the consumer as a result of a reduction in supply outages; and(iii) A beneficial impact on the balance of payments as the need for electricity imports is reduced due to reduction in losses.