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EBRD lends LukOil USD 150 million in the second-biggest Russian deal ever made by the Bank
In a sign of renewed confidence in Russia, the European Bank for Reconstruction and Development (EBRD) is providing a US$ 150 million (€165 million) medium-term working-capital loan to LUKOIL, the leading Russian oil company. The three-year facility will provide a sufficient and stable level of working capital for export-related payments, crude-oil production and oil processing at LUKOIL refineries in Russia. "LUKOIL’s current lack of external financing limits its growth opportunities. Our loan will provide a reliable source of working capital financing and will be an integral part of the company’s longer-term development plans," said Peter Reiniger, head of the EBRD’s Industry and Commerce Group. "We think that helping Lukoil do a good job with its ongoing privatisation could set a good example for the rest of Russia, " he added.
The loan underlines LUKOIL’s continued efforts to increase financial transparency, such as through the inclusion of a timetable for the publication of financial statements according to international standards. At the same time, it highlights the interest of both LUKOIL and the EBRD to work with the appropriate Russian authorities to address transparency issues related to the recent sale of LUKOIL shares to Reforma Investments.
LUKOIL and the EBRD also recognise that any future privatisation of LUKOIL shares presents an ideal opportunity to set a precedent for other Russian corporations through an initial public offering (IPO) on a major stock exchange. Both LUKOIL and the EBRD are committed to working with the Russian Government to implement a straightforward and transparent IPO privatisation in accordance with widely accepted "book-building" standards. This would be arranged through a consortium of leading Russian and international investment banks.
In addition, the transaction will contribute to the improvement of LUKOIL’s environmental standards. The company has committed to develop a new environmental management system and a programme of environmental safety. This includes increasing associated gas utilisation, waste minimisation and improvement of waste storage practices.
The US$ 150 million facility, secured by the assignment of crude-oil export contracts represents a further step in the long-term relationship between the EBRD and LUKOIL. To date, the Bank has financed two projects involving LUKOIL: the Chirag Early Oil project in Azerbaijan (up to US$ 200 million in 1999) and the Permtex Joint Venture in Russia (US$ 45 million in 1999). Under the conditions of the Chirag project, LUKOIL has maintained its commitment to provide detailed financial information to a consortium of international banks led by the EBRD and the International Finance Corporation. Permtex implemented and continues to prepare financial accounts according to internationally accepted standards.
The deal is the EBRD’s largest in Russia since a US$ 174 million loan to Western Siberia Oil and Gas Rehabilitation in 1993.
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