Project number:


Business sector:

Power and energy

Notice type:


Environmental category:


Approval date:

09 Jul 2002



PSD disclosed:

07 Jun 2002

Project Description

The proposed loan would be used to partially refinance the 1997 Mosenergo Eurobond as well as finance priority investments into Mosenergo’s generating capacity. The project is expected to help Mosenergo optimise its balance sheet, finance urgent rehabilitation investments, as well as help it prepare for restructuring and ensure that it is properly carried out, striving for higher levels of transparency and corporate governance throughout the restructuring process.

Transition Impact

The transition impact of the loan derives from the following:
  • Investments in improved generation, which will help Mosenergo reduce losses, increase reliability and be more competitive in the future power market;
  • broadening the market for financing of electricity sector investments by the international financial community through the syndication of the loan in a very difficult market context;
  • The EBRD’s active participation in sector restructuring at the Mosenergo level through:
participation in a Mosenergo Working Group, open to minority shareholders and representatives of RAO UES and local Government, to review the restructuring progress;
covenants that require Mosenergo to consult with the EBRD on the implementation of the restructuring program, including a covenant that requires the EBRD’s consent before any restructuring of Mosenergo is implemented;
  • working in cooperation with the distribution division of Mosenergo and the Federal Energy Commission (FEC) to implement an existing distribution tariff methodology developed by TACIS funded consultants for the FEC in order to:
allow Mosenergo’s distribution arm to provide cost reflective distribution services - a requirement under an unbundled and competitive power market;
help the FEC to test the new tariff methodology on Mosenergo with a view to extending its use to cover all of Russia;
  • promotion of the wider use of Western standard accounting system (GAAP) to be adopted by at least two main successor companies (generation and distribution) upon unbundling of the Company;
  • improvement of the company’s capability to plan and manage project implementation to reduce delays and keep within budget allocations;
  • introduction of adequate environmental reporting procedures in accordance with an agreed Environmental Action Plan.

The Client

Mosenergo, an open joint stock company, Russia’s largest vertically integrated utility responsible for producing and supplying the majority of the power and heat demand of Moscow and the surrounding region. Mosenergo is 50.9 per cent owned by RAO UES, the national grid and power holding company.

EBRD Finance

US$ 70 million (€74.6 million) corporate loan. Up to (€37.3 million) will be syndicated to commercial banks.

Project Cost

 US$ 70 million (€74.6 million).

Environmental Impact

The Project was screened as B/1, requiring an environmental analysis (EA) of the proposed power unit renovation, an audit of the existing facilities at the project site and a corporate review of environmental, health and safety (EHS) performance and management of Mosenergo's power production operations. The investigations were carried out by independent consultants.
The EA showed that the EHS impacts of the power unit renovations will be mainly positive and any adverse impacts of the construction works are likely to be very limited in both time and extent. The main environmental benefits will be achieved through reduction of air emissions and fuel consumption as well as efficiency increase.
The corporate environmental review, carried out in May-June 2002, took account of information received during the preparation of the first loan in 1996 and provided to the Bank in the annual environmental reporting of the Company. The review resulted in an Environmental Action Plan (EAP), which was developed to complement the Company's Programme of Environmental Actions for Existing Energy Facilities to the year 2010 to meet the Bank's requirements. The implementation of the EAP will significantly improve the Company's environmental performance and ensure that the Company meets relevant Russian, EU and World Bank environmental and health and safety standards.

Technical Cooperation

Proposed funding for the implementation of the Distribution Tariff Methodology developed by European Commission TACIS funded consultants for the Federal Energy Commission.

Company Contact


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