RAO UES RESTRUCTURING LOAN.
Power and energy
04 Sep 2001
04 Sep 2001
The proposed project concerns: (a) the refinancing of short-term debt, including overdue accounts payable as part of the financial restructuring of the company prior to privatisation; and (b) the financing of urgent priority investments for the improvement in the efficiency of operations of the company.
Project objectives: The project is expectged to help RAO UES to prepare for industry restructuring and insure that it is properly carried out, striving for higher levels of transparency and corporate governance throughout the restructuring process.
The transition impact of the loan derives from the following:
investments in improving transmission and communication, which will help the development of the competitive wholesale energy market to be established as part of the electricity reform programme and reduce losses;
consolidation of the debt of RAO UES which will facilitate the restructuring and unbundling which is also part of the electricity reform programme;
help in establishing an efficient market for trading carbon credits;
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;
improvement in the procurement procedures used by RAO UES in line with the Bank's standards and requirements;
establishment of a Working Group with participation of the Bank, open to minority shareholders and representatives of the Government to review progress of the restructuring; and
covenants that require RAO UES to consult with the Bank on the implementation of electricity reform.
RAO UES is a holding company with investments in many parts of the Russian power sector. The company owns and operates the national grid and three power stations with a total installed capacity of 2.1GW. It holds equity stakes in 46 large stand-alone power stations (59 GW) as well as in most (70 out of 72) of the regional vertically integrated heat and power companies that have a monopoly on sales to the final consumer.
A €100 million corporate loan, with €50 million to be syndicated to commercial banks.
The project was screened as C/1. The environmental issues likely to be associated with this transaction could include environmental liabilities associated with past and current operations of the company's facilities, compliance with environmental, health and safety regulations, and general corporate environmental practices of RAO UES. An environmental management review has been carried out that concentrated on corporate practices based on information available at corporate level. The company’s environmental and health and safety programmes are currently being reviewed by the Bank's environmental staff. The company is in the process of updating its ten-year environmental programme. Another initiative of RAO UES is the establishment in 2000 of an Energy Carbon Fund to help reduce greenhouse gas emissions in the sector.
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