The Project is a senior unsecured loan of EUR 217 million to JSC Georgian Oil and Gas Corporation ("GOGC" or the "Company"), a major Georgian electricity and natural gas supplier, to refinance a USD 250 million corporate Eurobond maturing in April 2021.
The Project is a response to the COVID-19 pandemic which caused significant shocks on the financial markets and an economic downturn in Georgia. A comprehensive Technical Cooperation ("TC") package will encompass sector reform, corporate level improvements i focused on climate corporate governance and supporting the role of women in technical positions in the energy sector i as well as a TC to identify and quantify the investment requirements in the country to generate and transport green hydrogen as well as to upgrade the Company's assets to transport the blended hydrogen to end users domestically or regionally.
ETI score: 60
Resilient: The loan will ease cash flow pressure and address liquidity constraints for the Company resulting from the significant economic turmoil caused by COVID-19 and the difficulty for the Company to access the capital markets.
Well-Governed: The Bank will assist in the design and implementation of a gas exchange in Georgia. The project involves a comprehensive ESAP, entailing the addition of specific E&S functionality in the Company at the corporate level, and support for development of a strategic long-term roadmap. The Project also includes the development of an Equal Opportunities Action Plan ("EOAP").
GEORGIAN OIL AND GAS CORPORATION
GOGC is 100% owned by JSC Partnership Fund, a national investment fund owned 100% by the Government of Georgia. GOGC's principal activities are electricity generation and supply, natural gas supply, and the ownership and leasing of pipelines. GOGC owns and operates two CCPPs that together supply c.20% of Georgia's total electricity generation and act as a guaranteed source of electricity, to ensure the security and reliability of the electricity system in the country considering the high proportion of intermittent hydropower generation.
EBRD Finance Summary
The loan proceeds will exclusively refinance an existing Eurobond, issued in 2016 on the London Stock Exchange.
Total Project Cost
The Bank is mobilising participation from a number of URP providers.
- Financing structure: EBRD offers essential financing that is currently not available in the market.
- Conditionalities: The project involves a comprehensive TC package, as described above.
- Knowledge, innovation and capacity building: EBRD offers extensive capacity building support and will engage with the Company through the implementation of a corporate level ESAP to better align the Company with international best practices.
- Standard setting: The Company seeks EBRD expertise to incorporate higher gender standards and an EOAP.
Environmental and Social Summary
The project is Categorised as B under the EBRD's 2019 ESP and project appraisal has been carried out by ESD staff in line with EBRD's COVID Response procedure.
ESDD included review of disclosures provided by the Borrower in addition to a series of follow up interviews with the Company's corporate management team. ESDD indicated that E&S governance is currently decentralised to an operational asset level and that the benchmark for E&S performance is Georgian national legal requirements. As a result, an ESAP has been developed, and agreed with the Borrower, which stipulates that the Company will develop a suitably resourced centralised management team; develop policies, procedures and management systems in line with EBRD's PRs; and will review the current and future business activities of the Company against the EBRD's PRs. This is a significant change in management approach and will demonstrate a material positive impact of the EBRD's involvement with the Company by way of this transaction, not least through the Company's commitment to achieve EU Best Available Techniques ("EU BAT") of all operating assets within the Company portfolio.
The proceeds of the transaction (refinancing with no working capital or capex and no identified new development or expansions to existing projects) is unlikely to be associated with increase in the Company's physical footprint or operating base. However, in order to meet the requirements of the ESP and to ensure that the transaction has been structured to meet the EBRD's PRs the Company has agreed to align its corporate E&S management systems with the PRs and develop measures at the corporate level to manage the environmental and social risks associated with its business activity. This includes development of management systems aligned with Good International Practice, reviewing operational assets against EU BAT, and planning new projects in accordance with the PRs.
The Company has confirmed that there is no plan for significant labour restructuring in the coming two years as a result of the COVID pandemic. Should this change, the Borrower would be required to ensure that any such measures be conducted in accordance with PR2 and EBRD Workforce Retrenchment Guidance Note. The Company has disclosed that there are several issues associated with land-acquisition along existing pipeline corridors and the ESAP has committed the Company to resolving such disputes in accordance with Georgian law. Further, the Company has agreed to develop a stakeholder engagement plan and information dissemination procedure, as well as reviewing benefit sharing mechanisms for all future projects commensurate with the risks and impacts of such projects.
The Bank will work closely with the Company to monitor the ESAP implementation in accordance with the limitations of the current COVID-19 restrictions, thereafter, further engagement with the Company will be undertaken.
Technical Cooperation and Grant Financing
- TC1: Identify and quantify the investment requirements in Georgia to generate green hydrogen as well as to upgrade the Company's assets to transport the blended hydrogen to end users.
- TC2: Implement policy-advisory support for the development of a gas exchange in Georgia.
- TC3: Develop and support the adoption of an action plan to improve the Borrower's climate corporate governance, reflecting Task Force for Climate Related Financial Disclosures recommendations.
- TC4: Develop and implement an Equal Opportunity Action Plan to support the role of women in technical positions in the energy sector.
Company Contact Information
0190, Tbilisi, Georgia 21 Kakheti Highway
PSD last updated
22 Sep 2020
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Independent Project Accountability Mechanism (IPAM)
If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).
IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.
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