Provision of a three-year revolving loan of up to EUR 150 million to Bulgargaz EAD (the "Borrower") under the Resilience and Livelihoods Framework for 1) partial refinancing of the bridge loan received from the Government of Bulgaria for the acquisition of natural gas; 2) acquisition of natural gas. The loan will be guaranteed by the Republic of Bulgaria.
This project was approved in the context of the Bank's response to the Russian-led invasion of Ukraine in February 2022. To avoid delays to the delivery of this project, the Bank's President granted a deviation from the ordinary timelines for PSD disclosure, as contemplated by Section V of the Directive on Access to Information. Details of this deviation, and the Bank's response to this situation, can be found on our website.
The strategic importance of the transaction is driven by the energy security objective to ensure continued and uninterrupted gas supply in Bulgaria during the 2022 winter season and the following years. This is essential to safeguard basic needs and economic livelihoods of the local population. The financing will enable procurement of gas from diversified sources, including from the Balkan Gas Hub and LNG imports in accordance with the EBRD procurement rules to compensate for the discontinuation of deliveries under the pipeline gas contract with Gazprom.
ETI score: 65
The Project will support the Resilient and Inclusive TI qualities:
Resilient: by providing financing to procure gas from diversified sources to compensate for the cancelation of the pipeline gas contract with Russian state-owned Gazprom. Bulgaria relies heavily on Gazprom for up to 75% (and more in previous years) of the gas it imports. With domestic production having been reduced to practically zero over the past few years, natural gas supplies diversification is critical for Bulgaria's energy security.
Inclusive: by (i) providing an emergency facility to prevent gas supply disruptions and maintain a reliable supply of vital energy services in advance of the main heating season; and (ii) promoting human capital development and capacity building for its local workers by introducing a new training programme on market-relevant procurement skills and procedures in line with EBRD's Procurement Policies and Rules. With the Bank's technical assistance, Bulgargaz will build up its capacity to purchase gas on competitive gas markets, including the LNG market, which is a new market for Bulgargaz. Ultimately, this will allow Bulgargaz to secure a portfolio of contracts with different suppliers, and to develop a sustainable long-term supply strategy, which does not depend on a single source.
Bulgargaz EAD is the sole public supplier and the last resort supplier of natural gas in Bulgaria, 100% owned by Bulgarian Energy Holding EAD, a state owned energy holding company 100% owned by the Ministry of Energy of Bulgaria.
EBRD Finance Summary
Total Project Cost
Sources of additionality under the Project are (i) Financing Structure, which effectively bridges a financing gap due to adverse market conditions with a longer than available tenor on the market; (ii) Standard-setting aimed to support the client to develop and adopt a Climate Corporate Governance Plan and climate reporting standards as well as introduction of best practices in terms of procurement of LNG and pipeline gas; and (iii) Risk mitigation helping Bulgaria to mitigate energy security risks and provide predictability of funding and stable pricing.
Environmental and Social Summary
Categorised B (ESP 2019). The independent environmental and social due diligence, consisting of the review of the EIA documents for key storage and transmission facilities and a site visit to selected facilities, that are crucial for the transportation and storage of the purchased gas, is ongoing. Key issues, identified to date, are associated with the excessive CO2 equivalent emissions (above permitted levels in some instances) most probably from the Chiren gas storage and outdated compressor stations. Chiren underground storage is the only available gas storage facility and is subject to the ongoing modernisation funded by EU. Key issues associated with the Chiren UGS include landtake and compensation of affected people, and compliance with SEVESO, IED and ATEX Directives. Some of the gas transmission facilities seem to traverse or be adjacent to protected areas and the Bank will review the Company's approach to managing biodiversity issues. The ESAP for identified risks and impacts will be agreed as a Condition Precedent to Disbursement.
Technical Cooperation and Grant Financing
Company Contact Information
47, Petar Parchevich Str. 1000 Sofia, Bulgaria
PSD last updated
21 Sep 2022
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Independent Project Accountability Mechanism (IPAM)
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