A subscription of up to EUR 60 million in green bonds issued by Latvenergo AS, a Latvian energy utility company (the "company"), under a EUR 200 million green bond programme. The bonds are to be listed on the Nasdaq Riga exchange. On 7th May 2021, the Bank subscribed EUR 3 million out of the EUR 50 million first tranche issued under the programme.
The proceeds from the green bond issuance programme will be used to renovate the company's distribution network, and partly finance the rehabilitation of three hydro power plants in Latvia. The investments will contribute to integration of more renewable sources into Latvia's electricity network, especially small and medium-sized solar and wind projects as well as increasing the reliability of the country's energy supply.
ETI score: 61
The operation will be 100% GET compliant, delivering climate mitigation benefits through energy efficiency and the upgrade of low-carbon energy generation ("Green" transition quality).
The operation will contribute to the local debt capital market development which suffers from a lack of investable securities and poor secondary market liquidity ("Resilient" transition quality).
Latvenergo AS is the Latvian state-owned energy utility company, 100% owned by the Republic of Latvia and one of the largest power suppliers in the Baltic states. The company operates in (i) electricity distribution, and (ii) electricity and heat generation and trade.
EBRD Finance Summary
A bond subscription up to EUR 60 million.
Total Project Cost
The Company expects to issue up to EUR 200 million bonds. The bond proceeds will be used to finance (i) investments in the electricity distribution network, (ii) the rehabilitation and upgrade of three existing hydro power plants, and (iii) environmentally sustainable management of living natural resources and land use.
Financing structure and Risk mitigation: The Bank's financing is to provide a valuable signal to the market, close the funding gap and facilitate a successful placement in the current uncertain debt capital market environment, given the Covid-19 pandemic.c
Environmental and Social Summary
Categorised B (2019 ESP). The Project is a capital market transaction and the Bank's due diligence has been limited to a review of publicly available documents, questionnaires and discussion with the Company's EHS management by the ESD specialists which allowed the ESD to undertake an adequate assessment of environmental and social risks and impacts of this Project in accordance with the Bank's 2019 ESP. The Bank has previously provided financing to the Company (Riga CHP-2 CCGT Project) and has undertaken a high level due diligence of the Company in the past. The Company publishes its annual non-financial information reporting in line with EU requirements. The Green Bond characteristics of the issuance have been reviewed by Treasury and ESD experts who found it meeting the Bank's criteria for Green Bond investments, allowing the Bank to publicly recognise the issuance as a Green Bond.
The Bank's use of proceeds will be allocated through conditions in the Framework Agreement to the strengthening of the electricity distribution network, needed for the development of renewable energy projects and energy efficiency. The Company will also upgrade existing three hydropower plants to increase efficiency as part of the bond programme. The Bank reviewed these investments as well as corporate EHS management as part of the ESDD. Latvenergo has a dedicated EHS management team, which is developing corporate EHS management systems and has the institutional capacity to implement the Bank's Performance Requirements. It develops sustainability reports for the group and individually for some subsidiaries. Those reports show that, overall, Latvenergo has a good compliance record and no material non-compliance issues have been identified. Latvenergo has focused on renewable energy generation and upgrade of existing CHPs and does not operate any coal-fired assets. The ESDD has also confirmed that the Company has good HR Polices in line with best practice and is implementing COVID-19 response measures.
The EBRD proceeds will not be used for any Category A projects and the Company will not invest in any coal fired units in the future.
An ESAP has been developed based of the findings of the ESDD and in addition to the above, it includes requirements relating to, among others, strengthening of non-financial reporting in line with best practices and EU law and associated guidance on climate related information. The ESAP further requires that if the Company was to develop projects in sensitive areas or of sensitive nature, those would need a full ESIA in line with Bank requirements. The ESAP has been agreed with the Company and is included in the Framework Agreement.
The Bank will monitor the Company's performance through reviewing annual reports prepared by the Company and site visits as deemed necessary.
Company Contact Information
+371 67 728 222
Pulkvea Briea street 12, Rīga, LV-1230, Latvija
PSD last updated
14 Jun 2021
Further information regarding the EBRD’s approach to measuring transition impact is available here.
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