AS Augstsprieguma Tikli

Location:

Latvia

Project number:

52822

Business sector:

Electric Power Transmission, Control & Distribution

Notice type:

State

Environmental category:

B

Approval date:

29 Sep 2021

Status:

Signed

PSD disclosed:

05 Nov 2021

As permitted by paragraph 2.6 of Section III of the Access to Information Policy, disclosure of this PSD was deferred in accordance with paragraph 1.4.4 of the Directive on Access to Information.

Project Description

Subscription of up to EUR 32 million in green bonds issued by AS Augstsprieguma Tikli (AST), a Latvian energy utility company (the "company"), under a EUR 160 million green bond programme. The bonds are to be listed on the Nasdaq Riga exchange.

Project Objectives

The proceeds from the green bond issuance programme will be used to refinance existing loans associated with the unbundling of transmission assets in Latvia in line with EU regulations. AST will also use the proceeds to finance part of the capital expenditures represented by reconstruction and upgrades of existing transmission assets to enable large-scale integration of renewables into the Latvian power system and synchronise the Baltic electricity network with that of continental Europe.

Transition Impact

ETI score: 60

The operation is 100% compliant with the EBRD's Green Economy Transition approach, delivering climate mitigation benefits through efficiency in the electricity transmission grid ("Green"). The operation will also contribute to local debt capital market development which suffers from lack of investable securities and poor secondary market liquidity ("Resilient").

Client Information

AUGSTSPRIEGUMA TIKLS AS

Augstsprieguma Tikls AS (AST) is the Latvian electricity transmission system operator, 100% owned by the Republic of Latvia.

EBRD Finance Summary

EUR 26,200,000.00

EUR 26,200,000.00

A bond subscription up to EUR 26.2 million.

 

Total Project Cost

EUR 154,200,000.00

EUR 160,000,000.00

The company expects to issue up to EUR 160 million in green bonds. On 13 October 2021, the Company issued the first tranche under the bond programme for an amount of EUR 100 million. The bond proceeds will be used to (i) refinance electricity transmission assets transferred as part of the TSO unbundling, and (ii) finance investments in reconstruction and upgrades of the existing the electricity transmission network.

Additionality

Financing structure and risk mitigation: The Bank's financing is to provide a strong signal to the market, close the funding gap and facilitate a successful placement in the current market conditions.

Environmental and Social Summary

Categorised B (2019 ESP). The Project is a capital markets transaction (Green Bond issuance) and the Bank's due diligence has been limited to a review of publicly available documents by ESD. The in-house due diligence was based on publicly available information, questionnaires and discussion with the Company. The level of available information allowed for adequate assessment of environmental and social risks of this Project in accordance with the Bank's 2019 ESP. The use of proceeds is focused on refinancing of constructed power transmission lines and upgrade of substations and will explicitly exclude any new category A projects. The bond issuance is in line with the International Capital Market Association's ("ICMA") Green Bond Principles ("GBP"), as verified by a second party opinion ("SPO").

The ESDD has reviewed the status of compliance and the Company's approach to environmental and social governance ("ESG") principles and capacity to implement the Bank's PRs. The ESDD focussed on a corporate- level review of the Company's management systems, sustainability strategy, policies and operations and its current compliance status as well as a desk top review of the power lines project that have been recently constructed and the planned upgraded of substations.

Overall, AST has a good compliance record and is developing corporate EHS management systems and no material non-compliance issues have been identified. It has a dedicated EHS management team and develops sustainability reports for the group however these will need to be strengthened in the future to take account of EU Corporate Sustainability Reporting Directive (CSRD) as well as the EU Taxonomy. The ESDD confirmed that the Company has the institutional capacity to implement the Bank's Performance Requirements. 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 Company's EHS practices are in compliance with national regulations, which are aligned with EU law.

An ESAP has been developed based of the findings of the ESDD and will include requirements relating to, among others, strengthening of non-financial reporting in line with best practices and EU guidelines on climate related information. This includes a commitment to implement TCFD recommendations as part of EU CSRD implementation in the future. The ESAP also requires that i) if the Company was to develop projects in sensitive areas or of sensitive habitats, those would need a full ESIA in line with the Bank's E&S policy and EU EIA Directive; ii) AST undertakes every 3 years an independent assessment of its E&S performance. The EBRD proceeds will not be used for any new Category A projects.  The Company does not own any generating capacity and will not invest in any in the future. The ESAP will be included in the Framework Agreement to be signed before subscription. Additional information on the Company can be obtained here: https://www.ast.lv/en/content/sustainability-reports

The Bank will monitor the Company's performance through reviewing annual reports prepared by the Company and published on its website.

Technical Cooperation and Grant Financing

n/a

Company Contact Information

leva Varakalne
ast@ast.lv
+371 67 728 353
www.ast.lv
86 Darzciema str., Riga, LV-1073, Latvija

PSD last updated

05 Nov 2021

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

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Environmental and Social Policy (ESP)

The ESP and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”.  The ESP and the PRs include specific provisions for clients to comply with the applicable requirements of national laws on public information and consultation as well as to establish a grievance mechanism to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project. Proportionate to the nature and scale of a project’s environmental and social risks and impacts, the EBRD additionally requires its clients to disclose information, as appropriate, about the risks and impacts arising from projects or to undertake meaningful consultation with stakeholders and consider and respond to their feedback.

More information on the EBRD’s practices in this regard is set out in the ESP.

Integrity and Compliance

The EBRD's Office of the Chief Compliance Officer (OCCO) promotes good governance and ensures that the highest standards of integrity are applied to all activities of the Bank in accordance with international best practice. Integrity due diligence is conducted on all Bank clients to ensure that projects do not present unacceptable integrity or reputational risks to the Bank. The Bank believes that identifying and resolving issues at the project assessment approval stages is the most effective means of ensuring the integrity of Bank transactions. OCCO plays a key role in these protective efforts, and also helps to monitor integrity risks in projects post-investment.

OCCO is also responsible for investigating allegations of fraud, corruption and misconduct in EBRD-financed projects. Anyone, both within or outside the Bank, who suspects fraud or corruption should submit a written report to the Chief Compliance Officer by email to compliance@ebrd.com. All matters reported will be handled by OCCO for follow-up. All reports, including anonymous ones, will be reviewed. Reports can be made in any language of the Bank or of the Bank's countries of operation. The information provided must be made in good faith.

Access to Information Policy (AIP)

The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form.

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.

Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM  via email ipam@ebrd.com to get guidance and more information on IPAM and how to submit a request.

 

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