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.
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.
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").
AUGSTSPRIEGUMA TIKLS AS
Augstsprieguma Tikls AS (AST) is the Latvian electricity transmission system operator, 100% owned by the Republic of Latvia.
EBRD Finance Summary
A bond subscription up to EUR 26.2 million.
Total Project Cost
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.
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
Company Contact Information
+371 67 728 353
86 Darzciema str., Riga, LV-1073, Latvija
PSD last updated
05 Nov 2021
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