A subscription of up to €40.5 million in sustainability-linked bonds (SLB) issued by EPSO-G, a Lithuanian state-owned group of energy transmission and exchange companies (the Company", under a €135 million sustainability-linked bond programme. The bonds are listed on the Nasdaq Baltic exchange as of 15 June 2022. The Bank already subscribed to €22.5 million out of the €75 million issued under the programme.
The proceeds from the SLB issuance programme will be applied solely towards general corporate purposes. The Company is however intending to direct the Bonds proceeds towards its investment programme which is focused on the electricity grid synchronisation programme with the EU network, the implementation of a 200 MW energy storage project and electricity grid renovation to allow for connecting more renewable energy capacity.
ETI score: 65
The operation will contribute to the local debt capital market development which has suffered from a lack of investable securities and poor secondary market liquidity ("Resilient" transition quality). The operation will be 50 per centGreen Economy Transition (GET) compliant, contributing to climate mitigation through improving energy efficiency by implementing transmission network synchronisation projects and improving grid interconnectivity, to allow for additional RES generators to be connected to the transmission network ("Green" transition quality).
EPSO-G is the Lithuanian group of energy transmission and exchange companies, 100 per cent owned by the Republic of Lithuania.
EBRD Finance Summary
A bond subscription up to €40.5 million.
Total Project Cost
The Company expects to issue up to €135 million bonds. The bond proceeds will be directed towards electricity transmission investments, including financing synchronisation of the electricity grid with the EU network, renovating the grid to allow for connecting more renewable energy capacity and financing energy storage facility.
Financing structure, Risk mitigation: The Bank's financing is expected to provide a valuable signal to the market, close the funding gap and facilitate a successful placement in the current market conditions given the current material change in investor sentiment towards emerging markets in general (and the Baltic countries in particular) since the start of the war in Ukraine. Standard Setting: The Bank will support EPSO-G to enhance its gender standards in line with international best practice by developing an Equal Opportunities Action Plan, including setting a target for increasing the share of women in executive positions, and introducing improved HR standards.
Environmental and Social Summary
Categorised B (2019 ESP). The Project is a capital markets transaction (SLB 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 bond use of proceeds are expected to be utilised for reconstructing power transmission lines, new battery storage facilities, and reduction of methane leakage, as well as upgrade of substations and will explicitly exclude any new category A projects. The bond issuance is in line with the Sustainability Linked Bond Principles ("SLBPs") and with the Paris Agreement goals, as verified by a second party opinion ("SPO").
The in-house 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 desktop review of the power lines projects that have been recently constructed and the planned upgrades of substations.
The Company 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 into account the 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 includes requirements relating to, among others, strengthening of non-financial reporting in line with best practices and EU guide 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 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. As part of the ESAP, the Company commits to undertake 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 is included in the Framework Agreement. Additional information on the Company can be obtained here: https://www.epsog.lt/en/reports/investors
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
+370 685 84866
Gedimino ave. 20, LT-01103 Vilnius, Lithuania
PSD last updated
29 Jul 2022
Further information regarding the EBRD’s approach to measuring transition impact is available here.
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Environmental and Social Policy (ESP)
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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).
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