Project Description
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.
Project Objectives
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.
Transition Impact
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).
Client Information
EPSO-G UAB
EPSO-G is the Lithuanian group of energy transmission and exchange companies, 100 per cent owned by the Republic of Lithuania.
EBRD Finance Summary
EUR 40,500,000.00
A bond subscription up to €40.5 million.
Total Project Cost
EUR 93,000,000.00
€135,000,000.00
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.
Additionality
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
N/A
Company Contact Information
Viktoras Baltuskonis
info@epsog.lt
+370 685 84866
https://www.epsog.lt
Gedimino ave. 20, LT-01103 Vilnius, Lithuania
PSD last updated
29 Jul 2022
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.
