Aksa Enerji Bond

Location:

Turkey

Project number:

48173

Business sector:

Power and energy

Notice type:

Private

Environmental category:

B

Target board date:

24 Feb 2016

Status:

Signed

PSD disclosed:

28 Jun 2016

Translated version of this PSD: Turkish

Project Description

The Bank has subscribed TRY 100 million (EUR 30.3 million) in Aksa Enerji A.S.'s latest TRY 200 million (EUR 60.5 million) local currency bond issuance. This issue is part of the company's TRY 500 million (EUR 152 million) bond programme as approved by the Capital Markets Board of Turkey.

Project Objectives

Successful placement of the bond supports Aksa Enerji to diversify its funding sources and restructure its balance sheet by refinancing a portion of the foreign currency short term debt with relatively longer term local currency bonds.

The Bank's participation is expected to assist in increasing the average tenor of bond issuances in the corporate bond market and mobilise investor interest for future bonds.

Transition Impact

The EBRD's investment is in line with the objectives of its Local Currency and Local Capital Market Development Initiative to promote the development of capital markets in countries where it invests.

The project's transition impact stems mainly from the following key areas which are set under the TRY Corporate Bond Framework:

  • Demonstration effect of new ways of financing: the project aims to show the viability of the local currency bond financing for a broader range of Turkish corporates. While the Turkish corporate sector is well versed in bank financing, bond financing particularly for non-financial institutions and with longer tenors, is relatively scarce in comparison with the size and potential of the market. The current issuance provides longer term investment options for institutional investors thereby broadening the investor base for the capital markets. Moreover, the successful placement of the bond contributes to the development of a functional and hedgeable floating rate index such as Turkish Lira Interbank Offered Rate (TRLibor). This adds to the attractiveness of this instrument for international investors.
     
  • Market expansion: the local currency corporate bond market has potential for further improvement, particularly in regards to providing financing with longer maturities and based on floating rate indices. The current market is dominated by floating issuances based on the Constant Maturity Treasury Reference i.e. a two year government bond index that is challenging to hedge and introduces basis risk into the three month floating rate. The tenors offered are mainly two years with limited issues of three years since 2010. The framework aims to demonstrate the viability of longer tenor issuances and increase the maturities available in the market. This will attract more issuers and investors, in turn increasing liquidity.

Client Information

AKSA ENERJI URETIM A.S.

Aksa Enerji, established in 1997, is the third largest independent power producer in Turkey and the largest listed on Borsa Istanbul.

The client is a member of Kazanci Holding, a diversified conglomerate founded in the 1950s, with activities in agriculture, energy and tourism. Kazanci is also a leading player in the Turkish natural gas distribution market. In this respect, Aksa Enerji benefits from strengthening its cooperation with the other companies of the holding. As such, Kazanci Group companies carry out their operations in synergy with each and every link of the energy value chain, from production to distribution.

EBRD Finance Summary

TRY 100,000,000.00

Total Project Cost

TRY 500,000,000.00

Environmental and Social Summary

Category B. In accordance with the Bank's Environmental and Social Policy a corporate Environmental and Social Due Diligence (ESDD) was undertaken on the project. The due diligence allowed for an appropriate assessment of company operations and performance. The use of proceeds from the bond issue will be used to restructure the company's balance sheet via refinancing of a portion of the foreign currency short term debt with longer-term local currency bonds.

Aksa Enerji operates a number of assets, mainly renewable generation and has oil-fired units as well as one state-of-the-art coal fired power plant. In total it operates 17 power plants that are located in different parts of Turkey and northern part of Cyprus. The company has a good record of compliance, and no material environmental health and safety (EHS) issues have been identified as part of the ESDD. The company is developing new renewable projects and implements EU environmental standards on new projects.

The company has a corporate EHS management system and certification system in place and is currently developing a corporate social responsibility (CSR) programme in line with Global Reporting Initiative standards. The company aims to have a CSR programme by end of 2016, with among others, a stated aim to reduce GHG emissions by 15 per cent by 2020 compared to 2008 levels.

The ESDD has confirmed that the company has the institutional capacity to fully implement the Bank's performance requirements. However, some additional strengthening to the EHS management, notably in terms of health and safety management has been identified as part of the ESDD. Based on the ESDD an environmental and social action plan (ESAP) has been agreed with the company taking into account the findings of the ESDD. This will be part of a framework agreement to allow the ESAP to be implemented, and the project to be structured to comply with the Bank's Environmental and Social Policy and relevant performance requirements. The company has committed to further strengthen its EHS management system in line with best practice and implement EU standards on new projects.

The Bank will monitor the implementation of ESAP.

Technical Cooperation

None.

Company Contact Information

Ozlem McCann
Ozlem.McCann@aksa.com.tr
+902166811053
Selvi Cikmazi No. 10, 34805, Istanbul, Turkey

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