BEH Bond Issue

Location:

Bulgaria

Project number:

48556

Business sector:

Power and energy

Notice type:

Public

Environmental category:

B

Target board date:

20 Jul 2016

Status:

Signed

PSD disclosed:

30 Aug 2016

Translated version of this PSD: Bulgarian

Project Description

The Bank has invested EUR 80 million in the five year senior unsecured bond issuance by Bulgarian Energy Holding EAD (BEH or the Company) of July 26th 2016. The bonds have been traded on the Irish Stock Exchange since 2 August 2016.

The funds have been used to refinance a bridge loan incurred by BEH in 1H 2016 whose proceeds support the commercial liabilities of BEH's key subsidiary Natsionalna Elektricheska Kompania (NEK) as part of a comprehensive reform plan aiming to restore the financial viability of the electricity sector and to promote electricity market liberalisation in Bulgaria.

Project Objectives

The operation will support the implementation of key power sector reforms and will enable BEH to restructure debt on its balance sheet, improving the long term financial sustainability of the power sector in Bulgaria.

Transition Impact

The investment is consistent with the Bank's strategy for Bulgaria (BDS/BU/15-1/F), dated 8 July 2015.

Bulgaria is emerging from a period of sector deficit and progressing with electricity market liberalisation thanks to a variety of Government measures to ensure the sector's long term sustainability. Participation in the bond will allow EBRD to deepen the important policy dialogue role that it has had as a key investor in Bulgaria for years at the crucial moment of transition to energy market stability and liberalisation.

Client Information

BULGARIAN ENERGY HOLDING EAD
Bulgarian Energy Holding EAD is a holding company 100% owned by the Ministry of Energy of Bulgaria that consolidates some of the largest energy companies in the country in the areas of electricity generation, transmission, supply and trading, gas transmission and supply and coal mining, among others. BEH is also the public supplier of both electricity and gas in Bulgaria.

EBRD Finance Summary

EUR 80,000,000.00

Total Project Cost

EUR 550,000,000.00

Environmental and Social Summary

Category B: Due to the nature of and rules for capital market transactions, the Bank was not in a position to undertake detailed or specific environmental and social due diligence (ESDD) in accordance with the Bank's Environmental and Social Policy before the bond issuance. Given this, the Board approved a derogation from the Environmental and Social Policy.

Nevertheless, limited ESDD was undertaken pre-issuance to gain an understanding of how environmental and health and safety (EHS) issues are managed and the Company's strategy to comply with current and future EU legislation. The ESDD confirmed that the Company and its subsidiaries have the institutional capacity to implement the Bank's Performance Requirements. The Company is making investments to ensure future compliance with EU environmental standards. Based on the ESDD, an Environmental and Social Action Plan (ESAP) was developed and agreed with the Company. EBRD signed a Framework Agreement with BEH to ensure ESAP implementation. However, it is recognised that the leverage for ESAP implementation through a bond issue may be limited.

Overall, the ESAP will help strengthen the corporate EHS management systems at both the holding level as well as the material subsidiaries through corporate social responsibility reporting, disclosure of non-financial information as part of annual reporting, and the implementation of international EHS management systems such as ISO 14001, OHSAS 18001 and ISO 50001. As part of the ESAP, BEH has agreed to implement corporate governance structures and environmental and social policies that will apply to its major subsidiaries, in line with the Bank's Performance Requirements.

The BEH Group consolidates a number of assets - including coal fired and nuclear plants - that are excluded from receiving EBRD's proceeds in order to meet various EBRD policy requirements. The bond financing by the EBRD includes a written commitment from the Company, as part of the Framework Agreement, that none of the EBRD financing from the bonds will be used for coal-fired or nuclear projects.

The Bank will undertake monitoring visits and meet with the EHS management of the Company and its material subsidiaries to discuss the implementation of the ESAP and ongoing strengthening of the corporate EHS management structures.

Technical Cooperation

EBRD is working with the Energy and Water Regulatory Commission to prepare and implement a Technical Cooperation assignment to support the implementation of the sector reforms and market liberalisation through capacity building.

Company Contact Information

Petya Dimova, Finance Department
Petya.Dimova@bgenh.com
+359 2 9263 892
+359 2 9250 401
www.bgenh.com
16, Vesletz Street, Sofia 1000, Bulgaria

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