Privatisation of ÉGAZ gas distribution company. Extension of the gas distribution network in the north-west of Hungary to connect 141 additional settlements and purchase of equipment to modernise the existing network (meters, SCADA, tooling, network replacement).
The project aims to develop the gas distribution infrastructure in an area with low gas penetration but where growth and foreign investment are high. Proceeds will be used to lay 1,430 km of polyethylene pipes and connect 141 new settlements.
The project will provide access to long-term capital in forints to support post-privatisation investments and contribute to the success of the 1995 privatisation. It will contribute to the deepening of the market for long-term forints through a bond issue.
The borrower is ÉGAZ, one of the five regional gas distribution companies in Hungary. It was privatised in 1995 by way of a competitive bidding process. A 50 per cent plus one shareholding was sold to Gaz de France (GdF). It operates approximately 4,000 km of gas pipelines and in 1996 sold 736 MMm3 of gas to 177,153 customers.
Proposed EBRD financing consists of:
· a loan to ÉGAZ of HUF 3,000 million (ECU 13.2 million)
· an equity participation in the holding company controlling ÉGAZ for a shareholding equivalent to 10 per cent of Gaz de France shareholding at privatisation.
Total project cost is HUF 14 billion (ECU 61 million).
The project was screened as B/1, requiring an environmental analysis and an environmental audit. An environmental audit of ÉGAZ's facilities was commissioned prior to privatisation by the Hungarian Government's financial advisor to assess the environmental liabilities relating to ÉGAZ's current and past operations. Phase I of the audit was carried out by an independent consultant which did not identify any significant potential environmental liabilities. The consultants also made recommendations for improving the environmental management practices. These recommendations will be incorporated into an Environmental Action Plan.
ÉGAZ is in compliance with local and national regulations on the protection of the environment and health and safety. The company has an environmental policy and internal regulations for the protection of air and water quality, and waste management (including hazardous waste). The company is planning to improve its environmental practices in line with the European Union (EU) regulations.
The company carries out regular inspections of the pipeline and equipment for leak detection. It has detailed instructions and regulations for emergency situations, including leaks and pipeline failures.
All equipment to be procured for this project will comply with Hungarian and ISO (International Standards Organisation) or CEN (Comité Européen de Normalisation) standards. This will ensure that the equipment meets relevant EU and national performance criteria and will reduce the risk of malfunctioning due to design flaws.
All new construction will be carried out in accordance with Hungarian construction regulations which provide for mitigation of short-term negative impacts. These are stringent and generally in line with the regulations which exist in the EU countries.
There are no direct long-term negative environmental impacts associated with the extension of the existing gas network. Indirectly the extension would have positive environmental as well as social impacts by providing access to relatively more environmentally friendly fuel and promoting energy efficiency. The risk associated with the operational safety is low since ÉGAZ has previous experience in construction and maintenance of gas distribution networks. Involvement of GdF would further encourage the development of more customer-friendly practices.
The project would promote increase in consumption of natural gas, thus replacing inefficient heating systems and more polluting heavy oil and coal fuels. This will result in environmental benefits, such as increased efficiency of fuel use and reduced emissions of NOx, SO2, CO2 and particulates.
For business opportunities or procurement, contact the client company.
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Text of the PIP