Translated version of this PSD: Albanian
The Project is linked to a comprehensive program of reforms of KESH and the Albanian energy sector in general which should significantly improve sector management and operational efficiency.
The loan proceeds themselves will be used to refinance and lengthen the tenors of short term sovereign guaranteed overdrafts which KESH has entered into with commercial banks on an emergency basis and require annual reapproval, perpetuating a liquidity crisis as well as uncertainty and instability. The loans were necessary to alleviate critical cash shortages created by hydrology conditions and sector organization. As the reform package is implemented, sector and KESH performance should improve overall.
The general objective is the reform and restructuring of KESH and the Albanian energy sector to achieve long term sustainability which has been lacking. The EBRD investment is expected to support a program of reform which aims to include KESH's corporate governance, market practices and regional trade. The refinancing of the balance sheet to lengthen tenors will give KESH greater control over its financial situation, relieving it of continuing urgent liquidity concerns.
The Project supports both the Bank's policy dialogue efforts for reform in the sector as well as opportunities for the country to develop regional and internal market principles. The Project will promote regional integration and trade. It will promote the adoption of secondary legislation consistent with and required for the implementation of the new Power Sector Law. This is expected to include improvements in tariff formation. The Bank will also require a thorough corporate governance review and recommendations for how to bring KESH to best international standards in compliance with international norms and codes.
ALBANIAN ELECTR. CORP. (KESH)
KESH sh.a., the 100% state-owned incumbent electricity utility in Albania active in generation, and supply of electricity. KESH supplies almost 70% of Albania's electricity demand through own generation.
EBRD Finance Summary
EUR 218 million sovereign guaranteed loan will be divided into 2 tranches. Involvement of commercial banks for co-financing will be explored, mainly for the second tranche.
Total Project Cost
The full amount of the proceeds will be applied to refinancing short term debt.
Environmental and Social Summary
Categorised B (2014). The restructuring of KESH Company is not associated with any activity or new infrastructure development that would trigger category “A”. An Environmental and Social Due Diligence (ESDD) of KESH at the corporate level was carried out by an independent consultant. The scope of the ESDD included site visits to KESH’s main production units (including the largest hydropower plant, and the nonoperational Vlore Thermal Power Plant) as well as meetings with the Company departments and managers in charge of human resources, occupational health and safety, environment and public relations. The environmental, social and health and safety performance of the Company over the recent years was reviewed against Albania legislation and EBRD Performance Requirements.
The information that was received indicates that the Company is operating in compliance with the national legislation. However, a number of actions were identified that will be required for KESH to operate in compliance with EBRD Performance Requirements and with the relevant objectives of the applicable EU directives such as the Water Framework Directive. These actions are included in an Environmental and Social Action Plan (ESAP) that is in the process of being agreed with KESH and will be fully agreed before signing the financing agreement. The ESAP includes actions that are at the corporate level (for example the development of an environmental and social management system, the improvement of stakeholder engagement and the preparation/implementation of a human resources policy) or site specific (for example in relation with the environmental or social concerns around Vlore
thermal power plant or the Drin river hydropower plants). The ESDD indicated that the Project will not result in retrenchment.
The restructuring Project is not subject to an environmental impact assessment under the Albanian legislation and does not trigger the EBRD requirements for a Greenhouse Gas Assessment.
The effective implementation of the ESAP is subject to specific monitoring actions by an independent consultant. The Project is subject to standard annual environmental and social monitoring.
Technical assistance will be provided to the company for purposes of:
1) Corporate Environmental & Social Due Diligence
An Environmental and Social Assessment of the company will be undertaken with the aim of providing recommendations for environmental and social management in the restructured company and to assist KESH in developing a long term environmental and social restructuring.
2) Corporate Governance
The assistance aims at supporting KESH in strengthening its corporate governance practices, so as to align them with international standards and best practices and at strengthening the Albanian corporate governance legislative and regulatory framework to accommodate KESH's improvements.
3) Hydrology Risk Mitigation
The assistance targets capacity building at KESH to build capacities for improved and longer term hydrology forecasting and management.
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