North-Eastern Bulgaria Electricity Distribution Companies

Location:

Bulgaria

Project number:

34982

Business sector:

Power and energy

Notice type:

Private

Environmental category:

C

Approval date:

06 Sep 2005

Status:

Completed

PSD disclosed:

11 May 2005

Project Description

The Bank is supporting the privatisation of two electricity distribution companies by providing support to a strategic investor. The Bank will partner with E.ON Bulgaria, a 100 % subsidiary of E.ON Energie, the owner of 67% of shares in the Varna and the Gorna Oriahovitsa Distribution companies, acquired via an international competitive tender. The companies supply 1.1 million customers in the north-eastern part of the country.

Transition Impact

Bank's participation will support the power sector liberalisation process in Bulgaria and in the region in line with the EU directive on Power and with the “Energy Community of South East Europe”. Specifically the Bank will:

  • support private participation in the power distribution sector;
  • support the establishment of a transparent tariff methodology, based on cost pass through and return on investment principles;
  • provide comfort to E.ON Energie seeking to invest in Bulgaria by providing additional assurance with respect to political and regulatory risk;
  • facilitate operational and financial efficiencies derived from the entrance of E.ON Energie;
  • enhance the transparency and credibility of the privatisation process; and
  • indirectly catalyse competition and further private participation in the electricity industry.

The Client

E.ON Energie, E.ON Group's business unit for central Europe. The E.ON Group is the largest private-sector provider of energy services in Europe, supplying some 14 million customers with power, gas and water.

EBRD Finance

The transaction consists of a direct equity investment in the distribution companies through purchase of shares from E.ON Bulgaria.

Project Cost

To be confirmed.

Environmental Impact

Environmental classification and rationale

The project is screened C/1, requiring an Environmental Audit of the two distribution companies. Initial due diligence carried out by the client will be complemented by comprehensive site audits to be completed by the end of 2005; these audits will establish the liabilities of the State of Bulgaria with regards to environmental damages caused by former acts and omissions. The findings of the audits will provided the basis on which an environmental Action will be developed by the company and agreed with the Bank.

Key environmental issues and mitigation
Environmental issues associated with electricity distribution are well understood, can be readily identified were they occur, and mitigation measures can easily be put in place where necessary. Issues characteristic for electricity distribution companies include:

  • occupational and public health and safety;
     
  • storage, handling and disposal of hazardous substances (e.g. transformer oils which may potentially include PCBs; lamps from public lighting operations; paints and solvents);
     
  • waste disposal associated with network rehabilitation and maintenance;
     
  • nuisances related to the operation of maintenance depots and workshops and an associated vehicle fleet;
     
  • site related liabilities (e.g. localized oil contamination at transformer substations);
     
  • social impacts if company restructuring is involved.

Environmental opportunities
Investment plans relate to renovation and re-enforcement of the network which is likely to reduce outages and line losses, and to improve reliability and efficiency.

Summary of Environmental Action Plan
The company will by the end of 2005 carry out comprehensive facility audits to establish the liability of the State for ‘environmental damages caused by former acts or omissions’. These audits will be the basis on which an Environmental Action Plan is to be developed, agreed with the Bank, and subsequently implemented.

Disclosure of information and consultation
There are no formal requirements for public information and disclosure associated with this project. The company will, however, be encouraged to inform the public on its activities and liase with its stakeholders.

Monitoring and reporting
The Company will monitor the environmental impact of its operations in accordance with national law and regulations. The Bank will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing annual environmental reports prepared for the project and may, if required, carry out monitoring visits.

Technical Cooperation

EUR 1 million for advisory services to the GoB was provided by the European Commission PHARE programme, arranged and administered through the Bank. No further technical cooperation envisaged.

Company Contact

Dr. Thomas Meyer
Head Corporate Development - Eastern Europe
E.ON Energie AG

E-mail: thomas.meyer@eon-energie.com

 

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

Public Information Policy (PIP)

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Text of the PIP

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