SEDAS Phase II

Location:

Turkey

Project number:

47451

Business sector:

Power and energy

Notice type:

Private

Environmental category:

B

Approval date:

04 May 2016

Status:

Repaying

PSD disclosed:

15 Oct 2015

Translated version of this PSD: Turkish

Project Description

EBRD is providing an up to US$ 162.5 million senior secured A/B loan to Akcez Group consisting of three entities, Akcez Enerji Yatirimlari Sanayi ve Ticaret A.S. ("Akcez") which owns Sakarya Elektrik Dagitim A.S. ("SEDAS"), the electricity distribution company and Sakarya Elektrik Perakende Satis A. S. ("SEPAS"), the electricity retail company. The three companies will act as co-borrowers.

Project Objectives

The funds will be used to refinance the outstanding corporate loan of USD 250 million (originally provided to Akcez) and to provide US$ 75 million to finance part of the co-borrowers' capex programme in the 2016-2020 period.

Transition Impact

The fundamental component of this project is to implement the Phase II of the Bank's 2010 loan as originally envisaged, i.e. restructure the financing into a limited recourse structure. The project will allow the company to complete a series of network renewal and capacity increasing investments in the 2015-2020 period in order to connect new customers to the network, to terminate the undervoltage and power scarcity and to decrease the technical losses. The project will help the company prepare for physical unbundling in 2016. Additionally, the project has the potential to improve the company's standards of corporate governance.

Client Information

SAKARYA ELEKTRIK DAGITIM A.S.
SEDAS was among the first electricity distribution companies to be privatised in Turkey and is one of the few electricity distribution companies in Turkey benefiting from the presence of a foreign sponsor, CEZ, a major energy sector player active in the region.

SEDAS holds exclusive rights for electricity distribution in its region in northwest Turkey. Retail and distribution activities were unbundled in 2013 and the retail activities were transferred to SEPAS.

Since its incorporation in January 2013, SEPAS provides consumer services as the retail supplier to customers subject to regulation (national tariff and last resource) in SEDAS region and eligible customers both in SEDAS region and other regions of Turkey by making bilateral agreements.

SEDAS and SEPAS are fully owned by Akcez which is owned 50% by CEZ a.s. ("CEZ"), and 50% by Akkok Sanayi Yatirim Ve Ulastirma A.S. ("Akkok").

EBRD Finance Summary

USD 36,746,658.00
US$ 162.5 million EBRD loan, US$ 105 million of which will be for the Bank's own account and US$ 57.5 million will be syndicated to a commercial bank.

Total Project Cost

USD 205,696,400.00
The proposed EBRD loan of US$ 162.5 million will be part of the US$ 325 million financing package to be provided jointly with International Finance Corporation ("IFC").

Environmental and Social Summary

The project is categorised B under Environmental and Social Policy (2014). Any adverse future environmental and social (E&S) impacts associated with the proposed project are expected to be site-specific and readily addressed through adequate mitigation measures. The environmental and social due diligence (ESDD) carried out by independent consultants included review of the existing reports for Phase I as well as an E&S Audit and an E&S Analysis of the impacts associated with the proposed additional investments. Based on the findings, the ESAP for Phase I has been revised.

At present limited information is available on the proposed investments (e.g., new distribution network routings and their impact areas) and therefore specific issues that may arise from the Project cannot be assessed at this stage. However, it is anticipated that the existing environmental and social issues associated with the current operations identified during the ESDD will apply also to the new investments. For the future investments ESAP requires that site-specific E&S impacts are assessed and mitigation measures are identified and implemented during the construction and operational activities. Construction Environmental and Social Management Plans (CESMP) including mitigation measures will be prepared and implemented by the contractors.

SEDAS has made considerable improvements in environmental and health and safety (EHS) management practices including waste management in terms of segregation / labelling / declaration and temporary storage of wastes. Still, further improvements are required at some of the operational warehouses and waste transport practices with respect to permits, stormwater management, leak checks for SF6 breakers, analysis of PCB in transformers, handling and disposal of asbestos.

AKCEZ, SEPAS and SEDAS employ 1,852 permanent staff, consisting 1644 men (88.8%) and 208 women (11.2%). Despite the improvements made to HR practices since privatization, women employed in AKCEZ, SEPAS and SEDAS comprise only 43.4%, 34.3% and 4.0% of the workforce, respectively. Women's presence in SEDAS is particularly low compared to industry best practice. [1] The proportion of women employed in technical roles within SEDAS is exceptionally low: women comprise 1.8% of the technical roles and 14% of engineering roles. In addition to supporting women
to access Technical jobs at SEDAS, further improvement are still needed to address among others wage differences between employees, working hours, OHS issues (including accident reporting and investigation), equal opportunities for women and enhancement of the existing grievance mechanism to cover subcontractor employees.

In order to manage project impacts on communities, SEDAS will be required to develop and implement a Corporate Land Acquisition and Resettlement Framework (LARF), Stakeholder Engagement Plan (SEP) and a formal complaint mechanism for future projects. Also SEDAS is required to enhance community safety through inclusion of public safety issues in the risk assessment process and implementing adequate safety measures during construction and operation.

The issues identified during the ESDD including above have been addressed in the ESAP. Key areas covered in the ESAP among others include enhancement of E&S management systems; assessment of E&S impacts on a site-by-site basis within the scope of future investments; contractor management; aviation protection; revision of the HR policy and procedures; effective communication of the existing internal grievance mechanism to employees; implementation of a storm-water management program; review of the requirements for leak checks for SF6 breakers; improvement of waste management practices; transformers containing PCBs; enhancement of the existing occupational health and safety (OHS) practices to guide all Project-related activities during construction and operation; measures to minimise public health and safety risks; development of a Corporate Land Acquisition and Resettlement Framework (LARF); development of a chance find procedure; implementation of the agreed Stakeholder Engagement Plan (SEP).

The project will be monitored through annual E&S reports. Monitoring visits will be carried out if deemed necessary.

[1] For example, in electric power generation, transmission, and distribution in USA and Canada, women comprise 23.3% and ~24.7% of total staff employed.

Company Contact Information

Firat Sogancik
Firat.Sogancik@akcez.com.tr

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