Tredas Financing

Location:

Turkey

Project number:

48387

Business sector:

Power and energy

Notice type:

Private

Environmental category:

B

Target board date:

19 Oct 2016

Status:

Repaying

PSD disclosed:

08 Jun 2016

Translated version of this PSD: Turkish

Project Description

A senior loan to Trakya electricity distribution company (TREDAS), Trakya electricity retail company (TREPAS), and to their parent company, IC Ictas Elektrik (ICEL) (together the co-borrowers). The transaction is part of an approximately USD 685 million dual currency financing package to be used for (i) refinancing existing financing package (acquisition of TREDAS, working capital and existing CAPEX) and (ii) financing new CAPEX for the 2016-2020 tariff period.

Project Objectives

The project is an opportunity to support the ongoing liberalisation process in the Turkish electricity sector by backing one of the committed private energy players post-privatisation in Turkey through (i) financing the new CAPEX plan which is needed to upgrade the current distribution infrastructure network to reduce distribution losses, to enhance the environmental and safety standards and to improve efficiency and reliability of supply and (ii) financially strengthening the co-borrowers' balance sheet by refinancing the acquisition of the distribution company and previous capex investment plan.

The bank's loan will finance the new CAPEX plan and up to 10 per cent of the refinancing tranche.

Transition Impact

The project's transition impact is expected to stem from two factors:

1. setting standards for business conduct and introduction of new products by creating a more reliable and more efficient distribution network in line with the modern smart grid principles.

2. setting standards for corporate governance and business conduct - improvement of management practices by imposing more stringent corporate governance requirements on the co-borrowers.

Client Information

IC ICTAS ELEKTRIK TICARET A.S.

  • ICEL is majority-owned by IC ICTAS Construction, a sister company of IC Ibrahim Cecen Yatirim Holding A.S. ("ICH"), a diversified conglomerate founded in 1969, with activities in construction, energy, infrastructure investments and concessions, tourism and real estate.
     
  • TREDAS holds the distribution license and the exclusive right to operate the electricity distribution network in the Thrace region until 2036. It provides electricity distribution services to circa 1 million consumers in three provinces, namely Tekirdag, Kirklareli and Edirne.
     
  • TREPAS was created in 2013, when it was required by law to unbundle distribution and retail companies.

EBRD Finance Summary

USD 134,750,000.00

Total Project Cost

USD 684,250,000.00

The transaction is part of an approximately USD 685m dual currency financing package to be cofinanced by IsBank, Garanti Bank, VakifBank and TSKB.

Environmental and Social Summary

The project is categorised B under Environmental and Social Policy (2014). The proposed CAPEX refinancing and financing of the capital investment programme for the years 2016-2020 includes mainly investments in the expansion and renewal of the distribution network. The Project will not result in physical resettlement, encroachment on protected areas, construction of high voltage overhead lines or construction of new power production units and therefore does not warrant an “A” categorisation.

An Environmental and Social Due Diligence (ESDD) of the Borrowers and of the proposed Project was undertaken by an independent consultant focusing on existing systems and practices relating to social issues (human resources, quality of service, benefits for users, public health and safety) and land acquisition, environment (birds protection), work conditions and occupational health and safety, a review of the management systems in place, and status of permits. At present not all details on the future investments (e.g., new distribution network routings and their impact areas) are available and therefore specific issues that may arise from the Project will be assessed by the Company once the details become available in accordance with the EBRD requirements. 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. Construction Environmental and Social Management Plans (CESMP) including mitigation measures will be prepared and implemented by the contractors.

The total number of permanent staff employed under TREPAS and TREDAS is 512. HR policies and procedures of TREDAS and TREPAS are generally in line with the national regulatory requirements. However the company shall undertake a gap analysis of existing HR procedures for all employees against EBRD PR 2 and update its HR policy and procedures to adopt additional measures to meet EBRD PR2 requirements including respecting workers right to join a union at their choice, establishing a formal employee grievance procedure and conducting regular labour audits (including contractors). The client has agreed to EBRD Technical Cooperation to strengthen Equal Opportunities across TREDAS and TREPAS, with a particular focus on supporting women in technical and engineering positions, and achieving national best-practice accreditation under the Women’s Entrepreneurs Association of Turkey/ Kagider Equal Opportunity Model (Firsat Esitligi Modeli – FEM).

TREDAS is also required to develop policy and procedures for oversight of contractor labour conditions and EHS performance related to construction works, and should enhance the existing grievance mechanism so as to manage anonymous grievances and cover subcontractor employees.

In order to manage project impacts of future investments on communities, TREDAS will be required to develop and implement a Corporate Land Acquisition and Resettlement Framework (LARF), Stakeholder Engagement Plan (SEP) and a formal complaint mechanism. Also TREDAS 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 of the energy distribution lines.

Biodiversity conservation may on a site-by-site basis be relevant within the scope of the future investments and works, and a Birds Protection Plan is yet to be developed at the corporate level. It is also recommended that EBRD PR8 is taken into account by TREDAS and its contractors through implementation of a Chance Finds Procedure during the construction activities as part of the future investment programme.

The issues identified during the ESDD including above have been addressed in the ESAP. Implementation of the ESAP will enable to project to achieve compliance with the EBRD PRs. 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; improvement of chemical management practices; 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.

Non-technical summary: English | Turkish

Technical Cooperation

None

Company Contact Information

Atilay Noyan

atilay.noyan@ictasenerji.com.tr

+90 312 285 83 43

http://www.ictasenerji.com.tr/en

Konya Yolu No: 182/B Blok Kat: 23 Balgat, Ankara, Turkey

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