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| Description of company and purpose of project |
Following a competitive tender in early 2001, the Government of Ukraine was successful in selling two distribution companies, Kyivoblenergo (KOE) and Rivneenergo (ROE), to AES Washington Holdings B.V. (“AES B.V.”), an affiliate of AES Corporation (“AES”). KOE and ROE together serve 1.2 million customers from a population base of 3 million people. KOE supplies energy to 811,285 customers spread over a 28,400 square kilometer service area in the Kyiv oblast (excluding the city of Kyiv). ROE supplies energy to 404,387 customers spread over a 20,100 square kilometer service area in the Rivne oblast, situated in the northwest of the country.
KOE and ROE have developed a capital investment program of approximately $80 million to be implemented over the 2005-2008 period. The capital investment program (the project) as four primary objectives:
- reduction of commercial and technical losses;
- refurbishment of ageing network equipment;
- capacity expansion in high growth areas; and
- improvement in management efficiency through investments in communication and information systems. |
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| Project sponsor and major shareholders of project company |
AES B.V. is the largest shareholder with 89.1% shareholding in KOE and 79.5% shareholding in ROE. The remaining shares are held by employees and financial investors who acquired shares either through a voucher privatization or on the stock exchange.
AES is a power holding company that operates a globally diversified portfolio of electricity generation and distribution businesses. AES’s affiliates operate over 100 individual power assets in 26 countries that span the US, Central and South America, Europe, Asia and Africa. AES is publicly traded on the New York Stock Exchange. |
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| Total project cost and proposed IFC investment |
| The total project cost is estimated at approximately $80 million. The proposed IFC investment will be in an aggregate amount of up to $45 million in the form of IFC A Loans to KOE and ROE, and a Partial Credit Guarantee in the aggregate of up to $5million. |
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| Location of project and description of site |
| KOE is based in the city of Kyiv and operates a distribution network that covers the entire Kyiv oblast (excluding the city of Kyiv). ROE is based in the city of Rivne and operates a distribution network that covers the entire Rivne oblast. |
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| Project Development Impact and IFC's Role |
IFC involvement will support the sustainability of the on-going reform and privatization process in Ukraine’s electricity sector by supporting capital investments in two of the best performing companies in the sector.
The project’s development impacts are expected to include:
- a reduction in outages caused by network faults (due to rehabilitation of assets);
- a reduction in energy losses to a sustainable level;
- improvement in customer services through modernization of billing and collection systems, and through more efficient handling of consumer complaints; and
- a demonstration of the economic gains of privatization which may encourage further privatization programs in the region.
Additionally, IFC's investment in the project will provide the necessary long term financing which is currently unavailable in Ukraine. Also, since a portion of the financing may be structured as a Hrivnya denominated loan, IFC’s financing would also facilitate access to longer term local currency financing for a utility that has local currency revenues. In addition, IFC's involvement would introduce the Companies to IFC’s environmental and social policies and help integrate these into their day-to-day operations. |
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| Environmental and social issues - Category B |
This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of the project consisted of appraising technical and environmental/social information submitted by the Companies and a site visit by IFC environmental and technical staff. The following potential environment, health and safety and social impacts of the project were analyzed:
- Effectiveness of environment, health and safety program;
- Environmental liabilities from past and current operations;
- Effectiveness of safety tracking and reporting systems;
- Right-of-way management; and
- Risks related to the Chernobyl energy complex.
To view the environmental documents for this project, click here |
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| Location of environmental documents in locally affected community |
Environmental documentation will be made available at following locations:
KOE
CJSC AES Kyivoblenergo
1a Stetsenka Street
Kive, 04136
Ukraine
ROE:
CJSC AES Riveneenergo
71 Knyazya Volodymyra Street
Rivne, 33000
Ukraine |
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| To contact the project company, please write to: |
Ron Beaver
KOE
CJSC AES Kyivoblenergo
1a Stetsenka Street
Kive, 04136
Ukraine |
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