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| ESM Macedonia |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 26093 |
| Company name | Elektrostopanstvo na Makedonija |
| Country | Macedonia, Former Yugoslav Republic of |
| Sector | Utilities |
| Environmental category | B |
| Department | Infrastructure |
| Status | Active |
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| Date SPI disclosed | July 25, 2007 |
| Projected board date | August 30, 2007 |
| Previous Events | Invested: September 29, 2008
Signed: April 7, 2008
Approved: September 6, 2007 |
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| View Environmental & Social Review Summary (ESRS), click here |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
The company, ESM, is the single electricity distribution and supply company in FYR Macedonia supplying electricity to households, industry and budgetary organizations. ESM also owns and operates 11 small hydro power plants.
The proposed project is the financing of a EUR 100m investment program to upgrade ESM’s electricity distribution network. The investment program will be focused on four main areas:
- Upgrade of grid lines and connections;
- Upgrade of substations and transformers;
- Roll out of metering;
- Upgrade systems and administration.
The proposed investment will play an important role towards strengthening ESM’s operations, through reducing energy losses, improving supply reliability, upgrading technical capacity, modernization and automation. |
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| Project sponsor and major shareholders of project company |
| ESM is owned 90% by the Austrian utility, EVN, a company listed in Austria and majority owned by the State of Lower Austria. The government of Macedonia owns the remaining 10% for ESM. |
| Total project cost and amount and nature of IFC's investment |
| The proposed project is the financing of a EUR100m investment program. IFC’s proposed investment is an A loan for up to EUR50 million to ESM, in parallel with an equivalent financing from EBRD. |
| Location of project and description of site |
| As Macedonia’s electricity distribution company, ESM manages and operates the entire Macedonian electricity distribution network. ESM’s supply territory has an area of around 25,713 km2 and a population of approximately 2 million. |
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| Anticipated development impact of the project |
| The loan will support the ongoing turnaround in operating efficiency of the recently privatized distribution company, ESM, demonstrating the benefits of private participation in the electricity sector and playing a key role in the ongoing sector liberalization and restructuring. The project is also expected to support the transfer of skills from the sponsor to ESM. |
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| IFC's expected development contribution |
IFC and EBRD are providing ESM with long term financing to match the long term nature of the underlying investment assets, such long-term financing is not readily available in the local banking market in Macedonia.
IFC will support and partially fund ESM’s capital expenditure plan to upgrade its distribution network, reduce energy losses and improve service quality, which is critical for the success of the privatization and sector reform process. A successful outcome of ESM’s privatization could be a catalyst for additional privatizations in Macedonia’s infrastructure sector. Privatization remains the key lever for attracting foreign direct investment into Macedonia.
IFC has been involved in a number of utility privatizations, both as an investor and as an advisor to governments. Based on its global expertise with the privatization of electricity utilities, its understanding of different regulatory environments and its knowledge of operational benchmarks of comparable utilities, IFC is well positioned to provide input on ESM’s turn-around strategy, including its proposed investment plan, its interaction with the regulator and its loss reduction and bill collection programs.
The company can benefit from IFC’s expertise in social and environmental practices. IFC and EBRD have worked with ESM to develop an environmental action plan (EAP) to strengthen ESM’s environmental management systems |
| Environmental and social issues - Category B |
IFC's review of this investment identified environmental, health, safety and social issues that are characteristic of an electrical distribution company:
- EVN's progress and timetable for implementing company-wide social, environmental and health and safety management systems at ESM;
- ESM's post-privatization capacity to conduct its investment program in accordance with IFC's Performance Standards;
- labor policies, including retrenchment;
- liability for past land contamination;
- siting and right-of-way alignment process for new facilities;
- GHG emissions benefits by reducing technical losses;
- management of cultural property; and
- worker health, safety and training programs.
This is a Category B project according to IFC's Environment and Social Review Procedure because potential environmental or social impacts attributable to the project are limited. |
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| For inquiries about the project, contact: |
Dr. Michael Längle, Director, Head of Finance and Accounting Chief Financial Officer
EVN Group
EVN Platz
A-2344 Maria Enzersdorf
Austria
Telephone: +43 22 36 / 200 – 123 24
Fax: +43 22 36 / 200 – 847 15
E-mail: michael.laengle@evn.at
Website: www.evn.at
The environmental documents will be made available at the ESM's office in Skopje:
MMag. Georg Waldner
Chairman of the Executive Board
AD ESM
11 October 9, 1000 Skopje, Macedonia
Telephone: +389 (0)2 3149-289
Fax : +389 (0)2 3120-426 |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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