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| Summary of Project Information (SPI) |
| This Summary of Project Information 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. |
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| Project number | 24162 |
| Project name | DistrigazSud |
| Country | Romania |
| Sector | Utilities |
| Department | Infrastructure |
| Company name | Romania Gas Holding |
| Environmental category | B |
| Date SPI disclosed | April 25, 2005 |
| Projected board date | May 26, 2005 |
| Status | Active |
| Previous Events | Invested: February 1, 2006
Signed: June 24, 2005
Approved: June 9, 2005 |
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| Description of company and purpose of project |
| Distrigaz Sud (DGS) is the dominant gas distribution and supply company in southern Romania. In 2004, the Government of Romania (GOR) signed a privatization agreement for the sale of a 51 percent interest in DGS to Gaz de France (GdF), the leading supplier and distributor of natural gas in France and one of the largest gas utilities in Europe. The privatization closing is expected to occur soon. IFC's investment in Distrigaz Sud will support the company's 2005-2012 investment program aimed at upgrading and expanding the company's distribution network. |
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| Project sponsor and major shareholders of project company |
| The project sponsor is GdF. Under the envisaged shareholding structure by the sponsor, the Government of Romania will own directly 49% of DGS, with GdF, IFC and the European Bank for Reconstruction and Development (EBRD) owning indirectly through a holding company 40.8%, 5.1% and 5.1% respectively of DGS. |
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| Total project cost and proposed IFC investment |
| The total 2005-2012 investment program is estimated at EUR 277 million. The proposed IFC investment is estimated at EUR 31 million equity. |
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| Location of project and description of site |
| DGS operates through its head office in Bucharest and 11 regional branches. DGS’ gas distribution and supply activities cover 20 counties serving an area of 100,000 sq. km with a total population of 11 million. |
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| Project Development Impact and IFC's Role |
The project has a high development impact due to the fundamental characteristics of city gas distribution, including its benign impact on the environment, the low hazards of transporting gas through gas distribution networks, and the positive social and economic benefits it imparts to the local populations. Natural gas is one of the cleanest and cheapest fossil fuels, and its widespread use is one of the most cost-effective ways of reducing harmful air pollution caused by the widespread use of less clean-burning fuels that can be replaced by natural gas, such as the sulfur-containing fuel oil and coal used by industry. The rehabilitation and expansion of the DGS distribution network will lead to important environmental and safety benefits. The largest part of the investment is expected to be directed towards rehabilitation, since about 45% of the existing steel distribution lines are more than 15 years old with many corroded and in need of replacement. This will result in lower natural gas leakage and a lower contribution to greenhouse gas emissions (natural gas itself being a greenhouse gas). The inherent physical characteristics of natural gas give it a higher ignition point, and a higher required concentration for an explosion, than competing fuels such as heating oil or LPG thereby reducing the risk of a catastrophic accident.
The continuous distribution of natural gas through the pipeline by a safety-conscious company such as DGS under GdF management, reduces risks associated with accidents in the transport of LPG cylinders, and eliminates the need for storage facilities. DGS will also widen access of natural gas to more residential consumers than at present. These consumers will derive benefit from the avoiding energy waste which is characteristic of other energy sources, and benefit from the avoided cost in terms of time and in the handling and change-out of LPG cylinders and the increased convenience of natural gas. Also, the rehabilitation and expansion of the gas distribution network will increase economic activity due to requirement for domestically manufactured goods such as polyethylene pipes and gas meters, as well as lead to an increased requirement for local construction jobs.
The government recognized in advance of the sale, that multilateral participation may be perceived by bidders as a significant risk mitigant. It provided the option for winning bidders to reduce their stake below 51 percent to the extent that they ceded a minority stake to IFC or EBRD.
IFC’s participation is expected to mitigate a broad range of political and regulatory risks notably providing comfort that the tariff reviews will be undertaken in accordance with the framework agreed.
In addition to its role as regulator, the government maintains 49 % of the ownership and a significant role on the Board of DGS. IFC’s demonstrated ability to engage the government on the regulatory framework within which DGS will operate, appears to have been key to GdF’s decision to include the multilaterals as equity partners. The sponsor see potential additional benefits from IFC participation in terms of the “stamp of approval” for environmental and social policies with the consequent mitigation of wider political risks from affected groups including customers, employees and the wider community. |
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| Environmental and social issues - Category B |
The following environmental and social issues were reviewed and summarized in the Environmental Review Summary:
- Corporate Environmental Management Program;
- Environmental Compliance;
- Environmental Benefits of Natural Gas; and
- Human Resources.
To view the environmental documents for this project, click here |
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| Location of environmental documents in locally affected community |
The Environmental Review Summary (ERS) is available at the following locations:
- Distrigaz Sud: Boulevard Marasesti Nr. 4-6, Sector 4, Bucharest, Romania
- IFC: Boulevard Dacia 83, Sector 2, Bucharest, Romania |
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| To contact the project company, please write to: |
Ms. Valérie Ruiz-Domingo :
Gaz de France, 23 Rue Philibert Delorme,
75840 Paris cedex 17 – France ;
email :valerie.ruiz-domingo@gazdefrance.com ;
tel : +33-1-47543556. |
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