EBRD plans loan for CEZ Distribution’s grid in Bulgaria

The proceeds of a loan being considered by the European Bank for Reconstruction and Development are set to be used by CEZ Distribution (Razpredelenie) Bulgaria a.d. The target date for the final review of the senior package of EUR 116 million is September 7, the project summary document states.

EBRD said the electricity distribution company which operates in the country’s western region will finance a capital investment programme in the distribution network for the period 2016-17, including the acquisition of energy infrastructure, equipment and reconstruction and building of new infrastructure. The investment is expected to reduce the company’s grid losses and improve the quality of distribution services.

CEZ Distribution is 67% owned by ČEZ Group from the Czech Republic, with the remainder belonging to legal entities and individuals. The group operates in Central and Southeastern Europe, including Turkey.

With this investment the bank will contribute towards the implementation of sector reforms, encourage infrastructure investments and move towards greater liberalization of the electricity market, the document said. EBRD is also preparing a technical cooperation project with the national energy regulator to focus on assistance in the upcoming market liberalization and enhance the analytical ability of the body with a particular emphasis on the regulation of electricity networks. In addition, the investment programme will contribute to setting new standards for business conduct in Bulgaria since it will primarily aim to reduce technical and commercial losses, leading to carbon dioxide emission savings of up to 50,000 tonnes per year, according to the bank.

The planned financing project is categorised B, according to EBRD’s 2014 Environmental and Social Policy. The new linear infrastructure elements to be constructed under the investment programme consist of segments of new underground medium-voltage lines connections in total length of 30 kilometres yearly and overhead low-voltage lines of 10 kilometres on an annual basis. They will be mostly constructed along existing roads and streets. The environmental and social due diligence (ESDD) is being carried out by an independent consultant. The ESDD identified a number of environmental and social impacts that  require implementation of mitigation measures, including past soil contamination with transformers’ oil, biodiversity impacts, electric and magnetic fields exposure of workers and community, permanent and temporary loss of land and crops as well as labour and human rights issues, among others, EBRD said. The environmental and social action plan (ESAP) is being developed and needs to be agreed with the company.