EBRD signs loan agreements with CIS countries

Jan 15, 1997 01:00 AM

Jan. 1, 1997 The European Bank for Reconstruction and Development (EBRD) signed three ground-breaking energy agreements with Russia and the countries of the former eastern bloc at the end of December. The Russian gas utility is to receive $ 225 mm (of which $ 125 mm will be syndicated through commercial banks) for the upgrading of its natural gas supply system. Gazprom is the world's largest producer, processor and transporter of natural gas. It owns and operates a network of 140,000 kilometres of large-diameter, high-pressure pipeline, several gas-processing plants, 245 compressor stations and 18 underground gas storage facilities. Some 25 % of its gas production is sold to western Europe, earning $8 bn per year in export income.
Even though Gazprom has recently gained wide access to the international loan and equity markets, EBRD's loan is novel in the sense that it will be the first syndicated loan facility to Gazprom without recourse to its long-term export contracts, or other guarantees. The EBRD financing will allow Gazprom to increase the reliability of its gas supply and the efficiency of the system, as well as improving its competitiveness tendering practices. The loan carries a five-year term, while the syndicated portion is for four years. The total cost of the investment program is $ 300 mm. The proceeds will be used to finance investments to improve gas pipeline inspection metering, introducing mobile compressor stations and replacing valves.
EBRD also signed an agreement with Tirex-Petrol, the state-owned Moldovan state oil company, and Technovax S.A. to provide $ 19 mm for the construction of a port oil terminal in Moldova. This is EBRD's first port project to be financed on a concession basis with private sector sponsors. The modern facilities will make Moldova's handling and distribution of oil more cost-effective and efficient. The terminal is to be built on the Danube River in the south of Moldova, and will increase the country's flexibility in importing raw materials, as well as introducing market-based principles to the oil products distribution sector.
The enormous problem of energy waste in the former Eastern bloc is also being tackled and the Bank is to fund an $ 85 mm multi-project facility with the Swiss company, Landis & Gyr. Up to 30 % of energy generated in the CIS is lost and with no means of controlling energy consumption on demand, this puts the energy sector under considerable pressure. A network of energy service companies will be set up throughout the region as part of the agreement.

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