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EVN Macedonia
Environmental & Social Review Summary

This Environmental and Social Review Summary is prepared and distributed 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 of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.
Project number 31573
Country
Macedonia, Former Yugoslav Republic of
RegionEurope and Central Asia
SectorDistribution Business
Department
Company nameEVN Macedonia AD Skopje
Environmental category:B
StatusActive
Date ESRS disclosedDecember 21, 2011
Previous EventsInvested: March 13, 2012
Signed: February 23, 2012
Approved: January 27, 2012
View Summary of Proposed Investment (SPI), click here

OverviewCategory &

Applicable Standards
Key Issues

& Mitigation
Community/

Engagements
Client's

Documentation

Overview of IFC's scope of review
This is a repeat investment for an original project (ESM Macedonia # 26093) that was appraised in 2007 and committed in 2008. The original project was the loan financing of an investment program to upgrade Macedonia’s electricity supply and distribution company, Electropanstvo na Makedonija AD (“ESM”) which was privatized in April 2006 and was acquired by EVN, Austria’s second largest power utility. ESM is now called EVN Macedonia AD (“EVN Macedonia” or the “Company”). After IFC’s investment in the Company, IFC has conducted periodic and ongoing supervision of the Company’s environmental, health and safety and social performance by reviewing Annual Monitoring reports for the year 2008, 2009 and 2010. In addition, IFC conducted a regular environmental supervision visit in March 2011.

The appraisal of this new investment in the Company was conducted by a desk review of the accumulated and updated information about the Company’s environmental and social performance obtained through IFC’s supervision activities as described above.
Project description
EVN Macedonia AD (the “Company”) is the Former Yugoslav Republic of Macedonia’s (“FYR Macedonia”) sole electricity supply and distribution company serving more than 640,000 customers and a population of 2 million people. In order to finance the Company’s investment program, in 2008 each of IFC and EBRD provided a long term loan of € 35 million (IFC’s project number #26093). The loans will be repaid in 18 equal installments that started in July 2011 and will be ending in January 2020.

In line with the EU Energy Policy, following the new Energy Law that was enacted in February 2011 and the new secondary regulation, EVN Macedonia and the Macedonian energy market is going through a major reform and liberalization process. Due to the ongoing unbundling of its distribution, supply and generation businesses and the changes to market mechanics the Company is expected to require additional working capital by the beginning of 2012. In order to finance this working capital need and capital expenditures of the Company IFC will provide a long term loan up to € 7 million. EBRD also considers participating in the financing. If EBRD decides to participate, the IFC loan amount will be reduced to € 3.5 million.

The Company’s capital expenditure includes items for high voltage lines, substations, low and medium voltage lines, connections to customers, transformers, meters, telecommunications, and some generation (investment in a new small hydropower project of 1.1MW in 2012). The potential environmental or social impacts of these items are similar to those supported by IFC’s previous investment made in the Company in 2008. The main business of the Company is electricity distribution with about 26,360 km distribution lines. The Company has 11 small hydropower plants (in total 46MW capacity).

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