€100 million loan to launch the overhaul of Russian power systems

A loan of €100 million (£62 million) will launch an overhaul of Russia’s power network, pivotal for the economic future of the country, the European Bank for Reconstruction and Development (EBRD) has announced.

The funds have been granted to the Unified Energy System of Russia (RAO UES), the company which is to set in motion a government-approved restructuring plan. Half of the loan will be syndicated to a group of international banks, and the total amount reverses the dramatic decline in investments in the power sector in the last 10 years.

The programme will include urgent efficiency improvements, and will also help RAO UES reduce inter-company and inter-group debts in preparation for the imminent unbundling of its businesses, under which transmission and distribution are due to be separated from generation and supply. A large part of the loan will be used to finance the rehabilitation of key sub-stations in the transmission network as well as for upgrading the communications system.

“The EBRD is embarking on what we expect will be a long process of involvement in the sector, while sending the international investment community a signal that an important first step towards reform has been taken,” said First Vice President of EBRD Noreen Doyle.

A small part of the loan will also be used to fund an Energy Carbon Facility, designed to identify greenhouse gas emission reduction projects that could attract outside investors. The facility will also work with the government to draft the laws and regulations needed to develop such projects.

The EBRD intends to continue to liaise closely with the government on the restructuring of the power sector, focusing on aspects such as development of regulation, competition and the protection of minority shareholder rights.

“The support of the international investment community towards reform of this key sector of the Russian economy is vital, and increasingly evident,” said First Deputy Chairman of RAO UES Leonid Melamed.

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