26016 - Enerjisa Enerji Uretim A.S.

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Summary of Proposed Investment

Project Number

26016

Company Name

ENERJISA ENERJI URETIM ANONIM SIRKETI

Date SPI Disclosed

Feb 1, 2008

Country

Turkiye

Industry

Infrastructure

Projected Board Date

Mar 6, 2008

Status

Active

Sector

Large Hydro - Renewable Energy Generation

Department

Gbl Infrastructure & Natural Resources

Environmental Category

B - Limited

Previous Events

Approved : Mar 13, 2008
Signed : Jun 13, 2008
Invested : Dec 17, 2008

Project Description

The proposed IFC investment will extend corporate loans to EnerjiSA Enerji Üretim A.S. (EnerjiSA or the company), secured with its underlying portfolio of energy assets and contracts, to finance the first phase of EnerjiSA’s capital investment program for the 2008 to 2012 period. IFC’s proposed investment will be in parallel with financing arranged by the Turkish commercial bank Akbank and the European commercial bank WestLB headquartered in Germany.

The project consists of the construction of a portfolio of one natural gas-fired thermal plant (TPP) and – according to current planning – ten hydroelectric power plants (HPP) in various locations throughout Western and Southern Turkey with total capacity of approximately 1.9 GW with an estimated cost of $2.0 billion (EUR1.4 billion) (Phase I), representing the initial phase of Enerjisa’s overall capital investment aimed at developing 5.0 GW in generation capacity by 2015.

Sponsor / Cost / Location

Enerjisa Enerji Üretim A.S. (Enerjisa or the company) is a 50:50 joint venture formed by H.O. Sabanci Holding A.S. (Sabanci) from Turkey and Österreichische Elektrizitätswirtschafts-Aktiengesellschaft (Verbund) from Austria.

Haci Omer Sabanci Holding (Sabanci Group, Sabanci Holding, Sabanci, the “Group”): Sabanci Holding is the parent company of the Sabanci Group, which is one of the top industrial and financial conglomerates in Turkey. The Sabanci family owns 78 % of the share capital of Sabanci while the remaining portion is a public float listed on the Istanbul Stock Exchange and depositary receipts are quoted on SEAQ International and PORTAL. Sabanci has a current market capitalization of approximately US$9.6 billion as of January 15, 2008. 13 Sabanci companies are listed on the Istanbul Stock Exchange representing approximately (14%) of the total Istanbul Stock Exchange market capitalization with Sabanci Holding, on a stand-alone basis, accounting for about (4%).

While operating in a diversified set of sectors mainly in financial services, cement, automotive, tire & tire reinforcement materials, retail and energy, the Group has built joint ventures with global players such as Toyota, Bridgestone, Philip Morris, Carrefour, Heidelberg Cement, International Paper, Citibank, and recently Aviva and Verbund. The Group comprises 70 companies, many of which are market leaders in their respective sectors, operating in 18 foreign countries. The Sabancı Group had $48 billion consolidated assets as of end-December 2006, and reported $12.1 billion in consolidated revenues, $1.9 billion in consolidated EBITDA and US$351 million consolidated net income in 2006.

Österreichische Elektrizitätswirtschafts-Aktiengesellschaft (“Verbund”):
Verbund is Austria’s leading vertically integrated electricity utility group covering the entire value chain from generation and transmission to trading and supply with the exception of distribution. Verbund operates a portfolio of 116 power plants with a total installed capacity of 9,300 MW and annual electricity generation of 27,000 GWh. With a generation mix comprising 85% of hydropower and 15% of thermal power, Verbund is considered one of the most environment friendly electricity generators in Europe. Verbund had EUR6.4 billion of consolidated assets at December 31, 2006 and reported EUR2.9 billion in consolidated revenues, EUR978 million in consolidated EBITDA and EUR501.1 million in consolidated net income for the fiscal year 2006. Electricity generation constitutes 88% of consolidated sales, followed by 9% grid operation, 1% emission and 1% other activities. Following its partial privatization in December 1988, 51% of the share capital of Verbund has remained under the ownership of the Republic of Austria. About 25% of the share capital is held by the provincial energy suppliers TIWAG (about 5%), Wiener Stadtwerke Holding (about 10%) and EVN (about 10%) while the remaining shares (about 24%) are free float. Verbund is the fifth largest company listed in the Vienna Stock Exchange, with a market capitalization of approximately €14.0 billion as of January 15, 2008.

For further information on the Sponsors please see their websites: www.sabanci.com and www.verbund.at.

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	247.70
Equity

Development Impact

Turkey is facing a serious electricity shortage, expected as early as 2009, due to a combination of sustained economic growth and lack of adequate investments in the energy sector in recent years. To address the critical situation, the Government of Turkey (GOT) has embarked on implementing an on-going liberalization program of the Turkish electricity sector, including the preparation for the privatization of state-owned electricity distribution and generation assets. Consequently, several of the local private groups, many of which are already auto generators for their own industries, have begun expanding their power generating capacity, either independently or by the means of partnerships with experienced international power operators.

Despite the growing risk appetite from commercial lenders to finance power generation assets, the sector exhibits significant commercial risks and regulatory uncertainties during the transition period, impeding the availability of long-term financing for the merchant power projects, in the absence of long-term power purchase agreements (PPA).

The project will have a high development impact as it will:

- contribute to the development of a merchant power operator in Turkey where ongoing structural and regulatory changes have introduced additional uncertainty for prospective investors;

- finance the construction of power generation capacity of approximately 1.9 GW and meet incremental power demand in Turkey given the expected supply shortage in 2009;

- support the power sector reforms in Turkey as the plants built within the scope of the project will not benefit from any government guarantees contrary to the existing independent power producers. Moreover, the project is expected to demonstrate the viability of a liberalized power sector to other potential private entrants to the sector. Due to its reliance on hydro and natural gas as energy sources, the project will contribute to reducing Turkey’s reliance on coal, thereby reducing carbon intensity and improving security of supply.

IFC’s role in this project includes:

- providing long-term financing and
- mobilizing additional financing from international commercial banks under IFC’s B-loan umbrella in the first major merchant power financing deal in Turkey; and
- implementation of adequate environmental and social standards in line with the WBG requirements.

Furthermore, IFC’s additionality in this project includes:

- creating a new corporate finance - project finance hybrid structure to accommodate Enerjisa’s growth strategy as well as its financing needs;
- sharing IFC’s extensive know-how of deregulated power markets;
- advice on contractual and financial structuring issues considering the merchant risk embedded in the project; and
- IFC’s stamp of approval and comfort to participants under its B-loan umbrella in one of the first major energy financing with merchant risk in the transitioning electricity market in Turkey.

The proposed project is a corporate loan to EnerjiSA, for which the funds will be used for construction of specific power plants. The key issue reviewed during appraisal involved the effectiveness of EnerjiSA’s corporate environmental and social management system and the ability of the organization to ensure compliance with the GOT regulatory requirements and IFC’s Social and Environmental Performance Standards in the various power infrastructure construction and operation activities in which the Company participates. The company’s activities primarily involve natural gas fired and relatively small hydroelectric power plants, and this corporate investment is a Category B project because a limited number of specific environmental and social impacts may result, which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.

Contacts

For Inquiries About the Project, Contact

Gerhard Wedam (CEO)
Enerjisa Enerji Uretim A.S.
Sabanci Center Tower 2, Floor 5, 4. Levent 34330 Istanbul

E-mail: gwedam@enerjisa.com.tr
Telephone:+90 212 385 88 50
Fax: +90 212 385 88 55
Website: http://www.enerjisa.com.tr/

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Local Access of Project Documentation

The environmental documents will be made available at the following location: Enerjisa Enerji Uretim A.S. Sabanci Center Tower 2, Floor 5, 4. Levent 34330 Istanbul Turkey

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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