SEDAS is a wholly-owned subsidiary of Akcez, a joint stock company owned 27.5%:27.5%:45.0% by CEZ of the Czech Republic, the Akkök Group (“Akkök”) and Akenerji Elektrik Üretimi A.S. (“Akenerji”) of Turkey, respectively. CEZ is the largest Czech utility and one of the ten largest utilities in Europe, and Akkök is a large industrial conglomerate in Turkey, owning several subsidiaries across many sectors, including Akenerji in the energy sector. Akenerji is an existing IFC client.

The total Project cost is approximately $700 million including inter alia capital expenditures for network expansion and renewal. $600 million of this amount is the consideration of the SEDAS privatization. The proposed IFC investment consists of a $75 million A loan to SEDAS, along with a $90 million B loan to be mobilized from international banks.

75.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	75.0
Equity

* These investment figures are indicative

SEDAS serves a distribution region located in north-western Turkey, in a highly industrialized section of Anatolia extending between Ankara and Istanbul and covering the districts of Sakarya, Kocaeli, Bolu and Düzce. The population of the region is 2.8 million, accounting for 4.1% of the national population. SEDAS’ customer base of 1.3 million represents 4.1% of nationwide subscribers, and their combined 2009 energy consumption of 8,414 GWh represented 5.4% of total 2009 nationwide consumption. SEDAS’s distribution network has a total line length of 40,491 km (12,864 km of Medium Voltage, 27,627 km of Low Voltage lines), 15 transformer stations (34.5/15 kV), 3 transformer stations (34.5/6.3 kV), 1,156 transformer stations (34.5/0.4 kV), 100 transformer stations (15/0.4 kV), 27 transformer stations (6.3/0.4 kV), 209 distribution center / switching substations (34.5/34.5 kV), and 3,345 SF6 (sulfur hexafluoride) breakers.

The Project’s development impact is as follows: (i) development of sustainable private power distributors by providing the first long term project financing to a distribution company in Turkey; (ii) demonstrating the viability of distribution privatization to help attract local and international investors to future distribution privatization tenders; (iii) supporting power sector reform in order to move towards possible EU accession and the creation of a regional energy market; and (iv) benefiting the end-users by bringing innovation and improved service levels. Through the above, the Project will positively impact the fiscal and macroeconomic stability of Turkey.

IFC’s role and additionality in this Project will include: (i) playing an “anchor lender” role to mobilize long term international financing by designing a project finance structure to accommodate the existing regulatory risk, that can be replicated by commercial banks for financing of the upcoming privazations; (ii) providing comfort to international investors and attract them to upcoming bids by demonstrating that long-term financing structure that accommodates existing regulatory uncertainty is possible; (iii) together with the WBG, assisting in the improvement of the investment climate for the private sector by providing best practices and emerging markets operational benchmarks to EMRA and the PA; and (iv) strengthening the Company’s environmental and social management systems and policies, in line with WBG requirements.

This is a category B project according to IFC’s Procedure for Environmental and Social Review Projects.

Key environmental and social issues are:
effectiveness of SEDAS’ EHS Action Plan, which was developed as an outcome of the comprehensive EHS audit, to improve EHS and social performance of SEDAS;
environmental areas for improvement at SEDAS (operating permits, mobile emissions, GHG inventory including SF6, wastewater and stormwater management, hazardous and non-hazardous waste and material management, potential PCB contamination of transformers, land/soil/groundwater contamination, environmental management system);
health and safety areas for improvement at SEDAS (occupational health and safety management, working at height, accident and near-miss investigation, emergency response plans and drills, employer training, personal protective equipment, public safety, traffic safety, strengthening health units, fire safety, risk analysis and management); and
SEDAS’ management of labor and working conditions.