The project sponsor is GDF Suez S.A., one of the leading energy providers in the world. In the gas sector, with 16 million customers in Europe, including 11 million in France, GDF Suez is Europe’s leading gas player. GDF Suez S.A. owns 90% of IZGAZ, with the balance owned by the the Kocaeli Metropolitan Municipality (the former sole owner of IZGAZ).

The total project cost amounts to approximately $300 million including inter alia capital expenditures for network expansion and the reimbursement of gas payables to the State-Owned Petroleum Pipeline Corporation (“BOTAS”). Part of the project cost will be financed by a local currency A Loan of $50 million equivalent for IFC’s own account.

50.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
Equity

* These investment figures are indicative

Located 80 km to the east of Istanbul, the Kocaeli region is one of the most industrialized areas in Turkey. Headquartered in the city of Izmit, IZGAZ is the third largest gas distributor in Turkey, with over 200,000 subscribers.

By nature, city gas distribution projects have a high development impact due to the fundamental characteristics of this activity, including its benign impact on the environment, the low hazards of transporting gas through gas distribution networks, and the positive social and economic benefits it imparts to the local populations. Natural gas is one of the cleanest and cheapest fossil fuels, and its widespread use is one of the most cost-effective ways of reducing harmful air pollution caused by the widespread use of less clean-burning fuels that can be replaced by natural gas, such as the sulfur-containing fuel oil and coal used by industry. In particular, IZGAZ activities have already contributed greatly to the use of natural gas as a fuel for residential cooking and heating. This has greatly reduced the reliance on lignite, coal, fuelwood and LPG by households, and has led to benefits of convenience and lower household fuel bills, as well as resulting in lower local atmospheric pollution. The continued expansion of IZGAZ distribution activities in the license area will reinforce these benefits in the future.

IFC’s development contribution is expected to include inter alia: political and regulatory risk mitigation; and foreign exchange risk mitigation through the provision of long-term local currency financing, which is not readily available amid current market conditions.

The project is a corporate-level capital investment in an existing gas distribution company that will be used to refinance existing debt and fund the company''s existing business and potential network expansion. No major new infrastructure works are expected in the near future and therefore no new environmental, social, health and safety, and labor impacts and risks are expected. The potential environmental, social, and health and safety impacts and risks associated with this Project are essentially the continuation or small increase of existing impacts / risks associated with continuity of business/service, including: (a) methane emissions from fugitive leaks and venting activities from regular operation and maintenance, (b) noise, vibration, dust, increased erosion, and other construction related impacts from earthworks and excavations as a result of pipeline installation associated to both, gas distribution network expansion activities and maintenance and replacement of existing ones, (c) solid waste and hazardous waste generation, (d) any potential risk to community health, safety, and security associated to the exposure of communities to hazards from gas leaks and/or explosions, as a result of accidents and pipeline ruptures caused by in-house staff, contractors, third-party activities (outside contractors and the public), and natural events (e.g. earthquakes), and (e) impact on natural habitats during construction of gas distribution systems in newly developed rural or peri-urban areas, if any. The only major new pipeline that is expected in the next few years is a 3-km sub-marine pipeline across the Marmara Sea to complete the loop and provide better supply security to the network. These impacts and risks can be mitigated or managed with readily available management practices, and therefore this project was categorized as a B.

IZGAZ has a well developed integrated Environmental, Social, and Occupational Health and Safety (ESH) Management System which was ISO 14001 and OHSAS 18001 certified in March 2006 by TÜV Nord. For further detail please refer to the project’s Environmental and Social Review Summary (ESRS).