28636 - UF Moldova

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Summary of Proposed Investment

Project Number

28636

Company Name

RED UNION FENOSA S.A.

Date SPI Disclosed

Nov 9, 2009

Country

Moldova

Industry

Infrastructure

Projected Board Date

Dec 11, 2009

Status

Completed

Sector

Distribution Business

Department

Regional Industry INF LAC & EUR

Environmental Category

B - Limited

Previous Events

Approved : Dec 17, 2009
Signed : Dec 21, 2009
Invested : Jun 28, 2010

Project Description

RED Union Fenosa (“the Company” or “UF Moldova”), the largest electricity distribution company in Moldova, combining the operations of three distribution companies privatized in 2000 and merged into it in January 2008, is seeking financing to fund its Investment Plan of approximately US$40 million to be implemented in 2009-2010 (“the Project”). The Project is designed to (i) rehabilitate and rationalize the existing network and substations; (ii) increase operational efficiencies; (iii) reduce technical and non-technical losses; (iv) increase productivity gains with investments in information technology; and (v) improve the safety and security of the installations.

IFC’s financing will be in the form of a corporate loan to UF Moldova to support its Investment Plan. This is a repeat business with the Company.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	15.0
Equity

Development Impact

The proposed Project seeks to support the improvement of living conditions of the population through the provision of efficient and reliable electricity to households, potable water systems, health clinics, schools and businesses. It will also contribute to increase the safety of the Company’s installations and to the reduction of accidents. Given the risk perception associated with investing in Moldova, foreign investment in the country and private financing are scarce. Since 2000, the Company is one of the largest foreign investments in the country. Therefore, IFC’s new financing to the Company to support its new capital investment needs is expected to have a strong positive demonstration effect and to pave the way for further foreign direct investment in the country.The Project is expected to generate additional indirect benefits such as improvements in education, health, communication and productivity.

Electricity distribution companies are highly regulated and, in many cases, regulatory entities lack the track record and knowledge to regulate, enforce and monitor their performance. Development institutions can therefore play a critical role in the mitigation of regulatory risk. The presence of IFC in the financing of the Company will provide comfort to other future private concessionaires and to senior lenders as to the fair and equitable treatment of private electricity distribution concessionaires by local authorities. Moreover, IFC’s involvement in the Project will ensure the application of IFC’s Performance Standards and will promote sustainability by ensuring that the implementation of the Project meets international social, environmental, health and labor safety standards. Although with the existing loan the Company has been applying IFC’s Performance Standards, the new financing would allow the Company to continue implementing security and safety practices.

The key environmental and social issues reviewed for this Project include:

- environmental, health and safety management system
- labor and working conditions
- ongoing screening program of potentially PCB contaminated transformers
- community health and safety management, especially measures to further reduce electrocution accidents by the general public

The Company is implementing various measures to continue to improve the environmental, health and safety performance of their operation. The Environmental and Social Review Summary presents the findings of IFC''s due diligence and include an Environmental Action Plan summarizing the actions that UF Moldova has agreed to implement.

Contacts

For Inquiries About the Project, Contact

Francisco Jose Lopez Ocampo
Corporate Director
RED Union Fenosa S.A.
Andre Doga nr. 4
MD-2024 Chisinau
Republic of Moldova

Tel. 37322-43-18-05
Fax. 37322-43-16-75

For Inquiries and Comments About IFC, Contact

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IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster

Local Access of Project Documentation

Based on the ongoing environmental, health and safety programs being implemented by the company, an Environmental Action Plan (EAP) dated November 6, 2009 was agreed between UF Moldova and lenders (EBRD and IFC). This document is being attached to this ESRS, but being disclosed by UF Moldova at the following location:

Place: http://www.ufmoldova.md/arbore_moldova_2009

Additional information about the EAP or UF Moldova’s environmental and social management programs can be obtained by UF Moldova’s officer:

Name: Mr. Veaceslav Ulitin
Title: Director Resurse Interne Address: RED Union Fenosa S.A.
Andrei Doga nr. 4
MD-2024 Chisinau
Republic of Moldova
Email: VUlitin@ufmoldova.com

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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