Project detail - OSMANGAZI ELEKTRIK DAGITIM A.S.

Who is our customer

On May 31st 2018, FMO signed a local currency senior loan of USD 65 million equivalent to a Turkish electricity distribution company, Osmangazi Elektrik Dagitim A.S. (“OEDAS” or the “Company”) to finance their 2017-2020 capital expenditure program (the “Project”), during the 2016-2020 regulatory period. OEDAS is the exclusive electricity distributor of a region covering five provinces in central Turkey, namely Eskisehir, Afyon, Usak, Kutahya and Bilecik (“OEDAS Region”). It is wholly owned by Zorlu Osmangazi Enerji Sanayi ve Ticaret A.S. (“Zorlu Osmangazi”), a joint stock company incorporated in Turkey. Zorlu Osmangazi also wholly owns Osmangazi Elektrik Perakende Satis A.S. (“OEPSAS"), the incumbent electricity supply company serving the OEDAS Region as well as other parts of Turkey. The Company and OEPSAS were acquired in February 2017 by Zorlu Osmangazi, which is wholly owned by Zorlu Enerji Elektrik Uretimi A.S. (“Zorlu Enerji”, or the “Sponsor”). Zorlu Enerji is a Turkish power company with approximately 1,100MW of operational assets and active in wholesale electricity trading. The Sponsor is a subsidiary of Zorlu Holding, one of the largest conglomerates in Turkey, which also owns two gas distribution companies and a retail sales company in addition to OEPSAS. OEDAS provides power distribution services to 1.6 million customers in the OEDAS Region, which has a population of 2.7 million in 194 towns and 1,596 villages, within 59 districts. OEDAS distributed a total net energy of 6.1 TWh in 2016.

What is our funding objective?

OEDAS has planned to invest ~USD 330 million during the period 2017-2020. The IFC and EBRD were mandated. At same date, EBRD signed USD110m and IFC USD80m (equivalent in local currency). OEDAS’ shareholders already injected USD360 million to acquire OEDAS early 2017. The investment objective and rationale are as follows: (i) the construction of and/or modernization of OEDAS’s existing network and distribution lines and the replacement of outdated equipment; (ii) the expansion of the automated electricity metering system (reading and billing); (iii) the expansion of the network and connection of new users; and (iv) installation of a new automatic control system and other auxiliary investments. FMO provides a senior loan in local currency (“TRY”) equivalent to USD 65 million. FMO co-invests with IFC and EBRD (who both act as Mandated Lead Arrangers). The project is an E&S B+ risk category according to FMO, due to upgrading and/or (new) construction works for distribution lines and networks, and environmental and social management system improvement.

Why do we fund this investment?

Because the distribution network companies in Turkey, including OEDAS, rely on tariffs and compensation in local currencies, it is important for these companies to have their long term investments being financed in local currency: this avoids currency mismatches (in particular in countries where currency depreciation might happen). FMO’s funding of OEDAS’s investments is therefore done in local currency and long term in nature: it is also fully aligned with FMO’s strategy and approach.

What is the Environmental and Social categorization rationale?

The following IFC Performance Standards (“PS”) (and equivalent EBRD Performance Requirements) are applicable for this investment in OEDAS: IFC’s PS 1,2,3,4,5 and 6. PS 1 - Assessment and Management of Environmental and Social Risks and Impacts. Considered being applicable due to environmental and social impacts as a result of the Project. PS 2 - Labour and working conditions. Applicable due to labour involved in Project activities. PS 3 - Resource Efficiency and Pollution Prevention. Applicable due to Construction activities and/or Operational activities, as part of the Project; Energy Efficiency is included as a major result of refurbishing and upgrading. PS 4 - Community Health, Safety and Security. Applicable due to local communities might be impacted as a result of Project activities. PS 5 - Land Acquisition and Involuntary Resettlement. Right of Way with respect to land, etc. is required as a result of the (construction as part of) Project activities. PS 6 - Biodiversity Conservation and Sustainable Management. The Project may impact biodiversity (for example: waste, T-line routing, etc.). IFC’s PS 7 (Indigenous People) is not applicable: the Environmental and Social Assessment did not identify any people qualifying as Indigenous in the region. IFC’s PS 8 – (Cultural Heritage) is not applicable: the Environmental and Social Assessment did not identify any relevant objects or sites as referred to under PS 8; a chance find procedure however will be developed.

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Date	Total FMO financing
12/17/2021	USD 75.00 MLN