In September 2006, the European Bank for Reconstruction and Development (EBRD) and a group of Russian and international banks closed a Rb6.3bn (US$235mn) Russian rouble financing of capital expenditures for OAO HydroOGK, the largest hydro generating company in Russia.
The transaction sets new standards for local currency financings in Russia and continues to support the development of the MosPrime index, Russia’s benchmark for floating rate financings. It sets a new record in terms of maturities for the commercial rouble syndication market, now stretching to 10 years for the first time.
The EBRD arranged the loan as an A/B loan facility consisting of an ‘A” loan of Rb2.3bn for its own account and ‘B1’s and ‘B2’s loans of Rb850mn and Rb3.15bn respectively for the account of a syndicate of commercial banks.
Co-arrangers under the B loan are: Standard Bank, Bank Austria Creditanstalt, and ING Bank (Eurasia). Lead managers are: Calyon, Fortis and ZAO Raiffeisenbank Austria. Managers are: ZAO Citibank, Credit Suisse and Banque Societe Generale Vostok.
The B loan comprises Rb3.15bn (€92mn) for 10 years (provided by Standard, ING, Bank Austria, Calyon and Fortis) priced at 305bp over Mosprime and Rb850mn (€25mn), provided by the remaining banks, for eight years priced at 275bp over Mosprime.
The EBRD A loan is for 14 years. The transaction is based on the three-month MosPrime benchmark, the index established in April 2005 under the auspices of the National Currency Association in partnership with major international and Russian banks, thereby supporting MosPrime as a credible benchmark for floating rate financings in Russia.
The transaction was successfully closed in September 2006 and the 10-year tranche oversubscribed.
HydroOGK is a fully-owned subsidiary of the main Russian power utility RAO UES and is expected to become the second largest hydropower utility in the world once the restructuring process is complete. The loan will allow HydroOGK to extend the lives of outdated hydropower stations by another 25 years.
The EBRD has provided Rb6.3bn (€185mn) in long-term funding to support renewable energy in Russia. The loan will finance a modernisation programme which will extend by at least a quarter of a century the life of nine power stations of the Volga-Kama cascade, one of the country’s largest sources of hydropower.
The total cost of rehabilitating obsolete equipment, mainly turbines, generators and transformers, on the Volga-Kama cascade is estimated at Rb26bn and it is expected to take five years to complete.
Hydro generation is the main source of renewable energy in Russia, providing 20% of all the power produced. It acts as the backbone of the power industry, stabilising supplies and maintaining the reliability of the country’s entire system, as well as generating economically efficient electricity.
The government has now put HydroOGK in charge of developing all renewable energy resources in Russia, including windfarms, tidal and small hydro projects.
Borrower: OAO Hydro OGK
Amount: Rb6.3bn (US$235mn)
Lender (A loan): EBRD
Lenders (B loan): Standard Bank; Bank Austria Creditanstalt; ING Bank (Eurasia)
Lead managers: Calyon; Fortis; ZAO Raiffeisenbank
Managers: ZAO Citibank; Credit Suisse; Banque Societe Generale Vostok
Law firms: Gide Loyrette Nouel (lenders)
Date closed: September 2006