The biggest single private investment in the Republic of Macedonia to date was signed during 2007 and arranged by Landesbank Berlin (LBB). The €167mn finance raised is for the construction of a ‘cleaner’ 220MW combined cycle power plant in Skopje by a consortium comprising Alstom (Switzerland) and Gama Power System of Turkey.

The borrower is TE-TO, Skopje, a joint venture between Toplifikacija, Skopje and Negusneft, Moscow (Sintez Group).

The export credit agency (ECA)-covered financing is based on and derived from payment claims of sub-contractors of Gama in Germany and Poland.

Three ECAs are involved comprising three direct insurance policies and two reinsurance arrangements.

The financing has four elements. There is a two-tranche confirmation of standby letters of credit (LCs) for €9.548mn and €17.612mn (tenor of 291 days). There is a bridge loan of €19.86mn with a tenor 158 days (€17.416mn secured by a pledge on Sberbank shares and €2.444mn secured by NLB).

The third element, a €106.02mn ECA loan, comprises:


  • Tranche A – €31.025mn for 85% of the German portion (Euler Hermes cover) 


  • Tranche B – €2.58mn for Euler Hermes costs (Euler Hermes covered) 


  • Tranche C – €3.4mn for capitalised interest during construction for tranches A and B (Euler Hermes covered) 


  • Tranche D – €15.385mn for 85% of the Polish portion (Kuke covered) 


  • Tranche E – €2.10mn for Kuke costs (Kuke covered) 


  • Tranche F – €2mn for capitalised interest during construction for tranches D and E (Kuke covered) 


  • Tranche G – €40.48mn for 85% of Swiss portion (Serv covered) 


  • Tranche H – €4.45mn for Serv costs (Serv covered) 


  • Tranche I – €4.50mn for capitalised interest during construction for tranches G and H (Serv covered) 

    Tranches G-I are partially reinsured by Euler Hermes and Kuke. The tenor for these is 12.5 years, with repayment in 20 consecutive semi-annual instalments.

    The fourth element is a commercial loan for €14mn. The tenor mirrors the ECA tranches.

    “LBB was mandated in early 2006,” says Ralph Lerch, director, team head, export finance, LBB. “The potential EPC contractors Gama and Alstom had no access to their ECAs during that time – Turk-Eximbank was not guarantor and ERG (later Serv) was not open to private risk in Russia. However, major equipment was envisaged to be sourced from subsidiaries in Germany and Poland. So the basic idea was to use as much Euler Hermes and Kuke coverage as possible derived from the claims of Gama’s sub-contractors in Germany and Poland.”

    After PricewaterhouseCoopers (PwC – acting on behalf of Euler Hermes) was mandated to advise the new Serv and implement new instruments, analysing tools, and so on, the project became a pilot for the Swiss ECA.

    “Due to the complexity of the documentation and the change in government in Poland (which also caused a change of Kuke’s external committee) a bridge credit became necessary to cover the first four milestone payments to contractors,” adds Bernd Schmidt, director and representative of LBB in Moscow.

    “Not only the borrower but also the guarantor had to accept specific covenants (eg, not to dispose of certain assets defined by the lender). In addition, a mortgage on land, a pledge on major equipment and power plant was agreed, which was new territory for foreign banks in Macedonia.”

    Financing was also helped by: law firm Beiten Burkhardt’s positive risk assessment for a pledge of Russian shares under Russian law as collateral for LBB as a foreign bank; UniCredit Bank acting as custodian and share pledge settlement agent; Nova Ljubljanska banka’s involvement in the bridge loan and commercial loan; Pepeljugoski law office’s expertise on Macedonian law; Euler Hermes/PwC’s role as a driving force among ECAs (co-ordinating the direct insurance and reinsurance); Nomos Bank’s and Komercjalna Banka’s issuance of guarantees and standby LCs.

    “Due to the lack of electricity in Macedonia the project plays a major role for stability and economic growth in the country and region,” says Schmidt. “Further power generation projects are on the agenda. And LBB is evaluating business opportunities in the financing of infrastructure, medical equipment and agricultural machinery.”

    “The investors are in talks with traders over offtake of electricity for delivery inside and outside Macedonia,” claims Christoph Schneider, senior project manager at Colenco. “Macedonia is located in an interesting spot for the supply of power to the eastern European part of the Balkans. There are often black-outs in Skopje, therefore the improvement of power generation infrastructure is a major target of the government.”

    Deal Information:



    Financial advisor, arranger: Landesbank Berlin (LBB)
    Co-lenders: NLB, Ljubljana; NLB Tutunska banka, Macedonia
    Guarantor for equity portion: Komercijalna Banka; Nomos Bank
    Custodian for the pledge agreement: ZAO UniCredit Bank, Moscow
    Tenor: 158 days-12.5 years
    Standby LCs: confirmation commission: 0.75 % pa; advising commission: €500.00
    Bridge loan: margin: 0.75% pa
    ECAs: Euler Hermes; Serv; Kuke
    Project development: GN Energy Engineering
    Technical advisor, environmental assessment: Colenco Power Engineering
    Law firms: Beiten Burkhardt, Moscow; Pepeljugoski Law Office & Intellectual Property Bureau, Skopje
    Date signed: July-October 2007