Financed ProjectsEurohold

Identification Code:

OP/21/0023

Total Operation Cost:

520.600.000

Maturity:

60 months

Operation Status:

Description and Purpose of the Operation:

The operation pertains to BSTDB’s potential participation in a banking syndication for the provision of a secured corporate loan to the company Eastern European Electric Company (the "Borrower"), which is a 100% subsidiary of Eurohold (the "Company"). In more specific, Tranche A is expected to be used to fund the purchase price of the target companies pursuant to the share purchase agreement, pay transaction fees and costs and fund repayment of certain shareholder loans, whereas tranche B is expected to be used to fund the Mandatory Tender Offer and the relevant Squeeze-out of minority shareholders and pay transaction fees and costs. Eurohold Bulgaria AD ("Eurohold"), a leading independent financial services group in the CEE/SEE region, is in the process of acquiring CEZ Group’s assets in Bulgaria ("CEZ Bulgaria"). The relevant Share Purchase Agreement ("SPA") was signed on 20 June 2019 and regulatory approvals were received on 29 October 2020 by the Commission for Protection of Competition (CPC) and on 19 January 2021 by the Bulgarian Energy Regulatory Authority (BERA). The transaction perimeter comprises of 7 assets operating in the Bulgarian electricity energy sector, with total consolidated revenues of €754mm and EBITDA of €87mm in FY2020: • The core asset is CEZ Razpredelenie (75% of cons. EBITDA), a natural monopoly, owner and operator of electricity distribution network in Western Bulgaria. The transaction perimeter includes 67% of the asset, while the rest is traded on Bulgarian Stock Exchange ("BSE"); • Electricity supply & trading companies CEZ Elektro and CEZ Trade (12% and 6% of cons. EBITDA respectively). The Perimeter includes 67% of CEZ Elektro (with the remaining part traded on BSE) and 100% of CEZ Trade; • Other businesses (8% of cons. EBITDA) including: two intragroup service companies, CEZ Bulgaria and CEZ ICT; • a photovoltaic power plant (Free Energy Project Oreshets) with 4.9MW of installed capacity; and • a conserved biomass power plant (Bara) The acquisition process envisages: i) purchase of all shares of CEZ assets in Bulgaria for a total consideration of circa €335 mm in an agreed timeframe ("Tranche A"); and ii) two mandatory tender offers in relation to minority shareholders of CEZ Razpredelenie and CEZ Elektro (both partially listed on the BSE) for a total amount of circa €105mm ("Tranche B")

Countries of Operation:

Bulgaria (100,00 %)

Financial Product:

Loans

Sector:

Utilities

Domain:

Private

Borrower/Client:

The Borrower will be a limited liability company incorporated in the Netherlands, Eastern European Electric Company B.V., which will own 100% of the acquired shares in CEZ Bulgaria.

Co-Financiers/Participants:

The banking syndication is expected to comprise of 10-12 banks/IFIs. The acquisition is expected to be financed through: • €65mm equity investment from Eurohold, funded with proceeds from a rights issuance currently underway and expected to be completed by early June 2021; • Up to €110mm from a preferred equity or junior debt instrument, underway and led by J.P. Morgan as sole financial adviser and placement agent expected to be completed ahead of the senior loan funding; • c. €325mm from 5 years amortizing senior term loan facility, which will be raised on the back of the target’s asset base.

Guarantors/Sponsors:

The Parent is Eastern European Electric Company II B.V. expected to be 100% owned by Eurohold.

Developmental and Regional Cooperation Impact:

The Project will have economic benefits for the Bulgarian economy and the energy sector and will assist to the broader target of restoring economic growth through the creation of new jobs, receipt of tax revenue gains and improvement of the country’s electricity infrastructure. It is noted that a highly reputable partner such as Eurohold , a leading publicly listed CEE/SEE financial services group with a strong footprint in Bulgaria is committed to the long term development of CEZ’s assets in the country finding additional potential for operating enhancement and cost optimisation driven by identified initiatives and expected synergies from the acquisition. The intention of Eurohold Bulgaria AD is to turn Eastern European Electric Company B.V. in a regional utility company in the country in terms of sustainability and customer satisfaction. Eurohold is clearly committed to investing in technology and digitizing processes to improve the efficiency of energy companies while maintaining financial stability and regulatory compliance, as well as by ensuring continuity in the operational management of the acquired assets.

Environmental Classification and Impact (summary):

The operation has been assigned environmental and social (E&S) category B and is associated with medium risks and impacts, which can be readily identified and managed by applying recognized performance standards and good practices used by power supply and distribution industry. The ESDD of CEZ Group Bulgaria concludes that its business is compliant with E&S national and EU legal and regulatory requirements, its management systems provides sufficient means to adequately control and manage the associated E&S risks and impacts, and overall CEZ Bulgaria registers good E&S performance and has identified areas that could be further improved.

Operation Leader:

Energy & Infrastructure

E-mail:

ei@bstdb.org