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EBRD boosts utility financing in Latvia
Increased loan to Riga Water draws strong interest from commercial banks
In one of the first long-term public utility transactions in Latvia without sovereign or a full municipal guarantee, the EBRD has syndicated to commercial banks $21 million of an EBRD loan to the Riga water company, Riga Udens. The structure has drawn strong interest, and the loan facility has attracted NordLB, HSH Nordbank, Nordea and Vereins- und Westbank to participate in the transaction.
Rigas Udens, wholly owned by the city, provides water and wastewater services for the 700,000 inhabitants of the capital of Latvia. While good management of operational costs and strong collection rates make the company profitable on its own, the city itself is confronted with growing demands which may have increased its debt burden.
The syndication of the water-company’s debt will free up municipal borrowing capacity for investments in other non-revenue generating municipal services in Riga, said Thomas Maier, Director of the EBRD’s Municipal and Environmental Infrastructure team. It demonstrates that municipal utility companies can be financed on their own merits. Given the strong demand for further infrastructure improvements and the challenges to comply with European Union standards following Latvia’s accession to the EU next year, the strong interest of commercial banks is encouraging, Mr Maier added.
Uldis Bambe of Riga Udens said that his company was very satisfied working with the EBRD as this is the third transaction signed with the Bank since the first loan in 1996.
The syndicated loan is part of a cumulative financing amounting to almost €40 million equivalent, which the EBRD has now extended to Riga Udens. The first loan, of $22.5 million, was signed in 1996, followed by $10.99 million in 2000 and a further €9 million as part of the latest transaction signed at the end of October this year. The loan proceeds are being used for operational and environmental improvements. Today 100 per cent of collected wastewater is treated at the Daugavgrivas wastewater treatment plant, and a major pollution source for the Baltic Sea has been eliminated. The new funds will allow the company to continue undertaking improvements to comply with EU environmental standards.
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