Nicoara: First, congratulations on winning the Deal of the Year award in Moldova!
Crasnobaev: Thank you! I am delighted that our successful collaboration has been recognized by this fascinating award.
Nicoara: Tell us a bit about CET-Nord and its operations.
Crasnobaev: The Joint Stock Company CET-Nord is an enterprise with full state capital and represents an entity of public interest at the national level. The company is also the largest supplier of thermal energy and produces electricity in cogeneration in the north of the Republic of Moldova, providing approximately 65% of the population of the city of Balti with thermal energy. It should be noted that JSC CET-Nord is the first thermal energy unit in the Republic of Moldova that has built and put into operation a cogeneration station with internal combustion engines in the country.
Nicoara: The winning deal involved an EBRD Loan to CET-Nord. What were the specifics of the deal that you can share?
Crasnobaev: On December 24, 2021, the European Bank for Reconstruction and Development (EBRD) concluded a loan agreement with the Republic of Moldova for the financing of Phase 2 of the Balti District Heating project by granting a EUR 15 million loan.
In order to achieve the effectiveness conditions and those preceding the disbursement of financial means within the Balti District Heating project, on March 30, 2022, JSC CET-Nord initiated the procedure for selecting a law firm with experience in providing legal services on the territory of the Republic of Moldova – having the obligation to prepare and submit to the EBRD a legal opinion confirming that the Action Plan developed by to the Project Entity included all the necessary legal steps to obtain the release of the JSC CET-Nord accounts under seizure and the removal of any restrictions on these accounts that had been applied in relation to the historical natural gas debt, as well as the clarification of any other matters that the EBRD may reasonably request.
After the selection of the Gladei & Partners law firm, as well based on the legal opinion delivered to the bank by your team, on July 28, 2022, JSC CET-Nord managed to pay the historical debt to the natural gas supplier, thanks to the component for the refinancing of the historical debt offered by the EBRD.
Nicoara: What is the financing intended for?
Crasnobaev: The EUR 15 million investment represents an EBRD loan of which EUR 8.5 million were allocated for an investment component and the remaining EUR 5.5 million for the mentioned refinancing component of the historical debt towards the natural gas supplier.
The main investment component of the Balti District Heating project, Phase 2, consists of the installation of individual thermal points (ITP) in 166 housing blocks and the construction of thermal networks with horizontal distribution in 296 housing blocks. In total, it is estimated that about two thirds of the consumers in the Balti municipality will benefit from these services.
Other investment components are intended to optimize operational costs, automated control, and monitoring, increase the operating life of machinery and equipment, as well as reduce thermal energy losses through: (1) construction of a thermal energy accumulator; (2) modernization of water treatment facilities within the Chemical Section; (3) implementation of the SCADA system for the distribution of the thermal agent and the provision of the thermohydraulic modeling software.
Nicoara: What were the most complicated aspects of the deal?
Crasnobaev: We could consider the refinancing component of the historical debt towards the natural gas supplier and its payment as the most complicated phase of the deal since this step was preceded by a complex process related to the conclusion with the creditor of an agreement transaction on the execution conditions. The aim was to obtain the necessary guarantees in order to cancel all the insurance measures applied to the movable and immovable assets and the bank accounts of JSC CET-Nord. At the same time, a goal was to obtain guarantees that no late interest or penalties would be calculated in connection with the settlement of the historical debt formed according to the executive document in the foreclosure procedure.
Nicoara: And, in contrast, what did you feel ran particularly smoothly?
Crasnobaev: Thanks to a successful collaboration between the Gladei & Partners law office, JSC CET-Nord, and the EBRD, the Balti District Heating project successfully entered into effect. At the same time, the procedure for the disbursement of financial means for the refinancing of the historical debt conditioned the avoidance of the repeated application of seizures and the blocking of the company’s bank accounts.
The payment of the historical debt to the gas supplier allowed the company to choose its own vector of development and to adapt its services according to international standards and the requirements of Balti municipality consumers.
Nicoara: What’s next for CET-Nord, once this project is concluded?
Crasnobaev: We will continue to focus on delivering quality services, rehabilitating the domestic hot water supply service, and attracting new consumers by offering modern heating solutions, with the installation of individual thermal points.
We believe that, with the increase in thermal load, production costs and tariffs will decrease and, by ensuring the competitiveness of the centralized heating service, we will be able to develop an efficient, comfortable, safe, and ecological heating system.
This article was originally published in Issue 10.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.