OREANDA-NEWS. In a move to promote wider private sector involvement in district heating, the EBRD has provided a Rb 525 million (€12.9 million) financing package - combining long-term debt and equity - to a private company operating in Russia's Tula and Kemerovo regions.

The EBRD transaction complements parallel funding provided by the International Finance Corporation (IFC), the private sector arm of the World Bank. The EBRD and IFC will, as a result, each hold a stake of 18.2 percent of the capital of the CCS group, a private operator of district heating, water and housing management services in these regions.

The EBRD funding consists of an equity investment of Rb 175 million (€4.3 million) and a 10-year loan of Rb 350 million (€8.6 million).

This will advance the group's plans to expand its operations among Russia's smaller municipalities, with a population of up to 150,000, as well as finance investments to modernise district heating systems by focusing on energy efficiency and cost savings.

Smaller municipalities traditionally have very limited access to funding for infrastructure investments, due to both the small size of individual utility operators, and existing constraints on local budgets which now face growing social obligations.

International financial institutions, such as the EBRD and IFC, are virtually the sole available sources of long-term funding for the district heating sector in Russia.

The development of the district heating sector in Russia is additionally limited by the obsolete and over-sized systems and networks it inherited from the Soviet era, which are plagued with abnormally high heat loss levels.

The CCS group, founded in 2009, is majority-owned by infrastructure equity funds affiliated with the Specialised Research and Investment Group (SPRING), a team of investment professionals active in the Russian power and infrastructure sector since 2003.

“CCS has a strong reputation and track record of improving the assets it manages, and seeks new concessions for district heating as well as other communal services,” said Ilya Brodsky, Chairman of the Board of Directors of the CCS group

The EBRD is willing to support additional private operators in this sector as long as they meet the Bank's criteria.