IFC Makes First Major Investment in the District Heating Sector in Eastern Europe

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Modernize the district heating sector in Russia and support environmental improvements in Lithuania.

Washington D.C.

IFC, a member of the World Bank Group, is making an equity investment in Dalkia Eastern Europe, a new holding company created by leading energy and environmental management firm Dalkia, to help modernize the district heating sector in Russia and support environmental improvements in Lithuania.

IFC’s investment of up to €100 million in Dalkia Eastern Europe will be made via a new share issue. It is the first major investment in the district heating sector in Eastern Europe. District heating generates heat in a central location and distributes it to surrounding buildings to heat space or water, which is more efficient and cleaner than operating individual boilers in each building. Dalkia will use the capital to help expand its operations in Russia and other new markets including Ukraine, and to increase energy efficiency and the use of renewable energy in Lithuania.

IFC’s investment in Dalkia is expected to help introduce better regulatory frameworks and contractual arrangements, corporate-governance standards, and the environmental and social policies needed to facilitate future flows of equity and debt into Russia’s district heating sector. The investment also is expected to help district heating services in Lithuania become more efficient, cost effective, and sustainable. Dalkia’s operations in Estonia and Lithuania will become the operational base from which Dalkia Eastern Europe is expected to grow.

Nena Stoiljkovic, lFC Director for Eastern Europe and Central Asia, said, “IFC believes that more efficient operation of district heating networks will bring significant economic and climate change benefits. Savings from improved operations should impact municipal budgets and the less affluent segments of society. We hope this investment will encourage other investors to explore the opportunities in this sector.”

In one of the first international attempts to enter the large Russian district heating market on a commercial basis, Dalkia Eastern Europe will be managed from Moscow, while drawing on technical and managerial expertise from its established district heating operations in Estonia and Lithuania. Dalkia Eastern Europe is expected to begin expanding its district heating operation in Russia through a joint venture with Quadra, an integrated power and heat utility in the Kursk region.

As the first large-scale, direct involvement in Russia’s district heating by an international industry investor, the project represents a significant step toward the modernization that is underway in the country’s other infrastructure sectors, including power generation and transportation.

About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in developing countries. We create opportunity for people to escape poverty and improve their lives. We do so by providing financing to help businesses employ more people and supply essential services, by mobilizing capital from others, and by delivering advisory services to ensure sustainable development. In a time of global economic uncertainty, our new investments climbed to a record $18 billion in fiscal 2010. For more information, visit www.ifc.org.

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