MVM DISTRIBUTION NETWORK UPGRADE II

The investment programme comprises a large number of schemes for the reinforcement and modernisation of the electricity distribution network in North-Eastern Hungary over the period 2024-2029. It also includes high, medium and low voltage electricity distribution schemes, as well as components for network automation and control.

The project is expected to support the efficient operation of the electricity distribution network in Hungary, to enable the Promoter to maintain the reliability and quality of the electricity supply, and to contribute to the integration of renewable energy sources (RES) generation.

The project comprises multiple investment schemes in the electricity distribution network in North-Eastern Hungary, to be implemented by MVM ÉMÁSZ the electricity Distribution System Operator of the region.

The EIB financing helps address sub-optimal investment typically associated with market failures related to security of supply issues, negative environmental and climate externalities. The project will contribute to the EIB's Sustainable Energy public policy goal, as well as providing a contribution to Climate Action (climate change mitigation) in line with the applicable EU Taxonomy requirements and to the EU Economic, Social and Territorial Cohesion by investing in EIB Cohesion Priority regions.

The investment will reinforce and increase flexibility of the power grid, while also expanding and refurbishing the network. This will enable the connection of new users, improve the reliability of supply and supporting further decarbonisation of Hungary's power mix. The economic return is deemed to exceed the financial rate of return, thereby providing a "broader social benefit". The Promoter has the experience and capacity to manage the implementation of the Programme and operate the assets over the loan term. The EIB financial contribution is expected to lower the overall financing costs of the regulated investments and to accelerate the implementation of the capex programme. Besides, the EIB financing will send a signalling effect to the market concerning the financial soundness of the company and the project.

Some of the project schemes (the high voltage components) may fall under Annex II of the Environmental and Impact Assessment (EIA) Directive 2011/92/EU as amended by Directive 2014/52/EU, and thus require the competent national authority to determine the need for an EIA. The impacts that can typically be expected for the project schemes relate to visual impact, vegetation clearance, collision and electrocution of flying vertebrates, electromagnetic fields, noise nuisance, and disturbance during construction, as well as the possible impacts on protected fauna and flora (Habitats 92/43/EC and Birds 2009/147/EC). The environmental and social due diligence will follow the programme lending approach according to the EIB's procedures and standards, i.e. the due diligence will focus on the Promoter's capacity and capability to implement the programme in line with EIB environmental and social standards and requirements.

The Promoter has to ensure that contracts for implementation of the project have been and will tendered in accordance with the applicable EU procurement legislation, Directive 2014/25/EU as well as Directive 92/13/EEC, as interpreted by the Court of Justice of the EU, with publication of tender notices in the EU Official Journal, as and where required.