MREK Privatisation and Transformation

Location:

Kazakhstan

Project number:

49730

Business sector:

Power and energy

Notice type:

Private

Environmental category:

B

Target board date:

14 Mar 2018

Status:

Signed

PSD disclosed:

07 Dec 2017

Translated version of this PSD: Russian

Project Description

A senior loan of up to KZT 14 billion (equivalent to EUR 35 million) to support business transformation and development of Mangistauskaya Regional Distribution Company (MREK) following its privatisation by Kazakhstan Utility Systems (KKS), a private power utility in Kazakhstan.

Project Objectives

The project will support the modernisation and energy efficiency improvements of distribution networks, including the installation of modern automatic control systems and smart meters. Proceeds of the loan will be used to cover the planned investment programme of newly-acquired MREK alongside a number of retroactively financed capital expenditures.

Transition Impact

The project is in line with the Bank's Green Economy Transition (GET) initiative. Modernisation of MREK's facilities will ultimately lead to the improved stability and reliability of energy supply, a reduction of losses and increased potential of the system to support the integration of RES in the national distribution network.

Additionally, the project will increase private sector participation in Kazakhstan's energy sector which is still dominated by 100% state-owned JSC Samruk Energy.

Client Information

KAZAKHSTAN UTILITY SYSTEMS

KKS is a private, vertically integrated utility company established in 2008 with operations in three segments: electricity and heat generation, electricity and heat distribution and supply in Karaganda, South and East Kazakhstan regions. KKS is rated BB- by Fitch and has more than 10,000 employees.

EBRD Finance Summary

KZT 14,000,000,000.00

Total Project Cost

KZT 27,000,000,000.00

Environmental and Social Summary

The project has been categorised B in line with EBRD's 2014 Environmental and Social Policy (ESP). The loan will be used to finance the investment programme of the newly acquired by KKS regional distribution company MREK (Western Kazakhstan) aiming at modernisation of the distribution networks and energy efficiency improvements. The majority of the financed capex involves installation of automation systems, new switchgear and transformers equipment at existing substations and three new short-distance 10kV, 35kV and 110kV lines that will be mostly constructed along existing lines and roads. MREK is nearing completion of the new 220kV line that was financed from its own funds and is not included in the Bank's Project’s use of proceeds. However, key E&S risks associated with all MREK assets and operations were reviewed. 

The Project’s Environmental and Social Due Diligence (ESDD) was carried out by an independent consultant, focusing on review of KKS (the Sponsor) and MREK (the Borrower) corporate Environmental, Health and Safety and Social management systems and procedures, and E&S Assessment of the Project to identify main risks and status of compliance with the EBRD's E&S Policy and Performance Requirements (PRs). The E&S risks and impacts associated with MREK’s current operations and investment plan’s activities are readily identified and can be mitigated via maintaining existing E&S management systems and implementing additional Bank’s requirements. The ESDD identified a number of E&S impacts that require implementation of mitigation measures, including in relation to the past soil contamination with fuel and transformers’ oil, labour practices, occupational accidents, electric and magnetic fields exposure of workers and public, and birds electrocution risks on contact with low voltage lines. The ESDD also assessed community impacts and determined the need for additional and improved stakeholder engagement, based on the implementation of the developed Stakeholder Engagement Plan (SEP). A Non-Technical Summary (NTS) was also prepared for the Project and was published on the Company’s website together with SEP to facilitate information disclosure on the Project and establish an effective grievance mechanism.

An Environmental and Social Action Plan (ESAP) is prepared to enable the Project to be structured to meet the Bank's PRs.  The ESAP is agreed with the Client, and includes among key actions the following:

  • implementing contractor management system for on-going and future infrastructure works;
  • updating HR policies, workers’ representation and grievance mechanisms;
  • implementing Behaviour Based Safety Program enhancing the safety culture and performance;
  • improving management of potential oil spills, development of a spill response procedure and staff training;
  • hazardous waste storage and handling improvements,
  • electro-magnetic radiation safety measures;
  • bird mortality prevention and monitoring;
  • chance finds procedure for excavation works; and
  • implementing SEP and consideration of stakeholder feedback for current operations and the Project implementation.

The Bank will monitor the implementation of the Project via annual E&S reports review and monitoring site visits when required.

NTS: English | Russian

Technical Cooperation

The Bank will provide a TC assignment on a cost sharing basis with the client under the existing framework programme "Green Economy Project Preparation and Implementation Framework". The assignment will review the existing investment programme, confirm appropriateness, perform cost/benefit analyses and make recommendations for improvements.

Company Contact Information

Sultan Akhanov

S.Akhanov@ordabasy.kz

+77273377707

www.kus.kz

7F, 14/3, Kunayev Street, BC Nursaya, Astana, Kazakhstan 010000

 

 

 

 

 

 

 

 

Business opportunities

For business opportunities or procurement, contact the client company.

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Text of the PIP

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