The European Bank for Reconstruction and Development is joining forces with the international community to modernise the communal heating system in parts of Russia’s westernmost city, Kaliningrad, through a €21.5 million financing programme, over half of which will come from the EBRD.
The EBRD funding will take the form of a 15-year loan of €12 million to the Russian Federation, which will be on-lent to the Kaliningrad district heating company, Kaliningradteploset. This is wholly owned by the city of Kaliningrad.
In addition, the project is supported by grants from the Northern Dimension Environmental Partnership (NDEP) Support Fund (€7.3 million), the Swedish International Development Co-operation Agency (SIDA) (€1.7 million), and the city of Kaliningrad (€500,000).
The investment programme will enable Kaliningrad to reduce gas consumption, as well as decrease water leakages and heat losses exacerbated by years of under-investment. Altogether, these measures will help to lower greenhouse gas emissions resulting from excessive fuel use.
The programme will involve the renovation of 30 km of the heating network (to be funded by the EBRD), the closure of 71 coal-fired boilers and the overhaul of 1,212 heating sub-stations. This will lead to annual savings of 4,280 MWh in electricity consumption, 700,000 cubic metres in water usage and 56,000 Gcal in heat losses.
Total annual cost savings from these improvements are estimated at €2.7 million, representing 10 percent of the utility’s operating costs.
The project aims to transform Kaliningrad’s district heating company into a commercially operated and financially viable company. The introduction of a metering system will permit billing based on real usage. Financial support for lower-income groups will replace operating subsidies to the utility.
At the request of Russia’s Finance Ministry, the EBRD and NDEP Support Fund established the Northern Dimension Foundation in Kaliningrad two years ago. The Foundation will work alongside the utility to support implementation of the project.
The NDEP programme was conceived in 2001 to mobilise help from the international community in tackling the region’s main environmental problems, particularly in northwest Russia.
Kaliningrad is one of the 89 regions of the Russian Federation. Located between Lithuania and Poland, it is separated from the rest of Russia by Belarus. The city has a population of around 420,000.