GrCF2 W2 Almaty CHP Modernisation

Location:

Kazakhstan

Project number:

52821

Business sector:

Energy

Notice type:

State

Environmental category:

A

Approval date:

15 Nov 2022

Status:

Approved

PSD disclosed:

15 Jul 2022

Project Description

A provision of senior loan of up to EUR 252 million in KZT equivalent to JSC "Almaty Power Plants" (the "Company" or "APP") for comprehensive modernisation of the existing Combined Heat and Power Plant 2 ("CHP-2"), with full replacement of coal by natural gas as a primary fuel in order to reduce CO2 emissions and improve air quality in the Almaty city (the "Project").  The Almaty CHP-2 is the biggest source of heating in the largest city of Kazakhstan. 

The Project is a part of the Green Cities Program of EBRD in Almaty. The primary aim of the Project is to reduce CO2 emissions in the city by c. 3 million tons (down c. 56%) and fully avoid air emissions of particulate matter and NOx. The latter is particularly important given Almaty's statistics on pollution-related diseases - according to studies conducted by Kazakh National Medical University named after Asfendiyarov, 24% of adults and 57% of children in Almaty suffer from chronic pulmonary diseases (2013-2017 statistics), significantly above country averages and 2-3 times higher than in comparable urban areas of CIS.

The Project will be implemented under the EPC Contract, with contractor to be selected following EBRD PP&R for public sector operations.  The compliance of proposed technical design with Best Available Technologies (BAT) is an explicit condition in tender documentation.

Project Objectives

The EBRD loan will finance brownfield deep modernisation of 510 MW Combined Heat and Power Plant-2 in Almaty with conversion from coal to gas. The Project will have a significant immediate impact on air quality in Almaty.  After modernisation, the Plant will be able to provide certain balancing capacity to the national grid and will facilitate faster implementation of renewable energy projects and back up development of renewable heating solutions, in line with Low Carbon Pathway for energy and heating sector. In addition to environmental impact, the Project will provide support for improved institutional-level capacity on gender and youth inclusion.

Transition Impact

ETI score: 75

The Project will primarilyhelp to promote the Green transition quality by addressing priority environmental challenges identified in the draft Almaty-GCAP to reduce GHG emissions from the biggest stationary source of pollution in the city of Almaty (by at least 3 million tons p/a) and to improve local air quality. The Project will additionally support the Inclusive objective through promoting higher institutional-level capacity and standards on gender inclusion.

Client Information

ALMATY POWER PLANTS JSC

JSC "Almaty Power Plants" is a power generating company operating three Coal and Heat Power Plants and two Hydro Power Plants in Almaty and Almaty region (the most populated region in Kazakhstan) with total installed capacity of 1,236 MW.  The Company's headquarter is in Almaty.

EBRD Finance Summary

KZT 126,000,000,000.00

Total Project Cost

KZT 324,118,371,968.00

Additionality

Financing structure: EBRD offers financing that is not available in the market from commercial sources on reasonable terms and conditions, in a local currency and with a longer tenor and grace period. Such financing is necessary to structure the Project. Risk Mitigation: EBRD's long-term relationship with a Client provides comfort to the Client to be willing to take on more risk and/or finance, enabling significant environmental outcomes. Policy, sector, institutional, or regulatory change: EBRD's involvement in the Project is designed to trigger a change in the policy, regulatory framework and enhance practices at the both city and country level, such as adaption of Low Carbon Pathway for energy sector, introduction of payback mecha-nism for projects that imply coal phase out, approval of Almaty Green Cities Action Plan, etc. Standard-setting: helping projects and clients achieve higher standards: Client seeks use of EBRD expertise on higher environmental standards, above 'business as usual' (e.g. adoption of emissions standards and climate-related ISO standards in line with EU BAT). Additionally, the Client uses EBRD expertise on the best international procurement standards.

Environmental and Social Summary

Category A (ESP 2019). The Project is the replacement of a coal-fired CHP with gas-fired state of the art CGGT and gas boilers to be constructed on the same site. This is part of a program to improve the air quality in the city of Almaty, which is one of the most polluted cities in the world. The Project will also result in substantial reduction of GHG emission and part of the transition to net zero emissions in Kazakhstan.

An Environmental and Social Impact Assessment ("ESIA") disclosure package has been prepared for the Project by the Almaty Power Plant ("APP"). This has utilised the local Environmental Impact Assessment (EIA) undertaken by APP as part of feasibility studies for the new CCGT and modernization programme undertaken in line with National requirements. Additional more detailed ESIA will be undertaken in the future as part of the detailed design by the chosen EPC contractor.

The Bank's Environmental and Social Due Diligence (ESDD) was undertaken by an independent consultant and the ESDD included a review of current operations at the existing facility, as well as the feasibility studies and plans for coal to gas change and proposed CCGT options.

The existing CHP-2 is located in the Alatau District of Almaty city, Kazakhstan, within an industrial setting and is by far the largest CHP in the city with 8 coal-fired power boilers, 7 steam turbines and related infrastructure and with total installed capacities of 510 MW and 1,411 Gcal/h. Currently, Ekibastuz coal is used as the main fuel at CHP-2, and fuel oil is used as a starting oil. Annual coal consumption is about 2.5 million tons. This equates to 6.5 million ton of CO2/per annum. The plant has also based air abatement system, which results in high NOx, SOx and dust emission, at the level of 650 mg/Nm3 NOC, 1500-2000 SOx and 400 mg/Nm3 of dust. These are a magnitude higher than current EU BAT standards, which is one of the key factors of poor air quality in the Almaty region.

The Project will result in substantial air quality improvements as mainly NOx and will be emitted from the use of gas. This in turn will be in line with EU requirement at the level of 50 mg/NM3 as the new CCGT plant will include DeNOx and be complaint with EU BAT. The new plant will also be substantially more efficient, which results in a substantial reduction of GHG emissions, currently estimated at 3 million ton CO2 saving per annum.

The Project will be developed in phases with the first phase a 200 MWe unit. The construction is planned to be carried out in three stages. The total duration of modernisation of Almaty CHP-2 will be 65.5 months during 2022-2026. The estimated average number of construction workers will be 629 people. The maximum number of employees at a time will be 726 people in the peak year 2025.

"Almaty Power Plants" JSC and Samruk-Energy group have committed to comply with best international techniques and practices, as well as with EBRD requirements, which include the EU Large Combustion Plan (LCP) Best Available Techniques (BAT) Conclusions. Therefore, any further Project developments (including engineering and construction works, environmental and social management during the construction and operation phases) will be aligned with relevant EBRD's PRs. The said requirements will also be cascaded to EPC contractor and sub-contractors' net and supply chain. The Bank will set the requirements on emission KPIs in the ESAP, which will be part of the EPC Contract. The Bank will also require the full phase out, mothballing and ultimate decommissioning.

The current planned configuration of the main equipment of gas turbine units for the new CHP as per the feasibility study prepared by APP is as follows:

1) one combined-cycle gas power unit (CCGT);

2) two gas turbine power units with cogeneration.

CHP-2 will be modernized within the existing site; additional land acquisition is not envisaged. Modernisation will be performed so that existing equipment could be operated in parallel and be mothballed afterwards. CHP-2 will operate 24 hours a day throughout the year. The power plant will provide electricity, heat for heating, hot water supply during the heating period, and heat for hot water supply during the summer period

The modelling demonstrated that, even under the worst-case scenario, all options would meet national and EU air quality standards for sulphur dioxide and dust, which will be fully eliminated on the new plant. The estimated concentrations of nitrogen dioxide with consideration of the baseline level will be slightly higher than the established limit value; however, the input by the modernised CHP-2 in these concentrations will not be greater than 5%. Nevertheless, this will be a significant improvement and additional means in the city of Almaty to eliminate emission point sources improve transport will aim to reduce emission further. However, this is not part of this Project

The existing CHP-2 is associated with a sanitary protection zone, which extended by law for over 1km radius around the plant and currently includes around 230 land plots including semi-formal residential houses and structures. The new plant is going to require renewing SPZ, but this will have to be calculated once the Project is built based and new measurements and studies required to establish SPZ are carried out. The ESAP will require any resettlement or/and livelihood impacts resulting from the Project construction and establishment and enforcement of SPZ is addressed in compliance with ESP Performance Requirement 5: Land Acquisition, Involuntary Resettlement, and Economic Displacement.

A Resettlement Framework has been developed to manage any land acquisition and resettlement impacts that may be potentially caused by the establishment and enforcement of the revised SPZ. Further details of land acquisition and resettlement process, if impacts take place, are provided in the Resettlement Framework disclosed below.  

As part of the Stakeholder Engagement Plan, the Company will continue engaging with various stakeholders and local communities as part of national EIA and ESDD disclosure. Specifically, during the disclosure period the Company will conduct a series of meaningful consultation meetings that will focus on discussion of key impacts and risks, proposed mitigations, and seeking other feedback from the stakeholders.

An ESAP has been agreed for the Project, which will be revised during the public consultation. The ESAP provides organizational and design measures to ensure the Project compliance with EBRD PRs, including the following:

  • Conducting a detailed Environmental and Social Impact Assessment (ESIA) of the Project by the EPC contractor in line with EBRD requirements inclusive of pubic consultations;
  • Adhering compliance with Best Available Techniques (BAT) for thermal plants;
  • Provide for strong management of environmental and social aspects of the Project implementation during both construction and operation phases, including management of contractors of all levels and supply chain;
  • Engaging stakeholders pro-actively throughout all Project phases following the requirements of the Stakeholder Engagement Plan, considering feedback and regular SEP update and adoption for the Project needs;
  • Embedding Grievance Redress Mechanism in the Company's Environmental and Social Management System (ESMS) as a major priority. The GRM will be functioning for both external (communities, NGOs, etc.) stakeholders and internal (workers, contractors, subcontractors and their workforce, both permanent and short term) stakeholders.

The Bank will be monitoring the implementation of the Project through site visits. The full ESIA disclosure package is available on this page.

Technical Cooperation and Grant Financing

None

Company Contact Information

Dauren Sagidulla
ds@ales.kz
+7-727-254-04-88

PSD last updated

18 Jul 2022

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Business opportunities

For business opportunities or procurement, contact the client company.

For business opportunities with EBRD (not related to procurement) contact:

Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

For state-sector projects, visit EBRD Procurement:

Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

Specific enquiries can be made using the EBRD Enquiries form.

Environmental and Social Policy (ESP)

The ESP and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”.  The ESP and the PRs include specific provisions for clients to comply with the applicable requirements of national laws on public information and consultation as well as to establish a grievance mechanism to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project. Proportionate to the nature and scale of a project’s environmental and social risks and impacts, the EBRD additionally requires its clients to disclose information, as appropriate, about the risks and impacts arising from projects or to undertake meaningful consultation with stakeholders and consider and respond to their feedback.

More information on the EBRD’s practices in this regard is set out in the ESP.

Integrity and Compliance

The EBRD's Office of the Chief Compliance Officer (OCCO) promotes good governance and ensures that the highest standards of integrity are applied to all activities of the Bank in accordance with international best practice. Integrity due diligence is conducted on all Bank clients to ensure that projects do not present unacceptable integrity or reputational risks to the Bank. The Bank believes that identifying and resolving issues at the project assessment approval stages is the most effective means of ensuring the integrity of Bank transactions. OCCO plays a key role in these protective efforts, and also helps to monitor integrity risks in projects post-investment.

OCCO is also responsible for investigating allegations of fraud, corruption and misconduct in EBRD-financed projects. Anyone, both within or outside the Bank, who suspects fraud or corruption should submit a written report to the Chief Compliance Officer by email to compliance@ebrd.com. All matters reported will be handled by OCCO for follow-up. All reports, including anonymous ones, will be reviewed. Reports can be made in any language of the Bank or of the Bank's countries of operation. The information provided must be made in good faith.

Access to Information Policy (AIP)

The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form.

Independent Project Accountability Mechanism (IPAM)

If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).

IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.

Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM  via email ipam@ebrd.com to get guidance and more information on IPAM and how to submit a request.

 

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