Khatlon Energy Loss Reduction Project

Location:

Tajikistan

Project number:

49930

Business sector:

Energy

Notice type:

State

Environmental category:

B

Approval date:

04 Nov 2020

Status:

Signed

PSD disclosed:

23 Jul 2019

Project Description

The provision of a sovereign guaranteed loan of up to 20 million for the modernisation of power distribution networks in southern Tajikistan. The Bank's financing will target the modernisation of a low-voltage distribution network in the cities of Kulob and Bokhtar, the construction of a new and an upgrade of the existing 110/35/10 kV substation in Kulob, and the installation of automatic billing and metering systems in both cities.

OJSC "Shabakahoi Taksimoti Bark" (the "Company"), established as part of the on-going unbundling of the Open Stock Holding Company "Barki Tojik" (OSHC Barki Tojik), the national power utility, will be the Borrower and Project implementing entity. The loan will be guaranteed by the Republic of Tajikistan.  

Project Objectives

The Project will target one of the key constraints to economic development in the country - limited access to the reliable energy supply. The Project's principal objectives are to: (i) address the most urgent needs for the replacement of aged infrastructure, (ii) contribute towards the reduction of distribution network losses resulting in financial and CO2 emissions savings, and (iii) introduce modern billing and metering infrastructure, improving payment discipline and cash collection, upholding operational and financial efficiency and sustainability of OSHC Barki Tojik at present. 

Transition Impact

ETI score: 70

The expected transition impact of the Project is twofold:

 Resilient: Through the planned network upgrades and replacement of distribution lines, the reliability of the electricity distribution network in the cities of Bokhtar and Kulob will be significantly improved. Additionally, the Project will support more efficient functioning of the distribution network operator through improved transparency and accountability and introduction of billing and metering.

 

Inclusive: The Project will support improvements in the employability of youth by expanding high-quality and certifiable skills training opportunities, in collaboration with local educational institutions, which is of particular importance in light of job losses and drop in remittances caused by the COVID-19 crisis.

Client Information

SHABAKAHOI TAKSIMOTI BARK OJSC

Borrower is in the process of establishment following the unbundling of OSHC Barki Tojik and shall consolidate all distribution activities and attributable infrastructure, revenues and expenses.

Guarantor: Republic of Tajikistan

EBRD Finance Summary

EUR 20,000,000.00

Up to 20 million long-term sovereign-guaranteed loan to OJSC "Shabakahoi Taksimoti Bark", with a sovereign guarantee provided by the Republic of Tajikistan. The Project will be co-financed with a 15 million grant from the European Union's Investment Fund for Central Asia (IFCA).

Total Project Cost

EUR 36,400,000.00

€36.4 million

Additionality

The Bank provides long-term financing necessary to structure the Project.  The Bank's technical, institutional and regulatory expertise with the turnaround of national utilities, technical cooperation and policy dialogue are complementary to the ongoing work in the power sector of Tajikistan.

Environmental and Social Summary

Categorised B (2014 ESP).  The environmental and social impacts associated with the modernisation of the power distribution networks in the cities of Kulob and Bokhtar and their surroundings have been identified and will be managed by the implementation of an Environmental and Social Action Plan (ESAP).  The Bank's due diligence was carried out by an independent consultant; it included the review of a questionnaire and information package supplied by the client, discussions with BT in-country (including on lessons learnt of the Sugd Energy Loss Reduction project) and field visits of the existing facilities in Kulob and Bokhtar.  The results of the ESDD indicated that while BT activities are currently driven by the obligation to comply with the applicable regulation of Tajikistan only, the existing PIU has been operating for many years, and has a solid experience with EBRD.  The main E&S risks are occupational health and safety (very poor practices observed on site), the demobilisation of the fee collectors (a retrenchment plan is required) and the stakeholder engagement associated with the introduction of new payment methods (smart metering).  The ESAP has been agreed with the Client.

 

The Project is not subject to an environmental impact assessment under the legislation of Tajikistan or would be under the EU EIA Directive.  OJSC "Shabakahoi Taksimoti Bark" established as part of the on-going unbundling of BT, the national power utility, will be the Project implementing entity.  An existing PIU will help implement the Project and the PIU has recently recruited an environmental specialist who will be in charge of following ESAP implementation.  Support will be needed at Cities level.  The ESAP includes overarching measures such as (i) the designation in both Bokhtar and Kulob of a person in charge of the implementation of the ESAP, (ii) the development and operation of an environmental and social management system, and (iii) the implementation of a stakeholder engagement plan.

 

At BT level, the application of the labour code is done through a collective agreement that is specific to BT and covers all employees; it is accessible on BT intranet.  BT has a formal workers' organisation.  The installation of smart meters will result in a reduction of the work for fee collectors, and subsequently Bokhtar and Kulob City Electricity Network Companies (CENC) to reduce their staff because of the Project.  The numbers of jobs to be cut (at least 10% of the number of workers in each establishment) is significant, and triggers the requirement for the preparation and implementation of a retrenchment plan in line with PR2. Currently there are 83 fee collectors (including one woman) for a total staff number of 509 over both sites.  

 

The elimination of pollution sources within the premises of Bokhtar and Kulob CENC, essentially related to oil and oil waste management, as well as to the presence of asbestos, is also included in the ESAP.  The annual reduction of GHG emissions due to the Project is estimated to 435 tCO2eq/year.

 

The Project construction and operation will not generate any additional public health risks.  The electric equipment will be safer (especially insulated cables), which will reduce the risk of electrocution.  Today, the observations made on site showed a quasi-absence of any OHS measures on site.  The Project will be an opportunity to improve OHS conditions for BT workers, since it will have an Occupational Health & Safety (OHS) component, including an improvement of the OHS management system, the provision of the personal protection equipment and a refurbishment/reconstruction of the technical buildings (workshops, storages, substations facilities) in both Kulob and Bokhtar.  Before starting any construction activities, the contractor that will implement the project's construction/rehabilitation activities will have to prepare a Health, Safety and Environment Management Plan.

 

The Project does not require any physical resettlement or any involuntary resettlement. The only required land acquisition in the context of the Project is the acquisition of a one-hectare land plot (presently used for farming, but not irrigated) for the construction of the new substation in Kulob.  The ESAP requires an inventory and a compensation at replacement value of the lost livelihoods for the previous user(s) since the procedure of transfer of the land use right was in process at the time of the ESDD.

 

The Project does not extend further in the countryside or in rural areas of the Khatlon province: it is therefore essentially an urban project, that will be implemented far from natural habitats.  The Project does not trigger any significant  risk for biodiversity.  The primary objective of the Project is to reduce network losses.  These network losses that will be reduced are of both technical and commercial origin.  With the introduction of smart metering and modernization of networks, the billing chain and the payment methods will change, and the disconnection of non-payers will be readily and remotely implemented.  The overall change is expected to be positive for consumers, but there is a risk that some consumers will find it difficult to understand or adapt to the new system.  The stakeholder engagement plan (SEP) that was prepared for the Project includes a commitment to disseminate information about the new system, and to implement a grievance mechanism.  In addition, the ESAP requires a one-year transition period to be put in place, during which customers who have not paid their bill within the set 5 days limit will be contacted directly by the CENCs - with a main objective to identify vulnerable customers.

 

The ESAP also requires developing and implementing an environmental and social management system (ESMS) aligned to ISO14001 and ISO45001 standards at corporate level; this ESMS shall include biodiversity management procedures in relation to birds' protection, such as sensitivity mapping and incorporation of insulations to new/modernised lines.  The Bank will monitor implementation of the ESAP through review of Annual Environmental and Social Reports (AESR) and communications with the Company as necessary.

Technical Cooperation and Grant Financing

- IFRS support for the Project financed by the SSF

- Consultancy support for environmental due diligence of the Project financed by the SSF

- Project implementation support to assist the project implementation unit with procurement of goods, works and services for the Project and to provide organizational and technical assistance financed by SSF 

 

 

- Gender assessment to be financed by the IFCA grant.

Company Contact Information

OJSC “SHABAKAHOI TAKSIMOTI BARK”

PSD last updated

15 Oct 2020

Understanding Transition

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

Business opportunities

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Email: projectenquiries@ebrd.com

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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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