Provision of a sovereign loan of up to EUR 450 million to Ukraine to be on-lent to Ukravtodor, the State Road Agency of Ukraine, consisting of three tranches (the "project"):
- Tranche 1 of up to EUR 100 million to finance the rehabilitation of the M-05 Kyiv-Odesa road section in Cherkasy region,
- Tranche 2 of up to EUR 160 million to finance the construction of a northern section of the bypass around the city of Lviv,
- Tranche 3 of up to EUR 190 million to finance the rehabilitation of the M-05 Kyiv-Odesa road sections in Kirovohrad, Mykolaiv and Odesa regions.
Tranches 1 and 3 aim to support the rehabilitation of strategically important sections of the M05 Kyiv-Odesa road, which is part of Corridor IX of the Trans-European Transport Network ("TEN-T") and one of the busiest roads in the country connecting the capital to the biggest city in the south and the Black Sea ports, which are a vital logistical hub for freight transport.
Tranche 2 will support the completion of the ring-road around the city of Lviv, which is located at the intersection of TEN-T Corridors III and V, and will enable through traffic to bypass the city more effectively improving travel times and reducing congestion in the city.
The project will also support legal and regulatory reform objectives aimed at developing a competitive and transparent road construction and maintenance sector.
ETI score: 67
Primary Quality - Well-Governed. The Project will support the following objectives:
- In accordance with the Memorandum of Understanding between the Government of Ukraine and the Bank on Prevention of Corruption and Fostering Transparent and Efficient Management in the Public Sector dated 7th October 2020: (i) development and implementation of a comprehensive anti-corruption programme for Ukravtodor involving the strengthening of procurement, anti-bribery and anti-corruption internal controls, policies and procedures; and (ii) review of procurement procedures at Ukravtodor and introduction of procurement certification by Chartered Institute of Procurement and Supply ("CIPS");
- Adoption of new standardised tender documents, qualification and evaluation criteria and internationally recognised forms of contract for road maintenance / construction contracts procured by Ukravtodor in accordance with the national legislation;
- Development of legal and regulatory reforms to support road safety objectives.
Secondary Quality - Integrated. The project will support the completion of the rehabilitation of the M-05 Kyiv-Odesa road and construction of the Lviv Northern Bypass, which are strategic road sections making part of the TEN-T corridor network. In addition, the Project will also support the introduction of weigh-in-motion systems to manage the impact of overweight vehicles and implementation of a strategic road safety risk assessment across the national road network to identify and prioritise high risk segments.
The borrower is Ukraine. The loan proceeds will be on-lent to Ukravtodor, the State Road Agency of Ukraine.
EBRD Finance Summary
A sovereign loan of up to EUR 450 million.
Total Project Cost
EBRD Loan: EUR 450 million
Tranche 1 EUR 100 million
Tranche 2 EUR 160 million
Tranche 3 EUR 190 million
EIB Loan: EUR 450 million
Client's contribution: EUR 247 million
The Bank provides support to strengthen the Ukravtodor's capacity with respect to procurement, project implementation, environmental and social issues, and anti-corruption reforms.
Environmental and Social Summary
Tranche 1 (rehabilitation of the M05 Kyiv-Odesa road section km 152-237) and Tranche 3 (rehabilitation of the M05 Kyiv-Odesa road section in Kirovohrad, Mykolaiv and Odesa regions km 237 - 467) are categorised B, Tranche 2 (24 km northern section of the Lviv bypass) is categorised A under the 2014 ESP. Tranche 1 has been already approved by the Board and, at this time, Board approval is sought for Tranche 3 only. The Environmental and Social Impact Assessment ("ESIA") for Tranche 2 is still under preparation and will be submitted to Board for consideration after the ESIA has been completed and ESIA for Tranche 2 is disclosed to public for review and comments for a minimum of 120 days.
The independent Environmental and Social Due Diligence ("ESDD") of the Company and Tranches 1 and 3 of the project has confirmed that the rehabilitation of the existing road will result in environmental and social benefits and safety improvements. Any adverse environmental and social impacts are expected to be temporary in nature, primarily limited to the construction activities and are readily addressed through appropriate mitigation measures. Potential cumulative environmental and social impacts for the whole Tranches 1 and 3 road sections have been characterised and assessed within the scope of ESDD and no material negative cumulative impacts were identified. The ESDD has confirmed that the Borrower's overall capacity, and related EHSS management systems, are generally aligned with the Bank's Performance Requirements ("PRs"). Furthermore, the Borrower is an existing client of the Bank and has demonstrated satisfactory performance to date on the previous projects.
Local EIAs (OVOS) have been undertaken in accordance with national requirements to evaluate the risks and impacts associated with Tranches 1 and 3 road sections. Findings from the ESDD and Road Safety Audit have been taken into account by the designers and integrated into the project design and are expected to be approved by the State expertise. Disclosure of OVOS and project related information and public engagement was organised and completed in accordance to the national requirements.
Whilst the project is generally found to be structured to meet EBRD PRs, the ESDD has identified a number of gaps to be further addressed through the implementation of an Environmental and Social Action Plan ("ESAP"). Particular focus is needed on management systems, labour, stakeholder engagement and health and safety.
The ESDD identified that stakeholder engagement and public consultations have been limited and not all Project details regarding the benefits and impacts of the Project were sufficiently communicated to the stakeholders. Stakeholder engagement activities will need to be improved and in line with the developed Stakeholder Engagement Plan ("SEP"). Additional stakeholder consultation activities (considering COVID-19 related restrictions) are required in parallel with the project development. Consultations will be undertaken with the local communities, local businesses and road users and will focus specifically on road safety benefits of U-turns closure, final U-turns solutions, additional road safety measures and alternative connection routes. Feedback from these consultation activities will inform the final detailed design of the Project. Engagement will continue prior to and during construction and during operation, with a focus on road safety in adjacent communities.
Occupational health and safety ("OHS") risks are related mainly to the construction phase and will be further elaborated and included into Construction Environmental and Social Management Plan to be provided by the contractors. The construction contractors will be required to comply with the relevant requirements in PR2 including preparation of an HR policy; recruitment procedures and workforce code of conduct; and accommodation standards. If any on-site accommodation is required for workforce it will need to be sited appropriately to minimise E&S impacts.
There is no physical resettlement associated with the Tranche 1. Very small-scale land acquisition limited to one location with the total area of up to 0.30 ha is expected and temporary economic displacement has been further limited due to the retention of existing access points to official businesses or provision of alternative access. Alternative arrangements will also be provided during the construction phase or any temporary access restrictions agreed in advance with businesses. Two informal businesses could be subject to permanent economic displacement and measures will be put in place to provide alternative, safe locations for these business activities or provision of alternative access arrangements.
For Tranche 3 permanent additional land acquisition needs are preliminary estimated at approx. 85 ha, including for additional interchanges to replace closed U-turns. Due diligence identified some legacy issues in relation to historical land acquisition on non-residential land which will be addressed by entitlements defined within the Resettlement Policy Framework ("RPF") for the Project.
As part of Tranche 1 the Client has prepared a RPF in line with both national and MDB (EIB and EBRD) requirements, which covers the Project. The RPF has been updated to account for the results of the due diligence for Tranche 3, including entitlements and compensation provisions to address legacy issues and has been agreed with the Client. A Resettlement Action Plan ("RAP") will be developed, disclosed and implemented by the Client prior to construction activities commencing. The RAP will also cover any entitlements needed for permanent and temporary impacts associated with loss of access to the M-05 road from existing formal and informal roadside businesses.
No negative biodiversity impacts are expected. Additional noise and air quality studies are required for Tranche 3 during detailed design to identify areas where installation of noise mitigation measures and additional monitoring may be required.
A road safety audit has been completed and confirmed significant improvements in relation to the baseline scenario with a number of good international road safety practice measures introduced. Possibly the most important improvement is that all at-grade pedestrian crossings will be replaced by footbridges or underpasses and 21 out of 23 U-turns will be closed for Tranche 1 and 67 out of 80 U-turns will be closed or replaced with 19 new grade separated interchanges for Tranche 3. The Bank also will continue broader involvement into policy dialogue and Road Safety reforms already agreed at the time of Tranche 1 approval, which among others will include: completion of the Strategic Road Safety Risk Assessment; improved coordination and establishment of a Road Safety Department within Ukravtodor; improvement in data collection and analysis system of the road safety data and mandatory implementation of post-construction road safety audits and road accidents monitoring and analysis after completion. Additional engagement with the Client will continue to close all other remaining U-turns subject to alternative access arrangements being finalised and consultation with local communities on the proposed solutions.
The ESAP for Tranches 1 and 3 has been developed to address the issues raised above, and also to include further improvements to the environmental and social management at all stages of the project implementation. Among others the ESAP includes: inclusion of E&S provisions in the construction contracts and preparation and implementation of a Construction Environmental and Social Management Plan; integration of climate adaptation measures, improvements in noise and air monitoring; formalising and developing improved labour and OHS procedures and practices; traffic management plans and safety and emergency response procedures during construction in accordance with PR2 and PR4. In addition, a workers' grievance mechanism will be implemented by both the Client and the Construction contractor.
The ESAP for Tranche 1 was agreed with the Client; the ESAP for Tranche 3 will need to be agreed before the Board.
Following project approval the Bank will support the Client through assistance with capacity building and developing the institutional capacity to implement the project in accordance with the PRs and ESAP. The environmental and social performance of the project and implementation of the ESAP will be monitored through annual E&S reports and site visits when deemed necessary.
Technical Cooperation and Grant Financing
TC1: Environmental and social due diligence
TC2: Economic and technical due diligence
TC3: Road safety audits of the road infrastructure to be rehabilitated under the Project
TC4: Assessment of the climate vulnerability context and potential structural and non-structural measures to improve climate resilience
TC5: Reform implementation support including strategic risk assessment, road safety inspections for high risk sections, road safety management capacity review and training
TC6: Procurement Practices Reform including the review and preparation of new standard procurement documents, qualification and evaluation criteria and forms of contract for the road construction sector
TC7: Procurement benchmarking and corporate certification by CIPS
TC8: Development of a targeted anti-corruption action plan for Ukravtodor and support in its implementation
TC9: Action plan to support electric vehicle roll-out
TC10: Stakeholder engagement support and capacity building
Company Contact Information
+38 (044) 287 74 08
+38 (044) 287 41 18
9 Fizkultury Str. Kyiv, 03150
PSD last updated
07 Dec 2021
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