GrCF2 W2 - Kyiv District Heating

Location:

Ukraine

Project number:

50839

Business sector:

Municipal and environmental infrastructure

Notice type:

State

Environmental category:

B

Approval date:

21 Jul 2021

Status:

Approved

PSD disclosed:

18 Mar 2020

Project Description

€ 140.0 million loan to Communal Enterprise "Kyivteploenergo" (Company), split into two equal tranches, to finance critical rehabilitation and modernisation of the district heating infrastructure in the city of Kyiv. 

The project is a part of the Green Cities Framework 2 designed to serve as a sector-wide catalyst for addressing environmental challenges in municipalities.

Project Objectives

The Project aims to provide sustainable and efficient operation of the existing combined heat and power plants and boiler houses in the city of Kyiv, improve the reliability of heat transportation, address other critical challenges in rehabilitating and modernizing the city's district heating system, enhance the quality of heat and hot water services to residential and non-residential customers and improve the Company's operational and financial performance and capacity.

Transition Impact

ETI score: 70

The project is part of the Green City Framework 2 (GrCF2). The GrCF2 is a strategic and multi-project approach targeting environmental issues in selected large cities in our countries of operation.

The primary goal is to achieve significant environmental improvements and promote the green transition quality within the relevant cities. The GrCF2 also aims to build necessary capacity and facilitate better coordination among various stakeholders within the relevant cities in order improve the governance, operational efficiency and financial sustainability of the targeted investments and initiatives. These objectives are supported by the development and implementation of a city-specific Green City Action Plan (GCAP) identifying and prioritising environmental challenges and ways to address them through targeted investments, services and policy instruments. The project will pursue Green and Well-governed TI objectives consistent with the GrCF2 transition impact.

Client Information

KYIVTEPLOENERGO CE

Communal Enterprise "Kyivteploenergo", a municipal utility wholly-owned by the city of Kyiv, is an operator of the district heating system of the city, which consists of two large gas-fired combined heat and power plants, 15 large and 168 small and medium-sized boiler houses, 2,800 km of district heating networks, more than 9,400 heat substations and a waste incineration plant.

EBRD Finance Summary

EUR 140,000,000.00

Total Project Cost

EUR 140,000,000.00

Environmental and Social Summary

Categorised B (2019 ESP). The Project is part of an ongoing rehabilitation and modernisation of the district heating infrastructure in Kyiv and will result in environmental and social benefits associated with the overall improvement in the quality of heating and hot water services, improved energy efficiency, reduction in fuel consumption and heat and water losses, and lower air emissions. As a result, net reduction of Green House Gas ('GHG') emissions will be around 196 k t/yr of CO2 equivalent.

An independent Environmental and Social Due Diligence (ESDD) was undertaken of the Project and included a review of corporate operations and assets. The ESDD confirmed that the Company is compliant with National legislation and has all valid locally required environmental air, waste and water discharge permits, complies with Sanitary-Protection Zone (SPZ) requirements, but needs to enhance capacity for environmental & social risk management to implement the Bank's PRs and to address OHS risks linked to the COVID response.

The ESDD confirmed that the Project financed by the Bank will comply with EU (EU BAT) and National legislation, however the existing Combined Heat and Power (CHP) plants and heating Boiler houses will not meet EU BAT requirements and EVLs for NOx as defined under the EU Industrial Emissions Directive 2010/75/EU.  The Company is developing a plan and a long-term modernization program to allow the existing CHPs and boiler houses to attain EU standards. This is not part of the current Project but a commitment has been included in the ESAP.

The Project requires an Environmental Impact Assessment (EIA) in accordance with the Ukrainian legislation, which will be completed at the next stage of the project development together with public hearings. A Stakeholder Engagement Plan has been prepared considering COVID-19 restrictions. Implementation of the local EIA and public hearings will be supervised and monitored by the international consultants. A Non-Technical Summary (NTS) has been developed and will be disclosed.

The ESDD confirmed that there is no resettlement associated with the Project.  Project components will be developed on existing land owned by the Company and the size of existing SPZs will not change. The Company has basic H&S standards, complies with national labour laws and is largely aligned with PR 2. The Company has no plans for labour restructuring or major redundancies within the next two years.

An Environmental and Social Action Plan (ESAP) has been developed to strengthen the Company's EHS capacity and to ensure the Project is structured and developed in line with best practices, relevant EU standards and EBRD's PRs and to mitigate any negative impacts from the project implementation. The ESAP contains a number of actions including: enhancing corporate EHS management; improving waste management; developing OHS and public safety risk assessment and construction management system; asbestos management plan, redeployment of the small number of staff with positions affected by the Project etc. The ESAP also specifically requires introduction of the continuous monitoring of NOx and CO at the CHPs to meet the requirements of the Industrial Emissions Directive 2010/75/EU. The Company will also develop a long-term plan to modernize the existing CHPs in line with EU requirements overall reduce emissions and increased energy efficiency, and will develop ESG/Sustainability reporting and include disclosure of climate related inflation in line with best practice and EU guidelines. The ESAP has been developed and agreed by the Company.

The Company will be required to provide the Bank with annual environmental and social reports, including updates on the implementation of the project and the ESAP in compliance with the EBRD PRs.

The Bank will monitor the environmental and social performance of the project through annual reports and additional E&S audits when required.

Technical Cooperation and Grant Financing

Pre-signing:

Initial project preparatory work implemented by USAID through its Energy Security Project included a simplified Pre-Feasibility Study, IFRS-compliant financial audit of the Company, and related project design documentation compliant with Ukrainian standards and regulations.

Technical, financial, environmental and social due diligence funded by Government of Sweden.

Green City Action Plan (GCAP). This technical cooperation assignment also funded by Government of Sweden supports the development and implementation of GCAP for the City of Kyiv. 

Post-signing:

Project Implementation Support Consultant will support the Company in all aspects of project implementation, including preparation of conceptual design, technical specifications, tender documentation, tender evaluation and contract finalisation reporting to the Bank. The Company will hire an additional consultant financed from the loan proceeds to carry out comprehensive technical supervision of construction.

 

Company Contact Information

Volodymyr Borkovskyi
borkovskyi.vv@kte.kmda.gov.ua
+38 (044) 207-60-86
https://kte.kmda.gov.ua
5 Ivana Franka sq., Kyiv, Ukraine 01001

PSD last updated

24 Jun 2021

Understanding Transition

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

Business opportunities

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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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