FEZ Minsk Electricity Network Upgrade Project

Location:

Belarus

Project number:

51524

Business sector:

Energy

Notice type:

State

Environmental category:

B

Approval date:

24 Jun 2020

Status:

Pending Approval

PSD disclosed:

10 Oct 2019

As permitted by paragraph 2.6 of Section III of the Access to Information Policy, disclosure of this PSD was deferred in accordance with paragraph 1.4.4 of the Directive on Access to Information.

Project Description

The provision of a €14.5 million sovereign loan to the Republic of Belarus to assist Miniskenergo, the regional state-owned utility in Belarus, in developing the electricity infrastructure related to Minsk Free Economic Zone (FEZ Minsk). The Project will support the construction of a 110/10kV low voltage substation in the town of Fanipol, a territorial unit of FEZ Minsk.

 

 

Project Objectives

The funds will be used to finance capital expenditure for the upgrade of a low voltage electricity network in FEZ Minsk. The project will help in meeting the growing need for electricity infrastructure for companies residing in Fanipol in FEZ Minsk, thereby resulting in further development and growth of the free economic zone.

Transition Impact

ETI score: 61

The Project will contribute to the Resilient and Well- Governed qualities. By improving electricity supply, the Project will help to meet the anticipated increase in electricity demand in Fanipol and provide a safe, secure and reliable electricity supply to the area. The project will indirectly support the development of the private sector since the residents of Fanipol in FEZ Minsk are dominated by private sector companies. Furthermore, the Project is supported by a technical cooperation that will bring consultants to convert financial statements of Minskenergo into IFRS accounting standards improving the company's accounting and financial reporting standards.

Client Information

REPUBLIC OF BELARUS

Borrower: Republic of Belarus.

Beneficiary: Minskenergo, the state-owned regional energy company responsible for the generation of ectricity and heat, the transmission, and the distribution in the city of Minsk and Minsk Region. It falls under the organisation of Belernergo, the state energy association in Belarus.

EBRD Finance Summary

EUR 14,500,000.00

Sovereign loan of up to €14.5 million to the Republic of Belarus.

Total Project Cost

EUR 15,590,000.00

Up to EUR 14,500,000 of the proceeds will finance the construction of new low voltage substation and the associated interconnection line.

Additionality

The EBRD is additional by providing a long-term financing unavailable from commercial banks and also through the conditionalities in the form of environmental compliance and IFRS reporting.

Environmental and Social Summary

Categorised as B (ESP 2014). The Environmental and Social (E&S) impacts and risks associated with the construction and operations of Cherkassy 110/10kV substation and related 9.4km new and reconstruction of old 110kV lines (the Project) by the vertically integrated regional power company Minskenergo are readily identified, site-specific, and can be mitigated through the implementation of E&S management systems and a targeted Environmental and Social Action Plan (ESAP). There are no sensitive areas to be affected by the Project, and this type of project does not require a local EIA or would have been eligible under the EU EIA Directive.

The Environmental and Social Due Diligence (ESDD) was carried out in-house consisting of the E&S Questionnaire and support materials review, a site visit to the future Project location, and discussions with Minskenergo experts. The preliminary feasibility study of the Project was prepared, with further detailed design, final route of the lines and respective land allocation, field investigations, geodesic survey, state expert review and permitting procedure by the national authorities are yet to be completed during next year. Based on the ESDD results it can be concluded that Minskenergo's institutional capacity and corporate systems need to be strengthened in order to fully comply with EBRD PRs and thus require involvement of an independent consultants. Therefore, PIU Consultant supported via TC funds will assist the Client in development of stronger Environmental, Social and Governance structures, systems and processes, as well as in the implementation of the ESAP.

Based on the available documents review the ESDD identified that key E&S issues are associated with the Project's right of way proximity to private land users, River Ptich' water safety zone, crossing of third parties' infrastructure, e.g. road bridge and gas pipelines, construction stage waste management, workers and public safety during construction and operation, labour practices, and stakeholder engagement among other. The ESAP was developed to address Project specific risks as well as broader Company's performance, including requirements for labour audit, contractors management procedures, occupational health and safety behavioural programme, transformers storage and spills prevention practices, preparation of corporate-level management plans for air emissions, waste, water use, wastewater, vegetation control, public safety from electro-magnetic radiation and noise, land acquisition procedure, as well as development of grievance mechanism, information disclosure and broader stakeholder engagement practices. The ESAP has already been agreed with Minskenergo. Its implementation will be monitored by the Bank via regular Annual E&S Reports review and site visits when necessary.

Along requirements to implement best practice the Company has agreed to carry out an ornithological study for its network of 67,000 km of power transmission and distribution lines that create potential collision and electrocution risks to birds. Some of Minskenergo's network is located in sensitive biodiversity areas as Belarus has an important from conservation perspective position due to bird migration routes crossings, resting stations at country's multiple lakes and marshlands, as well as rare species breeding and nesting habitats and in general high conservation value. Based on the bird study results a list of mitigation measures and/or offsets to prevent and minimise birds mortality risks will be prepared for the Company to implement by 2022.

Technical Cooperation and Grant Financing

The Project will be supported by five technical cooperation assignments including 1) Ornithological Study to complete a supplemental biodiversity assessment 2) Project Implementation Support to assist the Company in tendering, contract finalisation, as well as works supervision 3)  Smart Metering Study to develop a smart meters action plan for the rehabilitation and modernization of the networks 4) Financial Audit and Preparation of IFRS statements to provide support to the Company in preparing financial statements in accordance with the IFRS 5) Independent Labour Audit to carry out an independent audit of labour practices at Minskenergo.The estimated cost of the technical cooperation is up to EUR 875,000, out of which EUR 200,000 will  be financed by  the Central European Initiative Fund ("CEI") and the remaining are expected to be funded by other donors.  

 

 

Company Contact Information

Minskenergo
office@minskenergo.by
Tel: +375 (17) 223-81-039
+375 (17) 2327-21-11
www.minskenergo.by
Address: 24 Aranskaya st. Minsk; 220033; Belarus

PSD last updated

19 Jun 2020

Understanding Transition

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

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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.

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