Translated version of this PSD: Ukrainian
The EBRD is considering a project aimed at financing the development of Coal Energy’s waste coal recycling and beneficiation businesses, as well as mechanisation, energy efficiency and environmental, health & safety (“EHS”) upgrades at its priority mines.
The first tranche of the loan will finance above ground assets, including the development of the waste coal recycling business and a new beneficiation plant to process and improve the quality of mined and bought-in coal, as well as working capital requirements. The second tranche will finance further development of the waste coal recycling business, the EHS upgrade and mechanisation of the Chapaeva mine and an energy efficiency programme at priority mines.
The project has the potential to generate positive transition impact by supporting a private independent player in the Ukrainian coal industry. Targeted energy efficiency improvements could have a positive demonstration effect on other coal producers of the benefits of adopting modern mining and waste management recycling technologies and the significant CO2 reductions (targeted at c132kt per year) that can be achieved. The project has also the potential to set higher standards in terms of transparency, environmental and health and safety practices. Finally, the waste recycling project will contribute to the expansion of the carbon market in Ukraine.
Coal Energy S.A., a Luxembourg-based holding of a Ukrainian coal mining group listed on the Warsaw Stock Exchange.
A corporate loan of USD 70 million with specified use of proceeds for the investments outlined in the above project description.
USD 70 million.
Category B under the Bank’s 2008 Environmental and Social Policy. Independent E&S due diligence (ESDD) was commissioned by EBRD and undertaken by a firm of international consultants. ESDD showed that potential environmental and social impacts are readily identified and mitigated. ESDD also assessed operational performance of the above ground infrastructure and the Chapaeva underground mine, as well as the other underground mines and assets in the Company’s portfolio against the Bank’s Performance Requirements (PRs). ESDD identified a number of issues for the Company to address the safety risks at its underground mining operations. These are stipulated in the Environmental and Social Action Plan (ESAP) with measurable success criteria and reporting requirements.
ESDD confirmed that in order to improve operational and EHS efficiency and standards of mines owned and operated by the Company these need modernisation. The Company has made a number of proposals for mine modernisation that will make significant safety improvements. The ESAP requires that additional requirements and investments be identified, prioritised and implemented in order for the operations to meet EBRD requirements.
Under the ESAP, the Company will retain an international mine safety expert, under Terms of Reference prepared by the EBRD, to further assess environmental and health and safety risks and to work with the Company to develop solutions and come up with a prioritised action and expenditure plan to meet the EBRD’s requirements and best practise with regard to mine safety and environmental performance. This prioritised plan must be in place prior to second tranche disbursement. Under the plan, the Company will make investments to develop and to implement engineering solutions for upgrading EHS conditions and performance at all of its assets, initially at Chapaeva underground mine and then at other underground mines and assets.
In addition to the safety-related issues, the ESAP also requires the Company to improve EHS management systems and, in collaboration with the international expert, to prioritize and implement actions to reduce a number of other potential risks that require corrective actions to meet Ukrainian standards and EBRD requirements. In addition, the Company will obtain and maintain appropriate permits and licenses, manage emissions and discharges, and meet the EBRD’s requirements on stakeholder engagement.
The region is characterized by large piles of waste coal from historic mining. Recycling of these piles will reduce the need for new coal production while at the same time removing unsightly and polluting piles from populated areas. The ESAP requires all such exploited piles to be reclaimed and re-vegetated when recycling is complete, which will further improve local conditions. Other energy efficiency improvements that are part of the investment programme will reduce energy use, with associated carbon savings. The relatively minor E&S risks associated with energy efficiency investments will be managed and mitigated through the adoption of the ESAP.
Some ESAP requirements are conditions precedent to disbursement. These include the appointment of an international consultant to build capacity and assist the company in prioritizing and planning EHS upgrades. The Company’s performance and timely implementation of the required environmental and safety improvements and the ESAP will be monitored closely throughout the life of the Project, both by the Bank and by the independent consultant.
Ivan Makushenko, Deputy CFO
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