DH Meters Installation Programme

Location:

Kazakhstan

Project number:

47971

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

FI

Target board date:

19 Oct 2016

Status:

Signed

PSD disclosed:

24 Mar 2016

Translated version of this PSD: Russian

Project Description

The EBRD is considering a senior loan of up to 12.2 billion Kazakh tenge (KZT) (EUR 31.5 million), to JSC "Fond Razvitiya ZHKH" (the "Borrower", or the "Fund"), wholly owned by the state.

Project Objectives

The purpose of the project is co-financing of the National programme for installation of bulk heat meters in multi-flat residential buildings in Kazakhstan (the "Programme", "Metering Project").

The Programme targets all local heat supply companies, including those located in small towns. The current average heat metering coverage in the country is ca. 30 per cent of households. The implementation of the Programme is expected to increase the coverage of multi-flat houses in Kazakhstan by heat meters to around 80 per cent by 2019.

While metering of supplied resources is a necessary step towards commercialization of the sector, the ultimate goal of the Government is to achieve significant savings of water and energy through the installation of individual heat sub-stations at building level, designed for the specific needs of each building. The Project envisages the further development of the Individual Heat Sub-stations Programme and, therefore part of the loan will be allocated for co-financing (i) the Individual Heat Sub-stations Project (the "IHS Project") and potentially (ii) the wireless heat data transmission equipment in pilot regions (the "ASCUT Project").

Transition Impact

Transition impact for this Project is expected to stem from the expansion of heating metering in the country and expansion of meter-based heat billing, which are a necessary condition to achieve commercialization of the district heating industry. The project is expected to increase the level of metering in Kazakhstan to about 80 per cent from current 30 per cent. Significant behavioral changes of consumers, including energy saving effects, are expected as a result. Savings should lead to decrease in billed amounts and increase in collection rates. Moreover, the project is structured based on the "user-pay-principle" as full cost recovery from end-users is envisaged.

Client Information

JSC "Fond Razvitiya ZHKH"

JSC "Fond Razvitiya ZHKH" was established in 2012 and is managed by the Committee on affairs of construction, housing and communal services and management of land resources of the Ministry of national economy of the Republic of Kazakhstan. The Fund's primary goal is attracting private investors and development institutions to a municipal housing infrastructure sector.

EBRD Finance Summary

KZT 12,200,000,000.00

EBRD will provide a senior loan of up to 12.2 billion Kazakh tenge (KZT) (EUR 31.5 million).

Total Project Cost

KZT 21,200,000,000.00

The Government of Kazakhstan already contributed 6 billion Kazakh tenge (KZT) to the Fund for implementation of the Programme.

Environmental and Social Summary

Categorised FI (2014 ESP). The project will bring environmental and health benefits due to more rational use of heating energy and water in the residential sector. There are no environmental and social issues directly associated with the proposed Fund for leasing of equipment for heat metering and IHS installations in residential buildings. The Fund will be required to complete EHSS Questionnaire for FIs in order to assess its capacity to manage E&S issues in compliance with PRs 2, 4 and 9. An E&S Procedure for the Fund will need to be developed as part of the due diligence, to assist the Fund in assessing and managing the E&S issues and minimizing risks in its subprojects, as well as measuring E&S benefits. Potential adverse impacts of the sub-projects could be associated with the temporary disruptions and  nuisance caused by installation works for the equipment. The Procedure should also include provisions for appropriate consultation with and disclosure of information to potentially affected people on the planned rehabilitation works and
provide a grievance mechanism. Affordability issues that could affect most vulnerable users and gender issues would need to be assessed as part of the due diligence. The Fund will be required to report annually on the environmental benefits resulting from the investments.

This section will be updated upon completion of the due diligence.

Technical Cooperation

  • TC 1: Technical and Procurement Due Diligence and Environmental and Social Due Diligence of the Metering Project to include: (i) preparation of technical and functional specifications of metering devices, review of procurement and implementation schedules and arrangements, development of the consolidated procurement plan; and (ii) environmental and social due diligence. The estimated cost of this assignment is EUR 90,000, it will be financed by the Bank's own resources and reimbursed by the Client.
     
  • TC 2: IHS Programme Development to include IHS Programme Development, including

(i) an evaluation of the existing pilot IHS projects in Kazakhstan and other former USSR countries; (ii) assessment of potential savings of water and energy through installation of IHS; (iii) preparation of technical and functional specifications of IHS suitable for different types of buildings; (iv) proposing changes in institutional arrangements between heat supply utilities and residential consumers which would make both parties interested in installing IHS; (v) potentially

- assessment of pilot projects for ASCUT installation. Commitment of Tranche 2 of the EBRD loan will be conditional on this TC being completed. The estimated cost of this assignment is EUR 200,000, proposed to be financed by the Government of Kazakhstan under the terms of the Enhanced Partnership Framework Arrangement ("EPFA") or, in the event that a replenishment of EPFA is not possible, by international donors or the EBRD Shareholder Special Fund ("SSF").

  • TC 3: Project Implementation Support for the Fund to include: (i) assistance with procurement

of meters, including development of the tender documentation, tenders evaluation, contracting, assistance with technical acceptance; (ii) development of procedures for monitoring of lease contracts' compliance and of financial performance of the lessees. The estimated cost of the assignment is up to EUR 150,000 for support under the Metering Project, proposed to be financed under the terms of the EPFA or, in the event that a replenishment of EPFA is not possible, by international donors or the SSF.

Company Contact Information

Mr Kaysar Baidaly, JSC "Fond Razvitiya ZHKH"
kbaydaly@mail.ru
+7 (701) 747 2555
+7 (7172) 999 472
http://zhkh.kz

Dostyk Ave, 18 Business Centre "Moscow, 8th floor, Astana 010000 Kazakhstan

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