EL TO Zagreb Upgrade Project

Location:

Croatia

Project number:

47748

Business sector:

Power and energy

Notice type:

Public

Environmental category:

B

Target board date:

20 Sep 2017

Status:

Disbursing

PSD disclosed:

27 Sep 2016

Translated version of this PSD: Croatian

Project Description

The EBRD is considering arranging an A/B loan of EUR 100 million to Hrvatska Elektroprivreda d.d. (HEP), Croatia's national energy company. The EBRD's portion of the proposed syndicated loan will be up to EUR 50 million.

Proceeds of the loan will be used to finance the construction of a new gas fired combined heat and power (CHP) unit based on best available technique for a gas turbine cogeneration scheme on the site of the existing combined-cycle power plant EL-TO in Zagreb. The new unit will be in line with the requirements promoted by the EU Industrial Emissions Directive (IED) and the EBRD's energy strategy.

The new CHP will partially replace some of the old and inefficient units at EL-TO, which also have a poor environmental performance and do not comply with the IED directive, which will become mandatory for all EL-TO units on 1 January 2018. The new unit will be built under an engineering
procurement construction contract with a qualified contractor and equipment supplier. The existing EL-TO plant is the crucial provider for district heating in Zagreb, serving almost 80,000 households and a significant number of commercial customers in the western part of the city. The construction of the new CHP unit will ensure the security of electricity, district heating and industrial steam supply for a significant portion of Croatia's capital.

Project Objectives

The loan proceeds will predominantly be used for the financing of construction works and the installation of the required equipment, all of which will be procured under the EBRD's procurement policies and rules. In order to secure the adequate implementation of the project, the Bank will require the establishment of a project implementation unit by the Borrower, which will be responsible for the timely implementation of the investment.

The lender's supervisor will be required to approve all invoices prior to the disbursement of the EBRD loan proceeds.

Transition Impact

The proposed project will target the following two Transition Qualities:

Well-governed: As part of the Project engagement, the Bank will seek to help HEP to improve its corporate governance practices through the development and implementation of a Corporate Governance Action Plan (CGAP). The CGAP focuses on strengthening the independence and expertise of the HEP supervisory board as well as corporate functions such as (i) risk management, (ii) internal audit, (iii) compliance, and others.

Green:  The Project will allow HEP to replace an old inefficient CHP plant with a modern CCGT unit which will significantly improve efficiency and environmental performance. The new plant will use the best available techniques, satisfying the highest energy efficiency/resource efficiency and environmental standards. Overall carbon emissions will be reduced by more than 150,000 tons CO2 per year while the emissions of other pollutants such as NOx, SOx and particles will also be significantly reduced.

Client Information

HRVATSKA ELEKTROPRIVREDA D.D.

Hrvatska Elektroprivreda d.d. (HEP, or the Borrower) is a joint stock company established in Croatia
and fully-owned by the government of Croatia. The main activities of HEP include the generation,
transmission and distribution of electricity, the provision of district heating and gas distribution
services throughout the country.

EBRD Finance Summary

EUR 50,000,000.00

Total Project Cost

EUR 214,700,000.00

Environmental and Social Summary

Category B: The project has been categorized as "B" in accordance with the Bank#s Environmental and Social Policy following an Initial Environmental and Social Examination (IESE), which confirmed that the new plant will replace existing units and given the location. A fit for purpose in-house Environmental and Social Due Diligence (ESDD) was undertaken of the Project inclusive of site visits and review of the EIA.

The proposed CCGT plant will be located within the industrial complex of the City and within the existing CHP facility and environmental and social impacts will be limited and will be readily identified and mitigated. The new unit will produce yearly around 715,000 MWh of electricity and 690,000 MWh of heat at an overall cogeneration efficiency of nearly 90% (46% electricity efficiency and 44% heat efficiency), as compared to the current cogeneration efficiency of around 84% (16% electricity and 68% heat efficiency). It will replace around 525,000 MWh of grid electricity that is produced at much higher carbon intensity. Based on these figures, the overall carbon emission reduction from the Project is estimated to be above 150,000 tons CO2 per year.

An Environmental Impact Assessment (EIA) has been undertaken in line with National regulatory requirements and EU EIA Directive, which has been approved by the Competent Authorities. The EIA confirmed that the project will have limited environmental or social impacts and it will fully meet National regulatory requirements as well as the relevant EU environmental standards. In particular, the CCGT plant will fully meet all the relevant provisions under the EU Industrial Emissions Directive (IED). This was confirmed during meetings with the Competent Authorities and that the EIA process followed EU requirements.

The Bank's in-house ESDD, which include site visits and meetings with management and Competent Authorities, confirmed that the Company has the institutional capacity to fully implement the Bank's Performance Requirements. Overall, HEP has transformed and improved EHS operations and is developing corporate EHS management systems. It has a dedicated EHS management team and has developing its first sustainable report according to GRi standards. An ESAP has been developed based on the ESDD to help further strengthen the corporate EHS management systems, comply with IED and BAT as well as develop and implement a SEP and ensure appropriate reporting of nonfinancial information.

A Non-Technical Summary (NTS) has been developed for this Project and is available in English and Croatian as well as on the Company web site.

Technical Cooperation

None.

Company Contact Information

Kresimir Komljenovic and Davor Krilic
kresimir.komljenovic@hep.hr and davor.krilic@hep.hr
+385 1 3037801 +385 1 6322308
www.hep.hr
Ulica grada Vukovara 37 10 000 Zagreb

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

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Text of the PIP

Project Complaint Mechanism (PCM)

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Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.