ENA - Modernisation of Distribution Network

Location:

Armenia

Project number:

48957

Business sector:

Energy

Notice type:

Private

Environmental category:

B

Target board date:

07 Jul 2017

Status:

Repaying

PSD disclosed:

18 May 2017

Translated version of this PSD: Armenian

Project Description

Provision of a senior corporate loan of USD 80 million to Electric Networks of Armenia ("ENA" or the "borrower" or the "company") to finance a 5-year (2016-20) USD 200 mm investment programme for the modernisation of the distribution network including the introduction of smart metering across Armenia.

Project Objectives

The loan supports the borrower in the modernisation of outdated Armenian power infrastructure.

This will include:

(i) Reconstruction and modernisation of existing substations and lines and replacement of outdated equipment;
(ii) Expansion of the automated electricity metering system (reading and billing);
(iii) Expansion of the network and connection of new users;
(iv) Installation of a new automatic control system and other auxiliary investments.

Transition Impact

The project will improve significantly energy efficiency by reducing technical and commercial losses with corresponding direct carbon emissions reductions. The Bank is also considering engaging in policy dialogue with the regulator to perform gap analysis of the distribution tariff methodology in order to bring it in line with international and EU best practice and to develop implementation guidelines for the regulator.

Client Information

ELECTRIC NETWORKS OF ARMENIA CJSC

ENA is a closed joint stock company established under the laws of Armenia, which is involved in electricity transmission and distribution in the country. ENA is fully-owned by Tashir Group, a diversified group of over 200 industrial and construction companies, which in turn is ultimately controlled by the Armenian-born entrepreneur Samvel Karapetyan and his family.

EBRD Finance Summary

USD 80,000,000.00

Total Project Cost

USD 200,000,000.00

Environmental and Social Summary

Categorised B (ESP 2014). Environmental and social issues associated with the modernization of existing distribution networks are site specific and can be readily assessed and mitigated. The investment plan involves the refurbishment of substations, updating of equipment including the vehicle fleet and meters, building renovations, and the reconstruction of several transmission lines, including a 110 kV line. The Project will improve energy efficiency by reducing technical and commercial losses with corresponding direct carbon emissions reductions and in line with the Bank's Green Economy Transition ("GET") initiative. The Bank has a long standing relationship with the Company and an corporate Environmental and Social Action Plan (ESAP) was agreed in 2008.

The current ESDD carried out by an independent consultant confirmed that the investment plan does not require any resettlement or compensation, and none of the sub-projects are located in protected areas. The ESDD also included the audit of Company current and past environmental and social
performance and assessment of their capacity to carry out the project in line with EBRD PRs.

The ESDD confirmed that the Company has a dedicated Environmental, H&S, HR and PR/Communications positions, which were set up following EBRDs previous investment with the Company (in 2008) and is actively implementation of systematic approach to management of the environmental and social matters through implementation of systems compliant with ISO 9001, ISOA 14001 and OHSAS 18001 with a view of future certification. The current ESDD identified a number of issues and for instance there is a need for capacity strengthen of EHS function, including Health and Safety as well as waste management. Particular improvements are required for storage and management of transformers oils, acid batteries and asbestos. The issues related to transformers oil management were previously addressed in the ESAP and only partially implemented by the Company under the previous investment. Following recommendations of the ESDD appropriate investments related to construction of the oil storage facilities and management and storage of hazardous waste were estimated and included in the investment plan.

Based on the due diligence further improvements are required in relation to the use of PPE, contractor's management in relation to workers H&S risks during construction and public safety.

Based on the ESDD an updated ESAP has been developed and will be agreed with the Company prior to the Board. The ESAP focuses on strengthening of the Company's capacity and implementing systematic approach to management of environmental and social risks, formalising internal procedures for screening and scoping projects against EIA legislation, improving management of hazardous substances and hazardous waste, strengthening E&S requirements for contractors and strengthening internal HR procedures, including formalising grievance mechanism as well as H&S, use of PPE equipment and public safety. Through the implementation of a stakeholder engagement plan (SEP) the Company will address public safety and energy efficiency issues.

A Non-Technical Summary (NTS) and Stakeholder Engagement Plan (SEP) have been developed for the project and will be published as attachments to this PSD and on Company website when these are finalised. The EBRD will monitor the project through review of the implementation of the investment plan, review of the Annual Environmental and Social reports and monitoring visits as required.

Non-technical Summary | Stakeholder Engagement Plan

Technical Cooperation

The Project will mobilize EBRD Shareholder Special Fund to support the Public Services Regulatory Commission ("PSRC" or the "Regulator") in performing gap analysis of the distribution tariff methodology. Up to EUR 74,900 will be used for assessment of the current tariff methodology in order to align it with EU and international best practices.

Company Contact Information

Armen Arshakyan
arshakyan_AS@ena.am
+37477774000
www.ena.am
127, Armenakyan street Yerevan, Armenia, 0047

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