LUKOIL/TGK-8 Energy Efficiency Loan

Location:

Russia

Project number:

38714

Business sector:

Power and energy

Notice type:

Private

Environmental category:

A

Target board date:

08 Sep 2009

Status:

Cancelled

PSD disclosed:

22 Jun 2009

Project Description

To provide financing to OAO Lukoil for the investment by its subsidiary TGK-8 in a highly efficient state of the art 410MW CCGT unit at the Krasnodar CHP plant in Southern Russia. The transaction will support the ongoing liberalisation of the Russian power sector and renew its ageing and inefficient power infrastructure.

Transition Impact

The project enhances the strategic partnership between the Bank and Lukoil established through the Bank’s previous debt deals and promotes the benefits of privatisation for the implementation of specific investment projects.

The project will, in conjunction with other current and future projects, sustain the momentum of liberalisation and demonstrate the viability and efficiency of independent private operators in the sector. The addition of new generation capacity, whose power is entirely traded on the free market, will further deepen and strengthen that market and create the critical mass required to support the success of the liberalisation of Russia’s power sector.

The introduction of modern equipment, meeting EU Best Available Techniques (BAT) and environmental standards, will dramatically improve the environmental and operational efficiency of TGK-8’s Krasnodarskaya plant. At the same time the technical cooperation project associated with this loan will optimise TGK-8’s operation of all its existing facilities and improve its investment programme. Taken together this will establish new standards not just for TGK-8 but more broadly within the industry and raise the levels of efficiency across the sector.

The Client

The Borrower, Lukoil, is one of the Russian oil majors and the second largest non-state publicly traded oil company in the world as measured by proven reserves of hydrocarbons. Lukoil is a majority shareholder of TGK-8 (Southern Generating Company) one of fourteen Territorial Generating Companies in Russia formed in the process of unbundling of RAO UES.

EBRD Finance

A/B loan of up to USD 300 million (EUR 240 million).

Project Cost

RUB 15 billion (EUR 333 million).

Environmental Impact

Environmental classification and rationale

The project has been screened A/1, requiring environmental and social due diligence, consisting of an environmental audit of the existing power plant and environmental and social impact assessment (ESIA) of the planned investment in line with the Bank’s Environmental Policy (2003) and Public Information Policy. The project was screened A level due to the capacity increase at the plant. An Environmental and social due diligence was undertaken of the Project by an independent international and local consultant. The project is also subject to Russian OVOS requirements.

Due diligence undertaken and outcomes

The environmental and social due diligence has confirmed that the existing assets are well managed and are in general compliance with Russian Federation requirements and the investment programme will allow the plant to meet best international practice. The planned modernization programme at the CHP will improve efficiency as well as environmental management at the existing plant, although additional investment will be required in the future to further improve the plants efficiency levels to attain EU BAT requirements. This will not be possible in the short to medium term as the existing gas fired units are inherently inefficient when compared to the sate-of-the-art combined gas cycle turbines.

The Bank has agreed a project specific Environmental and Social Action Plan (ESAP) based on the due diligence. This includes among others a requirement that the new CCGT plant to be constructed in line with National and EU environmental standards, namely BAT requirements. The Company will also introduce continuous emission monitoring systems and an environmental, health and safety management system to cover both the new CCGT plant and existing power plant and all other operations of all operations of TGK 8. The Company is committed to developing an environmental, health and safety management system and undertaking an internal best available techniques (BAT) review of current operations to assess opportunities for further energy efficiency and environmental investments.
Disclosure of information and consultation

The Project is subject to a public consultation and a disclosure plan (PCDP) developed and approved by the Bank. Disclosed materials include:

  • 2009 ESIA Non Technical Summary in Russian and English
  • 2009 Public Consultation and Disclosure Plan (PCDP) in Russian and English.

The materials are available in hard copy at the following locations in Russia

  • EBRD Regional Office in Moscow , 6 Gasheka Str., Moscow 125047. Contact: Mr Vadim Dormidontov, Senior Banker. Phone: +7 (495) 787 1111; Fax +7 (495) 787 1122. E-mail: dormidov@ebrd.com

The EIA package and Executive Summary have also been released for public review by the project sponsor on its website (http://www.tgk-8.ru, - http://www.tgk-8.ru/investprojects/invest_lumpsum/buildproject_pgu-410/) and released locally in the following locations:

  • Krasnodar CHP power plant PR:
    Tolmacheva Olga (861)-219-38-93
    Е-mail: tolmachevaon@krtec.ru, (krtec@krtec.ru)
     
  • Krasnodar CHP power plant Head of Construction Division:
    Kostuk Vladimir (861)219-46-62

Additionally the executive summary is available on the EBRD internet site at www.ebrd.com,

Monitoring and reporting

The Bank will monitor the implementation of ESAP for this project as well as the implementation of the corporate ESAP. A commissioning audit will be undertaken of the project to verify that all the National and ESAP requirements have been implemented.

Technical Cooperation

The Bank has provided TC under the existing framework programme: Thermal Power Plants, Rehabilitation and Efficiency Improvement: Technical Audits/Project Review, which is funded by the Special Shareholder Fund. The value of the call-off under the framework allocated to this project is EUR 50,000.

Company Contact

Gleb Kiparisov
Head of Credit Portfolio Management, Treasury and Corporate Finance
OAO Lukoil
tel: +7 495 980 33 83

E-mail: kiparisovga@lukoil.com

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

Public Information Policy (PIP)

The PIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. Please visit the Public Information Policy page below to find out how to request a Public Sector Board Report.
Text of the PIP

Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

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.