Lviv District Heating

Location:

Ukraine

Project number:

39300

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Approval date:

29 May 2013

Status:

Repaying

PSD disclosed:

23 Jan 2012

Translated version of this PSD: Ukrainian

Project Description

The EBRD is considering providing a loan to the municipal district heating utility operating in the City of Lviv to finance installation of individual sub-stations, network replacement with pre-insulated pipes, modernisation of boilers and control systems, installation of new gas engine units for simultaneous co-generation of heat and electricity. The project aims at significantly improving the energy efficiency, reducing energy losses, gas and electricity consumption and improving the quality of heat and hot water supply services in the City.

Transition Impact

Framework for markets: The Project will support a tariff setting methodology development and adoption at the National Utility Tariff Regulator level with a view to ensuring:

(i) the full operating cost recovery and cost control;
(ii) full investment cost recovery based on the investment programme assessment to be performed by the National Utility Tariff Regulator and
(iii) improved revenue predictability and planning through a process of formalised, regular, transparent and timely adjustment of rates.

The City and the Company will enter into a Public Service Contract which will clearly define the City and the Company’s rights and obligations regarding the DH services provision and capital improvements including the tariff setting rules and policy. The demand side measures proposed by the project will help the Company increase its consumption-based billing and further improve revenue collection.

Demonstration of successful restructuring: Through physical investments and implementation of the Corporate Development Support Programme, the project will improve operational and financial performance of the Company and will have significant demonstration effect for other cities and utilities in Ukraine concerning ways to improve energy efficiency of district heating operations and reduce losses and costs.

Transfer and dispersion of skills: The donor funded Corporate Development Support Programme and Project Implementation Support will provide substantial training for the key staff of the Company enabling substantial market skill transfer.

The Client

Communal Enterprise “LvivTeploEnergo”, a municipal district heating utility wholly owned by the City of Lviv.

EBRD Finance

EUR 20 million loan to the Company, secured by a full municipal guarantee.

The project is expected to be co-financed by an up to EUR 10 million grant from the Eastern Europe Energy Efficiency and Environment Partnership (E5P).

Project Cost

Up to EUR 34.3 million.

Environmental Impact

The project has been categorised B in accordance with EBRD's 2008 Environmental and Social Policy. The priority investments into the rehabilitation and modernisation of the district heating infrastructure are expected to bring environmental and social benefits associated with the overall improvement in the quality of heating and hot water services in the City of Lviv, improved energy efficiency, reduction in fuel consumption and heat and water losses, and lower air emissions.

The due diligence is currently being finalised. It includes a corporate review of the Company’s corporate environmental, health and safety and social management capabilities and procedures in relation to its own workforce and construction contractors, and an analysis of the environmental and social impacts and benefits of the proposed priority investment programme to establish the level of project's compliance with EBRD's Performance Requirements (PRs). There were no major issues identified and any adverse impacts are expected to be limited to short-term environmental, health and safety issues arising from construction works which can be adequately mitigated by taking environmental protection measures into consideration in construction planning and work practices. Particular attention needs to be paid to conducting an asbestos survey and developing and enforcing implementation of strict procedures for handling and removal of asbestos-containing materials. An Environmental and Social Action Plan (ESAP), containing mitigation measures for identified issues along with a framework for provision of information to stakeholdershave been developed and are currently being reviewed by the Client. The Client will need to implement the ESAP, provide timely information to stakeholders affected by the Project. and submit annual environmental and social reports to the Bank.

Technical Cooperation

Pre-signing

  • Feasibility Study (EUR 279,950) funded under the Ukraine District Heating Project Preparation Framework (financed by Sweden);
  • IFRS audit (EUR 25,000) funded by the Bank’s own resources;

Post-signing

  • Corporate Development Support Programme to improve financial and operational performance of the Company (EUR 400,000 to be financed by donor funds TBD);
  • Project Implementation Support covering procurement advisory services, implementation support and contract supervision (EUR 600,000 to be financed by donor funds TBD).
 

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

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