MARITZA EAST 2 TPP

Location:

Bulgaria

Project number:

22344

Business sector:

Power and energy

Notice type:

Public

Environmental category:

B

Target board date:

20 Jul 2004

Status:

Cancelled

PSD disclosed:

18 Feb 2005

Project Description

The key objective of the proposed project is to reduce pollutant emissions and therefore to help improve local conditions and assist the country in meeting its national and EU environmental standards and obligations. The Project includes the installation of Flue Gas Desulphurisation (FGD) plants and associated investments at units 5 and 6 of the 1,450 MW lignite-fired Maritza East 2 power plant.  A project to install FGDs on units 7&8 at the Maritza East 2 power plant was completed in late 2002 and was financed by the Bank, EIB, PHARE and NEK.

Transition Impact

The transition impact of the loan derives from the following:
  • The project brings in technology that will lead to compliance with EU environmental standards. The technology, and the improved compliance with international standards that it allows, provides a positive demonstration effect and is potentially replicable in the region where environmental performance is a problem and where there has been limited investment to control pollutant emissions in thermal generation power plants to date. 
     
  • The project has significant economic benefits for the country and the region as it provides a relatively low cost alternative to new replacement capacity and supports the indigenous lignite mining industry.  
     
  • The project will be the first in the region where a medium term (5-year) Power Purchase Agreement will be used in anticipation of the expected liberalisation of the power market in accordance with the EU electricity directive.  It is anticipated that Maritza East 2 will be a significant player in the early days of liberalisation of the power market.   This is expected to have a good demonstration effect.
 

The Client

Maritza East 2 (ME2), a 1,450MW lignite-fired power plant located near Stara Zagora in south-east Bulgaria.  ME2 is an independent joint stock company, 100% owned by the state.  ME2 holds a BB rating from Standard & Poor’s.

EBRD Finance

The EBRD expects to provide Senior Debt Facility of up to € 35 million to Maritza East 2 TPP.  The Bank will syndicate approximately € 10 million to commercial banks.
The Ministry of Finance of Bulgaria has also applied to the European Commission for grant funding under the ISPA Financial instrument towards the cost of the Project.
Maritza East 2 will fund the remainder of the Project cost.

Project Cost

Approximately € 80 million.

Environmental Impact

The Project
The project consists of retrofitting two existing power generation units of Maritza East II TPP with flue gas desulphurization equipment (FGD) using limestone/gypsum technology. The key objective of this project is to reduce pollutant emissions and therefore to help improve local conditions and assist the country in meeting national and international standards and obligations.
Air emissions are the key environmental and public health and safety issues for this power station and the entire Maritza area.  Past performance of existing power stations has resulted in excessively high emissions of particularly dust and SO2 which need to be reduced to prevent further negative impact on the environment and on human health.  The necessary emission reduction measures are a key issue for the design of any new plant, e.g. ME1, as well as for bringing existing plant, e.g. ME3,  into compliance with EU regulations (e.g. the Large Combustion Plant Directive) and to help meet national emission reduction commitments. The retrofit with state-of-the-art desulphurization units will ensure that the units meet all relevant current and future SO2 and particulate (dust) emission requirements.  The design control level for SO2 of 94% will bring the units up the standard for new generating equipment and will allow the safe future us of local lignite.  
Due diligence focussed on the implications of the proposed retrofit of units 5 and 6. Units 7 and 8 are new, state-of-the-art and meet all national and EU standards. The four oldest units (1-4) are planned to be rehabilitated and fitted with FGD (again with state-of-the-art limestone/gypsum technology) under a separate project without Bank involvement. The rationale to build these FGD plants is that the ME2 TPP has a very important role in the Bulgarian power market and if this Project is not realized the Units 5&6 will have to be shut down. This will happen by 2007 if they do not comply by that time with Bulgarian environmental regulations.
Screening Category
The project was screened B 1, requiring an Environmental Audit of the existing facilities and an Environmental Analysis of the proposed investment.  
Information Reviewed
In addition to existing information in the technical specification of the project, information from a previous project at ME II and from other projects at ME I and ME III, specific studies were commissioned and reviewed. The new studies comprised an Environmental Audit of ME II plus an Environmental Analysis of the planned FGD retrofit; these studies were carried out in 2003.  
Environmental Issues
Key issues are air emissions, water usage and discharges, FGD resources and FGD byproduct management and usage.
Standards and Compliance
Relevant EU Directives include Directive 96/61/EC concerning integrated pollution prevention and control; Directive 2001/80/EC on the limitation of emissions of certain pollutants into the air from large combustion plants and directives related to waste, plus the relevant Bulgarian regulations.
The two FGD units are designed to meet all applicable national and EU standards.
Air emissions
The main environmental benefits of the Project are such that the Units 5&6 will comply with Bulgarian and EU regulations after retrofit with FGD plants. The reduction of SO2 emissions will be 94% of the present emission values resulting in a reduction of 285'000 tons per year. Dust emissions will be also reduced by about 50% of the present emission values. Guaranteed is 1’200 mg/Nm3 for SO2 and below 50 mg/Nm3 for dust.
The studies of the sickness rate for Galabovo municipality compared to the sickness rate of the whole country shows that Galabovo is below average in all classes of diseases with the exception of diseases of the respiratory system. Reductions in emissions (and here particularly in dust) from units 5 & 6 and other units of ME II will help address this problem.
Water
ME2 runs a so called “zero-discharge” system and there are actually no plans to change or quit this system due to the FGD Project for Units 5 & 6.  Clarified and drainage water from the ash ponds is re-cycled to the wet ash handling system. Cooling tower blow-down is re-used for FGD plants, and FGD plants either are zero-discharge systems too or discharge via dredger pump stations to the ash ponds.
Limestone Supply and FGD Byproducts  
The FGD system uses the wet limestone/gypsum process. Limestone demand for Units 5&6 will be in the order of 300'000 tons per year. The source of limestone is not yet specified but a variety of sources is easily accessible. Delivery to the power station is planned to be by rail, independent of the source. There is no concern that the demand of ME2 could not be met at reasonable conditions. Quarrying 300'000 tons of limestone per year is not exceptional and does not need any specific environmental monitoring or remedial action. And none of the potential limestone quarries are located in protected areas.
Units 5&6 FGD gypsum production is expected to amount to approx. 45 t/h and unit (total of 540’000 tons per year in terms of solid gypsum, including 10% surface moisture, for both units, 65% average unit load).
According to the EU Directives and Bulgarian national legislation there are basically four different feasible options for handling of the gypsum produced by the FGD:
(1) Use/Selling of commercial grade gypsum after passing secondary dewatering.
(2) Disposal of gypsum after passing secondary dewatering
(3) Final disposal of ash/gypsum-mixture slurry
(4) Reclaiming and reuse of completely drained ash/gypsum-mixture
Use of commercial grade gypsum (option 1) would be the preferred option but obviously depends on market demand. Unfortunately there is at present and most probably also in the near future almost no demand for the amount of 540'000 tons gypsum produced by units 5 & 6 (or 1.8 million tons if all units are equipped with FGD). It is estimated that there may be a market demand of up to 300’000 t/a on the long run but it would be completely unrealistic to assume that a similar use can be found for the remaining volume of gypsum. The second best option as identified by the consultants is Option 4, i.e. the use of the ash/gypsum mixture for backfilling, landscape shaping and structural improvement of mined out areas inclusive of soil improvement for re-cultivation and re-forestation.  
Environmental Opportunities 
As the massive reduction of SO2 emission is the main environmental rationale of the Project, designing for 94% continuous and 96% maximum rate (i.e. 94% without stand-by and 96% when also using the stand-by equipment) is a recommended environmental enhancement opportunity complying with the BATNEEC (Best available technology not entailing excessive costs) principle.  This would also offset the limitations of Units 7&8 FGD, which (at that time) had been designed for 90% desulphurisation rate, only. Moreover, (Units 7&8 FGD must run all recirculation pumps even for 90 % rate, and they can hardly be pushed or upgraded without incurring inappropriate cost. The 2001/80/EC requirement for plants where installation has commenced before 1st January 2001 is in fact 92 %.
Environmental Action Plan
Environmental due diligence identified a number of improvement opportunities which include
  • Dust reduction including identification of the sources that are not yet subject to dust preventing measures ('diffuse' or scattered sources, all kind of mechanical works for construction, maintenance and repairing, surface treatments, unpaved roads, outdated diesel engines, bus and car pool of the plant, etc.).  Selection of measures with acceptable cost/benefit-ratio and implementation of these measures. It is recommended to consider at least partial covering of limestone unloading and stocking and to improve surface lining at ash pond.
     
  • Asbestos survey. It is suggested to initiate a general investigation on asbestos in the power station, on to develop appropriate containment and disposal measures.
     
  • Extension and Improvement of the existing Monitoring Program including additional periodic ambient air quality measurements, monitoring of fine particulate matter (PM10), extension of periodic water quality and ground water quality measurements.
     
  • Continued efforts to increase the use of FGD gypsum.  The re-use of ash/gypsum mixture should not be restricted to the actual backfilling at Staroselets site only. The material could also be used as amendment of acidic soil, provide plant nutrients, improve soil physical properties, help alleviate soil compaction. This will require development of market demand.
 

Technical Cooperation

None.
 

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