PGE - Grid Enhancement for Renewables

Location:

Poland

Project number:

48064

Business sector:

Power and energy

Notice type:

Public

Environmental category:

B

Target board date:

26 Apr 2017

Status:

Signed

PSD disclosed:

12 Feb 2016

Translated version of this PSD: Polish

Project Description

The EBRD is considering providing a loan of up to PLN 500 million to the Polish electricity utility Polska Grupa Energetyczna S.A. ("PGE", or the "Company"). The debt financing will support an investment programme of the Company's distribution business (the "Project") , PGE Dystrybucja S.A. ("PGE DSO"), in the period 2016-2019. The EBRD financing will support PGE to implement grid investments that are critical to connect new renewable energy capacity and to cope with the intermittent nature of their production.

Project Objectives

The EBRD financing will focus on electricity grid extension and modernisation investments which are aimed at (i) increasing the connection capacity of new renewable energy sources, (ii) improving the grid assets and management systems related to the necessity to control dispersed generation and (iii) reduce energy losses.

Transition Impact

The extensive investment programme to upgrade PGE's distribution network will allow for an improvement of grid parameters by improving the grid reliability and reducing energy losses.

In addition the Project is expected to have a positive effect on the expansion of the renewable energy market by increasing grid connection capacity. In total, in the years 2016-2019, PGE is expected to connect more than 500 MW of renewable energy sources (mainly wind farms). This is intended to have a positive effect on the expansion of the renewable energy market by increasing grid connection capacity.

Client Information

POLSKA GRUPA ENERGETYCZNA

Polska Grupa Energetyczna SA is the largest vertically integrated Polish power utility, with operations concentrated in eastern and central Poland. The Company remains majority (58%) state owned and is listed on the Warsaw Stock Exchange.

EBRD Finance Summary

PLN 500,000,000.00

PLN 500,000,000.00 senior unsecured long-term corporate loan to PGE, to finance the investment programme of PGE DSO.

Total Project Cost

PLN 1,500,000,000.00

EBRD financing will be used to co-finance selected investments identified within the PGE investment programme in the distribution segment in the years 2016-2019.

Environmental and Social Summary

Categorised B (ESP 2014). The Project will mainly have environmental benefits through increasing the grid capacity for integrating renewable energy supply into the system and reducing energy losses in the distribution. Adverse environmental and social impacts associated with the Project have been assessed to be limited and these can readily be addressed through the implementation of appropriate mitigation and management measures included in the Environmental and Social Action Plans (ESAPs) agreed with both PGE SA and PGE DSO.

An independent consultant undertook environmental and social due diligence (ESDD) of both the Project and the distribution Company (PGE DSO) as well as a corporate review of PGE SA, the holding Company. This included site visits and meetings with the relevant staff and management of the Companies to review current operations, management systems and investment program. The ESDD confirmed that the Project is structured to comply with the Bank's Performance Requirements (PRs) and PGE SA has the capacity to fully implement the Bank's PRs.

The corporate review of PGE SA showed that it maintains a robust EHS and CSR management and reporting system and is among the leaders in EHS management in Poland. PGE DSO is still integrating into the PGE SA corporate structure and the ESDD identified additional work needed to implement best practice. The ESDD included a review of social and labour related issues, and no material issues were identified. Expropriation is not used by PGE DSO when developing new Projects and no labour disputes have been reported.

An initial screening of the planned investment program of PGE DSO indicated that these will not impact sensitive areas or receptors such as Natura 2000 sites. An environmental impact assessment (EIA) has been carried out in accordance with Polish legal requirements for one of the investment projects that has a potential to impact on a Natura 2000 site and it has also been subject to Habitat Directive screening procedure. The EIA investigations and Habitat Directive screening showed that the project will have no significant impacts, including on Natura 2000 sites). The EIA was subject to a consultation process as part of approval process and the project has been approved by the Competent Authorities.

The ESAPs has been developed on the basis of the ESDD and require the Companies to implement corporate requirements and EBRD PRs.

Specifically, the ESAPs require that the Companies will develop and implement all investment projects in compliance with the Bank’s PRs and that new investments will be subject to appropriate screening and assessment of impacts including those on Natura 2000 areas and other sensitive receptors as part of corporate review and agreements with Competent Authorities. On the basis of the screenings and assessments, biodiversity mitigation measures will be developed and implemented for all sites, and for other natural (non-protected) areas, as needed.  This will include a list of mitigation measures to be utilised on a case by case basis by contractors undertaking works.  Specific requirements include confirmation that projects have undergone Habitat Directive screening procedure and, where needed, an appropriate assessment and have received the approval of the Competent Authorities.  The Company will carry out public disclosure and consultations on each project that is subject to an EIA in accordance with National law and EU EIA Directive. A corporate level SEP will be developed to address both corporate environmental and social issues as well as the Project specific issues. The ESAP for PGE SA also commits it to continue to develop and publish non-financial information, such as annual CSR reports.

A Non Technical Summary (NTS) in English and Polish is available for the Project. The Bank will monitor the implementation of the ESAP and the Project through annual reports provided by the Companies and monitoring visits.

Technical Cooperation

No TC directly linked to the Project.

Company Contact Information

Jakub Frejlich
Jakub.Frejlich@gkpge.pl

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