Ternopil District Heating Modernisation

Location:

Ukraine

Project number:

42524

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Target board date:

18 Sep 2012

Status:

Repaying

PSD disclosed:

23 Jan 2013

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 Ternopil to finance the installation of individual heating substations, installation of a bio-fuel boiler, modernisation and rehabilitation of existing boilers and sections of networks, installation of controlling and monitoring equipment. 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 of Ternopil.

Transition Impact

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.

Framework for markets: A Public Service Contract is to be signed between the City and the Company, establishing an arms’ length relationship between the Company and the City and formalising the rights and responsibilities regarding the full cost-recovery tariffs (within the limits of the existing tariff regulatory framework), service provision and capital improvements. The Public Service Contract will include short, medium and long term operational and financial performance benchmarks and targets. The demand side measures proposed by the project and further corporate strengthening will help the Company increase its consumption-based billing and improve revenue collection. 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.

Transfer and dispersion of skills: The donor funded technical assistance will provide substantial training for the key staff of the Company enabling substantial market skill transfer.

The Client

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

EBRD Finance

EUR 10 million loan to the Company, secured by a full municipal guarantee.

The project is expected to be co-financed by an up to EUR 5 million grant from the Eastern Europe Energy Efficiency and Environment Partnership (E5P).

Project Cost

Up to EUR 16.1 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 Ternopil, improved energy efficiency, reduction in fuel consumption and heat and water losses, and lower air emissions.

Independent due diligence is currently being finalised by an international consultancy. It includes a 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).

Due diligence has identified a number of actions required to be addressed by the company to meet EBRD requirements and an action plan has been developed. The action plan includes iitems such as ncrease in capability and capacity to manage environmental and social issues and to develop management systems alinged with international standards - while maintinaing local regulatory compliance. In addition, issues associated with occupational health and safety, contractor management, waste management and development of sustainable procurement polciy are to be adopted by the company.

The above action plan has been incorporated into an Environmental and Social Action Plan (ESAP) has been developed by the consultant and reviewed by EBRD which includes corrective actions and mitigation measures for identified issues to ensure that the company meets the EBRD requirements. In additon, a Stakeholder Engagement Plan (SEP) has been developed and these two documents are currently being reviewed by the Client. The Client will need to implement the ESAP and SEP and submit annual environmental and social reports to the Bank.

Technical Cooperation

Pre-signing

  • Feasibility Study (EUR 251,550) funded under the Ukraine District Heating Project Preparation Framework (financed by Sweden)
  • IFRS audit (EUR 18,000) funded by the Bank’s own resources;

Post-signing

  • Corporate Development Support Programme to improve financial and operational performance of the Company (EUR 300,000 to be financed by donor funds TBD);
  • Project Implementation Support covering procurement advisory services, implementation support and contract supervision (EUR 500,000 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

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.