Provision of an up to EUR 500 million loan to Trans Adriatic Pipeline AG, the constructor, owner and operator of the Trans Adriatic Pipeline ("TAP" or the "Project"). TAP is a 878 km cross-border natural gas pipeline, currently under construction, stretching from the Greek/Turkish border (near Kipoi) to Italy (near San Foca) after crossing Greece, Albania and the Adriatic Sea. TAP's initial capacity will be 10 billion cubic meters of natural gas per annum.
Stretching across five countries of operations of the EBRD, the Southern Gas Corridor - of which the TAP Project is an integral part - is an important strategic gas infrastructure project aimed at improving the security and diversity of the energy supply to Europe and Turkey. It will expand gas supply options and provide new energy transportation routes enabling Europe to access gas from the Caspian region and, in the longer term, beyond it, including the Eastern Mediterranean, Central Asia and the Middle East.
As a cross-regional infrastructure project, the Southern Gas Corridor will foster opportunities for international cooperation, economic integration and sustainable economic development in the region. TAP has been included to the European Commission's list of 33 priority energy security projects of common interest. Projects of such scale also create significant opportunities for local employment and businesses. During construction, some 5,000 jobs will be created (in excess of 3,000 in Greece and 1,700 in Albania). The construction of the pipeline has led to the rehabilitation of 58 km of roads and 42 bridges in Albania. In addition, TAP has agreed with each of the governments of Greece and Albania respective Social and Environment Investment (SEI) packages including investments into
health, transport, SME and agricultural sector development.
As countries undertake the long-term transition to a low carbon economy, gas will continue to play a significant role as a complementary fuel. As a relatively low-carbon fossil fuel providing a flexible power generation source, gas can be used to complement renewable energy sources as a reliable back-up to expanding intermittent renewable energy. Most new thermal facilities are expected to be fueled by gas because of lower capital costs, greater flexibility to act as back-up to intermittent renewables and lower carbon footprint. As renewable energy is expanding and as greenhouse gas emission reduction goals are becoming more stringent, gas, as a lower carbon fuel, will have an increasingly prominent role in power generation in the move to a low carbon economy.
The transition impact of the Project is expected to come mainly from its contribution to the integration and resilience of the energy markets in South Eastern Europe.
The Project will support the diversification of gas supply sources into Europe supporting resilience of the South Eastern Europe energy sector. The Project will introduce or consolidate regulatory and commercial practices such as Third Party Access and short-term products use of which is currently limited in South Eastern Europe.
Additionally, through the Project, the Bank will engage in policy dialogue to support capacity building of the Albanian TSO in the legal and regulatory areas. The Project has already prompted a considerable overhaul of the Albanian's energy system by inducing institutional, regulatory and legislative changes. The Bank will explore other initiatives that strengthen the energy market institutions of Albania.
TRANS ADRIATIC PIPELINE AG
TAP AG is the constructor, owner and operator of the Project. TAP AG's shareholders include: BP (UK, 20% shareholder), Snam SpA (Italy, 20%), SGCC (Azerbaijan, 20%), Fluxys SA (Belgium, 19%), Enagas (Spain, 16%) and Axpo Trading (Switzerland, 5%).
EBRD Finance Summary
Total Project Cost
Environmental and Social Summary
Categorised A (2014). TAP is a greenfield development consisting of the design, construction, and operation of a 878 km cross-border natural gas pipeline. The route of the pipeline will start at the Greek-Turkish border and terminate in southern Italy (near San Foca), after crossing Greece, Albania and the Adriatic Sea until its delivery point in Italy. TAP will connect at its entry point to the Trans Anatolian Pipeline ("TANAP") in Turkey and downstream to the Italian natural gas network of Snam Rete Gas ("SRG"). TAP is the last leg of the Southern Gas Corridor ("SGC"), a series of four projects (TAP, TANAP, Shah Deniz 2 & Southern Corridor Expansion) crossings six countries and 3,500 km.
TAP's initial capacity of 10 billion cubic metres (bcm) of gas per year is equivalent to the energy consumption of approximately seven million households in Europe. In Greece, the pipeline (48" diameter) will be approximately 550 km in length, starting at Kipoi and finishing at the Greek border with Albania, south-west of Leropigi. The Greek section will include one compressor station near Kipoi and 22 block valve stations. The pipeline in Albania will be approximately 215 km long (48" in diameter), starting at Bilisht Qender in the Korca region, on the border with Greece and having its landfall site located 17 km north-west of Fier (approximately 400 metres inland from the shoreline). A compressor station and a metering station will be built near Fier, and near Bilisht, respectively as well as 8 block valve stations. TAP's route will then cross the Adriatic Sea (36" diameter) for approximately 105 km along the seabed to the Italian coast. The offshore pipeline through Italian territorial waters will be about 25 km long. The pipeline comes ashore in southern Italy via a microtunnel under the beach, near the town of San Foca. TAP terminates at the Pipeline Receiving Terminal (PRT), 8.2 km inshore where the gas pipeline is tied into the Snam Rete Gas (SRG).The PRT will house the supervisory control centre of TAP. It will occupy a 12-hectare plot of land and has been designed to integrate with the surrounding landscape with limited visual impact. The tie-in point with the Snam Rete Gas system will be at the fence of the TAP facility. In the future, the addition of two extra compressor stations could double throughput or the overall system to more than 20 bcm as additional energy supplies come on stream in the wider Caspian region. The pipeline will also have the so-called 'physical reverse flow' feature, allowing gas from Italy to be diverted to South East Europe if energy supplies are disrupted or more pipeline capacity is required to bring additional gas into the region.
Environmental and Social Impact Assessments (“ESIA”), covering each country (Greece, Albania and Italy) as well as the offshore marine project components, were prepared for TAP by an independent environmental consultancy in accordance with national and relevant EU requirements and have been disclosed on the Company's website since 2013-14. In 2016, an Independent Environmental & Social Consultant (“IESC”) was retained to assist the Lenders to review and benchmark the Project against EBRD’s standards (2014) and those of the other potential Lenders. The EBRD’s and IESC's initial assessment identified areas where the ESIAs needed to be supplemented and, as a result, TAP developed a Supplemental Lenders Information Package (“SLIP”) to address these issues. The ESIAs and the SLIP have been disclosed on the EBRD's and the Company's website since 19 December 2017.
The IESC has confirmed that the Project has been structured to meet EBRD’s PRs and relevant EU Directives. Further, the IESC confirmed that the Project has been designed in accordance with Best Available Techniques (“BAT”) and Good International Practices (“GIPs”). For example, the design level for fugitive emissions for the TAP project (including related infrastructure) is less than 0.01%, well within the EU BREF energy efficiency benchmarks. In terms of GHGs, the total annual scope 1 emission estimates for the Project, as presented under the 10bcm/year case, is approximately 300kt CO2e/year.
In order to begin construction, TAP first needed to secure access to land along its proposed route so that the pipeline and its associated infrastructure could be built and operated. In total, the Project will affect approximately 20,900 plots of land: 10,200 in Greece, 10,500 in Albania and about 200 in Italy (represented by approximately 45,000 land owners and users). However due to careful route planning, the Project will not result in any physical resettlement. A Guide to Land Easement and Acquisition (“LEA”) and a Livelihood Restoration Plan have been prepared for each country outlining the nature and magnitude of land acquisition and the entitlement framework to compensation and livelihood assistance. TAP’s LEA process is based on the principle of providing compensation for land, assets and restrictions on land use at full replacement cost. TAP has also recently committed to undertake an independent review of its compensation methodologies and rates as well as appointing an Independent Environmental and Social Monitoring Group (“IEMG”) in each country to ensure overall conformance with Lender/project commitments relating to social impact management, stakeholder engagement, grievance management, livelihood restoration and compensation.
To mitigate Project-related environmental and social impacts, the Company has developed a Health, Safety and Environment (“HSE”) Policy in accordance with GIP. This is further supported by a robust Environmental, Social and Cultural Heritage Management System (“ESCHMS”), which is aligned with the requirements of ISO14001:2015. The ESCHMS and Environmental and Social Management Plans (“ESMPs”) are implemented at the project level by TAP through Environmental and Social Implementation Plans and by its Contractors through Contractor Control Plans. These are further supported by additional management documents including Route Environmental & Social Impact Registers and the Company's Social & Environmental Investment programme commitments. TAP has also developed a Stakeholder Engagement Plan including a comprehensive grievance mechanism in accordance with the Bank’s PR2 and 10.
Implementation of these environmental and social commitments and safeguards has been closely monitored by the Anchor Lenders and IESC, with site visits to all three countries (on an approx. a quarterly basis) by ESD staff in 2016, 2017 and 2018. Results of the IESC monitoring reports from 2017 onwards have been summarised and are publicly disclosed on the Company's website.
The Project is not without CSO criticism and community opposition. The latter has been particularly relevant in Italy and Greece (Kavala), where the Project has faced scrutiny, and at time protests and work stoppages. The Bank has also received a number of reports and letters, relating to themes such as climate change and the pipeline locking Europe into long-term reliance on carbon-intensive energy strategies; lack of consultation and engagement; land access and compensation complaints; and non-adherence to international standards on environmental and social management. In each instance, ESD has worked with the Bank’s Civil Society Engagement Unit to issue a response in keeping with the Bank’s Public Information Policy.
To assess the effectiveness of TAP’s E&S management, including its grievance process, EBRD has visited a number of directly-affected communities, project complainants and held Open Houses in 2018 in both Albania (Berat) and Greece (Thessaloniki). In Italy, the Bank did not hold an Open House, meeting instead with various regulatory authorities at both the national and project level to better understand the EIA approval process and the rationale behind the “No TAP” movement in Lecce. As a result of these meetings, and the Bank’s ESDD, ESD has been working closely with TAP to refine the Project’s overall strategy to de-escalate tensions “on the ground” in Greece and Italy. This has included, but is not limited to, helping TAP retain Alternative Dispute Resolution specialists to guide TAPs engagement processes and engaging an independent security firm, specialising in the Voluntary Principles on Human Rights and Security (“VPSHRs”), to monitor TAP’s performance, in the Kavala area.
Finally, the Anchor Lenders and TAP have agreed a revised Environmental and Social Action Plan (“ESAP”), which was originally disclosed in December 2017. The revised ESAP captures additional items identified during the Bank’s environmental and social due diligence to ensure that the Project is structured to meet EBRD’s PRs. These include, but are not limited to (i) the engagement of independent experts to monitor the implementation of project commitments to the Voluntary Principles on Security and Human Rights in Greece & Italy during construction; (ii) the development of an operational phase Greenhouse Gas (GHG) Management Plan, and (iii) the development of a Biorestoration Management Plan in accordance with commitments outlined in the Project’s Ecological Management Plan.
Going forward, EBRD will continue to monitor the Project closely. This will include carrying out regular site visits and receiving quarterly construction reports and annual monitoring reports from TAP concerning their performance against project commitments and the ESAP. The role of the IESC will also be maintained throughout the life of the loan, as directed by the Lenders.
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