Translated version of this PSD: Ukrainian
The provision of a sovereign-guaranteed loan to the National Energy Company Ukrenergo (the "Borrower") of up to €149 million to finance procurement of up to 26 new transformers and the automation and upgrade of 12 high voltage substations in key locations of the transmission network of Ukraine (the "Project").
The Project will enable Ukrenergo to upgrade its key transmission infrastructure, required for synchronisation with the European Network of Transmission System Operators for Electricity (ENTSO-E) and an integral part of Ukraine's ongoing alignment programme with the EU 3rd Energy Package, while contributing to the improvement of overall energy efficiency in the country.
EBRD's financing is triggering a robust policy dialogue agenda focused on commercialisation and institutional strengthening of Ukrenergo and the sector, as well as promoting procurement standards beyond the Bank's usual requirements. In particular, the Project will:
1) prescribe the implementation of a Corporate Governance Action Plan (CGAP), with a specific focus on the completion of ownership unbundling and corporatisation of Ukrenergo, initiation of Transmission System Operator (TSO) certification, proper functioning of its majority independent Supervisory Board for the corporatised joint-stock entity and the introduction of an internal audit and risk management functions; and
2) result in substantial energy savings and associated CO2 emission reduction, coming from improvement in the efficiency and reliability of the electricity transmission substations.
National Energy Company Ukrenergo is a natural monopoly company and the sole electricity transmission grid operator of Ukraine, 100 per cent state-owned with the Ministry of Finance acting as nominated owner.
EBRD Finance Summary
Total Project Cost
In addition to the €149 million EBRD loan to be applied to the modernisation programme, the Borrower will also contribute €49.2 million of its own resources.
Environmental and Social Summary
Category B (ESP 2014). The modernisation of 12 existing substations and procurement of new transformers is associated with site-specific issues that can be assessed and mitigated based on the Environmental and Social Due Diligence (ESDD) results. An independent consultant has undertaken the ESDD of the Project as well as reviewed the status of implementation of corporate requirements agreed under the past loans.
The Project is part of a wider upgrade of transformers financed by a number of IFIs. The Bank is coordinating the due diligence approach.
Key issues identified during the ESDD include potential need for soil and groundwater remediation following transformers replacement, land acquisition and workers and community safety during construction and operation. It shall be noted that the disposal process for old transformers, drained oil and contaminated soil (notably with PCB if found to be present) is to be undertaken in line with good industry practice, which may mean disposal outside Ukraine and related high cost. This has not yet been quantified and will be included in the ESAP. The procurement of transformers will have to ensure environmental performance is included into the tender's technical specifications.
The Project is associated with future retrenchment. A draft retrenchment action plan for the national substation automation program for 2nd half of 2021-2027 has been submitted by Ukrenergo and is currently being reviewed by the EBRD, EIB, IBRD and KfW. Retrenchment planning and implementation are to be carried out in line with PR2 requirements and the Bank will further work with Ukrenergo to identify priority areas for support to Ukrenergo's retrenchment process.
An NTS and SEP will be published in English and Ukrainian on the Company web site and a link provided prior to Board consideration.
The Bank will monitor the Project as part of overall Ukrenergo monitoring program.
1) Procurement assistance will be provided by the Bank's Shareholder Special Fund (SSF) which will allow the procurement to be carried out in parallel with the structuring and effectiveness of the funding, thus substantially mitigating risks of project implementation delays.
2) Technical cooperation funds will also support Ukrenergo in being one of the country's pioneers in obtaining certification of procurement excellence by the Chartered Institute of Procurement and Supply (CIPS).
3) The Bank is going to commission a donor-funded grid absorption study aimed at complementing Ukrenergo's assessment of the technical challenges posed by the increasing share of renewables in Ukraine to the stability of the grid and potential solutions.
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