Cherkasy Energy Efficiency Project

signed

The proposed project involves a loan to the Municipal District Heating Company “CherkasyTeploKommunEnergo” (the “Company” or the ”Borrower”), a municipal unitary enterprise, wholly owned by the City of Cherkasy (the “City” or the “Guarantor”) in Ukraine. The loan will finance the rehabilitation and modernisation of existing boiler houses, replacement of pipes, introduction of new, compact individual heating sub-stations in residential apartment buildings in the City equipped with meters as well as energy efficiency investments in residential buildings and installation of small co-generation plants. The investments and institutional reforms are expected to achieve significant cost savings and greater efficiency. The proposed project will have an impact on the transition process through: (i) corporatisation and commercialisation of the Company; (ii) billing according to actual consumption; (iii) transfer of skills during the implementation phase including the procurement, design, installation and contracts supervision in accordance to the best available international engineering practice. (iv) Demonstration effect as the project is expected to be developed with the assistance of the Ukrainian government and will demonstrate efficient way to finance energy saving investments in buildings. The borrower is the Cherkasy District Heating Company. The City of Cherkasy acts as guarantor. Senior loan of EUR 11.2 million to the Company. EUR 18.6 million. The rehabilitation and modernisation of existing district heating infrastructure is associated with limited environmental impacts; therefore, the project was screened B/1. An environmental audit and analysis as well as an environmental management plan (EMP) will be prepared as part of the project feasibility study. The project will result in substantial environmental benefits, including significant energy efficiency improvements as follows: The decreased heat consumption and a rational prioritisation of further upgrades and renovations of the district heating system will reduce fuel consumption and emissions from the heat production plants. The change towards a demand-driven business strategy, adoption of a least cost district heating strategy, shift to alternative fuels, recovery of waste heat, introduction of heat pumps etc. will further increase efficiency and reduce emissions. The Bank will explore with the Client the possibility for Carbon Finance through the Netherlands Emissions Reduction Co-operation Fund. The implementation of the proposed EMP for bringing the Company’s operations into compliance with Ukrainian and EU standards will be covenanted in the Loan and Guarantee Agreements. The Company will disclose locally a summary of the Project and the associated environmental issues, in accordance with the provisions for public information for the Bank’s “B” category projects. Technical Feasibility Study. To be financed by the Government of Sweden. IFRS Audit Funding to be identified. Corporate Development Support Programme for the Company. Funding to be identified. Project designer and engineer, implementation support consultant for procurement and contracts supervision. Funding to be identified.