Kaliningrad Water&Environmental Rehab: District Heating

complete

The proposed project will consist of the rehabilitation of the district heating network in the City of Kaliningrad. The key objectives of the project are to (i) improve energy efficiency in the district heating network through reduced losses, and (ii) ensure the commercial and financial sustainability of ME Kaliningradteploset, the municipality-owned district heating company of Kaliningrad through the adoption of best commercial practices, and sound pricing and subsidy reforms. The project is expected to have major environmental benefits, in particular through lower greenhouse gas emissions. Implementation of a least cost investment programme will improve efficiency and include a metering and control component that will allow consumers to regulate their consumption and permit billing in line with actual consumption. This will improve service levels and the long-term commercial viability of the service. Tariffs will be set at cost-reflective levels and the subsidy system reformed with a view to providing a social safety net for lower income groups. The borrower will be the Russian Federation. The proceeds will be on-lent to ME Kaliningradteploset through a subsidiary loan agreement mirroring the terms of the sovereign loan. The Bank will enter into a Project Agreement with ME Kaliningradteploset, and a Project Support Agreement with the City of Kaliningrad. Sovereign loan of USD 12 million (EUR 11.2 million). To be co-financed with a grant from the Northern Dimension Environmental Partnership (NDEP) of EUR 7.3 million (to be confirmed). EUR 20.8 million. The project has been screened as B/1 requiring an environmental analysis to determine current and potential future environmental impacts associated with the project components as well as potential liabilities from past operations. Energy efficiency improvements including heat loss reduction will be the main benefits of the project. Due diligence will concentrate on environmental issues characteristic to district heating projects (e.g., air emissions; waste management; occupational health and safety). Technical assistance of EUR 0.5 million for project preparation and implementation is in progress and funded bilaterally by SIDA, Sweden’s international development agency. Technical assistance of EUR 0.5 million for institutional strengthening and management support is to be funded bilaterally by SIDA.