Latvenergo Riga CHP-2

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The EBRD is considering providing a loan to AS Latvenergo to finance the construction of a ~400 MWe/270MWth Combined Cycle Gas Turbine (CCGT) unit at Riga CHP-2. The Project is the second stage of Riga CHP-2 reconstruction, which aims to replace the old generating units of low efficiency with two new CCGT units and increase the electrical capacity of Riga CHP-2. Riga CHP-2 reconstruction project is expected to result in a major increase in generation net efficiency. The project is intended to hedge Latvia against possible shortages of electricity supply in the Baltic region following the decommissioning of the Ignalina Nuclear Power Plant (INPP) and against the risk of excessive dependence on imported energy in Latvia. It is also expected that the project will promote the development of the Common Baltic electricity market. AS Latvenergo is a state-owned utility engaged in power generation, transmission and distribution as well as heat generation. Latvenergo controls all major electricity generation facilities in Latvia. Senior loan of up to €150 million. European Investment Bank (EIB) will also provide a loan of €100 million for the Project. Ca €400 million. Environmental classification and rationale Following an Initial Environmental and Social Examination (IESE), the Project has been screened as category “B” under the Bank’s Environmental and Social Policy (2008), which requires an Environmental and Social Due Diligence (ESDD) of the Project. Environmental and social impacts associated with the replacement of two old and in-efficient gas fired units with a modern Combined Cycle Gas Turbine (CCGT) at an existing power plant can be readily assessed and mitigated as part of an ESDD. The project and related changes may add up to 160MW thermal to the input thermal capacity of the site, but does not result in the additional of generating capacity, above 300 MW thermal Due diligence undertaken and outcomes The ESDD is to be undertaken and will consist of an environmental and social audit of the existing power plant and environmental analysis of the planned investment. The ESDD will be undertaken by an independent consultant. The Company is subject to IPPC permitting and an EIA was undertaken for the project in 2008 in line with National requirements. The Company has up-to-date environmental permits. The key environmental issue is associated with air emissions, notably NOx emissions. The IESE indicated that the new CCGT plant as well as the existing units that will remain in operation will comply or be upgraded to comply with EU environmental standards as defined by Large Combustion Plant Directive (LCP) and EU IPPC Directive. The CCGT plant will fully meet National and EU environmental standards. The completion of CCGT Unit 2 will deliver environmental benefits and energy efficiency gains. A limited number of staff redundancies will occur when the old units are closed The project was subject to the Latvian EIA process and no material issues or complaints have been raised by the public. Stakeholder Engagement Plan (SEP) and additional Non Technical Summary (NTS) as part of ESDD have been prepared to keep the public informed of project developments. The NTS has been published on the Company’s website, including the English version. The IESE included a review of the company operations to asses the institutional capacity of the Company to implement the Bank’s Performance Requirements. The Company has a good environmental and health and safety management system. The Company already publishes corporate social responsibility reports. An Environmental and Social Action Plan (ESAP) has been developed and agreed with the Company. The Bank will monitor the implementation of ESAP for this project as well as the implementation of the corporate ESAP. The Project NTS has been published on the Company’s website. Implementation requirements None.