Lutsk District Heating Project

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The EBRD is considering providing a loan to the municipal district heating utility “State communal enterprise of Lutsk City Council “Lutskteplo”, operating in the City of Lutsk to finance the installation of individual sub-stations, biofuel boiler(s?), network replacement with pre-insulated pipes, decommissioning of obsolete basement boiler houses, modernisation of boilers and control systems, and the installation of monitoring and dispatching system. The project aims at significantly improving the energy efficiency, reducing energy losses, gas and electricity consumption and improving the quality of heat and hot water supply services in the city. The Project is part of an Integrated Approach to Reform in the Ukrainian District Heating Sector that sets out specific transition objectives for the sector which, by their nature, would benefit from a multi-project and strategic approach, to create a synergy between priority investments, technical cooperation, and sector policy dialogue. The transition impact of the project is expected to derive from: Framework for markets: The Project will support a tariff setting methodology development and adoption at the National Utility Tariff Regulator level with a view to ensuring: (i) full operating cost recovery and cost control; (ii) full investment cost recovery based on the investment programme assessment to be performed by the National Utility Tariff Regulator and (iii) improved revenue predictability and planning through a process of formalised, regular, transparent and timely adjustment of rates. The city and the company will enter into a Public Service Contract, which will clearly define the city and the company’s rights and obligations regarding the district heating services provision and capital improvements including the tariff setting rules and policy. The demand-side measures proposed by the project will help the company increase its consumption-based billing and further improve revenue collection. Demonstration of successful restructuring: Through physical investments and commercialisation resulting from implementation of the Corporate Development Support Programme, the project will improve the operational and financial performance of the company and will have a significant demonstration effect for other cities and utilities in Ukraine concerning ways to improve energy efficiency of district heating operations and reduce losses and costs. Energy Efficiency: Through investment programme implementation the project is expected to result in significant energy efficiency gains as well as enable better energy management at the building level, thereby providing incentives for energy-savings by end-users. State communal enterprise of Lutsk City Council “Lutskteplo”, a municipal district heating utility wholly owned by the city of Lutsk. € 7 million EBRD loan to the Company, and € 3 million from the Clean Technology Fund (CTF), both secured by a municipal guarantee. The project is expected to be co-financed by a grant of up to € 4 million from the Eastern Europe Energy Efficiency and Environment Partnership (E5P). Up to € 16 million. The project has been categorised B in accordance with EBRD's 2008 Environmental and Social Policy. The priority investments into the rehabilitation and modernisation of the district heating infrastructure are expected to bring environmental and social benefits associated with the overall improvement in the quality of heating and hot water services in the city, improved energy efficiency, reduction in fuel and electricity consumption, heat and water losses, and lower air emissions. The due diligence has been finalised and included a corporate review of the Company’s corporate environmental, health and safety and social management capabilities and procedures in relation to its own workforce and construction contractors, and an analysis of the environmental and social impacts and benefits of the proposed priority investment programme to establish the level of the project's compliance with EBRD's Performance Requirements (PRs). There were no major issues identified and any adverse impacts are expected to be limited to short-term environmental, health and safety issues arising from construction works which can be adequately mitigated by taking environmental protection measures into consideration in construction planning and work practices. Particular attention needs to be paid to conducting an asbestos survey and developing and enforcing implementation of strict procedures for handling and removal of asbestos-containing materials. An Environmental and Social Action Plan (ESAP), containing mitigation measures for identified issues along with a framework for the provision of information to stakeholders has been developed and is currently being reviewed by the Company. The Company will need to implement the ESAP, provide timely information to stakeholders affected by the Project and submit annual environmental and social reports to the Bank. Pre-signing Post-signing Visit EBRD Procurement Enquiries: Tel: +44 20 7338 6794; Fax: +44 20 7338 7472, Email: procurement@ebrd.com EBRD project enquiries not related to procurement: Tel: +44 20 7338 7168; Fax: +44 20 7338 7380 Email: projectenquiries@ebrd.com The PIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. Text of the PIP The EBRD has established the Project Complaint Mechanism (PCM) to provide an opportunity for an independent review of complaints from one or more individuals or from organisations concerning projects financed by the Bank which are alleged to have caused, or likely to cause, harm. The Rules of Procedure governing the PCM can be found at www.ebrd.com/downloads/integrity/pcmrules.pdf, the Russian version can be accessed at http://www.ebrd.com/downloads/integrity/pcmrulesr.pdf Any complaint under the PCM must be filed no later than 12 months after the last distribution of EBRD funds. You may contact the PCM officer (at pcm@ebrd.com) or the relevant EBRD Resident Office for assistance if you are uncertain as to the period within which a complaint must be filed. Project Summary Documents are created before consideration by the EBRD Board of Directors. Details of a project may change following disclosure of a Project Summary Document. Project Summary Documents cannot be considered to represent official EBRD policy. Last updated 15 July 2014