Maritza East 2 TPP - FGD 5-6 Loan Extension

cancelled

The EBRD is considering financing the installation of a Flue Gas Desulphurisation (FGD) plant at units 5 and 6 of the Maritza East 2 (ME2) power plant in Bulgaria. The power plant is fired by lignite and has a capacity of 1,450 MW. The key objective of the proposed project is to reduce pollutant emissions and therefore to help improve local conditions and assist the country in meeting its national and EU environmental standards and obligations. The transition impact of the EBRD involvement results from: The project introduces FGD technology that will lead to compliance with EU environmental standards. The technology and the improved compliance with international standards that it allows are potentially replicable in the region where environmental performance is an issue and where there has been limited investment to control pollutant emissions in thermal generation power plants to-date. The project will also have significant economic benefits for the country and the region as it provides a relatively low cost alternative to replacement capacity and supports the local lignite mining industry. Due to access to low-cost lignite, ME2 will continue to be a low cost producer, which is particularly important in the context of increasing demand and supply shortages in the region. The project will support a key market player in the Bulgarian Electricity market to improve its environmental performance to EU standard and become a modern producer of electricity. Maritza East 2 (ME2), a 1,450-MW, lignite-fired power plant near Stara Zagora in south-east Bulgaria. ME2 is an independent joint stock company. ME2 is a subsidiary of the Bulgarian Energy Holding, 100% owned by the state via the Ministry of Economy and Energy. The EBRD expects to provide a senior debt facility of up to EUR 55 million to Maritza East 2 TPP. The Bank intends to syndicate approximately EUR 20 million to commercial banks. The European Commission has provided a EUR 34.5 million grant funding under ISPA towards the cost of the project. Maritza East 2 will fund the remainder of the project cost. Approximately EUR 101 million. The project was screened B (2008). The project will require an environmental and social analysis and an environmental health and safety audit of on-going operations of the plant. It should be noted that extensive due diligence was conducted, and an Environmental Management Plan prepared for the original project in 2003. Therefore, the environmental and social appraisal of the current project will need to focus on obtaining an update on the status of mitigation measures identified previously as well as analysing any other key issues within the context of the revised and Environmental Social Policy (2008) and Performance Requirements. Key issues identified by the original due diligence include: air emissions, water usage and discharges, FGD resources and FGD by-product management and usage. The environmental and social appraisal will need to identify the extent and magnitude of impacts at construction and operation phases of the project taking into account boundaries of the direct influence of the project, and assess how any environmental, social, health or safety issues related to the activities of the sub-contractors, can be mitigated given that the EPC contract has already been issued. Environmental issues include: disposal of waste at construction and operation stages, including hazardous waste, and a potential contamination of groundwater and surface water in case of poor integrity of a landfill and floods overflowing existing ash ponds. Labour-related issues include protection of workers in terms of wages and compensation; availability of a grievance mechanism for addressing concerns by employees of both the Client and sub-contractors; provision of safe systems of work and working environment. Community health and safety issues include a requirement for adequate emergency preparedness. Availability of an adequate stakeholder engagement programme will be reviewed by the due diligence. The Company has been issued with an Integrated Pollution, Prevention and Control (IPPC) permit in 2005. Compliance with the IPPC permit will also be reviewed by the EBRD’s environmental and social appraisal. None.