Nuclear Power Plant Safety Upgrade Program

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Translated version of this PSD: Ukrainian The EBRD is considering providing financing, in parallel with Euratom (as represented by the European Commission), for safety upgrades only, at all 15 operating nuclear power units in Ukraine to bring them in line with internationally accepted safety standards and the Ukrainian requirements. The units in question are: The project includes measures to replace equipment in safety relevant systems, such as the modernisation of monitoring and control equipment, as well as operational measures. The programme has been developed on the basis of a successfully completed safety upgrade programme for two nuclear power units (the Khmelnitsky 2 and Rivne 4) in Ukraine funded with EBRD and Euratom loans. The upgrade program has been developed by Energoatom taking into account the International Atomic Energy Agency recommendations as well as comments from Ukrainian and international experts. The EC has provided assistance to the Ukrainian nuclear regulatory authority in the review of the proposed upgrade programme to ensure internationally acceptable safety levels. The project will also allow for the Bank, as part of the loan requirements, to engage with the authorities to ensure that “Stress Tests” are performed and the results implemented at Energotatom’s units. Setting standards for corporate governance. Corporatisation - Energoatom is not corporatised and there may an opportunity to bring this about, supported through this project, supported with analysis. The Bank could envision providing, if necessary, Technical Cooperation to evaluate Energoatom for capacity and corporate governance and create a roadmap leading to corporatisation. Transfer and dispersion of skills. Implementing best practice in terms of corporate governance and stakeholder engagement with a Strategic Ecological Assessment (SEA). The Assessment will supplement the environmental study undertaken by Energoatom of the specific upgrade projects and allow for an overall Ecological Assessment of the upgrade program in Ukraine. This will be among the first SEAs of its type in Ukraine, and the first for the Nuclear sector. Institutions, law, policies that promote market: Tariff formation – The project must be supported by an appropriate tariff methodology and a review of the methodology could result in improvements. EU integration: The project is a key milestone to the further integration of Ukraine into the EU and is a requirement for the energy cooperation between EU and Ukraine (MOU of 2005). In particular, Ukraine’s ability to trade with the EU is limited due to its lower nuclear safety standards as EU members have objected to receiving power from a system with such sub-standard nuclear entities. While only thermal facilities in the west of Ukraine are physically able to trade with the EU, achieving current standards in nuclear safety should lift the nuclear safety related embargo and allow Ukraine greater flexibility to trade with the EU. This strategy is consistent with the country’s recent entry into the Energy Community Treaty, which will open Ukraine’s energy market to the EU and vice-versa, and its long term goal to integrate its transmission system with ENTSO-E, the interconnected network of Western Europe. Nuclear Regulation: Ukraine has made tremendous progress in establishing a regulatory framework and organizations in line with the Convention on Nuclear Safety and other international agreements. This project provides an opportunity to further strengthen this framework. National Nuclear Energy Generating Company Energoatom - a state enterprise, 100% state-owned by Ukraine, and is subordinated to the Ministry of Energy and Coal Industry of Ukraine. Up to EUR 300 million long-term sovereign loan to Energoatom. The loan is expected to be made in parallel with a similar loan, also to part finance the Project, from Euratom. EUR 1.45 billion. Category B. The Project involves safety improvements at existing Ukrainian Nuclear Power Plants (NPPs), with no new construction or capacity increase. The safe operation of existing NPPs is a priority for the Ukrainian Government and International agencies. The Government of Ukraine has approved the continued use of the existing NPPs and has developed plans for the future construction of new nuclear power including the completion of Khmelnitski NPP unit 3 and 4. These investments are not part of the Bank’s financing. In line with the Bank’s Environmental and Social Policy, the Bank is undertaking an environmental and social due diligence (ESDD) of the Project as well as of Energoatom’s corporate management systems to verify that the Company has the institutional capacity to implement the Bank’s Performance Requirements (PRs). The ESDD to date has confirmed that the Company has the institutional capacity to implement the Bank’s PRs. Following the ESDD and Environmental and Social Action Plan (ESAP) will be agreed with the Company. This will require among others the development of an Environmental, Health and Safety management system at the Company, with certification to ISO 14001 standards as well as implementation of a Stakeholder Engagement Plan (SEP) for all project sites. As part of the project preparation, the Bank has provided TC funding to Energoatom to retain an independent consultant to undertake an Ecological Assessment (EA) in accordance with the principles of the UNCE Strategic Environmental Assessment (SEA) protocol of the planned safety improvement program at the existing nuclear power plants in Ukraine. This TC is within the Bank’s mandate to assist, among others, the Ukrainian Authorities with a nuclear safety project. The Energoatom study will form part of the Bank’s due diligence process, and is aimed at providing information on the proposed scope of measures to be taken and by Energoatom and to ensure meaningful and transparent public consultation takes place prior to the Bank considering this program for financing. The Energoatom Environmental Assessment study has been undertaken in the 2011 and information on the process and the project can be obtained on Energoatom's website. The site includes among others: This PSD will be updated upon the completion of the Bank’s due diligence, prior to submission to the Board of Directors, with a summary of the environmental and social issues associated with the project and the mitigation measures agreed, and a summary of the stakeholder engagement that has been undertaken.