Sakha (Yakutia) Energy Efficiency Programme

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Translated version of this PSD: Russian The EBRD is considering a senior loan of up to RUB 3 billion (~EUR 75 million) to State Unitary Enterprise “Municipal and Housing Services of Republic of Sakha (Yakutia)” (the “Company”). The transaction will support the Company’s efforts to implement a priority investment programme of RUB 8.4 billion (~EUR 210 million) focusing on energy efficiency improvements in the district heating systems in settlements located in the arctic and sub-arctic zone addressing issues both on supply as well as on demand side. Framework for markets: The project will introduce a new mechanism for communal services provision in Arctic territories on the basis of energy service contracts implying energy efficiency stimulus for the service provider. Such energy performance contract will: (i) improve the quality and efficiency of the heating services provision to the residents at no additional cost to the consumers; (ii) allow service provider to retain the benefits of the efficiency gains achieved during implementation of the investments; (iii) reduce dependency on budget subsidies; and (iv) make the budget subsidies mechanism more predictable and transparent. This approach could be replicated elsewhere in the Arctic regions and could attract private operators to provision of municipal services in the arctic settlements. Demonstration of successful restructuring: Reorganisation of the Company into an open joint stock company will allow for introduction of more efficient corporate governance practices. State Unitary Enterprise “Municipal and Housing Services of the Republic of Sakha (Yakutia)” is an entity wholly owned by the Republic of Sakha (Yakutia) responsible for provision of heating and other municipal utility services in the settlements of the Republic including in the Arctic zone. Senior loan of up to RUB 3 billion (approximately of EUR 75 million) to the Company. The project is expected to be co-financed with other financial institutions. Total project cost (Priority Investment Programme): RUB 8.4 billion (~EUR 210 million). The project has been categorised B in accordance with EBRD's 2008 Environmental and Social Policy. The priority investments into the modernisation and upgrade of the district heating facilities are expected to bring environmental and social benefits associated with the overall improvement in the quality of heating services in the northern settlements, improved energy efficiency, reduction in fuel consumption and heat and water losses, and lower air emissions. The due diligence is currently on-going. It includes 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 project's compliance with EBRD's Performance Requirements (PRs). An Environmental and Social Action Plan (ESAP) will be prepared and agreed with the Company to address any environmental and social issues identified during the due diligence to achieve and maintain compliance with the Bank's PRs within a reasonable time-frame. The Company will also develop a Stakeholder Engagement Plan, including a grievance mechanism. This PSD will be updated when the results of due diligence are known.