Sofia District Heating Rehabilitation

complete

To finance the rehabilitation of the district heating network owned and operated by Toplofikacia Sofia AD, the Sofia municipal district heating company, and to provide consultancy services for project implementation and commercial improvement of the company. The project will be financed by loans of €30 million from the EBRD and €26 million from the World Bank. An additional grant component of up to €30 million is anticipated to be provided by the Kozloduy International Decommissioning Support Fund (KIDSF). The main objective of the project is to increase efficiency of heat supply, distribution and consumption to levels comparable with international equivalents and to improve the financial, commercial and environmental performance of the district heating company. The project has potential for transition impact through (i) the introduction of proper pricing of heat energy, rationalisation of subsidies and effective collection of receivables; and (ii) introduction of private sector in the form of a management contract which will be developed with and approved by the Bank, will improve commercial performance of Toplofikacia Sofia and bring better standards of corporate governance to the public service sector. The Bank’s client will be Toplofikacia Sofia AD, the district heating company of Sofia, which is wholly owned by the city of Sofia. Toplofikacia Sofia provides heat and hot water to over 800,000 inhabitants, representing 65 per cent of district heat consumption in Bulgaria. Toplofikacia Sofia is also the largest gas consumer in Bulgaria and has the potential to realise significant savings through improved energy efficiency. The EBRD will provide a sovereign-guaranteed loan of €30 million. Total project cost is anticipated to be €114 million, including the EBRD and World Bank loans, local contributions and the anticipated KIDSF grant. The project has been classified B/0, requiring an environmental analysis, which will be completed. As most of Toplofikacia’s heat sources are gas fired, the principle environmental impact will be reduced emissions of carbon dioxide, together with some reductions in nitrogen oxides, particulates and sulphur dioxide from more limited reductions of oil consumption. The project will also lead to reduced water losses through improvements to the pipe network. Technical cooperation funding of €1,580,000 will be provided by EU Tacis in order to fund project development and implementation services. This will principally support Toplofikacia in developing and implementing a turnkey contract structure in order to ensure construction risks are transferred to contractors.