TGK-13 Capacity Financing

complete

The EBRD is considering providing a senior loan of USD 75 million (EUR 56.6 million) to TGK-13 to finance the completion of coal-fired Combined Heat and Power (CHP) plant No. 3 in the city of Krasnoyarsk. The Project is the completion of an existing unit of 185 MW electrical and 270 gcal/h heat capacity and is designed to (1) increase the heat and power generation capacity to meet the regional demand, and (2) to increase the efficiency by substituting the production from less efficient electric boilers and coal-fired plants currently operating in Krasnoyarsk. The improvement in efficiency will enhance the security and quality of supply of both electricity to the power grid and heat to the district heating network. The Project will demonstrate the viability of private operators in the power generation sector and support the development of a liberalised electricity market in Russia. The addition of new generation capacity, with power to be traded entirely on the free market, will deepen and strengthen that free market for electric utilities. The Project will also bring environmental benefits to the city of Krasnoyarsk. The new unit will be fully compliant with EU standards for emissions for existing power plants as defined by the Large Combustion Plant Directive (LCPD). The addition of new power capacity to CHP-3 will substitute the less efficient power capacity at Krasnoyarsk CHP-1, while the addition of heat capacity will allow for only peak-time usage of the costly electrical boilers and the less efficient current heat only boilers (HOBs) at CHP-3. TGK-13, the regional generating company servicing the Krasnoyarsk region and the Republic of Khakassia, was created as part of the sector-wide reorganisation and privatisation plan. The Company became privately-controlled upon the dissolution of RAO UES in 2008 and is now majority owned by SUEK – the leading Russian coal producer. USD 75 million senior debt. Currently estimated at RUB 8.2 billion. Environmental classification and rationale Following an Initial Environmental and Social Examination (IESE), the Project has been screened as category “B” under the Bank’s Environmental and Social Policy (2008), which requires an Environmental and Social Due Diligence (ESDD) of the Project. Environmental and social impacts associated with the completion of a boiler and generator at an existing power plant can be readily assessed and mitigated as part of an ESDD. The ESDD consisted of an environmental and social audit of the existing power plant and environmental analysis of the planned investment. The ESDD was undertaken by an independent consultant and utilized the results of an earlier audit undertaken in 2007 as part of an initial assessment of the Project. Due diligence undertaken and outcomes The Company operates a coal fired heating plant (water boilers) and is completing the construction of a combined heat and power (CHP) unit that was initiated in the 1980s, but mothballed due to shortage of funds. The project will add a 185 MWe CHP unit to the existing plant and will increase the plant’s efficiency and results in the installation of modern technology. The key environmental issue is associated with air emissions, and need to reduce dust emissions from existing point sources. The due diligence confirmed that the CHP unit will meet EU environmental standards for existing units as defined by the Large Combustion Plant Directive (LCP) as well as implement many provision of the EU IPPC Directive. The plant will fully meet EU environmental standards for existing plants, although it would not meet the requirements for new plants under the EU IPPC Directive, which would require a fundamental change of plant layout and technology. The unit will be equipped with a state-of-the-art electrostatic precipitator ensuring compliance with EU dust emissions, attaining emission value levels three times lower than required by Russian legislation. The plant will also attain EU and Russian standards for NOx and SOx, mainly through the use of low NOx burners and the combustion of low sulphur coal. An FGD unit is judged as not necessary on this size of unit, given the low sulphur coal used at the plant. The Bank financed CHP unit will therefore attain similar emission levels as many existing units in EU Member States. The Company will install continuous monitoring and implement and environmental, health and safety management system in line with best practice. The project was subject to Russian EIA (OVOS) procedures and no material issues or complaints have been raised by the public. Stakeholder Engagement Plan (SEP) and additional Non Technical Summary (NTS) have been prepared to keep the public informed of project developments, and the NTS will be published on the Company’s website shortly. The ESDD included a review of the existing water boilers as well as the overall operations of TGK-13 to asses the institutional capacity of the Company to implement the Bank’s Performance Requirements. The Company has a good environmental management system, but recommendations have been made for further institutional strengthening and the need for the development of a more formalized environmental, health and safety management system. The ESAP has also required the installation of continuous monitoring systems on the new CHP unit, and the upgrade of the dust abatement systems on the existing water boilers. This together with the implementing of a Stakeholder Engagement Plan (SEP) has been included in the Environmental and Social Action Plan, which has been developed and agreed with the Company. The Bank will monitor the implementation of ESAP for this project as well as the implementation of the corporate ESAP. An independent commissioning audit will be undertaken to verify that the plant fully meets the ESAP requirements. Implementation requirements Technical Assistance was provided through a call-off under Technical Cooperation framework agreement “Technical Audits / Projects Review of Thermal Power Plants” funded by the EBRD’s Special Shareholder Fund. Panov Ilya Mikhailovich OJSC “TGK-13” Tel: + 7 391 2744-207 E-mail: panov@tgk13.ru