Vladivostok Combined Heat & Power Plant

complete

Translated version of this PSD: Russian The EBRD is considering financing of a new 140MW gas fired Combined Heat power plant to replace an existing coal fired heating facility in Vladivostok city. The loan will be provided to JSC “RAO ES Vostoka” (the “ESV”) and part of it will be used to refinance existing debt. The project will significantly improve energy efficiency and cut carbon emissions thanks to the installation of modern co-generation units that will replace old and inefficient systems. The fuel-switch from coal to gas and introduction of state of the art GTUs for co-generation that will lead to significant resource efficiency improvements and a reduction in greenhouse gas emissions. TC funds sponsored by the Bank will be utilized for the project. This will promote the adoption of Best Available Technology (BAT) standards in thermal generation in Russia’s remote Far East region, thus helping to local environmental and energy efficiency performance standards conform with best practice in industrialized countries. The loan will be provided to ESV – a vertically integrated utility owning and operating 8.8GW of electric and 16,168Gcal/h of heat generation capacity, 96,000km of distribution grid lines in the Far East region. Senior loan of up to RUB 4bn (EUR 100m) is envisaged for the project. It is expected that the project will be co-financed by the European Investment Bank. The Project’s total operation cost is estimated at RUB 10.3bn (EUR 250mn). Category B. The planned new gas fired power plant consists of three small gas turbines of total capacity of 140 MWe, which is above the 300 MW thermal threshold guideline given in Appendix 1 of the Bank's Environmental and Social Policy for A category Projects. However, given that the gas fired plant will be constructed on a site of a former coal fired heating plant and will displace other generating capacity, an Initial Environmental and Social Examination (IESE) was undertaken to ascertain the appropriate project category. The IESE, undertaken jointly with an independent consultant, concluded that the potential environmental and social issues associated with the construction of this medium sized gas fired CHP plant are readily assessed and mitigated and not expected to have significant adverse future environmental and social impacts. For these reasons, the Project was categorised B, and required to undergo an Environmental and Social Analysis. The Environmental and Social Due Diligence (ESDD) was undertaken by an independent consultant and confirmed that ESV has the institutional capacity to implement the Bank’s Performance Requirements (PRs), although further strengthening of the Company’s environmental, health and safety (EHS) management systems is needed. Based on the results of the ESDD, a corporate ESAP for ESV has been developed and agreed with the Company to address environmental, social, health and safety issues associated with ESV’s assets and operations. The ESAP requires ESV to further develop their corporate EHS management systems and structures to achieve compliance with the Bank’s PRs as well as RusHydro’s corporate requirements. The corporate ESAP also requires further investment in modernization of ESV’s existing assets so as to reduce their environmental and social impacts and allow them to meet in the future the requirements of EU Industrial Emissions Directive (IED) standards and Best Available Techniques (BAT). This includes, among others, fuel conversion from coal to gas at further combined heat and power plants. The Company is also committed to installing continuous emission monitoring systems on its new and rehabilitated power plants with thermal capacity above 300 MWth. The ESDD showed that the new gas fired plant to be constructed with the support of the proposed Bank’s loan would support and allow for the planned fuel switch from coal to gas at Vladivostok CHP-2. The Company has undertaken an OVOS (local EIA) in accordance with National requirements. A review of the local EIA and additional air modeling was undertaken as part of the Bank’s ESDD. The ESDD confirmed that the plant will meet EU BAT requirements for similar plants and will not have a material adverse impact on the air quality of the City. It should be noted that the current ambient air quality in Vladivostok is already degraded and exceeds the EU ambient air quality standard for NOx, mainly due to traffic and industrial air emissions. The switching of combined heat and power plants from coal to gas are part of the program of addressing the City’s air quality problems. The ESAP requires additional studies by an independent international consultant and that the Company will develop and implement a mitigating action plan if the further study suggests this is necessary. In addition, ambient air and noise measurements will be undertaken as part of the commissioning audit. The new plant will be installed with continuous air measuring systems (CEMS). A Stakeholder Engagement Plan is being developed to guide communications with local and other stakeholdes and to establish a grievance mechanism for external stakeholders. The Company has disclosed an NTS on the web site. This ia also available on ebrd.com in English (2MB - PDF) and Russian (2MB - PDF). The Company will provide the Bank with annual environmental and social reports, including updates on the ESAP implementation. The Bank will evaluate ESV’s and the Project’s environmental and social performance in accordance with the ESAP and Bank’s PRs including compliance with Russian regulatory requirements and EU environmental standards based on the use of BAT through reviewing the Client reporting and undertaking periodic monitoring visits.