Vologda District Heating

complete

The EBRD is considering extending a Rouble loan facility to Vologda’s Municipal District Heating company in the amount of up to RUB 500 million to finance a priority investment programme (“PIP”). The PIP would result in increased energy efficiency through reduced fuel and electricity consumption as well as improved quality and consistency of the heat and hot water services in two districts of the City of Vologda. The investment programme will target replacement and upgrade of the existing pipe-networks, boilers, and other equipment, using modern energy saving technologies. The transition impact will be delivered through: (i) improvements in tariff methodology (a qualified consultant financed by TC funds will assist the company and the local regulator with adoption of the new tariff methodology, including introduction of Regulatory Asset Base tariffs); (ii) cost restructuring and improvement in the operational, technical and financial performance of the Utility; (iii) Introduction of transition related performance indicators, to be identified during the due diligence. Vologda Municipal District Heating Company “Vologdagorteplosetj”, wholly owned by the City of Vologda. Up to RUB 500 million senior loan to the Company guaranteed by the City of Vologda. RUB 638 million. Categorised B in accordance with EBRD 2008 Environmental and Social Policy. The project is expected to mainly result in environmental benefits associated with the reduction of heat and energy losses, reduction of GHG emissions and improvement of air quality in Vologda. The environmental and social impacts are expected to be site specific and can be readily identified and addressed through appropriate mitigation measures. Environmental issues may be related to the disposal of the construction waste, increased noise and dust levels at the construction stage. Health and safety issues might be associated with the decommissioning of the old facilities/boilers and replacement of pipes, where asbestos might be present in the form of boiler coating and pipe lagging. The environmental and social due diligence is on-going and will include an environmental, health and safety and social audit to assess the Company's current environmental and social management systems and the Company's past and current performance against EBRD Performance Requirements (PRs). An environmental and social analysis of any potential environmental and social impacts and benefits of the priority investment programme (PIP) will also be carried out. 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 Client will develop a Stakeholder Engagement Plan (SEP), including a grievance mechanism, and will release information on environmental and social performance and a summary of the agreed Action Plan to stakeholders. This PSD will be updated when the results of due diligence are known. The following assignments are planned to use the TC funds