INTEGRATED SAFEGUARDS DATA SHEET APPRAISAL STAGE Report No.: ISDSA886 Public Disclosure Copy Date ISDS Prepared/Updated: 11-Jan-2013 Date ISDS Approved/Disclosed: 11-Jan-2013 I. BASIC INFORMATION 1. Basic Project Data Country: Kazakhstan Project ID: P130013 Project Name: Energy Efficiency Project (P130013) Task Team Mirlan Aldayarov Leader: Estimated 28-Jan-2013 Estimated 15-Apr-2013 Appraisal Date: Board Date: Managing Unit: ECSEG Lending Specific Investment Loan Instrument: Sector: Energy efficiency in Heat and Power (100%) Theme: Infrastructure services for private sector development (100%) Financing (In USD Million) Financing Source Amount Borrower 1.30 Free-standing TF for ECA 21.70 Public Disclosure Copy Total 23.00 Environmental B - Partial Assessment Category: Is this a No Repeater project? 2. Project Objectives The Development Objectives of the proposed project are to improve: (a) energy efficiency in public and social facilities; and (b) the enabling environment for sustainable energy financing. 3. Project Description The project will be supported by a US$21.7 million grant from the Government of Switzerland, State Secretariat for Economic Affairs (SECO), as well as an estimated US$1.3 million in parallel co- financing from the participating institutions, utilities, and provinces/municipalities. The project consists of two components: an investment component and a technical assistance (TA) component, which are outlined below. Page 1 of 6 Component 1: EE investments in public and social facilities (estimated cost: US$19.0 million, including US$17.7 million from the World Bank grant and US$1.3 million from local co-financing). This component will finance, on a grant basis, EE projects (“subprojects�) in public and social Public Disclosure Copy facilities, such as schools, kindergartens, clinics/hospitals, and street lighting. These subprojects will generate demonstrable energy cost savings and social co-benefits (e.g., improved indoor temperature and comfort, reduced student sick days). Three annual batches of investment projects, selected through competitive proposals, will be developed and implemented. In Year 1, these investments will be fully grant financed; in the subsequent years, some co-financing will be required from the participating public institutions to help shift to a more sustainable model. Target facilities will be competitively selected based on calls for proposals from the Project Implementation Unit (PIU). Eligible subprojects must meet basic eligibility criteria, which include: (i) confirmation of public ownership; (ii) structural soundness of the facility; and (iii) absence of plans for closure, downsizing or privatization. Measures to be eligible for support will include upgrades to reduce the energy use of public buildings, including building envelop measures (insulation of walls, basements and attics, repair/replacement of external doors and windows, window optimization ), heating and cooling systems (boiler upgrade/replacement, fuel switching, reflective surfacing of walls behind radiators, control systems, pipe insulation, chiller/AC replacement, heat pumps), lighting (compact fluorescent lamps, high pressure sodium vapor, light emitting diodes), power systems (transformers, capacitors), and other energy-using systems (e.g., pumps and fans, solar water heating). All measures must be financially justified, i.e., having a simple payback period of less than eight years. A limited additional funding for EE measures with longer payback period may be provided to ensure reasonably full renovation. The subprojects will be implemented in annual batches, so that construction can take place between heating seasons. Financing of public facilities will be demand-driven but subject to agreed ranking criteria. In Year 1, each of the 14 oblasts (administrative regions) and the cities of Astana and Almaty will be able to nominate facilities where energy use is high and an energy audit has already been conducted. The PIU will review the energy audit reports and rank the facilities based on Public Disclosure Copy potential energy savings (i.e., percentage of potential energy reduction with all eligible measures). With a budget of about US$4.5 million in Year 1, it is estimated that about 20 schools/kindergartens, 5 hospitals and one street lighting project can be implemented. The PIU will then enter into a Memorandum of Understanding (MOU) with each facility’s oblast akimat (regional administration) and the Project Beneficiary (i.e., schools, hospitals or municipalities), and then conduct procurement of any supplemental energy audits and engineering designs as well as construction works for selected subprojects. In order to ensure regional distribution, the annual allocation per oblast will not exceed US$1.5 million, and subprojects should not receive more than US$150,000 per school/kindergarten, US$250,000 per hospital and US$500,000 per street lighting subproject. Based on experiences gained in Year 1, and results of EE market assessment studies, the selection and eligibility criteria for the subsequent years will be subject to modification to allow the testing of alternative business models, contracting and financing arrangements. For example, future phases are expected to include some local co-financing, use of simplified energy service company (ESCO) contracts, and other mechanisms to help incrementally develop the EE market and capacity among the government and service providers towards commercially sustainable energy investments, which could then be scaled-up through a dedicated EE financing mechanism. About US$6 million will be allocated from the grant for Year 2 and US$7.2 million for Year 3. Component 2: Technical assistance (US$4 million from the World Bank grant). The scope of the TA Page 2 of 6 component will include: (i) PIU project implementation support and capacity building (e.g., technical advisors, construction supervision, monitoring and reporting, staff training); (ii) technical studies, including EE market assessments and energy audits (in support of Component 1); (iii) awareness, Public Disclosure Copy outreach and information campaigns; (iv) legal, institutional and regulatory reviews and workshops, with a focus on sustainable financing options, ESCOs and regulatory gaps/constraints to meeting GOK’s EE targets; (v) development of a pilot oblast EE Master Plan for replication in the other regions; (vi) design of a sustainable energy financing mechanism (e.g., EE Fund) with detailed design and implementation plan; and (vii) other technical studies and TA as identified during project implementation to support the sustainable energy agenda of the GOK. 4. Project location and salient physical characteristics relevant to the safeguard analysis (if known) The project will be implemented countrywide. 5. Environmental and Social Safeguards Specialists Roxanne Hakim (ECSSO) Arcadii Capcelea (ECSEN) 6. Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/ Yes This policy is triggered as the project will BP 4.01 support a series of demonstrational energy efficiency and conservation projects which will generate some environmental and social impacts. Natural Habitats OP/BP 4.04 No No important wildlife and wildlife habitats are expected to be found in the vicinity of the potential locations for the implementation project activities as they will be implemented within the boundaries of existing settlements. Public Disclosure Copy Forests OP/BP 4.36 No This policy will be not triggered as all project activities will be implemented within the boundaries of existing settlements. Pest Management OP 4.09 No N/A Physical Cultural Resources OP/ No The policy is not triggered as the client BP 4.11 confirmed the project will not support any activities in buildings which might represent national physical cultural property. Indigenous Peoples OP/BP 4.10 No N/A Involuntary Resettlement OP/BP No As the project activities will not change 4.12 boundaries, ownership or use rights in the project area and will work within the public buildings without any expansion or need of land the WB OPs 4.12 is not triggered Safety of Dams OP/BP 4.37 No The project will not support any subprojects based on building/renovation of an existing dam. Page 3 of 6 Projects on International No N/A Waterways OP/BP 7.50 Public Disclosure Copy Projects in Disputed Areas OP/BP No N/A 7.60 II. Key Safeguard Policy Issues and Their Management A. Summary of Key Safeguard Issues 1. Describe any safeguard issues and impacts associated with the Restructured project. Identify and describe any potential large scale, significant and/or irreversible impacts: As the project would support different types of civil works, it may generate some environmental and social impacts. While these impacts are expected to be mostly positive (reduced energy consumption and pollutant emissions, improved indoor temperature and comfort, reduced student sick days, reduced payments for energy resources), the project might also generate some adverse impacts which would be associated with air pollution, dust, noise, construction wastes, asbestos, occupational hazards, etc. All of these adverse impacts are minor, short term, site specific, and can be easily avoided and/or mitigated during project implementation. As the project activities will not change boundaries, ownership or use rights in the project area and will work within the public buildings without any expansion or need of land and thus the WB OPs 4.12 is not triggered. The client has also been confirmed that there will be no impacts on Forests and Natural Habitats as all public and social building are located within the existing settlements. The client also confirmed the project will not support any civil works in public and social buildings which might be considered as Physical Cultural Resources and thus this WB OP 4.11 is not triggered. 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: Public Disclosure Copy The indirect and long term impacts are mostly positive and relate to improved conditions for the schoolchildren, hospital patients and students in social and public buildings (indoor temperature and comfort, reduced sick days); reduced emission of air pollutants and financial savings due to better performances of thermal heating of the buildings. 3. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts. N/A 4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described. In order to address potential social and environmental impacts the client has prepared an Environmental Management Framework. The EMF outlines environmental assessment procedures and mitigation requirements for the subprojects which will be supported by the project. It provides details on procedures, criteria and responsibilities for subprojects’ screening, preparing, implementing and monitoring of subproject specific EMP. The document also includes Environmental Guidelines for proposed subprojects, containing the following: (a) generic mitigation measures for potential environmental impacts of the EE activities in the selected premises. In this regard the guidelines are focused, in particular, on handling of construction generated wastes, and storage of hazardous materials under project supported activities, measures to reduce noise and dust; preventing occupational hazards; (b) screening procedure for identifying Page 4 of 6 category C subprojects which do not require an EA as well as category B subprojects for which it is necessary to apply an Environment Management Plan Checklist; and (c) requirements for conducting monitoring activities for category B subprojects. The EMF contains also institutional Public Disclosure Copy responsibilities for its implementation and for implementation specific EMPs. Ministry of Industry and New Technologies (MINT) will be responsible for the overall project coordination and oversight. The day-to-day implementation was delegated to the PIU, established within the JSC KazEnergoExpertiza (KazEE), which is a specialized state-owned company under the MINT. The PIU has designated a part time Safeguards Specialist which will be in charge of EMF implementation. In his main tasks will be included: (a) subprojects’ screening and environmental categorization; (b) ensuring for all category B subprojects an EMP Checklist has been prepared before project implementation; (c) randomly conducting environmental supervision and monitoring of EMPs implementation; (d) ensuring the EMPs provisions are included in the specifications and bills of quantities and in the Contracts for implementing civil works; (e) reporting on EMPs implementation, providing short texts on these issues to be included in the Project Reports to be submitted semiannually to the WB. The recently designated PIU Safeguards Specialist has only general knowledge in the domain without preliminary experience in this regard. To improve his EA capacity it was agreed during the first supervision mission (before the project will finance any of subprojects) the WB Environmental Specialist will provide him on the job training, including all aspects on conducting environmental screening, preparing EMP Checklist, conducting field supervision as well as preparing progress reports. The EMF will be integrated into the Project's Operational Manual. The subproject EMPs will be integrated into the construction contracts for individual sites, both into specifications and bills of quantities and the Contractors will be required to include the cost in their financial bids. The whole filled in tabular EMP Checklist (or its main provisions) should be attached as an integral part to the works contract and, analogous to all technical and commercial terms, has to be signed by the contract parties. Public Disclosure Copy 5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. The draft EMF was disclosed in the country and consulted with key stakeholders. On November 15, 2012 the draft EMF in Russian was posted on the KazEE web site (www.kazee.kz). On December 13, 2012, the JSC KazEnergoExpertiza conducted a public briefing and consultation meeting on the EMF documents. Separate meetings and consultations have been held with the representatives of the Ministry of Environmental Protection. The meeting concluded that the draft EMF document covers practically all potential impacts and possible mitigation measures. The final version of the EMF in Russian and its English version were posted on the MINT website and submitted to the World Bank. EMF will be used by the client during the project implementation. B. Disclosure Requirements Environmental Assessment/Audit/Management Plan/Other Date of receipt by the Bank 11-Jan-2013 Date of submission to InfoShop 11-Jan-2013 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors Page 5 of 6 "In country" Disclosure Kazakhstan 10-Jan-2013 Comments: www.kazee.kz Public Disclosure Copy If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/ Audit/or EMP. If in-country disclosure of any of the above documents is not expected, please explain why: C. Compliance Monitoring Indicators at the Corporate Level OP/BP/GP 4.01 - Environment Assessment Are the cost and the accountabilities for the EMP incorporated Yes [ ] No [ ] NA [ ] in the credit/loan? The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the Yes [ ] No [ ] NA [ ] World Bank's Infoshop? Have relevant documents been disclosed in-country in a public Yes [ ] No [ ] NA [ ] place in a form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional Yes [ ] No [ ] NA [ ] responsibilities been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included Yes [ ] No [ ] NA [ ] in the project cost? Does the Monitoring and Evaluation system of the project Yes [ ] No [ ] NA [ ] Public Disclosure Copy include the monitoring of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed Yes [ ] No [ ] NA [ ] with the borrower and the same been adequately reflected in the project legal documents? III. APPROVALS Task Team Leader: Mirlan Aldayarov Approved By Regional Safeguards Name: Agnes I. Kiss (RSA) Date: 11-Jan-2013 Coordinator: Sector Manager: Name: Ranjit J. Lamech (SM) Date: 11-Jan-2013 Page 6 of 6