INTEGRATED SAFEGUARDS DATA SHEET APPRAISAL STAGE Report No.: ISDSA6194 Public Disclosure Copy Date ISDS Prepared/Updated: 10-Dec-2013 Date ISDS Approved/Disclosed: 11-Dec-2013 I. BASIC INFORMATION 1. Basic Project Data Country: Ukraine Project ID: P132741 Project Name: District Heating Energy Efficiency (P132741) Task Team Yadviga Viktorivna Semiko Leader: Estimated 12-Dec-2013 Estimated 27-Mar-2014 Appraisal Date: Board Date: Managing Unit: ECSEG Lending Specific Investment Loan Instrument: Sector(s): Energy efficiency in Heat and Power (100%) Theme(s): City-wide Infrastructure and Service Delivery (80%), Climate change (20%) Is this project processed under OP 8.50 (Emergency Recovery) or OP No 8.00 (Rapid Response to Crises and Emergencies)? Financing (In USD Million) Total Project Cost: 382.00 Total Bank Financing: 332.00 Public Disclosure Copy Financing Gap: 0.00 Financing Source Amount Borrower 0.00 International Bank for Reconstruction and Development 332.00 Clean Technology Fund 50.00 Total 382.00 Environmental B - Partial Assessment Category: Is this a No Repeater project? 2. Project Development Objective(s) The project development objective is to improve the energy efficiency and quality of service of selected Ukrainian DH companies, improve their financial viability and decrease their CO2 emissions 3. Project Description Page 1 of 7 The proposed District Heating Energy Efficiency (DHEE) Project will be financed through IBRD and Clean Technology Fund (CTF) loans; it will be implemented over 6 years. The Ministry of Finance of Ukraine will be the Borrower under the Project. The Government, through the Ministry of Public Disclosure Copy Finance, will on-lend to the participating district heating (DH) companies. The DH companies will be responsible for the implementation of their respective investment programs financed under the Project. The Ministry of Regional Development, Construction, Housing and Communal Services (Minregion), which oversees Ukrainian municipal sector, will be responsible for overall Project implementation as well as for capacity building of participating DH companies. The Project consists of two components: (i) energy efficiency investments component; and (ii) technical assistance and capacity building component. Component 1: Energy Efficiency Investments (US$ 376.5 million: US$ 326.5 IBRD and US$50 million CTF). This component will increase efficiency of participating utilities, reduce their costs, enhance reliability of their services and improve quality of heat supply. This component will cover rehabilitation of boiler houses; closing of redundant boiler houses; installation of mini-CHPs; replacement of network pipes with pre-insulated pipes; installation of individual heat substations (IHSs) in residential buildings; installation of building-level heat meters and installation of SCADA management systems to optimize heat production and supply of participating DH companies. This component includes CTF co-financing that will cover installation of IHSs (together with connecting pipes) and building-level heat meters. This Component will target DH companies in the following municipalities: Chernigiv, Dnipropetrovsk, Donetsk, Ivano-Frankivsk, Kam’yanets-Podilsky, Kharkiv, Kherson, Kirovograd, Mykolaiv and Vinnyitsia. The participating DH companies and municipalities were selected competitively. Selection was based on governance indicators and financial indicators. Governance indicators included: availability of boiler-level gas and heat meters; prevalence of residential consumption-based billing ; availability of IHSs and /or readiness to install IHSs. Financial indicators Public Disclosure Copy included: cost recovery level of heating tariffs; collection rate. All the participating DH companies have 100 per cent gas meters in their boiler houses; almost all boiler houses operated by participating companies have boiler-level heat meters. The average cost recovery of the participating DH companies is 70 per cent (compared to 60 per cent average in Ukraine). The size and details of investment programs have been finalized for the following participating DH companies: Ivano-Frankivskteplokomunenergo (Ivano-Frankivsk), Miskteplovodenerhiya (Kamyanets-Podilsky), Kharkivski Teplovi Merezhi (Kharkiv), Khersonteploenergo (Kherson), Mykolayiboblteploenergo (Mykolaiv), and Vinnytsiamiskteploenergo (Vinnytsia). The investment programs have been identified and finalized with the support of the CTF Project Preparation Grant. The size of the investment programs has been discussed with the Ministry of Finance. The size of the investment program for Donetskmiskteplomerezha (Donetsk) has been agreed with the Ministry of Finance; the components of the investment program will be finalized soon after the Board approval. The DH company is financing a feasibility study with its own funds. The size of investment programs have been discussed for the following DH companies and are pending approval of the Ministry of Finance: Chernihivteploelectrocentral (Chernigiv), Dniproteploenerho (Dnipropetrovsk) and Kirovohradteplo (Kirovograd). The size of the investment programs for these companies will be finalized before negotiations; the details of investment Page 2 of 7 programs will be finalized soon after the Board approval. The investment programs will be identified and finalized with the support of the Swedish International Development Cooperation Agency (SIDA) Urban Infrastructure Project Grant. Public Disclosure Copy Component 2: Technical Assistance and Capacity Building (US$5.5 million). This component will finance technical assistance to Minregion, which will oversee the implementation of the Project. Technical assistance will support: (i) supervision of Project implementation; (ii) guidance and trai ning to the participating DH companies in project implementation, monitoring and evaluation; (iii) capacity building and knowledge-sharing workshops to the participating companies; (iv) annual quality of service surveys among the consumers of the participating DH companies; (v) annual Project audits; (vi) preparation of case studies, including technical studies; and (vii) incremental operating costs of Minregion related to all eligible expenses. The implementation of the Project will be combined with policy dialogue on tariff reforms with the main objective of improving financial viability of DH companies and advancing sector regulatory practices. 4. Project location and salient physical characteristics relevant to the safeguard analysis (if known) The Project will be located in Chernigiv, Dnipropetrovsk, Donetsk, Ivano-Frankivsk, Kam’yanets- Podilsky, Kharkiv, Kherson, Kirovograd, Mykolaiv and Vinnyitsia. The specific Project sites have been selected for Ivano-Frankivsk, Kam’yanets-Podilsky, Kharkiv, Kherson, Mykolaiv and Vinnyitsia DH companies based on the results of the feasibility studies. The specific Project sites will be selected for Chernigiv, Dnipropetrovsk, Donetsk and Kirovograd companies once their feasibility studies are completed. 5. Environmental and Social Safeguards Specialists Alexei Slenzak (ECSEN) Dmytro Glazkov (ECSEG) Public Disclosure Copy Klavdiya Maksymenko (ECSSO) 6. Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/ Yes The Project is classified as Environmental BP 4.01 Category B as it will support investments which are expected to be Category B. The types of activities to be implemented under the Project will have either minor or no adverse environmental impacts and provide significant environmental benefits. Negative environmental impacts are primarily associated with construction activities and will be mitigated through good construction and site-keeping practices. Since the investment programs of participating DH companies are similar, a Program-Level Environmental and Social Assessment (PLESA) was prepared by the Client and disclosed in every participating municipality. Based on the PLESA, Environmental Page 3 of 7 Management Plans (EMPs) for each of the proposed DH companies' investment programs will be developed. The EMPs will be prepared as Public Disclosure Copy a part of design documentation. EMPs will be disclosed and publicly discussed in every project location. Natural Habitats OP/BP 4.04 No Forests OP/BP 4.36 No Pest Management OP 4.09 No Physical Cultural Resources OP/ No No physical cultural resources will be affected BP 4.11 by the Project. Indigenous Peoples OP/BP 4.10 No Involuntary Resettlement OP/BP Yes The proposed investments are not going to cause 4.12 any permanent physical displacement. The sub- projects causing any physical displacement will be included in the Project. However, acquisition of some municipally-owned land for the Project purposes is likely and may cause economic displacement. In some places unregistered trade pavilions and/ or street markets with unofficial vendors may be temporary displaced by the works related to networks rehabilitation. The Resettlement Policy Framework is described in Public Disclosure Copy one of the sections of the PLESA (attached as Annex 4). It has been duly disclosed in every Project location in local language as a separate document. As site-specific technical designs are finalized, the abbreviated Resettlement Action Plans (RAPs) will be prepared by DH companies where relevant and publicly discussed; mitigation measures will be implemented prior to start of the Project works. The Project Implementation Units (PIUs) of the participating DH companies were trained in Bank Safeguards policies and will alert the Central Project Management Unit (CPMU) in Minregion and the Bank in case of any displacement is caused by Project works. The designated safeguards specialist in the CPMU will closely monitor implementation of sub- projects. Safety of Dams OP/BP 4.37 No Page 4 of 7 Projects on International No Waterways OP/BP 7.50 Public Disclosure Copy Projects in Disputed Areas OP/BP No 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 proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts: The types of activities to be implemented under the Project will have either minor or no adverse environmental impacts. More over, they will provide significant environmental benefits: reduction in local pollution (dust and sulfur dioxide emissions); decreased emissions of greenhouse gases (carbon dioxide). There will be no serious irreversible environmental consequences resulting from the Project implementation. Negative environmental impacts will be local and primarily associated with construction activities (e.g. dust, noise and other minor impacts of construction). Those impacts will be mitigated through good construction and site-keeping practices. No potential large scale, significant and/or irreversible impacts have been identified/ expected. Physical works on most of the Project sites will take place at existing industrial/ district heating footprint. Based on previous experience with similar investments, the rehabilitation / replacement works are not expected to generate any hazardous materials that will require special disposal. The acquisition of the municipally-owned land for the Project purposes is likely and may cause some economic displacement. The Project works related to the rehabilitation of networks may cause temporary economic displacement of light trade pavilions and/or street markets. These adverse effects will be mitigated by provision of alternative land and places for trade, assistance in moving or compensation for lost income. Public Disclosure Copy 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: N/A 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. The Project is classified as Environmental Category B. Since the investment programs of participating DH companies are similar, a Program-Level Environmental and Social Assessment (PLESA) was prepared by the Client and disclosed in every participating municipality. PLESA covers the whole investment program financed by the Project in participating DH companies. PLESA contains description of potential environmental and social impacts as well as mitigation measures to address those. PLESA also contains monitoring plan to oversee the implementation of the proposed mitigation measures. The site-specific Environmental Management Plans (EMPs ) will be prepared by each DH company as a part of works design documentation. The abbreviated Resettlement Action Plans (RAPs) will be prepared in cases where any economic displacement is caused by the Project. The Central Project Management Unit (CPMU) in Minregion will be in Page 5 of 7 charge of the overall Project implementation. Minregion has prior experience of successful implementation of Bank-financed municipal projects (e.g., Urban Infrastructure Project). The CPMU has a designated safeguards specialist who will supervise implementation of the site- Public Disclosure Copy specific EMPs and abbreviated RAPs. 5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. The key project stakeholders are: participating DH companies, local authorities and local communities in municipalities where participating DH companies are located. Draft PLESA has been disclosed and is being discussed in all Project municipalities (public consultations in two municipalities have been completed; in remaining four they have been scheduled; the public consultations are expected to be completed by the end of December, 2013). Project Implementation Units (PIUs) of participating DH companies and the CPMU are responsible for organizing public consultations in every city. Special training session was conducted for the PIUs and the CPMU on October 31, 2013, to ensure they have sufficient understanding and capacity to organize the consultations process. Site-specific EMPs will be prepared for each project site and disclosed before works start. Where relevant abbreviated RAPs will be prepared, publicly consulted on and implemented before the Project works start. B. Disclosure Requirements Environmental Assessment/Audit/Management Plan/Other Date of receipt by the Bank 21-Nov-2013 Date of submission to InfoShop 25-Nov-2013 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors "In country" Disclosure Ukraine 26-Nov-2013 Comments: PLESA was disclosed in English and Ukrainian on Minregion's website as well as in Public Disclosure Copy municipalities where participating DH companies are located. Resettlement Action Plan/Framework/Policy Process Date of receipt by the Bank 21-Nov-2013 Date of submission to InfoShop 25-Nov-2013 "In country" Disclosure Ukraine 26-Nov-2013 Comments: Resettlement Policy Framework was disclosed in English and Ukrainian on Minregion's website as well as in municipalities where participating DH companies are located. 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 Page 6 of 7 Does the project require a stand-alone EA (including EMP) Yes [ ] No [ ] NA [ ] report? Public Disclosure Copy OP/BP 4.12 - Involuntary Resettlement Has a resettlement plan/abbreviated plan/policy framework/ Yes [ ] No [ ] NA [ ] process framework (as appropriate) been prepared? If yes, then did the Regional unit responsible for safeguards or Yes [ ] No [ ] NA [ ] Sector Manager review the plan? 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 [ ] 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? Public Disclosure Copy III. APPROVALS Task Team Leader: Name: Yadviga Viktorivna Semiko Approved By Regional Safeguards Name: Agnes I. Kiss (RSA) Date: 10-Dec-2013 Advisor: Sector Manager: Name: Ranjit J. Lamech (SM) Date: 11-Dec-2013 Page 7 of 7