INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Public Disclosure Copy Report No.: ISDSC2603 Date ISDS Prepared/Updated: 20-Mar-2013 Date ISDS Approved/Disclosed: 16-Apr-2013 I. BASIC INFORMATION A. Basic Project Data Country: Ukraine Project ID: P132741 Project Name: District Heating Energy Efficiency (P132741) Task Team Yadviga Viktorivna Semiko Leader: Estimated 03-Sep-2013 Estimated 20-Dec-2013 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%) Financing (In USD Million) Total Project Cost: 350.00 Total Bank Financing: 250.00 Total Cofinancing: Financing Gap: 0.00 Public Disclosure Copy Financing Source Amount Borrower 50.00 International Bank for Reconstruction and Development 250.00 Clean Technology Fund 50.00 Total 350.00 Environmental B - Partial Assessment Category: Is this a No Repeater project? B. Project Objectives 15. The project development objective is to improve the energy efficiency and quality of service of selected Ukrainian district heating utilities and decrease their CO2 emissions. C. Project Description 1. The proposed project would be implemented over six years, through a Specific Investment Loan (SIL) from IBRD directly to DH utilities, guaranteed by the Government of Ukraine, in the total amount of US$250 million, blended with Clean Technology Fund (CTF) loan in the amount of US$50 million; the utilities are expected to contribute funds of approximately US$50 million. Public Disclosure Copy 2. The CTF funds would allow increasing the scale of the proposed investments in building- level heat substations (ITPs) that have surprisingly low market penetration in Ukraine. Most of the countries in Western and Eastern Europe have switched to supplying heat through ITPs due to their economic and efficiency gains. However, in Ukraine this switch has not happened, partly because of historical reasons (group substations were invented in Ukraine) and partly because of prevalence of the old Soviet mentality among Ukrainian DH professionals who still believe in superiority of supply-driven DH systems. Using CTF funds would buy down the investment costs of the participating utilities, allowing them to install more ITPs, thus speeding up the process of introduction of a more efficiency technology to the market, increasing its demonstration effect and reaching the tipping point when other DH companies start investing in ITP installation. Using CTF funds would also lead to lower CO2 emissions that could not be achieved otherwise. 3. The proposed project aims to engage with utilities of different sizes (small, medium and large) to enhance its demonstration and transformation effects. The participating utilities were selected though a screening process managed by the Ministry of Regional Development, Building and Communal Services of Ukraine (Minregion). Minregion developed an application form for the district heating utilities, based on the criteria, suggested in the World Bank “Ukraine: Creditworthiness of District Heating Companies� report. Minregion, the executor of the CTF Project Preparation Grant received by Ukraine as a part of the CTF investment plan, decided to use the project preparation grant to prepare feasibility studies for 6 of the selected utilities. 4. Applications, received from over 60 Ukrainian utilities, were independently evaluated. Based on the recommendations of the independent report, the Government recommended the following 6 DH utilities for participation in the proposed project and preparation of the feasibility studies: • Miskteplovodenerhiya (Kamyanets-Podilskyi), • Ivano-Frankivskteplokomunenerho (Ivano-Frankivsk); Public Disclosure Copy • Kharkivski teplovi merezhi (Kharkiv); • Vinnytsiamiskteploenerho (Vinnytsia); • Mykolaivoblteploenerho (Mykolaiv); and • Khersonteploenerho (Kherson). 5. The two other companies were suggested as potential candidates for the project if financing becomes available for additional feasibility studies: • Donetskmiskteplomerezha (Donetsk) and • Southwest teplovi merezhi (Khmelnytsky). 6. The proposed project would consist of two components: (i) investment component; and (ii) technical assistance and capacity building component. 7. The investment component (US$294 million) would improve companies’ efficiency, reduce costs and improve their quality of supply. This component is expected to finance: • installation of ITPs in resi dential buildings and possibly municipal buildings (schools, hospitals, etc) serviced by participating utilities; and • replacement of networks with pre-insulated pipes. 8. The scope of the investment component will be determined by feasibility studies conducted for each participating utility. Feasibility studies financed by the CTF Project Preparation Grant are expected to be launched in April 2013. The draft feasibility studies are expected to be completed in July 2013. The feasibility study for Donetskmiskteplomerezha (Donetsk) is being prepared by Public Disclosure Copy EBRD. 9. Each feasibility study financed by the CTF Grant will develop a strategic investment plan and priority investment program for each participating utility. For each of the developed investment programs, an affordability analysis and environmental and social impact assessment, consistent with the Bank’s safeguards policies will be carried out. Since the participating DH utilities are similar, it was suggested that a programmatic-level Environmental and Social Assessment will be prepared, covering the whole program of improving energy efficiency of DH companies and, based on this, Environmental Management Plans for each of the proposed DH companies' investment programs will be finalized. LEGLE would follow-up with LEGEN to obtain their opinion on whether this is feasible 10. OP 4.12 will not be triggered since no land acquisition is expected. All sites will be located on municipal land which is not used in any way. There are no illegal occupiers or squatters on expected project sites. The proposed project would use existing district heating pipeline routes that are owned by municipalities. OP 4.11 will not be triggered since no old or historic buildings/facilities will be included in the proposed project. No gender-specific impacts are expected. If potential gender effects are identified during subprojects’ preparation, a separate analysis will be done. 11. The technical assistance and capacity building component (US$6 million) would finance operational strengthening of participating utilities. It would include: • software and necessary training support to implement 100% consumption-based billing; • regular service quality surveys; • capacity building of participating utilities to install and maintain ITPs; and • project implementation support. 12. The preparation of the proposed project would be combined with policy dialogue on tariff Public Disclosure Copy reforms with the main objective of improving the regulatory practices focused on achieving financial sustainability. The preparation of the proposed project would also be supported by a public awareness campaign, financed by the CTF Project Preparation Grant. D. Project location and salient physical characteristics relevant to the safeguard analysis (if known) 13. The project will be located in Ivano-Frankivsk, Kamyanets-Podilskyi, Kharkiv, Kherson, Mykolaiv, Vinnytsia and possibly Donetsk and Khmelnitskyi. The specific project sites are going to be selected after feasibility studies are completed based on the proposed priority investment programs; they are expected to include basements of buildings (residential and possibly municipal), spaces below staircases in buildings and pipeline routes. E. Borrowers Institutional Capacity for Safeguard Policies 14. The project is going to be implemented by participating utilities and the Ministry of Regional Development, Construction and Communal Services (Minregion). Each utility will have a separate Project Implementation Unit (PIU). It is planned that a PIU established in each of these utilities would include a safeguards specialist, who would be the existing staff of each utility responsible for Environment, Health and Safety. Utility-level PIUs will be supervised by central PIU in Minregion. Minregion is familiar with World Bank safeguard rules, as they have been implementing the World Bank-financed Urban Infrastructure Project since 2004. To confirm that the participating utilities have necessary safeguards capacity, and meet the Banks requirements, safeguards assessment would need to be carried out in each of the participating utilities. Capacity building activities may need to be planned as determined necessary by the safeguards assessment, including training of the staff, etc. Public Disclosure Copy F. Environmental and Social Safeguards Specialists on the Team Dmytro Glazkov (ECSEG) Klavdiya Maksymenko (ECSSO) II. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/ Yes The operation is designated as Category B as it BP 4.01 will support investments which are expected to be Category B. Since it is expected that the selected utilities’ proposed priority investment programs, identified in the feasibility studies, would be similar, it was suggested that Minregion will prepare a program-level Environmental and Social Assessment, covering the whole program of improving energy efficiency of participating DH companies. Based on this, participating utilities will develop Environmental Management Plans for each of the proposed investment programs. Natural Habitats OP/BP 4.04 No Forests OP/BP 4.36 No Pest Management OP 4.09 No Public Disclosure Copy Physical Cultural Resources OP/ No No old or historic buildings/facilities will be BP 4.11 included in the project Indigenous Peoples OP/BP 4.10 No Involuntary Resettlement OP/BP No No temporary or permanent displacement will 4.12 be required for the proposed investments; the subprojects will be implemented on municipal land that is not used in any way. There are no illegal occupiers or squatters on expected project sites. Safety of Dams OP/BP 4.37 No Projects on International No Waterways OP/BP 7.50 Projects in Disputed Areas OP/BP No 7.60 III. SAFEGUARD PREPARATION PLAN A. Tentative target date for preparing the PAD Stage ISDS: 17-Jul-2013 1 Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons. B. Time frame for launching and completing the safeguard-related studies that may be needed. The specific studies and their timing1 should be specified in the PAD-stage ISDS: March-June, 2013 Public Disclosure Copy IV. APPROVALS Task Team Leader: Name: Yadviga Viktorivna Semiko Approved By: Regional Safeguards Name: Date: Coordinator: Sector Manager: Name: Ranjit J. Lamech (SM) Date: 16-Apr-2013 Public Disclosure Copy