Heat Supply Improvement Project
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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: PAD2164 INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT IN THE AMOUNT OF SDR 16.3 MILLION (US$23 MILLION EQUIVALENT) Public Disclosure Authorized AND ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 16.3 MILLION (US$23 MILLION EQUIVALENT) TO THE KYRGYZ REPUBLIC Public Disclosure Authorized FOR A HEAT SUPPLY IMPROVEMENT PROJECT OCTOBER 5, 2017 Energy & Extractives Global Practice Europe and Central Asia Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective August 31, 2017) Currency Unit = KGS KGS 68.990 = US$ 1 US$ 0.708 = SDR 1 FISCAL YEAR January 1 - December 31 Regional Vice President: Cyril E Muller Country Director: Lilia Burunciuc Senior Global Practice Director: Riccardo Puliti Practice Manager: Sameer Shukla Task Team Leaders: Kathrin Hofer, Yabei Zhang ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank ARIS Agentstvo Razvitiya I Investirovanya Soobschtv Kyrgyzkoi Respubliki (Community Development and Investment Agency) BTS Bishkekteploset CAEWDP Central Asia Energy-Water Development Program CAPEX Capital Expenditures CHP Combined Heat and Power CIS Commonwealth of Independent States CJSC Closed Joint Stock Company CO Carbon Monoxide CPS Country Partnership Strategy CQS Consultants’ Qualification Selection DA Designated Account DC Direct Contracting DCSR Debt-Service Coverage Ratio DH District Heating DPO Development Policy Operation EBIT Earnings Before Interest and Taxes EBRD European Bank for Reconstruction and Development ECA Europe and Central Asia ECAPDEV Europe and Central Asia Regional Capacity Development EEU Eurasian Economic Unit e-GP Electronic Government Procurement ESMAP Energy Sector Management Assistance Program ESMF Environmental and Social Management Framework ESMP Environmental and Social Management Plan EPP Electric Power Plant ERP Enterprise Resource Planning FBS Fixed Budget Selection FM Financial Management Gcal Giga Calories GDP Gross Domestic Product GJ Giga Joules GNI Gross National Income GPS Geographic Positioning System GRM Grievance Redress Mechanism HSIP Heat Supply Improvement Project IC Individual Consultation selection procedure ICB International Competitive Bidding IDA International Development Association IFAC International Federation of Accountants IFR Interim Un-audited Financial Report IFRS International Financial Reporting Standards IHS Individual Heat Substations ISA International Standards on Auditing ISP Implementation Support Plan ITQ Invitation to Quote KGS Kyrgyzstani Som KyrSEFF Kyrgyz Sustainable Energy Financing Facility LCS Least Cost Selection LPB Low pressure boiler MBPF Monthly Benefit to Poor Families M&E Monitoring and Evaluation MOU Memorandum of Understanding MTTP Medium Term Tariff Policy MUV Manufactures Unit Value NCB National Competitive Bidding NGO Non-Governmental Organization NSDS National Sustainable Development Strategy OM Operational Manual O&M Operation and Maintenance OJSC Open Joint Stock Company PAC Project Advisory Committee PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PIU Project Implementation Unit RAP Resettlement Action Plan RKDF Russian Kyrgyz Development Fund RPF Resettlement Policy Framework PAC Project Advisory Committee PAD Project Appraisal Document PDO Project Development Objective PM2.5 Particulate Matter, 2.5 micrometers or less PPD Public Procurement Department PPL Public Procurement Law PRAMS Procurement Risk Assessment and Management System PSIA Poverty and Social Impact Assessment QAA Quality Assurance Agent QBS Quality Based Selection QCBS Quality and Cost Based Selection RAP Resettlement Action Plan RPF Resettlement Policy Framework SAI Supreme Audit Institution SBD Standard Bidding Document SCADA Supervisory Control and Data Acquisition SECO State Secretariat for Economic Affairs (Switzerland) SE4All Sustainable Energy for All SORT Systematic Operations Risk-Rating Tool SSS Single Source Selection SUE State Unitary Enterprise T&D Transmission and Distribution ToR Terms of Reference USD United States Dollars VSD Variable Speed Drive The World Bank Heat Supply Improvement Project (P157079) BASIC INFORMATION Is this a regionally tagged project? Country(ies) Financing Instrument No Investment Project Financing [ ] Situations of Urgent Need of Assistance or Capacity Constraints [ ] Financial Intermediaries [ ] Series of Projects Approval Date Closing Date Environmental Assessment Category 27-Oct-2017 31-Dec-2023 B - Partial Assessment Bank/IFC Collaboration No Proposed Development Objective(s) The Project Development Objective is to improve the efficiency and quality of heating in selected Project areas. Components Component Name Cost (US$, millions) Component 1: Improving supply efficiency and quality of the District Heating system in 31.00 Bishkek Component 2: Piloting efficient and clean heating stoves 5.00 Component 3: Demonstrating the benefits of energy efficiency improvements in public 10.00 buildings Organizations Borrower : Kyrgyz Republic Implementing Agency : Bishkekteploset JSC (BTS) Community Development and Investment Agency (ARIS) PROJECT FINANCING DATA (US$, Millions) Page 1 of 119 The World Bank Heat Supply Improvement Project (P157079) [ ] [ ] IBRD [ ✔ ] IDA Credit [ ✔ ] IDA Grant [ ] Trust [ ] Counterpart Funds Parallel Funding Financing FIN_COST_OLD Total Project Cost: Total Financing: Financing Gap: 46.00 46.00 0.00 Of Which Bank Financing (IBRD/IDA): 46.00 Financing (in US$, millions) FIN_SUMM_OLD Financing Source Amount IDA-61460 23.00 IDA-D2400 23.00 Total 46.00 Expected Disbursements (in US$, millions) Fiscal Year 2018 2019 2020 2021 2022 2023 2024 Annual 1.50 2.99 4.05 7.87 10.67 14.38 4.53 Cumulative 1.50 4.49 8.54 16.41 27.08 41.47 46.00 INSTITUTIONAL DATA Practice Area (Lead) Energy & Extractives Contributing Practice Areas Environment & Natural Resources Governance Page 2 of 119 The World Bank Heat Supply Improvement Project (P157079) Social, Urban, Rural and Resilience Global Practice Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks Gender Tag Does the project plan to undertake any of the following? a. Analysis to identify Project-relevant gaps between males and females, especially in light of country gaps identified through SCD and CPF Yes b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or men's empowerment Yes c. Include Indicators in results framework to monitor outcomes from actions identified in (b) Yes SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating High 1. Political and Governance Moderate 2. Macroeconomic High 3. Sector Strategies and Policies Substantial 4. Technical Design of Project or Program High 5. Institutional Capacity for Implementation and Sustainability High 6. Fiduciary Substantial 7. Environment and Social Substantial 8. Stakeholders 9. Other 10. Overall High Page 3 of 119 The World Bank Heat Supply Improvement Project (P157079) COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✔] No Does the project require any waivers of Bank policies? [ ] Yes [✔] No Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 ✔ Natural Habitats OP/BP 4.04 ✔ Forests OP/BP 4.36 ✔ Pest Management OP 4.09 ✔ Physical Cultural Resources OP/BP 4.11 ✔ Indigenous Peoples OP/BP 4.10 ✔ Involuntary Resettlement OP/BP 4.12 ✔ Safety of Dams OP/BP 4.37 ✔ Projects on International Waterways OP/BP 7.50 ✔ Projects in Disputed Areas OP/BP 7.60 ✔ Legal Covenants Sections and Description Schedule 2, Section V of the Financing Agreement: Except as the Association shall otherwise agree, BTS shall not incur any debt unless a reasonable forecast of the revenues and expenditures of BTS shows that the estimated net revenues of BTS for each of its fiscal years during the term of the debt to be incurred shall be at least one times the estimated debt service requirements of BTS in such year on all debt of BTS including the debt to be incurred. Sections and Description Schedule, Section II.B of the BTS Project Agreement: Not later than 30 days from the Effective Date, BTS shall install an accounting software specifically for the Project accounting, which will have a functionality of automatic generation of the Project financial reports as well as Statements of Expenditures. Sections and Description Page 4 of 119 The World Bank Heat Supply Improvement Project (P157079) Schedule, Section II, paragraph 4 of the ARIS Project Agreement: ARIS shall, not later than two months from the Effective Date, develop a Project cycle database for Component 2 of the Project in order to track the implementation status and progress, including with regards to registered eligible households and respective household contributions, selected stove suppliers/ products and related payments, as well as the stove installation progress and related payments. Sections and Description Schedule 2, Section I.A, paragraph 2.a) of the Financing Agreement: The Recipient shall cause ARIS, not later than 30 days from the Effective Date, to strengthen the capacity of the ARIS Project Implementation Unit and thereafter maintain it during the entire