PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.:49085 Project Name Bratsk Hydropower Plant Power Generation Efficiency

Public Disclosure Authorized Improvement Project Region ECA Sector Power sector (100%) Project ID P101997 Borrower(s) Russian Federation Implementing Agency Irkutskenergo ( Joint Stock Company of Energetics and Electrification) Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared March 11, 2009 Date of Appraisal 06/20/2009 (TBD) Authorization Date of Board Approval 07/15/2009 (TBD) Public Disclosure Authorized

KEY DEVELOPMENT ISSUES AND RATIONALE FOR BANK INVOLVEMENT Russia is the third largest emitter of greenhouse gases, after the USA and China. Although Russia presently uses energy much less efficiently than most industrialized countries, it has ratified the Kyoto Protocol, thereby demonstrating its commitment to combat global climate change. Under the Kyoto Protocol, the Russian Federation is committed to stabilize its Greenhouse Gas emissions during the commitment period of 2008-2012 to 1990 levels. As a country that has adopted an emissions target, the Russian Federation can also participate in Joint Implementation (JI) projects. With it Russia could be the largest seller of quotas, and also potentially a large receiver of Joint Implementation (JI) investments.

Public Disclosure Authorized One of the priorities of the Country Partnership Strategy (CPS) is to support Russia’s increasing global role, and to assist the country in fulfilling its global commitments in the framework of the UNFCCC. The Bank plays a leading role worldwide in the donor community in addressing global challenges of climate change. The World Bank, as trustee of various Carbon Funds, supports investment projects aiming at mitigating climate change via market-based flexibility mechanisms of the Kyoto Protocol such as Joint Implementation (JI) and Clean Development Mechanism. The purchase of the emission reductions (ERs) from such activities opens up a significant supplemental source of revenue for financing GHG emission mitigation projects. The World Bank has undertaken a pioneering role in developing the JI market in Russia, including capacity building workshops and conferences. With the prior experience of developing other carbon finance projects in the ECA Region, the Bank is well positioned to facilitate the transaction for this project.

Public Disclosure Authorized Russia has significant potential to reduce carbon emissions through efficiency gains and reduced energy losses, resulting also in gains to the local economy and environment. The priorities for Russia’s state energy policy are formulated in the “Energy Strategy of Russia until 2020”. Since its approval by the Government on August 28, 2003, significant changes have taken place both in the external macroeconomic environment and in the Russian domestic energy market. In the context of high international energy prices, the state of the Russian energy sector has become a prominent issue for a number of energy-importing states, including many members of the EU. The current economic recession and significant drop of energy prices provides new challenges for the Russian economy and energy sector. At the same time, domestic energy demand in Russia is increasing at a much higher rate than previously forecasted. In accordance with the scenario of energy sector development the demand for investments in the sector will be about US$250-300 billion during the period of 2006-20. This market environment raises the importance of energy efficient and environmentally friendly technologies. There is a growing realization in Russia that energy saved by increasing deployment of energy efficient technologies can substantially contribute to the benefits from international trade in energy resources. As indicated above, huge investments are needed in the power sector. RAO UES has announced that large investments are foreseen in particular in the renewable energy sector, and namely in the hydropower sector. The rehabilitation of the turbines at the Bratsk Hydropower Plant within the JI project would become an example of how to use carbon finance to incentivize and facilitate upgrading of the electricity sector in Russia.

PROPOSED OBJECTIVES The project development objective is to reduce GHG emissions by increasing power generation efficiency at 6 turbines of the Bratsk HPP and thereby generating zero emissions power that would otherwise be generated by the fossil fuel power plants of the Irkutskenergo power system, namely from relatively low efficient coal fired power plants. The project will generate 2,103,743 tCO2eq of emission reductions during the 1st crediting period between 2008 and 2012.

PRELIMINARY DESCRIPTION Bratsk hydroelectric plant (BHPP) is the second HPP of the coordinated hydroelectric system downstream on the river and the world’s leader in the total volume of electricity production since the first generating unit was put into operation. The installed capacity of Bratsk HPP is 4500 MW (18 generating units of 250 MW each). The annual output under the design is about 26-28 TWh. The share of BHPP in the total electricity production of OJSC «Irkutskenergo» is more than 40%. Due to the unique and sufficiently stable water resources, Bratsk HPP plays an important role in providing the steady-state reliable functioning of Irkutsk region. BHPP supplies electric energy through the Irkutsk power grid to the regional industries and residential consumers. Currently, the electricity production by “Irkutskenergo” energy system is generated by the hydro power plants that represent about 82% of the installed capacity and the remaining power is generated by the relatively low-efficient thermal power plants mainly consuming coal. BHPP generates «low-cost -must-run» electricity that is loaded at the maximum in the primary order. Overall, the BHPP generation can only be limited by the specified restrictions of water resources utilization provided by the Operative Group of the Ministry of Natural Resources that can give out the recommendations on running the water schedule.1 The project comprises the replacement of 6 impellers (blade wheels) of turbines No. 13-18 during the period from 2006 to 2010. The rehabilitation will increase the units’ generation efficiency up to 95.3% and provide supplemental generation of about 674 GWh per year by the six rehabilitated turbines. The supplemental power generation from the Project is expected to reduce about 2,103,743 tonnes of CO2 during the period 2008-2012 by displacing the power generation by fossil-fuel power plants of the Irkutskenergo power grid. The combined margin emission factor of the Irkutskenergo power grid is calculated ex ante at 0.833 tCO2/MWh. Without the contribution of the JI component, the rehabilitation of the turbines would not be economically feasible for “Irkutskenergo” and the wheels would continue operating based on their existing operational reserve beyond 2012.

SAFEGUARDS POLICIES THAT MIGHT APPLY Safeguard Policies Triggered (please explain why) Yes No TBD Environmental Assessment (OP/BP 4.01) X The environmental category B was assigned due to the need for an EMP for the planned construction activities of the project. No significant negative environmental impacts are expected and the EMP will contain provisions mainly referring to good practice during routine civil and mechanical construction works. The main issues will likely relate to prevention of accidental pollution of the downstream aquatic environment, emission control (noise, dust), waste management and transport of the new turbine parts to the site (traffic safety, protection of local population on transport routes against noise, dust, exhaust emissions). This will include an assessment of the potential impacts of increased road traffic and the development related mitigation/ management measures. Natural Habitats (OP/BP 4.04) X Forests (OP/BP 4.36) X Pest Management (OP 4.09) X Physical Cultural Resources (OP/BP 4.11) X Indigenous Peoples (OP/BP 4.10) X Involuntary Resettlement (OP/BP 4.12) X Safety of Dams (OP/BP 4.37) X At an earlier stage of project preparation it was decided that the planned investment will not relate to the structural stability or performance of the dam. However during the Project Concept review the team will seek for the guidance on the issue of dam safety and if the full-scale dam safety analysis will have to be carried out later on. Projects on International Waterways (OP/BP 7.50) X

1 Water regime of BHPP which means the support of water level in the reservoir in the prescribed range, the control of overflow water in the period of snowmelt flood, etc. is specified by the Yenisei Basin Water Directorate, the requirements of navigation, conservation of fish resources in the river Angara and normal water stream in the lower reach is taken into account. Safeguard Policies Triggered (please explain why) Yes No TBD Projects in Disputed Areas (OP/BP 7.60) X Disclosure Policy (OP 17.50) X Safeguard documents will be disclosed prior to appraisal.

FINANCING Source: $m Spanish Carbon Fund 13.5 (Preliminary estimated ERPA value) Total: 13.5

CONTACT POINT Helmut Schreiber Lead Environmental Economist World Bank Tel.: +7-495-745-7000 (ext.2057) Fax: +7-495-745-7002 [email protected] Russia Country Office 121069, Moscow Bolshaya Molchanovka street, 36/1 Russia

FOR MORE INFORMATION CONTACT: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop