Report No. 23827

Report No: I051829 <--Please check for duplicates! Integrated Safeguards Data Sheet (Initial) Public Disclosure Authorized Date ISDS Prepared/Updated: 03/13/2002

Section I - Basic Information

A. Basic Project Data Country: SLOVAK REPUBLIC Project ID: P051829 Project: Industrial Cogeneration Project Task Team Leader: Helmut Schreiber Authorized to Appraise Date: March 15, 2002 IBRD Amount ($m): Bank Approval: July 3, 2002 IDA Amount ($m): Managing Unit: ECSIE Sector: PY - Other Power & Energy Conversion; VY - Other Environment Lending Instrument: Specific Investment Loan (SIL) Status: Lending

Public Disclosure Authorized I.A.2. Project Objectives: The major objective of the project is to decrease the emissions of greenhouse gases (GHG) in a cost-effective and reasonably low-risk manner. This objective would be achieved by means of displacing grid electricity with more efficient electric generation from a CHP plant at the site of Chemosvit a.s. (a large producer of foil packaging materials and synthetic fibers). An associated Project objective is to demonstrate small-scale gas-fired cogeneration in the Slovak Republic.

I.A.3. Project Description: The energy system of Chemosvit a.s., a large Slovakian producer of foil packaging materials and synthetic fibers, was designed primarily to meet the demand of company plants for steam and hot water. On-site cogeneration at the CHP plant of Chemosvit's subsidiary energy supplier, Energochem, Public Disclosure Authorized meets approximately half of Chemosvit's electrical needs. The rest of demand for electricity is met by purchases from the public grid.

In line with its global objective to decrease GHG emissions, the project will introduce investments necessary to modernize Chemosvit Energochem's electric production capacity in a way that will ensure maximum efficiency and a high standard of environmental compliance. Without such modernization, the plant would most likely lose its physically obsolete steam-turbine capacity and deteriorate into a heat-only boiler plant, with all its electricity purchased from the grid. Under the project, some of the most efficient technology for gas-fired on-site cogeneration will be used.

The investment components of the project will include, first of all, the supply and installation of 3 x 2.7 MWe gas motors. At a later stage in the Public Disclosure Authorized project, the existing steam turbines will be retired and replaced with a steam turbine of 3.75 MWe capacity for a total of 11.85 MWe of electric capacity. For heat, the gas motors will have 8.7 MWt capacity while the steam turbine will have 17.3 MWt capacity. The existing heat-only gas-fired boilers will cover the remaining 19 MWt of peak heat demand. In addition, the implementation of the project will require the installation of some new gas-supply, heat exchange and distribution systems, and electric power transformation and distribution equipment. A new building for the gas motors will be built. The building will have either one stack or three stacks (one for each gas motor).

I.A.4. Project Location: (Geographic location, information about the key environmental and social characteristics of the area and population likely to be affected, and proximity to any protected areas, or sites or critical natural habitats, or any other culturally or socially sensitive areas.) The project site is located in the small town of Svit, Slovakia. The town is situated 8 km west of the town of Poprad, in a long valley stretching between the High Tatry mountains in the north and the Low Tatry mountains in the south. The elevation of the town is about 750 m above sea level. The most significant environmentally sensitive area close to the project site is the Tatransky National Park (TANAP), which covers an extensive territory of the High Tatry mountains spanning the Slovakian border and continuing into Poland. In 1993, the Tatransky National Park was listed by UNESCO in the Global Net of Biosphere Reservations as the "Biosphere Reservation TANAP". The area of the National Park in Slovakia is about 74 kmy. Around the National Park is a protection zone (buffer zone) with an area of 36.5 kmy. The closest point on the border of TANAP is north of Svit at a distance of about 3.5 km from the project site.

The National Park of Low Tatry (NAPANT) is another protected area southwest of the project site, but both the distance (about 18 km) and the dominant wind direction make it unlikely for NAPANT to be affected by the project.

Some level of environmental protection is also applied to the natural area of Baba immediately south of Svit. The distance from the project site to Baba's northern border is about 300 m. However, Baba is much smaller and environmentally less sensitive than TANAP or NAPANT.

The origin of Svit is closely linked to the history of the Chemosvit company. The town was founded in the 1930s when the Bata company established Chemosvit as its subsidiary company here. Today, Svit is still an industrial town with 7,500 residents, with about 1,600 of its people employed by Chemosvit. Retirees from Chemosvit form another sizeable group of its population.

The predominant wind direction is from the west to the east. Besides the eastern part of Svit itself, the populated areas downwind (within a 5 km radius of the project site) include the villages of Batizovce, Gerlachov, and Spisska Teplica. The larger town of Poprad (pop. about 60,000) is 8 km to the east.

B. Check Environmental Classification: ERROR: Invalid UNID; UNID must be a 32-digit hex string. Comments: The environmental category A was assigned to the project rather as a precautionary measure mostly due to the relative proximity of the above-mentioned protected areas. Otherwise, neither the size of the project nor its nature would warrant this category. This is not a green-field project but a modernization of an existing industrial facility with a limited expansion of existing energy production capacity. The environmental quality of the fuel used by the project entity Chemosvit Energochem (natural gas) and the contribution of project-induced emissions

- 2 - to the existing ambient air pollution is small and certainly within the limits established by the Slovak authorities as well as those recommended by the World Bank. With respect to emissions of greenhouse gases, the project has a positive environmental impact when displacement of more pollution-intensive electricity from the grid is considered. C. Safeguard Policies Triggered Policy Applicability Environmental Assessment (OP/BP/GP 4.01) Forestry (OP/GP 4.36) Natural Habitats (OP/BP 4.04) Safety of Dams (OP/BP 4.37) Pest Management (OP 4.09) Involuntary Resettlement (OP/BP 4.12) Indigenous Peoples (OD 4.20) Cultural Property (OP 4.11) Projects in Disputed Territories (OP/BP/GP 7.60)* Projects in International Waterways (OP/BP/GP 7.50) *By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas

Section II - Key Safeguard Issues and Their Management D. Summary of Key Safeguard Issues. Please fill in all relevant questions. If information is not available, describe steps to be taken to obtain necessary data.

II.D.la. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts. The main issue from an environmental assessment point of view is whether the operation of the expanded cogeneration plant of Energochem would have any significant impact on the air quality in the populated areas and in the above-mentioned national parks. In particular, NOx concentrations have required close examination since operation of gas motors is associated with high temperatures. NOx was focused on also because the other common energy-related pollutants (SOx, particulates) are practically not present in this project since the plant uses natural gas.

The existing 30-minute average ambient concentration of NOx in the town of Svit, resulting largely from Energochem's existing heat-only boilers (HOBs), is estimated at 17 cg/m3 (micrograms per cubic meter of ambient air) in Chemosvit's environmental statement for the Ministry of Environment. The project introduces gas motors as a new source of natural gas combustion with a stack(s) currently proposed to have a height of 30 m. This is in addition to the three stacks of the existing HOBs with an installed capacity of 3x50 tons of steam per hour. Dispersion modelling has shown that the highest value for the one-hour-mean contribution of the gas motors is 48 cg/m3 NO2, and the resulting concentrations are clearly below the Slovakian standard of 200 cg/m3 NO2 for the 30-minute-mean. The highest value of the annual mean is 1.0 cg/m3 NO2, which is far below the Slovakian standard of 80 cg/m3 (Source: Nariadenie Vlady c. 92/1996 Z.z. Priloha c. 6, B-1, Strana 129-130) and the EU standard (Source: Directive 1999/30/ European Community of 22.4.1999) of 40 cg/m3 NO2 for human beings. The highest value of the 24-hour mean is 10 cg/m3 NO2, which is clearly below the Slovakian standard of 100 cg/m3 N02. The highest value of 99.8 percentile (max. hourly mean which may be exceeded 18 times per

-3 - year) is 16 cg/m3 N02, which is clearly below the EU standard of 200 cg/m3 for N02.

The spatial distribution of the pollutants in the middle of the year clearly reflect the average annual wind direction distribution. The maximum additional pollution load lies approx. 300 to 400 m to the east of the planned location. After approx. 1.2 km the additional pollution load has already fallen by 50%. A secondary maximum lies to the west, which however is already considerably less distinctive regarding the absolute level of the values than the first maximum. To the north, in the direction of the National Park TANAP, the additional pollution as a result of the planned plant is absolutely unimportant. The natural area Baba will only be affected to a very slight extent by pollutants, which means that damage to the vegetation can be ruled out. The value here remains clearly under the protection value for plants of 30 cg/m3 NOx, which is applicable within the EU. Directly at the edge of the natural area Baba, the value is 0.4 - 0.5 cg/m3 NOx and falls fast to < 0.1 cg/m3 NOx. So the additional pollution as a result of the planned plant is insignificant.

In the dispersion calculations it is presumed that the three gas motors operate continuously over the whole year. In reality the operation time will be lower so that the emissions will accordingly be proportionally lower. The dispersion model is based on representative weather statistics from Poprad Airport for the years 1993 -2000, which were made on the basis of average hourly values and which were made available for the emission forecasts by the German National Meteorological Service. On the basis of these weather statistics the expected emissions can be realistically simulated, not only for the annual mean but also for peak loads.

The cogeneration plant would operate continuously, including night time. During plant operation, noise emissions of up to 66 dB (A) would arise in the vicinity of the cogeneration plant if sound reduction measures were not taken. This does not meet the night-time guidance value of 45 dB (A) used by the German Environmental team based on the Technical Instructions for Protection against Noise (TA Lcrm). This value coincides with the World Bank standard of 45 dB (A) for night-time noise level in residential areas. Thus, sound reduction measures are envisaged (see Section II.D.3 below). On the basis of a dispersion calculation with noise reduction measures, considerable noise pollution for the adjacent residential area as well as for the protected areas can be ruled out. In order to rule out noise pollution during the construction period, construction work should be carried out only during day time.

No potential large-scale, significant, or irreversible impacts have been identified.

II.D.lb. Describe any potential cumulative impacts due to application of more than one safeguard policy or due to multiple project component. No potential cumulative impacts have been identified.

II.D.lc Describe any potential long term impacts due to anticipated future activities in the project area. In case of expanding demand for Energochem's heat (e.g., by its mother company Chemosvit or by the town of Svit due to connection of new consumers to the district heating system), installation of additional gas

-4 - motor(s) may be warranted in the future. However, this is highly unlikely to bring the ambient concentrations close to the standards in effect in Slovakia or expected under the EU directives.

II.D.2. In light of 1, describe the proposed treatment of alternatives (if required) In its Environmental Impact Assessment (EIA), the Slovak Ministry of Environment chose not to request an analysis of alternatives due to the small size of the project. Nevertheless, in the feasibility study implemented for the Bank by the German company Fichtner, nine project alternatives were identified (final feasibility study is available in the Project File). When indirect impacts of the project (namely, the displacement of more pollution-intensive electricity from the grid) are considered, the proposed project, along with the option of cogenerating electricity based on combined-cycle technology, has been shown to have the lowest global emissions of GHG into the atmosphere. It has to be emphasized that the cogeneration of heat (or steam) and electricity is today's state of the art for plants of comparable capacity. In addition, the emission concentrations, which are half of the Slovakian (and German) standards, correspond to the state of the art of emission reduction technology.

II.D.3. Describe arrangement for the borrower to address safeguard issues Pursuant to the procedure under the Slovak Government's Act no. 127/94 Coll on environmental impact assessment, the Environmental Department of Chemosvit prepared an environmental impact statement indicating the company's intent to implement the project and describing its expected environmental impacts. The statement, called Zamer (Intent), was sent to the Ministry of Environment (MoE) in late October 2001. The approval from the MoE was received on January 7, 2002, after receiving no objections from other ministries, the public, or local authorities.

This process provides the Bank with: (i) the necessary assurance of the "in-country" acceptance of the project, (ii) useful baseline information on the state of the environment in the project area, and (iii) initial analysis of the environmental impacts expected from the project.

It should be noted that the Ministry of Environment has been the major counterpart in the selection of potential projects aimed at GHG reduction in Slovakia. The Chemosvit project was selected through this process.

Specific measures to address the issues of environmental protection in accordance with the requirements of OP/BP/GP 4.01 have been identified in the Environmental Management Plan (EMP) prepared by a group of independent environmental experts contracted by the German Federal Ministry of Environment (the experts have followed the Terms of Reference provided by the World Bank). The EMP stipulates noise control measures which consist of the installation of sound absorbers in the stack and at the inlet-air and exhaust-air openings. According to the EA Report, this will bring the noise levels down to 42 dB (A), which is sufficient to meet the TA Lcrm and World Bank's standard of 45 dB (A) for night-time noise level in residential areas. Noise emission measurements after the start of operation at important noise sources.

For NOx control, the emission standards required in the technical

- 5 - specifications for the gas motors will be set at 250 mg/Nm3 according to the German 1/2 TA Luft standard, which is more stringent that the applicable Slovak (500 mg/Nm3) and World Bank's (320 mg/Nm3) standards. Such standards can be achieved only by low-NOx motors. As a measure to ensure the accuracy of the dispersion modeling conclusion about low levels of NOx, the EMP requires continuous monitoring of NOx concentrations in the protected area of TANAP.

Environmental issues will also be revisited at the stage of obtaining the construction permit from the local authorities. By that time (currently estimated as August-September 2002), the 2nd stage bidding documents for the project will be finalized, making more technical details of the project available for the local authorities' review.

II.D.4. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. The project stakeholders are represented, first of all, by the staff of the project implementing company Energochem (Chemosvit's subsidiary for energy supply), the mother company Chemosvit, and its several production subsidiaries. Energochem's staff consists of 74 persons (60 workers and 14 personnel of high technical qualifications). This staff is likely to be kept by Energochem, although transfers of staff will be necessary - especially, from the downsizing steam-turbine operation to the new gas-motor operation introduced by the project.

The Chemosvit company's most important stakeholders are the staff of the facilities receiving the heat and electricity from Energochem, as well as the company as a whole. During project preparation, consultations were held with representatives of Chemosvit's Social Department, during which the commitment of Chemosvit's staff to the project was reconfirmed.

The Svit Municipality and residential consumers of heat in the town of Svit are also important stakeholders because part of the heat from the project will be supplied to their apartments (through building-level substations being introduced by the Municipality). Receiving heat from Chemosvit Energochem is the most economical option for these residents since a substantial part of the heat they will receive from the plant will be the waste heat from its new gas motors. At the same time, the residents of Svit (especially, its eastern part) also represent the main recipients of air pollution from the plant's additional stack(s), although this pollution is not high (see Section II.D.la above) and clearly within the allowable limits. The Municipality has been closely involved in the discussion of project's costs and benefits, and its recent decision to support district heating modernization was made in close consultation with Chemosvit and with full consideration of the proposed project.

Information about the project was initially placed on the bulletin board of the Svit Municipality in November 2001. According to the Slovak law, this information must be available for public review and comment for one month before the Ministry of Environment can give its official approval for the project. During this time, a number of other agencies of the Slovak Government, as well as NGOs such as the Center of Environmental Information in Banska Bystrica, had an opportunity to review this information. No objections were raised. Newspaper articles in the regional

- 6 - press (Tatransky Dennik, November 21, 2001) have been published highlighting particularly the 15-year heat supply agreement from Energochem's plant to the Town of Svit.

In February 2002, the Mayor of Svit acknowledged the receipt of the EA Report implemented by the German consultants and confirmed that the Town of Svit would follow the established Slovak procedure for disclosure of such information to the public, which includes placing a translated version of the Summary EA Report on the town-hall bulleting board. The complete version of the EA Report would be translated into the Slovak language and made available to the public on request. The Bank will not object to this, but will also require that public consultation meetings are held in Svit to make sure that all potentially affected groups are informed of the project, its benefits, as well as its environmental and social impacts. One condition for negotiations is that the Municipality will a) hold a public consultation on the project, clearly identifying the actions to be taken and their anticipated impacts and obtaining inputs from the public; and b) provide documentation to the Bank that describes the consultations, the issues raised, and actions to be taken, if any, in response to the inputs that are received.

Furthermore, the full EA Report will be published on the Internet site of the Slovak Environmental Agency (www.sazp.sk). The Project Information Document (PID) is already available to the public through the Internet (http://www.worldbank.org/pics/gef/sk51829.txt).

E. Safeguards Classification. Category is determined by the highest impact in any policy. Or on basis of cumulative impacts from multiple safeguards. Whenever an individual safeguard policy is triggered the provisions of that policy apply.

I S1. - Significant, cumulative and/or irreversible impacts; or significant technical and institutional risks in management of one or more safeguard areas [XI S2. - One or more safeguard policies are triggered, but effects are limited in their impact and are technically and institutionally manageable I S3. - No safeguard issues I SF. - Financial intermediary projects, social development funds, community driven development or similar projects which require a safeguard framework or programmatic approach to address safeguard issues.

F. Disclosure Requirements Environmental Assessment/Analysis/Management Plan: Expected Actual Date of receipt by the Bank 2/26/2002 2/26/2002 Date of "in-country" disclosure 2/28/2002 2/27/2002 Date of submission to InfoShop 3/1/2002 3/5/2002 Date of distributing the Exec. Summary of the EA to the ED (For category A projects) 2/20/2002 3/5/2002 Resettlement Action Plan/Framework: Expected Actual Date of receipt by the Bank Not Available Not Available Date of "in-country" disclosure Not Available Not Available Date of submission to InfoShop Not Available Not Available Indigenous Peoples Development Plan/Framework: Expected Actual Date of receipt by the Bank Not Available Not Available Date of "in-country" disclosure Not Available Not Available

- 7 - Date of submission to InfoShop Not Available Not Available Pest Management Plan: Expected Actual Date of receipt by the Bank Not Available Not Available Date of "in-country" disclosure Not Available Not Available Date of submission to InfoShop Not Available Not Available Dam Safety Management Plan: Expected Actual Date of receipt by the Bank Not Available Not Available Date of "in-country" disclosure Not Available Not Available Date of submission to InfoShop Not Available Not Available

If in-country disclosure of any of the above documents is not expected, please explain why. Signed and submitted by Name Date Task Team Leader: Helmut Schreiber 07-Mar-02 Project Safeguards Specialists 1: Victor B. Loksha/Person/World Bank 07-Mar-02 Project Safeguards Specialists 2: Project Safeguards Specialists 3: Approved by: Name Date Regional Safeguards Coordinator: Bernard Baratz 07-Mar-02 Sector Manager/Director: Henk Busz 07-Mar-02

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