World Bank Financing to Help Ukraine Reduce Energy Intensity 50 Percent by 2030

May 19, 2011

Washington, May 19, 2011 - The World Bank’s Board of Directors today approved a US$200 million loan for the Energy Efficiency Project in Ukraine. The loan will finance investments in energy saving measures in industrial companies, municipalities and municipally owned enterprises and energy service companies.

The Project will contribute to helping Ukraine achieve its ambitious targets to reduce energy intensity by 20% by 2015 and by 50% by 2030. It will also contribute to decreasing Ukraine’s dependence on imported gas, hence mitigating energy supply security risks and decreasing the cost of energy supply.

“The potential for energy efficiency in Ukraine is enormous. If the country were to reduce its energy intensity to the level of Poland it could reduce its energy consumption by about one third.  This could translate into a reduction of at least 30% in the consumption of natural gas,” said Martin Raiser, World Bank Country Director for Ukraine, Belarus and Moldova.

The investments will have environmental and broader social benefits as well. The Project will help reduce CO2 emissions by at least 1 million tons annually. And it is expected to contribute to job creation, both directly and indirectly through the benefits of increased cost competitiveness resulting from less energy intensity.

The project is a Financial Intermediary Loan to UkrEximBank as borrower which has a successful track record of lending to industrial companies for energy efficiency projects. UkrEximBank will lend directly to industrial and municipal energy efficiency projects.  In addition, UkrEximBank will onlend the funds to Participating Banks (PB) to create a financial market for energy efficiency projects.

The types of energy efficiency investment sub-projects fall into six broad categories: (i) modernization of inefficient and obsolete equipment/facilities; (ii) installation of highly energy-efficient industrial equipment and processes  for new production capacities whose current energy use considerably exceeds current best practices; (iii) utilization of waste gas and heat and excess pressure from industrial processes; (iv) improvement of industrial systems which involves a suite of measures to increase energy efficiency; (v) energy loss reduction in municipal sector enterprises (largely focusing on district heating); and (vi) energy loss reduction in buildings.

The Bank has supported Ukraine in its efforts to reform and restructure its energy sector through policy dialogue, technical assistance and financing of adjustment and investment projects since the early 1990s, including two Hydropower Rehabilitation Projects, Power Transmission Project, Kyiv District Heating and Kyiv Public Buildings Energy Efficiency Projects, Coal Sector Adjustment Loan and Coal Sector Pilot Project.  The World Bank is also working with the Government and other international financial institutions to provide technical assistance in restructuring of the gas sector with an objective to facilitate investments in gas modernization.

Since Ukraine joined the World Bank in 1992, commitments to the country total about US$7.0 billion for 38 operations.

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