World Bank and UkrEximBank Move Ahead with Energy Efficiency Project

June 10, 2011

Kyiv, June 10, 2011 -  The Loan Agreement for the Energy Efficiency Project was signed today by Mr. Mykola Udovychenko, Chairman of the Board of JSC UkrEximBank and Mr. Martin Raiser, World Bank Country Director for Ukraine, Belarus and Moldova.

The World Bank’s Board of Directors approved a US$200 million loan for the Energy Efficiency Project in Ukraine on May 17, 2011. 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.

"To reduce Ukraine's energy intensity by 50% by 2030 as the government plans, will require around USD 20 billion in investments. But these would easily pay for themselves through improved competitiveness, reduced import needs and greater energy security, as well as reduced carbon emissions. This loan is a contribution to get this agenda moving and encourage commercial lenders to follow suit," said Martin Raiser, World Bank Country Director for Ukraine, Belarus and Moldova.

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.

Having signed the Loan Documents, the World Bank and UkrEximBank are looking for cooperation with the Verkhovna Rada since the Energy Efficiency Project documents need to be ratified by the Ukrainian parliament.

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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