Announcement of the World Bank's Support for a Hydropower Project in Ukraine on April 12, 1995

FOR IMMEDIATE RELEASE The World Bank 1818 H Street, N.W., Washington, D.C., 20433, USA News Release No. 95/69ECA Contact: Jan Pakulski Phone: (202) 473-1797 Fax: (202) 676-0585 E-mail: JPakulski@Worldbank.org WORLD BANK SUPPORTS HYDROPOWER PROJECT IN UKRAINE WASHINGTON, April 12, 1995 -- The World Bank yesterday approved a $114 million loan to help rehabilitate hydropower plants and improve power system control in Ukraine. Ukraine, with its highly educated labor force, fertile lands, abundant natural resources and proximity to European markets, has tremendous growth potential. Although the country is still grappling with inflation, lagging exports and other economic failings, its industrial and agricultural sectors are poised to boost significantly Ukraine's shift to a market economy. The key to growth lies in efficiently and sustainably meeting energy demands. Ukraine currently imports nearly half its energy, buying crude oil, petroleum products and natural gas mainly from Russia and Turkmenistan. By late 1994, overdue payments for imported gas exceeded $2 billion. The energy intensity of GDP in the 1990-1993 period reached 2.5 kilogram oil equivalent per US dollar, a ratio several times higher than in most developed countries. Domestic energy production, consisting of fossil fuels and primary electricity (hydro and nuclear power), represented about 50 percent of energy consumption in 1993-94. The Ukrainian power industry was developed as part of the integrated power system of the former Soviet Union. The new World Bank loan backs the government's ongoing effort to adapt existing utilities to the requirements of a new market economy. Increased generation efficiency will also reduce fuel costs and improve Ukraine's balance of payments. Improving the quality of electricity supply will facilitate the modernization of industry and encourage foreign investments. In the past, fluctuations of electricity frequency have posed a risk to electrical equipment for both consumers and producers of power. Many of the existing hydropower plants in Ukraine are old and in need of rehabilitation. The loan will help improve the overall efficiency and quality of electricity --- more --- Archives/Records Center, H 8-OO1 ( 1) supply, and in particular: (i) improve the efficiency, reliability, safety and environmental performance of hydropower plants; (ii) increase hydropower generation capacity; (iii) improve the quality of electricity supply by upgrading load and frequency control, which would also improve the safety of nuclear plants; and (iv) reduce fuel costs by facilitating the economic dispatch of generating units. The project consists of the following components: * rehabilitation program for eight major hydropower plants (Dnieper I and II, Kiev PSP, Kakhovka HPS, Kiev, Kanev, Kremenchug, and Dniprodzerzhinsk hydropower plants;) which are at least 20 years old; * installation of dam safety monitoring systems at the main water reservoirs on the Dnieper river (Kiev, Kanev, Kremenchug, Dnieper, Dniprodzerzhinsk, and Kakhovka); * up-grade of communications, dispatEh, system control and protection, and generating unit control; and * technical assistance for project implementation, and optimization of the use of the reservoirs on the Dnieper river. The project will be implemented over a five-year period with an estimated completion date of June 2000. The beneficiaries, Dniprohydroenergo (DHE) and National Dispatch Center (NDC), will be responsible for implementing the project, and will be assisted by a Project Coordination Unit (PCU). The PCU will coordinate project preparation activities, technical assistance, scheduling, reporting, training, and other aspects requiring coordination between the implementing agencies. The total project cost is estimated at $190.2 million equivalent, of which $106.7 million is in foreign exchange. The government of Ukraine will enter into subloan agreements with the beneficiaries and the loan will be onlent to DHE and the NDC for 17 years, including five years of grace, with interest at the standard Bank rate (currently at 7.09 percent) plus a mark-up of 1.5 percent a year. Co-financing grants totaling $12.9 million will be provided by other donors. Ukraine joined the World Bank in September 1992. This is the third loan World Bank approved for the country. A $500 million rehabilitation loan was approved in December 1994 to help stabilize and restore growth to the Ukrainian economy and a $27 million loan was approved in June 1993 to strengthen government institutions in support of economic reforms. ---0 ---