Ukraine - Coal Mining Restructuring Project

Report No. PID8618 Project Name Ukraine-Coal Mining Restructuring Project Region Europe and Central Asia Sector Mining Project ID UAPE40561 Borrower(s) Ukraine Implementing Agency Ministry of Fuels and Energy Environment Category B Date This PID Prepared January 12, 2000 Projected Appraisal Date June 2000 Projected Board Date September 2000 Background. Since the presidential elections of November 1999, the Government of Ukraine launched deeper and more comprehensive economic reforms. An administrative reform program is on-going, which is also affecting the coal sector. Building upon the experience gained under two previous Bank-supported operations in Ukraine's coal sector (Coal Pilot Project and Coal SECAL), the Government wants to accelerate the closure of uneconomic mines. The relevant elements of the Bank's strategy supporting Ukraine's coal sector restructuring are: improvement of macroeconomic indicators, efficient supply of energy; protection of the environment and mitigation of the social costs of adjustment. Objective. The project development objective is to increase the economic efficiency of coal mining in Ukraine. The key performance indicator is a reduced number of loss-making mines. Description. The project has three main physical components: payment of social benefits to miners and pensioners affected by mine closures; civil works to render ex-mine sites safe and environmentally acceptable; and public works to provide temporary employment for socially and environmentally useful work. In addition, the project comprises a technical assistance and training component centered mainly on new employment creation and regional regeneration. The proposed Bank loan would finance social payments to laid-off miners and underground works for closure as well as works for environmental mitigation. Financing. Total project costs are estimated at about US$ 300 million. The proposed Bank loan would finance up to US$ 200 million. The remainder would essentially be financed by the Ukrainian budget. Grant funding is being sought for technical assistance and training. Implementation. The project is planned to be executed over a period of two to three years. A new central unit would oversee and coordinate project implementation. The mine closure agency UDKR would be responsible for paying the social benefits to ex-miners as well as for contracting and supervising the physical works for closure. The Donetsk and Lugansk Oblast Administrations would be responsible for executing the public works. The Government would sign agreements with the executing entities acceptable to the Bank. The executing  entities would be subject to project accounting and auditing. Monitoring and evaluation would be executed by the central project unit, partly assisted by consultants. Sustainability. The mine closures are irreversible. While this project alone cannot bring about a sustainable Ukrainian coal sector, it certainly is a significant step towards sustainability. Lessons learned from past operations in the country/sector. The project would employ improved mine closure procedures and secured financing. The project would be restricted to proven project components, implemented on the basis of proven institutional arrangements. Poverty Category. Although the project is not a poverty focused operation, it helps alleviating poverty in municipalities affected by coal mining restructuring through adequate financing of social benefits, public works and assistance for new employment. Environmental Aspects. The project is rated category B. The project does not support increased coal output. Instead, it helps concentrating the production in a smaller number of efficient mines, a shift which reduces the environmental impact of coal mining. The mine closure agency UDKR would be responsible for mitigating environmental damages caused by previous mining activities at the closed sites. Program Objective Category. The project's Program Objective Category is being determined as Environment. Contact Points: The InfoShop The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Task Manager Heinz Hendriks Sr. Mining Specialist Industry and Mining Unit The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-2887 Fax: (202) 522-0396 Note: This is information on an envolving project. Certain components may not be necessarily included in the final project. Processed by the InfoShop week ending January 14, 2000. - 2 -  Annex Because this is a Category B project, it may be required that the borrower prepare a separate EA report. If a separate EA report is required, once it is prepared and submitted to the Bank, in accordance with OP 4.01, Environmental Assessment, it will be filed as an annex to the Public Information Document (PID) . If no separate EA report is required, the PID will not contain an EA annex; the findings and recommendations of the EA will be reflected in the body of the PID. -3-