GUARANTEE FOR ECONOMIC DEVELOPMENT IN UKRAINE

Promoter – Financial Intermediary

Ukraine

Location

• Ukraine

Description

EIB guarantee in favour of the International Bank for Reconstruction and Development (IBRD), covering five IBRD investment loans in Ukraine. The IBRD projects contribute to the development of economic infrastructure and are eligible for EIB support. The guarantee will release IBRD exposure to Ukraine, enabling the IBRD to support gas purchases by Naftogaz.

Objectives

The proposed operation consists of a guarantee of up to USD 520 m to be issued by the EIB in favour of the IBRD. The guarantee will cover five IBRD loans supporting projects in the road transport, power and energy efficiency sectors against the risk of default by Ukraine. The guarantee may help the IBRD to free up sufficient financing exposure to Ukraine, so as to enable it to provide a guarantee for gas purchase alongside a working capital facility from the European Bank for Reconstruction and Development (EBRD). The IBRD guarantee aims at securing a portion of Naftogaz's gas purchases for the coming winter seasons.

Comments

The proposed operation would be an effective and innovative way to achieve the goals set by the external lending mandate (ELM). It would involve the use of the guarantee instrument in favour of another international financial institution (IFI) and enable the Bank to make a material and visible contribution to the EU's external policy in an effective manner. In line with the ELM, the operation will strengthen the cooperation of the Bank with other IFIs, developing jointly an innovative instrument and thereby maximising synergies, cooperation and efficiency. The envisaged EIB operation would be secured by the EU comprehensive guarantee under the EIB's 2014-2020 external lending mandate.

Sector(s)

• Transport
• Energy

Proposed EIB finance (Approximate amount)

EUR 466 million (USD 520 million)

Total cost (Approximate amount)

EUR 1551 million (USD 1730 million)

Environmental aspects

If undertaken within the EU, some subprojects would fall under Annex I and Annex II of Environmental Impact Assessment (EIA) Directive 85/337/EEC, as amended, and a full EIA would be required, or, respectively, the competent authority would be required to determine the need for a full EIA. EIAs have been undertaken for all activities with potential for a significant environmental and social impact, as requested by the IBRD and Ukrainian authorities. The IBRD ensures full compliance of the projects with World Bank safeguard policies and Ukrainian regulations. This includes the full EIA process from the identification of environmental impact, definition of mitigating measures, and public consultation. Implementation of the agreed mitigation measures, as captured in the environmental management plans, is subject to monitoring by the IBRD. The IBRD reports that no particular environmental or social risks have materialised or are anticipated. No substantial issues related to land acquisition or resettlement have been flagged. EIA and resettlement plan requirements have been enforced where appropriate. The operation is therefore considered to be compliant with the principles of applicable EU environmental and social legislation and acceptable to the EIB.

Procurement

Project procurement is carried out in accordance with the applicable World Bank procurement guidelines which are acceptable for the EIB. Procurement procedures applied to underlying projects are reported to be satisfactory for the IBRD and on this basis are acceptable for the EIB. No exceptional procurement risks have been identified for the EIB operation. Regarding the applicable thresholds, covenant of integrity and publication requirements, these are considered acceptable in this specific instance due to the circumstances.

Status

Signed - 9/10/2015