AES Kavarna

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	26836
Company name	AES Geo Energy OOD
Country	Bulgaria
Sector	Utilities
Environmental category	A
Department	Infrastructure
Status	Active

Date SPI disclosed	June 26, 2008
Projected board date	August 26, 2008
Previous Events	Invested: December 24, 2008 Signed: December 2, 2008 Approved: September 11, 2008

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The project comprises the construction and operation of the 156 MW St. Nikola Wind Farm in the municipality of Kavarna, in the north-east of Bulgaria close to the villages of Bulgarevo, Sveti Nikola, Hadji Dimitar, Rakvovski and Porouchik Chounchevo, on an elevated plain approximately 3km from the Black Sea.

The wind park will comprise 52 3 MW V90 turbines, manufactured by Vestas A.S. (Vestas) of Denmark. The project will include a 33/110 kV substation, which will be connected to the national grid through an 8 km transmission line.

Anticipated development impact of the project

Once operational, the project will:

- increase Bulgaria’s electricity output from renewable energy by approx 330 GWh per annum, thereby helping Bulgaria maintaining its EU commitment of 11% of electricity consumption generated by renewable energy by 2010 and progress towards the 16% target by 2020;
- decrease the country’s dependence on highly-polluting coal-lignite fired generation and nuclear generation;
- in doing so, displace up to approximately 300,000 tons of carbon emissions per year – reducing pollution in the North East of the country and contributing to the effort to reduce global warming;
- help Bulgaria maintain its position as one of the main power exporters or the region;
- by nature of the size of the transaction, influence Bulgaria’s ability to attract foreign investment in the renewable energy sector and position Bulgaria as an alternative emerging market destination for wind power investments.

IFC's expected development contribution

- Assisting the sponsors in identifying and addressing (with the assistance of external consultants) key environmental and social risks;

- Financing a substantial part of the project cost, providing a loan with a longer average life than that available from commercial banks; and
- providing additional comfort to B-Loan participants through IFC’s structuring and due diligence role, as well as in light of regulatory and political risk, especially given the recent market turmoil in financial markets in Europe and the USA;

- Providing support to an IFC long time client in their quest to develop a sizeable renewable energy footprint in the region.

Environmental and social issues - Category A

The project has been classified as a Category A project according to IFC’s Environmental and Social Review Procedure because of potential impacts on migratory birds and migration corridor impacts. The project site is located in the Kaliakra Peninsula in the Via Pontica migration corridor, a major Flyway of European significance. Impacts on birds relate primarily to projected incremental mortality rates the project potentially poses and the cumulative impacts of wind development in the project area on mortality and the migration corridor. A comprehensive range of baseline bird surveys has been undertaken for the purposes of the Environmental Assessment (EA) and a Collision Risk Assessment (CRA) was undertaken using the Scottish National Heritage (SNH) model, a widely used and accepted model. Based on the CRA, as defined in detail in the EA documentation, the project is not expected to affect species viability or the viability of the migration corridor. There is nonetheless incremental mortality of endangered species associated with the project and cumulative impacts. This loss for endangered species is also modeled to be well under the SNH threshold limits and is thus not deemed significant. The project will incorporate radar and human observation and detailed turbine shutdown plans will be implemented when migratory flocks approach.

Additional key environmental, health, safety and social (EHSS) issues associated with this project include:

- environmental assessment and management;
- labor policy and contractor management;
- management of construction activities and wastes;
- temporary traffic disruption and community safety during construction;
- cultural property; and - worker health and safety during construction and operations phases.

The impacts associated with these additional issues can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The project is otherwise of obvious positive benefit as it will generate electricity from a renewable resource. AGE has completed an independent EA, independent Supplementary EA, public consultation (and will conduct additional consultation), developed a detailed Environmental Management and Monitoring Plan (EMMP) and has committed to conduct its activities in accordance with the requirements therein, and will, upon implementation of the EA, EMMP and specific additional measures described below, comply with the IFC Performance Standards on Social and Environmental Sustainability.

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