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| Petropavlovsk Kamchatsky Municipality |
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| 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 | 26363 |
| Company name | Petropavlovsk Kamchatsky |
| Country | Russian Federation |
| Sector | Utilities |
| Environmental category | B |
| Department | Sub-National Finance |
| Status | Active |
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| Date SPI disclosed | October 10, 2007 |
| Projected board date | December 4, 2007 |
| Previous Events | Invested: February 8, 2008
Signed: December 27, 2007
Approved: December 21, 2007 |
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| View Environmental & Social Review Summary (ESRS), click here |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
The proposed project involves implementation of a program of capital investments in local infrastructure by the Municipality of Petropavlovsk-Kamchatsky (MPK) in Russia. The key areas of investment are roads, health, education and housing and communal services.
In 2007 and 2008 MPK has envisaged rehabilitating 86 km of the main streets. In addition, the City also plans to undertake some more comprehensive road reconstruction work involving dismantling and replacement of the old road pavement in 2008. MPK will also upgrade its social infrastructure through modernization and re-equipping municipal health and education facilities and essential renovations of the municipal housing. |
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| Project sponsor and major shareholders of project company |
Petropavlovsk-Kamchatsky (the City) is the capital of Kamchatka Krai (the Region), which was formed only on July 1, 2007 as a result of a merger of two earlier regional jurisdictions, the Kamchatka Oblast (population 352,000) and the Koryak Autonomous Okrug (population 25,000). While Kamchatka’s natural resources include gold, silver, copper, natural gas, and coal, and it has substantial timber reserves, its economy depends primarily on fishing and fish-processing. In recent years, ecotourism has also been growing in the Kamchatka Peninsula. However, the economic development of the region has been hindered by inadequate infrastructure, remote location, dependence on fuel imports and high energy prices.
MPK’s revenues grew at an average rate of 25% p.a. during 2004-2006 and reached RUB4.7 billion ($180 million) in 2006. Municipality’s operating margin has grown steadily from zero to about 13% of total revenues in four years. Simultaneously MPK has also rapidly increased its capital investment program in order to improve municipal service coverage and quality. The City’s capex program is expected to reach 13% of the total budget in 2007, while keeping the budget deficit at 5-6% of the total revenues. |
| Total project cost and amount and nature of IFC's investment |
| The total project cost is estimated at RUB1.74 billion (approximately $70 million). The proposed IFC investment is a senior loan of up to RUB 700 million (approximately $27 million). The expected maturity of the loan is 8 years, including 2 year grace period. |
| Location of project and description of site |
| The city of Petropavlovsk-Kamchatsky is one of the easternmost municipalities of Russia located on the Peninsula of Kamchatka. |
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| Anticipated development impact of the project |
The following are expected to be the main developmental impacts of the project:
- help contribute to economic growth and the competitiveness of local firms by improving the local infrastructure,
- allow MPK to better match its liabilities with the expected benefits of its infrastructure investments over their service life and free up resources for additional productive investments,
- extend MPK’s credit history. Accompanying technical assistance will help MPK improve its procurement practices and support its efforts to improve effectiveness of financial management. |
| IFC's expected development contribution |
| The proposed loan will provide the Municipality of Petropavlovsk-Kamchatsky access to long-term Rubles on reasonable terms, which are difficult to obtain from other sources, to implement a highly needed infrastructure investment program. It will help MPK diversify its sources of long-term finance over the medium term. |
| Environmental and social issues - Category B |
The project is a category B investment according to IFC’s Environmental and Social Review Procedure. The project has limited potential adverse environmental and social (E&S) impacts, which are mainly associated with road reconstruction works. E&S impacts are assessed and will be managed in line with Russian regulatory requirements. To minimize third party risks associated with client’s contracting activity, the implementing Agency will introduce a screening mechanism to identify if contracts for road reconstruction works are likely to be in significant non-compliance with IFC’s Performance Standards and will address them via appropriate Action Plans.
A summary of IFC’s environmental and social review findings for the project including the rationale for the B categorization is publicly available in the Environmental and Social Review Summary (ESRS). |
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| For inquiries about the project, contact: |
Vasiliy L. Nikiforov, Deputy Mayor
Municipality of Petropavlovsk-Kamchatsky
14 Leninskaya St.
Petropavlovsk-Kamchatsky 683000
Russian Federation
Telephone: +7-4152-23-50-06
Fax: +7-4152-23-51-00
The environmental documents will be made available at the above location. |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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