DPSP III: Sustainable Urban InfrastructureCountry / Region: Ukraine | Project Id: PCTFGL725A | Fund Name: CTF |

MDB : International Finance Corporation

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Comment 1 Nicolas vonKalm

Germany Dear colleagues,we have the following questions/comments:there seems to be inconsistency with respect to the amount to be committed:according to IFC proposal document 21 M€, but according to approval text24,157,350 €, according to resource availability 24.15 M$, according to cover pageEuro and USD amountCountry: it does not become clear whether projects will be focused on Ukraine or ifother countries should be eligible as well and if so, which countriesConsistency with DPSP III: does the proposal relate to any of the project conceptnotes in the endorsed DPSP III paper (annex 1 and 2)?Best regards,Nicolas

Oct 23, 2018

Response 1 AndreyShlyakhtenko

IFC Comment 1:[T]here seems to be inconsistency with respect to the amount to be committed:according to IFC proposal document 21 M€, but according to approval text24,157,350 €, according to resource availability 24.15 M$, according to cover pageEuro and USD amountIFC response 1:The correct amount of investment funds requested under this CTF program is EUR21 million (and USD 0.6 million MPIS), as is indicated in the Program proposaldocument. The approval text has been revised accordingly.Comment 2:Country: it does not become clear whether projects will be focused on Ukraine or ifother countries should be eligible as well and if so, which countries.IFC response 2:IFC’s own Sustainable Cities Platform is global and covers many countries, withinitial significant focus on middle income countries. The requested CTF funds,however, will be used to support IFC’s work specifically in Ukraine, as correctlyindicated in the Sub-Program title, decision text, and Sub-Program description file.Comment 3:Consistency with DPSP III: does the proposal relate to any of the project conceptnotes in the endorsed DPSP III paper (annex 1 and 2)?IFC response 3:This Sub-Program builds upon and combines the two concepts submitted by IFC aspart of the pipeline for the endorsed DPSP III paper: Waste-to Energy andSustainable Urban Transport (see below for further details). Unlike the originallyproposed concepts that targeted individual infrastructure sectors, however, this Sub-Program takes a more holistic and strategic approach suggesting that some of themost pressing municipal needs can be better addressed as a package. This approachnot only reflects the potential efficiency of project preparation, improved andbroadened dialog with IFC clients, and possibility for lowering project transactioncosts, but also responds to the manner in which individual infrastructure activitiesare evaluated, planned, and implemented by municipalities.Specifically, this Sub-Program builds around the following two concepts included inthe DPSP III paper:1. Waste-to-Energy concept (indicative request of USD 40 million), part of theoriginal DPSP III Sealed pipeline (annex 1). The concept indicates that “The projectwill manage increasing municipal solid waste (“MSW”) in a sustainable way (i.e.generating clean energy through WtE) and support renewable sources of energy tocombat climate change. [] The Project will also help facilitate inclusive growth sincethe poor suffer disproportionately due to improper waste disposal. The project willinitially focus on Waste to Energy but, depending on the market situation, othertechnologies for waste disposal such as anaerobic digestion and composting could

Oct 25, 2018

be considered, as well as waste collection, transport, and treatment of hazardouswaste.”2. Sustainable Urban Transport concept (initial request of USD 45 million), part ofthe original DPSP III Reserve pipeline (annex 2). The concept indicates that thework was going to focus on: “[] providing financing to test new private-sector drivenapproaches to support expanding mass transit systems and improve non-motorizedtransport options in the context of judicious land use, across several countries. Thiswork will stimulate the creation of an urban environment that reduces residents’overreliance on private cars, even as cities grow bigger and richer. [] The currentpipeline includes: (a) Significant expansions to metro networks in some of the ECAcountries, which are likely to have a major impact on the cities’ transportinfrastructure; (b) Major improvement to a city’s public transport system by creatinga full circle of the city through tramway, leveraging some existing train infrastructurein an ECA country as well; (c) Improvements to the logistical side as well asmodernizing and decarbonizing the rolling stock of the buss transit systems acrossmultiple countries in AFR, EAP, ECA, and LAC regions.”Since the time of the submission of these concepts (as part of the DPSP III paper),IFC has continued developing the underlying pipeline not only by bringing moreprojects to the pipeline, but also by making it more coherent and interlinked. ThisSub-Program is, therefore, aiming to work across the above two areas, leveragingsynergies at operational and strategic levels. Given the current broader scope of theactivities (than was laid out in the original concepts) and the need to concentratethe effort to achieve the desired scale and impact, the Sub-Program will focus thework on the pipeline of projects in Ukraine (as opposed to originally proposedbroader reach). The amount of resources the Sub-Program is currently requesting isless than amount of resources indicatively proposed by either of the two originalproject concepts in the DPSP III paper.

Comment 2 Irina Stavchuk NationalEcologicalCenter ofUkraine

There are 4 concerns and questions I would like to raise regarding waste to energyprojects in Ukraine:1. In Ukraine the basic waste separation for the recyclable and hazardous waste isnot resolved. It means that battaries, electronic and other dangerous waste is mixedwith paper, plastic, glass and also organic matter. It will impact the efficiency ofincineration (enourmous amount of energy to make it burn) and create hugeproblem with produced thousands of tonnes of hazardous ash and filter residue.What is the stategy to deal with hazardous ash and filter residue?2. Recent report from Ukrainian state Accounts Chamber on control of air and waterpollution by companies showed numerous serious problems (http://www.ac-rada.gov.ua/doccatalog/document/16756304/Zvit_10-3_2018.pdf?subportal=main).Just to name few - in Ukriane there is no offical registry of companies, who recievedlicences for pollution. Companies, which have recieved licences never go againthrough the inventory process. Penalties for emissions over allowed levels are so lowthat it is much cheaper to pay it than to invest in filters.What the CTF strategy to secure that the waste to energy projects have safe levelsof emissions regardless absence of efficient state control system?3. Waste collection fees are extremely low in Ukraine. My family of 3 people pays1,7 euros per month for waste collection, trnasportation and landfilling.What is the strategy to make incinerator projects in Ukraine profitable for privatebusiness?4. From the local perspective is much wiser to use scarce municipal and statebudget money for support pograms on waste separation and recycling. Recycling ofmunicipal solid waste is currently at a low level, and much more should be done toprevent and recycle waste before investing in expensive disposal solutions. The EU’sWaste Framework Directive requires 50% recycling of plastics, metal, paper andglass until 2020. Waste-to-energy is presented as an efficient method of utilisingwaste products, but it would be much more energy efficient to invest in wasteprevention and non-toxic recycling instead of burning re-usable materials.Why CTF prioritises waste incinaration and not waste recycling?5. What are the municipalities where waste to energy projects are planned?Thank you,Iryna StavchukNGO Ecoaction

Oct 26, 2018

Response 1 AndreyShlyakhtenko

IFC Comment 1:In Ukraine the basic waste separation for the recyclable and hazardous waste is notresolved. It means that batteries, electronic and other dangerous waste is mixedwith paper, plastic, glass and also organic matter. It will impact the efficiency ofincineration (enourmous amount of energy to make it burn) and create hugeproblem with produced thousands of tonnes of hazardous ash and filter residue.What is the strategy to deal with hazardous ash and filter residue?

Mar 15,2019

IFC response 1:The technical solutions and strategies to deal with specific composition of the wastewill be developed at the individual sub-projects level. In any event, the final designof the facilities (including on-site sorting of waste if applicable, facility operatingparameters and protocol, disposal of residual waste and the exhaust gas monitoring)will undergo rigorous technical analysis and scrutiny, with full application of IFC’sE&S and other relevant performance standards. IFC will disclose the relevant projectinformation, environmental and social implications through IFC's Access toInformation Policy (AIP) portal, https://disclosures.ifc.org/#/landing.Comment 2:Recent report from Ukrainian state Accounts Chamber on control of air and waterp o l l u t i o n b y c o m p a n i e s s h o w e d n u m e r o u s s e r i o u s p r o b l e m s(http://www.acrada.gov.ua/doccata log/document/16756304/Zv i t_10-3_2018.pdf?subportal=main). Just to name few - in Ukriane there is no officialregistry of companies, who received licences for pollution. Companies, which havereceived licences never go again through the inventory process. Penalties foremissions over allowed levels are so low that it is much cheaper to pay it than toinvest in filters. What the CTF strategy to secure that the waste to energy projectshave safe levels of emissions regardless absence of efficient state control system?IFC response 2:Similarly to the previous question, specific obligations and performance standardswill be discussed at the sub-project level. As such, typically the requiredperformance standards would be imposed by the parameters of the legal agreementwith the client. Clients are required to adhere to these standards and periodicallyreport on performance indicators. Non-compliance may result in penalties.Comment 3:Waste collection fees are extremely low in Ukraine. My family of 3 people pays 1,7euros per month for waste collection, transportation and landfilling. What is thestrategy to make incinerator projects in Ukraine profitable for private business?IFC response 3:The strategy for enhancing the sustainability of a particular sector – through sectorreform, tar i f f adjustments and ident i f icat ion of the most su i tablearrangements/technologies belongs to each particular municipal government. IFC’sengagement with each municipal client is undertaken in a holistic manner andtypically goes beyond simply offering financing for a certain project. In manymunicipalities, IFC is already deeply engaged to provide technical assistance andadvice on how to improve the financial sustainability of the sector and how to makethe potential private sector projects bankable.In some sectors a tariff reform is needed to bring the tariffs to the cost recoverylevels and some of the cities are already embarking on that path. To help ease theburden of increased tariffs and, at the same time, temporarily cover the remainingmismatch between the cost of service and collections for the services provided, IFCis planning to utilize the concessional CTF funds.Comment 4:From the local perspective is much wiser to use scarce municipal and state budgetmoney for support programs on waste separation and recycling. Recycling ofmunicipal solid waste is currently at a low level, and much more should be done toprevent and recycle waste before investing in expensive disposal solutions. The EU’sWaste Framework Directive requires 50% recycling of plastics, metal, paper andglass until 2020. Waste-to-energy is presented as an efficient method of utilizingwaste products, but it would be much more energy efficient to invest in wasteprevention and non-toxic recycling instead of burning re-usable materials. Why CTFprioritises waste incinaration and not waste recycling?IFC response 4:The priorities for investments are identified by the municipal governments (IFCclients) and confirmed through the IFC strategic sectoral analysis. At the moment,the final design of the waste treatment (solid waste and wastewater) facilities is notyet fully defined and we are seeing strong interest and need in solutions similar tothe ones you are describing. The proposed Sub-Program is specifically designed toprovide a broad scope of technological solutions, so that, in each individual project,the client, in consultation and agreement with IFC, will be able to select the mostappropriate waste treatment approach, process, and technology.Comment 5:What are the municipalities where waste to energy projects are planned?IFC response 5:At the moment IFC is conducting active discussions with five municipalities, with theintention to further broaden this conversation by including other target cities. Sincethe projects are still in the preparation phase, we cannot disclose the full list ofmunicipalities.

Comment 3 Batley Waqas UnitedKingdom

Thank you for the proposal.We are concerned that sub projects for transport includes the intention to procureEURO 6 diesel buses. We would like to understand the rationale for this and theimpact it would have on the proposal if this was removed as a proposed transportsub project.We would also be grateful if more information could be provided regarding therationale and analysis justifying the provision of concessional finance.Regards,Waqas Batley

Nov 01,2018

Response 1 AndreyShlyakhtenko

IFC Thank you to the UK colleagues for this comment and for the productive bilateralfollow up discussion.As indicated in the proposal, the focus of transport sub-projects that are beingconcurrently designed in several municipalities is on supporting wider systemchange of municipal transport networks. In Ukraine, many cities have supply gapsand inferior performance in their typically decades old public transport systems thatoften date back to Soviet times. Transport systems – that had been organizedaround a few centralized residential and industrial sites – do not just need to bemodernized through new upgraded rolling stock, but also need to be made fit forpurpose in today’s more decentralized economy.IFC takes a holistic approach to the development and financing of such transportprojects, facilitating changes simultaneously on multiple fronts. This approachincludes working with the city’s municipal government to redesign the entire publictransportation network, upgrade related traffic planning and management system,review and adjust the tariff structure to bring the tariffs to the cost-competitivenesslevel, modernize rolling stock, improve dispatch processes, conduct IT systemimprovements, etc. It is expected that this work will also help improve projectpreparation practices and enhance financial sustainability of the municipal transportsystem. The expectations are that the benefits generated by each particular project– climate, development, economic, etc. – are going to accrue at the system level asa result of modal shift.However, the availability of long-term financing to support projects of that natureremains limited due to (1) the lack of borrowing capacity of many Ukrainian cities,(2) the nature of infrastructure investment that often require large amounts offinancing with long tenors to allow for sufficient time to recover costs of investment,and (3) the fact that further reforms are needed to improve the financial viability ofcity services over the long run. Together with CTF, IFC can address these marketbarriers - specifically by providing financing on terms affordable to cities and end-users of urban services, while also supporting fundamental reforms that wouldimprove the long-term sustainability of new investment in urban infrastructure.In each project, the design of transport flows and choice of transport technologydepend on specific project circumstances and, as such, this CTF Sub-Program seeksto maintain a flexible approach to be able to develop the most suitable solutions.However, given the ultimate objective to support the shift towards low-carbonrolling stock and taking into account the shape of the emerging pipeline, dieseltechnology can be excluded from the list of available transport solutions under thisSub-Program. IFC has made the respective changes to the text of the proposal.

Jan 18, 2019

Comment 4 Louise Shaw-Barry

CIF AU Given the changes to the pipeline since submission in October, IFC has decided toresubmit this proposal with an updated funding request. IFC indicates that theproposal remains substantially unchanged, apart from changes to the project resultsframework and eligible technologies for proposed transport sub-projects (referencesto diesel buses removed, for clarity). An updated proposal will be recirculated forreview and approval

Jan 25, 2019