Notice

Category A project supported: Dhi Qar Power Station

Published 15 May 2019

1. Project description

UK Export Finance (UKEF) has agreed to provide Buyer Credit and Direct Lending in respect of the supply of goods and services by ENKA UK Construction Limited (EPC Contractor) and General Electric (gas turbine equipment provider) for the construction and commissioning of phase 1 of the Dhi Qar Power Station (the project).

The project is located at Nasiriyah City, 200km northwest of Basra in Southern Iraq. It comprises a 432.8MW simple-cycle gas fired power plant and associated infrastructure.

It is estimated that peak summer demand for electricity in Iraq has typically exceeded actual generation by almost 50%, causing power shortages. The project is being built as part of a wider programme to increase power generating capacity to meet this recognised shortfall across the country.

Specifically the project includes: 4 gas turbines, 132kV substation, air condenser, water and wastewater treatment facilities, fuel storage and an access road.

Associated Facilities^{[footnote 1]} include 2 x 400 kV Overhead Transmission Lines (OHTLs), one of 1km which will link the project with the nearby Nasiriyah power station and a second OHTL of 176km which will link to an existing grid north of Nasiriyah. There are also short pipeline connections from the project to be built by the Ministry of Oil (MoO).

Phase 2 (which is not part of the project) involves the future conversion to a combined-cycle power plant with the addition of a steam turbine and heat recovery steam generators to provide a final capacity of 750MW.

The project is also being financed by Standard Chartered Bank and JP Morgan.

2. Project sector

The project is in the power sector.

3. Project sponsors

The project is being developed by the Government of Iraq represented by the Ministry of Electricity. The Ministry of Finance is acting as the borrower.

4. UK exporters

General Electric Global Parts and & Products GmbH (GEGPP) will provide the gas turbine power plant technology and Enka UK Construction Ltd will act as the EPC Contractor in a consortium with GEGPP.

5. Export Credit Agent bank

JP Morgan Europe Limited.

6. Amount of UKEF support

The principal value of the support is approximately US$310 million.

7. OECD Common Approaches

UKEF categorised the Project as Category A (having potentially significant environmental, social and human rights (ESHR) impacts) in accordance with the definition in the 2012 OECD Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the “OECD Common Approaches”).

As required by the OECD Common Approaches, UKEF disclosed its possible involvement in the Project. A notification was posted on the UKEF web site on 25 October 2018, which directed interested parties to the contact from where published ESHR information can be sourced. UKEF is not aware of any comments received from interested parties.

8. Environmental, Social and Human Rights (ESHR) Standards

Project related ESHR documentation was reviewed for alignment against the 2012 International Finance Corporation (IFC) Performance Standards (PS) on Environmental and Social Sustainability and the World Bank Group Environmental, Health and Safety (EHS) Guidelines. The applicable IFC PS and World Bank Group EHS Guidelines are:

• PS1: Assessment and Management of Environmental and Social Risks and Impacts
• PS2: Labour and Working Conditions
• PS3: Resource Efficiency and Pollution Prevention
• PS4: Community Health, Safety and Security
• PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources

• PS8: Cultural Heritage World Bank Group EHS Guidelines, of which the following are relevant:

  – General EHS Guidelines (2007)

  – EHS Guidelines for Thermal Power Plants (2008)

  – EHS Guidelines for Electric Power Transmission and Distribution (2007)

  – EHS Guidelines for Water and Sanitation (2007)

IFC PS5 (Land Acquisition and Involuntary Resettlement) and IFC PS7 (Indigenous Peoples) are not considered relevant for the project. In addition to the standards above, the EBRD/IFC Worker Accommodation Processes and Standards (2009) was also included within the ESHR review.

9. Nature of ESHR impacts

The review of potential ESHR risks and impacts took into account the following impacts, receptors and issues during the construction and operational phases of the project:

• health and safety
• emissions to air including GHG emissions
• noise and vibrations
• energy and water consumption
• wastewater treatment
• biodiversity and aquatic habitats including species of conservation interest
• waste and hazardous material management
• emergency planning and response
• grievance mechanisms
• worker conditions of contract and accommodation
• archaeology and cultural heritage
• community health and safety
• security management
• community engagement, including engagement of women and vulnerable groups

10. Assessment of ESHR impacts

A review was undertaken in line with the requirements of the OECD Common Approaches to identify potential ESHR risks and impacts of the project and how these would be effectively managed. The review considered the available and proposed environmental and social policies, procedures, impact assessments, management and mitigation plans, stakeholder engagement plans, and other relevant documents from the exporters and their environmental and social consultants.

The review was carried out in collaboration with environmental and social teams in JP Morgan and Standard Chartered Bank (the lender group). An Independent Environmental and Social Consultant (IESC) AECOM, was commissioned to undertake an environmental and social review of the project for the lender group. UKEF’s review and the findings of AECOM formed the basis for the evaluation of the project’s alignment with relevant international standards, and recommendations for future compliance and monitoring.

Taking account of the E&S review, the project was deemed to have potential to cause adverse environmental and social impacts. However, a proposed suite of controls developed as part of the project’s environmental and social management system facilitates the appropriate management and mitigation of these impacts.

11. Decision

Various actions have been agreed between the project sponsors, exporter, and the lender group which are necessary to ensure the project’s on-going alignment with international standards. Following agreement of these commitments, it was concluded that the project should meet the relevant international standards over the project cycle and UKEF therefore decided to provide support to the project in respect of the supply of capital goods and services by GEGPP and Enka UK to the project.

A condition of support is that project will be subject to monitoring by an IESC so UKEF can be satisfied that the project is aligned with the relevant international standards throughout the duration of support.

1. OECD Common Approaches defines “Associated Facilities” as: those facilities that are not a component of the project, but that would not be constructed or expanded if the project did not exist and on whose existence the viability of the project depends; such facilities may be funded, owned, managed, constructed and operated by the buyer and/or project sponsor or separately from the project. ↩