Notice

Category A project supported: Kabaale International Airport Project, Uganda

Published 2 February 2018

1. Project Description

UK Export Finance has agreed to provide a direct loan to the Government of Uganda, represented by the Ministry of Finance and Economic Development (MOFED) and the Ministry of Works and Transport (MOWT), for the construction and operation of the Kabaale International Airport (the Project) and Associated Facilities, involving construction services provided by SBC (Uganda) Limited. SBC is a joint venture partnership formed by Colas Ltd and SBI International Holdings AG with the purpose of facilitating the construction of the Project. Once constructed, the Project will be handed over to the Uganda Civil Aviation Authority (UCAA) for operations.

The Project will comprise the country’s second international airport, opening access for the delivery of equipment, materials and services to the region. It is a priority project for the Government of Uganda as it will enable vital work to be carried out on oil refining and supporting infrastructure projects planned in the area. A second phase of development is planned to improve the airport’s capacity to support tourism and international trade at a later stage.

Specifically, the Project comprises the construction and operation of a new international airport with the following key components:

• Airside: a runway with a length of 3500m and with of 75m (including shoulders), taxiway with a length of 60m and width of 25m, apron, perimeter road, airfield ground lighting, navigational aids, meteorological equipment, air traffic control tower, airport rescue and fire-fighting, security fencing, and ground support equipment area; and
• Landside: cargo terminal, employee housing, parking areas and landside roads, landside fencing, aircraft fuel storage, power supply, water supply, sewerage, and solid waste handling.

Associated Facilities^{[footnote 1]} include:

• Two new 33KV power transmission lines, constructed to connect the airport to the national grid, and a 33/0.4 KV substation located within the airport footprint, adjacent to the taxi lane. Transmission line 1 is approximately 24 km long running from the existing Hydromax dam to the airport site. Transmission line 2 is approximately 18 km long running from Kiziranfumbi to the Airport site. Both transmission lines have been constructed within a 10m corridor from existing road reserves; and
• An approximately 1 km deviation of an existing road, which currently traverses the proposed runway.

In addition, the future proposed oil refinery complex is considered to be an Associated Facility. According to available Project-related documentation, the planned refinery is the primary factor driving the construction of the Project, and the Project appears the only reasonable option to deliver equipment and materials to the future planned refinery. The Project is also anticipated to support tourism and trade in Western Uganda in the future and provide a second international airport in Uganda, Entebbe currently being the only international airport.

The Government of Uganda has earmarked an area of 29.2 km2 in Kabaale for the refinery complex along with other related infrastructure. The Project is planned to be located within this 29.2 km2 area.

2. Project Sector

The Project is in the infrastructure sector.

3. Project Sponsor

The Project is being developed by the Government of Uganda represented by the MOWT, who have entered into a supply contract with the joint venture SBC for design and construction of the Project. The Uganda MOFED is acting as borrower.

4. UK Exporters

Colas Ltd.

5. Export Credit Agent Bank

Standard Chartered Bank.

6. Amount of UK Export Finance Support

The facility amount is EUR 270 million.

7. OECD Common Approaches

In July 2016 UK Export Finance screened and categorised the Project as Category A - having potentially significant environmental, social and human rights (ESHR) impacts - in accordance with the definition in the 2016 Revised text for the OECD Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the “OECD Common Approaches”) and the 2013 Equator Principles.

As required by the OECD Common Approaches, UK Export Finance disclosed its possible involvement in the Project. A notification was posted on the UK Export Finance web site on 12th June 2017 and remained for a period of at least 30 days. The notification contained a description of the Project, its location and a contact point for any enquiries to signpost interested parties to environmental and social information. No enquiries were received by UK Export Finance or the contact point as a result of this notification.

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

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

• 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
• PS5: Land Acquisition and Involuntary Resettlement
• PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
• PS8: Cultural Heritage
• General EHS Guidelines, 2007
• EHS Guidelines for Airports, 2007
• EHS Guidelines for Electric Power Transmission and Distribution, 2007

IFC PS7 (Indigenous Peoples) is not considered relevant for the project as people in the nearest communities are not considered Indigenous Peoples for the purposes of the application of PS7. 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 Impact

The review of potential ESHR risks and impacts took into account the following impacts, receptors and issues:

• noise and vibrations
• stormwater and wastewater
• hazardous material management
• solid waste
• emissions to air
• energy and water consumption
• terrestrial habitats and biodiversity, including species of conservation concern, habitat characterisation, and habitat alteration
• management of third party contractors and suppliers
• grievance mechanisms
• occupational health and safety
• emergency planning and response
• community health and safety
• influx management
• cumulative impacts
• worker conditions of contract and accommodation
• land acquisition, resettlement and livelihood restoration
• cultural heritage
• community engagement

10. Assessment of ESHR impacts

A review was undertaken, in line with the requirements of the OECD Common Approaches and Equator Principles, to identify potential ESHR issues for the Project and how these would be effectively managed. The review was conducted with the support of an Independent Environmental and Social Consultant (IESC), who was commissioned to undertake an environmental and social due diligence assessment of the Project for the financing parties.

The approach taken by the IESC and UKEF consisted of:

• a review of Project-related documentation: environmental and social impact assessments, master plans, and Resettlement Action Plans for the Project and Associated Facilities; regional development plans and strategic environmental assessments; and ESHR management and mitigation plans specific to the Project, including stakeholder engagement plans and labour management plans and procedures
• site visit, including a walk-through of the Project area, interviews with relevant personnel, and meetings with Government of Uganda representatives, local authorities, civil society, and community representatives
• follow-on meetings with Government of Uganda representatives.

The results of this review formed the basis for the evaluation of the Project’s alignment with relevant international standards, and recommendations for future compliance and monitoring.

The review found that a suite of ESHR controls has been developed to mitigate and manage the significant Project-related environmental and social impacts and risks over time.

11. Decision

Various actions have been agreed between the Project developers, operators, and the lenders involved in the financing 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 UK exporters to the Project.

A condition of support is that Project will be subject to monitoring by an Independent Environmental and Social Consultant so it 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. ↩