Türkiye: Osmangazi Electricity Distribution Network Modernization and Expansion Project

OBJECTIVE

To support the upgrade, modernization, and expansion of the medium- and low-voltage electricity distribution network of the Osmangazi region.

DESCRIPTION

The Project involves the provision of a senior loan in Turkish lira (TRY) to support the capex program of Osmangzi Elektrik Dagitim A.S (OEDAŞ), the incumbent operator of the medium-/low-voltage network in the Osmangazi region.

OEDAŞ operates the network in accordance with the terms and conditions set out in the Transfer of Operating Rights Agreement (TORA) signed between OEDAŞ and Turkish Electricity Distribution Company (TEDAŞ) on July 24, 2006, and the Distribution License received on September 1, 2006. Since 2017, OEDAŞ is owned by Zorlu Enerji Elektrik Uretimi A.S. (Zorlu Enerji) through Zorlu Osmangazi Enerji Sanayi ve Ticaret A.S. (Zorlu Osmangazi).

OEDAŞ serves around 2.79 million consumers in across 191 urban centers and 1,596 villageswithin a landlocked 49,344 km² area located in western Anatolia that encompasses the provinces of Afyonkarahisar, Bilecik, Eskisehir, Kutahya and Usak. The company has circa 50,787 km of distribution lines and 7,855MVA of transformer capacity installed.

The capex program covers the investments required under the Türkiye’s Fourth Tariff Implementation Period (TIP-4) for the years 2021-2025, as approved by the Energy Market Regulatory Authority (EMRA) and TEDAŞ and amounts to approximately USD400 million, subject to the realization of capex efficiency during the implementation.

The Project will contribute to the expansion, rehabilitation, and improved efficiency of the Osmangazi electricity distribution network. The Project activities will include the procurement, construction, and operation of medium- and low-voltage overhead lines, underground lines, transmission connection lines and transformers.

The Project will contribute to the reduction of theft and losses (T&L), enhancement of environmental and safety standards, improve the efficiency and reliability of the network and contribute to the digitalization of the network.

ENVIRONMENTAL AND SOCIAL INFORMATION

The proposed financing will be co-financed with the European Bank for Reconstruction and Development (EBRD), and the Project's environmental and social (ES) risks and impacts have been assessed in accordance with EBRD’s Environmental and Social Policy 2014 (EBRD's ESP) and relevant Performance Requirements (PRs). To ensure a harmonized approach to addressing ES aspects of the Project, and as permitted by AIIB’s Environmental and Social Policy (AIIB’s ESP), EBRD’s ESP relevant PRs will apply to this Project in lieu of AIIB’s ESP. The Bank has reviewed EBRD’s ESP and PRs and is satisfied that (i) the EBRD ESP and PRs are consistent with the Bank’s Articles of Agreement and materially consistent with the provisions of AIIB’s ESP and the relevant ES Standards (ESS), and (ii) the monitoring procedures that are in place are appropriate for the Project. This Project has been assigned Category B in accordance with EBRD’s ESP (equivalent to Category B if AIIB’s ESP were applied) since the ES risks and impacts are relatively limited, reversible, localized, and will mainly occur during the construction phase.

An Environmental and Social Assessment (ESA) was conducted, and the potential ES impacts associated with the Project and existing operations were assessed to be limited and readily addressed and managed through the implementation of the Environmental and Social Action Plan (ESAP).

The Project will have impacts on biodiversity areas in the vicinity of the distribution lines. Other impacts include generation of waste, use of hazardous materials, disturbance to traffic, issues associated with community health and safety and occupational health and safety. These impacts will be mitigated through the implementation of the ESAP. The Project will not require any resettlement of households or businesses, and the majority of the investment plan will be carried out on public land in urban locations. Some land acquisition in rural areas may be required, and the company has committed to avoiding land take in agricultural areas. An updated Land Acquisition Policy Framework has been prepared. The lenders will support the company in developing a gender action and strengthening its HR policies to enhance career opportunities for women.

A Stakeholder Engagement Plan has been prepared which provides details of the approach to stakeholder engagement and their planned meetings and commitments to inform stakeholders about the plans and development on an ongoing basis and to gather any complaints or feedback.

The existing Grievance Mechanism OEDAŞ established will be applied in this Project. The information of the Grievance Mechanism has been included in the Non-technical Summary (NTS) and the Stakeholders Engagement Plan (SEP). The NTS and SEP in English and Turkish languages has been disclosed on websites of EBRD and OEDAŞ. The link to these websites are also provided on AIIB’s website including the Summary Environment and Social Action Plan.