IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical and environmental/social information submitted by the Companies and a site visit by IFC environmental and technical staff. The following potential environment, health and safety and social impacts of the project were analyzed: - Effectiveness of environment, health and safety program; - Environmental liabilities from past and current operations; - Effectiveness of safety tracking and reporting systems; - Right-of-way management; and - Risks related to the Chernobyl energy complex.

The Companies have presented plans to address these impacts and that are designed to provide, upon implementation of the specific agreed measures, the proposed project’s compliance with the environmental and social requirements - the host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the Companies is summarized in the paragraphs that follow. Supplemental information is provided in the attached documentation. - Implementation of formal environment, health and safety (EHS) program Since privatization, the Companies have focused on safety improvements, and they have implemented measures to improve workplace and public safety in their operations. Examples of measures that were implemented to improve public safety include the installation of over 100,000 padlocks on formerly unlocked company facilities to restrict public access, and the use of twisted cables at residential installations, which are more resistant to electricity theft. A safety manual is in place and both KOE and ROE have safety supervisors. Safety walk-arounds by management staff are conducted weekly. Further safety improvements are, in large part, dependent on the proposed capital investment program. Environmental liabilities, both past and current, from electrical distribution systems are normally not significant, which is the case here. Currently, KOE and ROE each have an environmental representative in the safety department, who coordinates with local environmental agencies. The Companies recognize that a more formal program for environmental improvement would be a positive measure and it is currently being designed. A senior EHS position has been established at the Companies’ level covering both KOE and ROE in order to facilitate coordination between the Companies, and with corporate staff. The Companies expect to establish an EHS liability and compliance baseline that can be used as the basis for an environmental improvement program in KOE and ROE. The Companies expect to conduct EHS audits to assess compliance status with respect to applicable and relevant Government of Ukraine requirements and World Bank Group (WBG) environmental and social policies and guidelines. Key EHS issues to be addressed will include liquid, solid and hazardous waste management; fuels and hazardous materials (including PCBs) storage and handling; subsurface soil and groundwater and adjacent surface water and sediment contamination and remediation; fire protection and emergency response; and workplace health and safety, including training. The review will also consider and identify opportunities where there is a business case to “go beyond compliance”, such as implementation of pollution prevention approaches, energy efficiency improvements, resource recovery and waste recycling opportunities, etc. Each resulting Environmental Action Plan (EAP) for KOE and ROE will include interim and long-term targets and a proposed timetable for achieving them, together with an indication of the investments and other resources (human, information, etc.) that may be necessary to achieve these targets. The results of the audit will be used to fine tune the 2005-2008 investment program. For example, corrective actions for obsolete facilities such as the existing transformer repair shops and redundant fleet repair and other shops may well drive investment decisions. KOE and ROE will also upgrade their tracking and reporting of safety information, to include internal workforce, contractor, and public accident statistics. - ROW Encroachments The Companies operate overhead lines at voltages ranging from 110 kV through 400 V for transmission down to local distribution. There are numerous encroachments on these systems, mainly on the lower voltage lines. Most are understood to have resulted from improper building permits (rather than squatters), and are not considered highly unsafe. KOE and ROE staff now patrols for new encroachments. The Companies are conducting an inventory of their systems and prepare a plan for right-of-way recovery and management. - Chernobyl risk The Chernobyl energy complex is located in KOE's service area, about 100 km north of Kyiv. An accident with Unit no. 4 at Chernobyl in April 1986 caused widespread damage and radiation contamination. More than 135,000 people were evacuated from the surrounding area. The 30-km exclusion zone around the plant will remain uninhabitable for decades. Long-term cleanup and containment measures are being implemented, supported in part by international agencies and lending institutions. The Chernobyl energy complex is a KOE customer, and KOE provides electricity to and services the distribution network within the 30-km exclusion zone but outside a 10-km zone surrounding the energy complex. Other specialized contractors perform work in highly contaminated areas within the energy complex. Procedures for KOE's line work in the zone near the Chernobyl energy complex is governed by its Safety Manual, and is conducted "specifically and only" by workers out of Ivankovskogo RES. These personnel work totally supervised and monitored in this hazard zone for up to two weeks at a time and are limited to 36 hours of work in each of these weeks. The work method involves a direct supervisor, specification controller, and security monitor (in this case a Government inspector). This inspector is provided by the State of Ukraine and controls all work-order functions and all accesses. Each time that work is planned in this area, a refresher course re-explaining the Ukrainian Rules for Radiation Area Safety is re-introduced. Since the original accident, there have been no accidents or radiation incidents that have involved KOE personnel, and no KOE staff has exceeded radiation exposure limits. The Companies indicate that normal work rules apply in other areas of the Ivankovskogo RES.

The attached EHS Action Plan documents provide further details of environmental and social issues mitigation agreed with IFC.

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering: - the status of implementation of any measures contained in the Action Plan and - ongoing performance of project-specific environmental, health and safety and social activities. Periodic site supervision visits will also be conducted.