26093 - ESM Macedonia

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Environmental & Social Review Summary

Project Number

26093

Company Name

EVN MAKEDONIJA A.D.

Date ESRS Disclosed

Jul 27, 2007

Country

North Macedonia

Region

Europe

Last Updated Date

Jun 3, 2021

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Sep 6, 2007
Signed : Apr 7, 2008
Invested : Sep 29, 2008

Sector

Distribution Business

Industry

Infrastructure

Department

Gbl Infrastructure & Natural Resources

Project Description

ESM is Macedonia’s single distribution company supplying electricity to more than 700,000 customers. ESM’s supply territory has an area of around 25,713 km2 and a population of approximately 2 million. Electricity is universally available in Macedonia, with approximately 99% of the population having access to power.

ESM purchases the majority of its electricity from Macedonia’s transmission operator, MEPSO, and the remainder from its 11 small hydro power plants with 37 MW of total installed capacity.

The proposed project is the loan financing of an investment program to upgrade ESM’s electricity distribution network, reduce energy losses, and improve service quality.

Overview of IFC's Scope of Review

Macedonia’s electricity distribution company, Elektropanstvo na Makedonija AD (ESM or the company) was privatized in April 2006, with 90% of its shares being acquired by EVN (Sponsor), Austria’s second largest power utility. The World Bank and EBRD played an active role in advising the Government of Macedonia (GOM) on power sector reform and the privatization of ESM. IFC’s proposed investment will be in parallel with an equivalent financing from EBRD.

IFC and EBRD jointly engaged the WSP Group to conduct an environmental, health, safety and social review of ESM’s existing operations, assess the plans and progress by EVN since take over, and work with EVN and ESM to develop an Environmental and Social Action Plan for ESM to meet the requirements of IFC and EBRD within a reasonable timetable. WSP conducted visits and interviews at ESM’s headquarters and five representative Company facilities. WSP also met with staff from the Ministry of Environmental and Physical Planning, the ESM labor union, and two Macedonian ecology NGOs.

WSP’s June 2007 draft report was the primary basis for IFC’s staff review of the project. IFC staff also reviewed the following documents:

- Information Memorandum, Privatization of “A.D. Elektrostopanstvo Na Makedonija, issued by the Government of the Republic of Macedonia, Ministry of Economy, December 2005
Initial Review: Implementation of an Environmental Management System for Elektrostopanstvo, prepared for EBRD by Jacques Whitford consultants, Final Report, July 17, 2006
- EVN and ESM Company Presentations to IFC and EBRD, April 2007

E & S Project Categorization and Applicable Standard

While all Performance Standards (PS) are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:

- PS1: Social and Environmental Assessment and Management Systems
- PS2: Labor and Working Conditions
- PS3: Pollution Prevention and Abatement
- PS4: Community Health, Safety and Security
- PS5: Land Acquisition and Involuntary Resettlement

As explained below, the remaining PSs are not applicable or minimally relevant:

- PS6: Biodiversity Conservation and Sustainable Natural Resource Management: ESM uses both concrete and wooden poles to support its electricity distribution lines. ESM does not use large numbers of poles each year (less than 700 since takeover by EVN), and ESM’s central procurement department confirms that it does not source wooden poles from protected areas.

- PS7: Indigenous Peoples: Macedonia is nearly 100% electrified and the service area and facilities of ESM are already established; the project will modernize ESM’s system. Although there are numerous ethnic groups in Macedonia, no Indigenous Peoples as defined in PS 7 are expected to be affected by the project.

- PS8: Cultural Heritage: Although many of the facilities to be taken over by ESM are historic, no historic heritage is expected to be adversely affected by the modernization of ESM. Any chance finds during system construction and maintenance will be addressed under local regulatory requirements.

IFC''s review of this investment identified environmental, health, safety and social issues that are characteristic of an electrical distribution company: EVN’s progress and timetable for implementing company-wide social, environmental and health and safety management systems at ESM; ESM’s post-privatization capacity to conduct its investment program in accordance with IFC’s Performance Standards; labor policies, including retrenchment; liability for past land contamination; siting and right-of-way alignment process for new facilities; GHG emissions benefits by reducing technical losses; management of cultural property; and worker health, safety and training programs.

This is a Category B project according to IFC’s Environment and Social Review Procedure because potential environmental or social impacts attributable to the project are limited.

Environmental and Social Mitigation Measures

--PS 1: Social and Environmental Assessment and Management Systems:

IFC and EBRD are working with EVN and ESM to develop an Environmental, Health and Safety (EHS) Action Plan to strengthen the Company’s environmental management systems. EVN has a fully developed system in Austria, and is currently in the process of implementing a new structure at the Company’s headquarters in Skopje, in order to better consolidate activities of ESM’s 28 regional branches. Work by Jacques Whitford in 2006 (see report above) will be an important reference in developing the management systems.

Within ESM, a group-level person designated as the EHS Manager who leads the H&S and Environmental teams. This is a cross-department function that reports to the Management Board of ESM. Two “coaches” from EVN assist the H&S and Environmental teams.

IFC/EBRD’s consultant found that during the planning of new facilities (including overhead lines) the company follows the requisite Macedonian requirements related to permits and environmental impact analysis (EIA).

--PS 2: Labor and Working Conditions:

Since takeover in 2006, EVN is building upon existing systems within ESM to upgrade the company’s human resources and occupational health and safety policies and procedures with respect to the requirements of EU regulations. Toward this goal, EVN has created a centralized Human Relations department within ESM and a dedicated HR manager. Under the terms of the Sale and Purchase Agreement, EVN is also implementing a three-year social program with an emphasis on training to support employees.

There is currently a planned and budgeted program for a health and safety review of operations within ESM. H&S training is planned and managed centrally, and EVN plans to emphasize H&S training as one of the specific tasks within the “ESM Academy” system that ESM is planning to introduce for general staff training. Environmental training associated with specific job requirements and general awareness training is also planned as part of the development of the approach to an environmental management system.

H&S related investments planned include the roll out of a fleet of new vehicles, the provision of hard hats and safety shoes and significant training opportunities (including electrical safety on all ESM system voltages). Accident recording processes and reporting are also being reorganized.

ESM is one of the largest employers in Macedonia, and as of December 2006 had 3,529 employees. Some services such as metering operations, maintenance, and employee health care are outsourced. Close to 100% of ESM’s in-house workforce belongs to a labor union. The company’s management maintains a regular dialogue with the local union regarding the future of ESM and the implementation of efficiency improvements. In an effort to migrate towards more effective staff levels, EVN has introduced a voluntary leave program whereby employees can choose to leave ESM in exchange for remuneration package. By agreement, staff reductions will occur over time, and reductions in 2007 and 2008 will be limited to 5% of total employees. There have not been any recent strikes or job actions within ESM.

--PS 3: Pollution Prevention and Abatement

IFC will request the ESM report annually on GHG emissions benefits from reducing technical losses.

An EHS Action Plan is being prepared by the IFC/EBRD consultant in cooperation with ESM/EVN to addresses the key issues and actions identified during the review. It is anticipated that upon adoption of the Action Plan, it is likely that a generally satisfactory performance against Macedonian, as well as most internationally accepted modern performance standards, will be achieved within a reasonable timeframe. A description of some of the elements of the Action Plan follows:

- Historical liabilities: These liabilities are mainly associated with land contamination from the spillage of oils and other dielectrics (PCBs). ESM has identified potential sites and the EVN expert has visually assessed the potential sites. On the basis of this assessment, a program of further investigating two fuel stations and one other site is currently ongoing.

- PCB inventory and removal: ESM has generally good control of the larger high voltage transformers and has systematically removed capacitors containing polychlorinated biphenyls (PCB) and stored them ready for destruction. As part of the Action Plan the Company will inventory its small and medium sized, low and medium voltage transformer equipment for PCBs.

- Solid Waste Management: Currently the EHS department is assessing the waste arising and determining type and quantity of waste. Further, an inventory of waste management practices will be undertaken as part of the Action Plan.

- Surface water management: Drainage systems at ESM facilities must be managed to reduce the risks of oil spills being washed into surface waters. Some facilities have oil-interceptors installed, typically single chamber units, and maintenance of the interceptors is required. Oil catch pits under transformers, areas where oil drum are stored, and areas where vehicles are washed and serviced also require upgrading.

- Asbestos: ESM has a considerable number of buildings and sites and some may contain asbestos materials. A study will be prepared to assess the level of asbestos contamination, as well as a program that aims to identify and either seal or remove any high risk materials.

- Lead/acid batteries: A replacement and upgrading program for the stand-by batteries has been largely achieved, but effective management will be needed to minimize the pollution potential for disposing of the old batteries (lead and acid) contained in the remaining old and the new equipment. This will be part of the waste management plan.

--PS 4: Community Health, Safety and Security

ESM experiences commercial losses through tampering and meter bypassing at individual residences and businesses, and less frequently through attempts at illegal connections to the overhead lines in its system. Information on injuries and accidents resulting from theft and other activities are not currently tracked or compiled by ESM. The Action Plan will include an item for ESM to collect such data at the local level and centralize it for analysis.

Seismic risk – nearly all parts of the system are in seismic risk areas, including the small scale hydro dams in the more mountainous areas of the country. Inundation from dam overflow and/or dam failure is an important safety and environmental risk. The issue has clearly been high on the design agenda in the past and the overall system robustness has been modeled in a range of scenarios. Dam inspections are routinely undertaken by independent assessors. ESM’s community engagement program will need to make the results of these studies accessible to potentially affected communities.

--PS 5: Land Acquisition and Involuntary Resettlement

As noted above, ESM service area is effectively 100% electrified, and land requirements for the planned investment program will be small. As a regulated utility, ESM will operate within procedures established under Macedonian regulations for any land acquisition.

ESM has operational procedures for controlling encroachments onto its system, and the company inspects its rights-of-way and other facilities (such as substations and yards) regularly and has operation teams with responsibility to maintain the safety zones. The company does not have significant problems with existing or long standing encroachments. When new attempts at encroachment are encountered, ESM works with encroachers to remove or discontinue prohibited activities. In urban areas, ESM introduces or increases the scale of the physical separation barriers to prevent further encroachment.

Stakeholder Engagement

ESM currently conducts a proactive program of customer and staff dialogue, including both internal and external publicity campaigns to present ESM’s image in a customer oriented light. Key topics include ESM’s meter installation/bill payment enforcement/disconnection programs, both in relation to issue about disconnections and in the changes needed to allow easier inspection and reading of meters. Complaints and requests for service are taken by the dispatching centers, branches and the payment offices. ESM experiences very few reported environmental complaints. EVN plans to increase ESM’s currently limited stakeholder dialogue in relation to environmental matters as part of the Action Plan.

Contact details for the client:

Dr. Michael Längle
Director, Head of Finance and Accounting,Chief Financial Officer
EVN Group
EVN Platz
A-2344 Maria Enzersdorf
Austria

Phone: +43 22 36 / 200 – 123 24
Fax: +43 22 36 / 200 – 847 15
Email: michael.laengle@evn.at
Web: www.evn.at

Environmental documentation will be made available at the following location:

MMag. Georg Waldner
Chairman of the Executive Board
AD ESM
11 October 9, 1000 Skopje, Macedonia

Phone: +389 (0)2 3149-289
Fax : +389 (0)2 3120-426

**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

Online form: available at https://www.cao-ombudsman.org/
Mail/Hand Delivery to: 2121 Pennsylvania Avenue, NW, Washington, DC 20433, USA
Voice mail: +1 202 458 1973
Email: cao@worldbankgroup.org
SMS, WhatsApp, Telegram, and Signal: +1 202 650 2627

CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Environmental and Social Review Summary (ESRS) is prepared by IFC to disclose its findings and recommendations related to environmental and social considerations regarding potential investments. Its purpose is to enhance the transparency of IFC's activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this ESRS is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein.
It is distributed in advance of IFC Board of Directors' consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following ESRS is disclosed in accordance with IFC's Access to Information Policy (AIP).

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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