Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: ICR00005459
IMPLEMENTATION COMPLETION AND RESULTS REPORT
Loan Number 8351-BY
ON A
LOAN
IN THE AMOUNT OF US$90 MILLION
TO THE
REPUBLIC OF BELARUS
FOR THE
BIOMASS DISTRICT HEATING PROJECT
October 26, 2022
Energy & Extractives Global Practice
Europe And Central Asia Region
CURRENCY EQUIVALENTS
(Exchange Rate Effective Aug 31, 2022)
Currency Unit = US dollar (US$)
Belarusian ruble = US$0.40
US$ = BYN 2.50
FISCAL YEAR
July 1 - June 30
Regional Vice President: Anna M. Bjerde
Country Director: Arup Banerji
Regional Director: Charles Joseph Cormier
Practice Manager: Sudeshna Ghosh Banerjee
Task Team Leader(s): Irina Voitekhovitch
ICR Main Contributor: Elena Merle-Beral, Yae Jun Kim
ABBREVIATIONS AND ACRONYMS
Bank World Bank
BDHP Biomass District Heating Project
BYN Belarusian Ruble (introduced after the denomination on July 1, 2016)
BYR Old Belarusian Ruble (before the denomination on July 1, 2016)
CO2 Carbon Dioxide
CHP Combined Heat and Power
CHS Central Heating Substation
CPF Country Partnership Framework
CPS Country Partnership Strategy
DH District Heating
E&S Environmental and Social
EED Energy Efficiency Department under State Committee for Standardization
EEP Energy Efficiency Project
EIRR Economic Internal Rate of Return
ENPV Economic Net Present Value
ESMAP Energy Sector Management Assistance Program
ESMP Environmental and Social Management Plan
EU European Union
FM Financial Management
FY Fiscal Year
GDP Gross Domestic Product
GHG Greenhouse Gas
GoB Government of Belarus
GRM Grievance Redress Mechanism
GWh Gigawatt-hour
IBRD International Bank for Reconstruction and Development
ICR Implementation Completion and Results Report
IHS Individual Heat Substations
ISR Implementation Status and Results Report
LLC Limited Liability Company
M&E Monitoring and Evaluation
MW Megawatts
MWh Megawatt-hour
NDC Nationally Determined Contribution
PAD Project Appraisal Document
PCRP Post-Chernobyl Recovery Project
PDO Project Development Objective
PMU Project Management Unit
S&I Supply and Installation
SESUP Sustainable Energy Scale-Up Project
SIRP Social Infrastructure Retrofitting Project
TA Technical Assistance
TOC Theory of Change
TTL Task Team Leader
US$ United States Dollar
ZhKH (HCS) Housing and Communal Services (Belarusian abbreviation)
TABLE OF CONTENTS
DATA SHEET .......................................................................................................................... 1
I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 5
A. CONTEXT AT APPRAISAL .........................................................................................................5
B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) ..................................... 11
II. OUTCOME .................................................................................................................... 14
A. RELEVANCE OF PDOs ............................................................................................................ 14
B. ACHIEVEMENT OF PDOs (EFFICACY) ...................................................................................... 14
C. EFFICIENCY ........................................................................................................................... 18
D. JUSTIFICATION OF OVERALL OUTCOME RATING .................................................................... 20
E. OTHER OUTCOMES AND IMPACTS (IF ANY)............................................................................ 20
III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 23
A. KEY FACTORS DURING PREPARATION ................................................................................... 23
B. KEY FACTORS DURING IMPLEMENTATION ............................................................................. 24
IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 26
A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................ 26
B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ..................................................... 27
C. BANK PERFORMANCE ........................................................................................................... 29
D. RISK TO DEVELOPMENT OUTCOME ....................................................................................... 30
V. LESSONS AND RECOMMENDATIONS ............................................................................. 30
ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 33
ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 48
ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 50
ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................... 51
ANNEX 5. BIOMASS PRICES .................................................................................................. 55
ANNEX 6. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 56
ANNEX 6. SUPPORTING DOCUMENTS (IF ANY) ..................................................................... 69
The World Bank
Belarus Biomass District Heating Project (P146194)
DATA SHEET
BASIC INFORMATION
Product Information
Project ID Project Name
P146194 Belarus Biomass District Heating Project
Country Financing Instrument
Belarus Investment Project Financing
Original EA Category Revised EA Category
Partial Assessment (B) Partial Assessment (B)
Organizations
Borrower Implementing Agency
Belinvestenergosberezhenie (PMU), Energy Efficiency
The Republic of Belarus
Department, State Standardization Committee
Project Development Objective (PDO)
Original PDO
The Project Development Objective is to scale up the efficient use of renewable biomass in heat and electricity
generation in selected towns of Belarus.
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Belarus Biomass District Heating Project (P146194)
FINANCING
Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$)
World Bank Financing
90,000,000 90,000,000 87,766,402
IBRD-83510
Total 90,000,000 90,000,000 87,766,402
Non-World Bank Financing
0 0 0
Borrower/Recipient 0 0 0
Total 0 0 0
Total Project Cost 90,000,000 90,000,000 87,766,402
KEY DATES
FIN_TABLE_DAT
Approval Effectiveness MTR Review Original Closing Actual Closing
31-Mar-2014 31-Jul-2014 09-Oct-2017 31-Dec-2019 30-Apr-2022
RESTRUCTURING AND/OR ADDITIONAL FINANCING
Date(s) Amount Disbursed (US$M) Key Revisions
14-Feb-2018 53.98 Change in Results Framework
25-Sep-2018 57.58 Change in Components and Cost
Other Change(s)
11-Oct-2019 64.68 Change in Results Framework
Change in Loan Closing Date(s)
Change in Implementation Schedule
29-Oct-2021 85.88 Change in Loan Closing Date(s)
KEY RATINGS
Outcome Bank Performance M&E Quality
Satisfactory Satisfactory Substantial
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Belarus Biomass District Heating Project (P146194)
RATINGS OF PROJECT PERFORMANCE IN ISRs
Actual
No. Date ISR Archived DO Rating IP Rating Disbursements
(US$M)
01 23-Oct-2014 Satisfactory Satisfactory .12
02 24-Apr-2015 Satisfactory Satisfactory .87
03 26-Oct-2015 Satisfactory Satisfactory 6.52
04 11-May-2016 Satisfactory Moderately Satisfactory 11.02
05 23-Dec-2016 Satisfactory Satisfactory 24.98
06 30-Jun-2017 Satisfactory Satisfactory 37.38
07 10-Jan-2018 Satisfactory Satisfactory 51.08
08 12-Jul-2018 Satisfactory Satisfactory 57.58
09 11-Jan-2019 Satisfactory Satisfactory 57.58
10 26-Aug-2019 Satisfactory Satisfactory 64.68
11 06-Mar-2020 Satisfactory Satisfactory 70.68
12 26-Jun-2020 Satisfactory Satisfactory 72.18
13 03-Dec-2020 Moderately Satisfactory Satisfactory 77.18
14 16-Jun-2021 Moderately Satisfactory Satisfactory 83.38
15 05-Nov-2021 Moderately Satisfactory Satisfactory 85.88
16 29-Apr-2022 Satisfactory Satisfactory 86.88
SECTORS AND THEMES
Sectors
Major Sector/Sector (%)
Energy and Extractives 100
Renewable Energy Biomass 100
Themes
Major Theme/ Theme (Level 2)/ Theme (Level 3) (%)
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Belarus Biomass District Heating Project (P146194)
Urban and Rural Development 80
Urban Development 80
Urban Infrastructure and Service Delivery 80
Environment and Natural Resource Management 20
Climate change 20
Mitigation 20
ADM STAFF
Role At Approval At ICR
Regional Vice President: Laura Tuck Anna M. Bjerde
Country Director: Qimiao Fan Arup Banerji
Director: Laszlo Lovei Charles Joseph Cormier
Practice Manager: Ranjit J. Lamech Sudeshna Ghosh Banerjee
Task Team Leader(s): Fan Zhang Irina Voitekhovitch
ICR Contributing Author: Yae Jun Kim
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Belarus Biomass District Heating Project (P146194)
I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES
Disclaimer: In light of the deteriorating operational environment resulting from the cumulative impact of the various
restrictions and sanctions imposed on Belarusian financial institutions, as well as substantial restrictions on travel and
access to materials and technology, the Bank suspended all projects in Belarus. The suspension went into effect on
March 19, 2022. This ICR was finalized and submitted during the official Belarus portfolio suspension period.
A. CONTEXT AT APPRAISAL
Context
Country Background
1. The Belarus Biomass District Heating Project (hereafter, BDHP or the Project) started in the context of fragile
stability after a period of macroeconomic turmoil, which demonstrated the growing need for reforms to address
the structural problems of Belarus’s economy, and which led to a strong devaluation of the Belarus ruble in 2016.
Heavy reliance on cheap energy imports from a single source was one of the cornerstones but also a weakness of
Belarus’s economy. For decades, Belarus relied heavily on imports of oil and natural gas from Russia to meet
domestic energy demand. Annual costs related to energy imports amounted to about 22 percent of gross domestic
product (GDP). Natural gas was the dominant fuel in Belarus’s energy mix, and about 80 percent of heat and
electricity was produced from gas imported from Russia. Although the price of gas for Belarus was below the world-
market levels, it was negotiated as part of broader agreements with Russia, requiring other trade-offs and exposing
Belarus to energy price volatility and supply disruption risks. Fluctuations in gas import prices were affecting the
balance of payments and fiscal situation; therefore, reducing the reliance on energy imports from a single source
was an important driver of the national energy policy.
Sector Background
2. Historically, district heating (DH) systems played a very important role in the energy sector of Belarus,
providing heating to 60 percent of the population (81 percent of urban and 14 percent of rural households) and
consuming about 8 billion cubic meters of gas annually, which was about 42 percent of the country’s gas
consumption in 2013. Approximately half of heating was supplied by DH systems operated and maintained by the
state-owned vertically integrated utility Belenergo under the Ministry of Energy. The other half was supplied by
municipally-owned local housing and communal service utilities, so-called ‘ZhKH companies/ DH utilities’ under the
Ministry of Housing and Utilities. Municipal authorities not only owned the ZhKH utilities but also appointed their
management and approved investment plans. Belenergo produced heat mainly at combined heat and power (CHP)
plants, 1 while ZhKH companies used less-efficient heat-only boilers, and the overall efficiency of DH systems
operated by ZhKH utilities was lower compared to the systems operated by Belenergo.
3. Most DH systems were built during the 1970s and 1980s and were historically inefficient, with high levels of
annual heat and water losses, but significant efforts were made since the mid-1990s to improve their efficiency as
part of broader policies aiming to reduce energy intensity of the economy, improve energy security and increase
the share of domestic resources in the energy mix. By the time of the Project preparation, significant investments
1In 2003, Belenergo’s installed capacity included 3,982 MW of large CHPs, 182 MW of small CHPs (under 50 MW), and 12 MW of local
fuel fired CHPs.
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had been made to improve the efficiency of Belenergo’s DH systems; however, the DH systems operated by the
local ZhKH companies remained less efficient. During Project preparation, it was estimated that further wide-scale
energy efficiency improvements in DH systems could reduce their gas consumption by up to 30 percent. For
example, only replacing centralized heat substations (that were commonly used across Belarus) with automated
building-level heat substations could reduce energy consumption by 15–25 percent, according to experience in
other countries. However, the local ZhKH companies did not have the financial resources to invest in energy
efficiency improvements, and public energy efficiency financing was limited. Inefficient DH contributed to high
energy and carbon intensities of the country: despite remarkable progress in reducing Belarus’s energy intensity (a
45 percent decrease from 2000 to 2010), it was still twice as high as the average level in European Union (EU)-27
countries.
4. Heavy subsidies jeopardized the DH sector’s financial sustainability, and although the Government committed
to their phase out, the removal of subsidies would have serious social impacts. Viewing energy services as a social
good, the government subsidized household electricity, gas, and district heating tariffs. In 2014, district heating
tariffs covered only about 10–21 percent of the costs, depending on the heat producer.2 The direct fiscal cost of
underpriced energy amounted to about 2 percent of GDP annually. In response to rising energy costs and fiscal
pressures, the Government planned to gradually eliminate cross-subsidization and achieve full cost-recovery of
residential electricity and gas tariffs and reach 60 percent of cost-recovery levels for residential heating tariffs by
2015. The World Bank’s “Belarus Public Expenditure Review” estimated in 2011 that after the removal of subsidies,
residential heating tariffs could increase by 112–256 percent in real terms (depending on the scenario) leading to
an increase in the national poverty rate from 5.4 percent in 2009 to about 6.3–7.2 percent in 2014. The use of local
fuels, including biomass, was expected to decrease the cost of heat production, making the tariff reform smoother;
therefore, the role of the forestry sector was important from the point of view of both energy security and social
protection.
5. Belarus’s forestry sector was well positioned to diversify energy supplies and reduce DH production costs,
while contributing to local economic growth. Forests are one of Belarus’s richest natural resources, covering about
39 percent of the country’s land area—the fifth largest share in Europe and Central Asia. At the time of Project
preparation, forests were well stocked and growing (in both standing volume and area) and were efficiently and
professionally managed. However, there was room to further explore their potential for contributing to economic
growth. According to a World Bank estimate, fuelwood supply could reach 11.3 million cubic meters by 2020, at an
affordable cost. The price of local biomass was about half the 2013 price of imported natural gas on an energy-
equivalent basis, even without considering the environmental benefits of renewable energy.
National Priorities Relevant to the Project
6. Both energy efficiency and biomass use in heating were high on the national policy agenda at the time of
Project preparation. In 2010, the Government of Belarus (GoB) adopted a Strategy for Developing Energy Potential
of the Republic of Belarus3 setting several objectives including increasing the share of local fuels in the fuel share
used for heat generation from 20 percent in 2009 to 28–30 percent by 2015 and 32–34 percent by 2020, thus
reducing the dependence on imported natural gas for heat production. In line with this Strategy, the GoB enacted
a number of sector-specific policies, including the State Program for Building Energy Capacities Based on Local Fuels
2 World Bank, 2014, Heat Tariff Reform and Social Impact Mitigation: Recommendations for a Sustainable District Heating Sector in
Belarus.
3 Decree of the Council of Ministers of the Republic of Belarus № 1180 of August 9, 2010.
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in 2010-2015 and the National Energy Saving Program for 2016-2020, specifying the rehabilitation of existing energy
assets and thermal renovation of buildings as development priorities. In the State Program for Building Energy
Capacities Based on Local Fuels the government aimed to attract BYR 2,353 billion (equivalent to US$ 93.2 million
at the current exchange rate) in investment during 2011–15 to develop local-fuel-based heat boilers and CHP
plants—with a target of installed thermal capacity of 769.7 megawatts (MW) and electricity capacity of 23.6 MW.
Local administrations were responsible for the implementation of energy savings and fuel switching measures at
the local level.
7. In parallel, the Government was demonstrating the political will to gradually increase residential energy tariffs
to cost-recovery levels while investing in energy efficiency, increasing the service quality, and reducing the costs of
heat energy production by switching to biomass. The 2010 Strategy for Developing Energy Potential envisaged
restructuring heat tariffs to phase out subsidies and cross-subsidies (residential heat tariffs were cross-subsidized
by higher industrial tariffs), as necessary actions for achieving the strategic objectives. The Program for Housing and
Utilities of the Republic of Belarus aimed to replace old and inefficient heat networks and reduce heat losses by 6.7
percent by 2016, introducing more energy-efficient generation facilities, reducing subsidies and cross-subsidies,
and increasing the use of local fuels. The political will to implement tariff reforms was evidenced by residential heat
tariff increases during 2013 (by 5 percent in January and 9 percent in August).
Rationale for Bank Involvement
8. At the time of Project preparation, the Belarusian district heating sector needed large investments in
modernization and efficiency improvements but had limited access to financing. Both the GoB and local
administrations recognized that additional capital was needed to scale up the necessary investments. The World
Bank was well positioned to provide financing to address the investment gaps and assist Belarus in addressing the
key challenges mentioned above and meeting the national policy objectives. Since the late 1990s, the Bank had
assisted the government of Belarus in improving energy efficiency and increasing the use of renewable energy
through investment financing, policy advisory support, and technical assistance (TA). These efforts included two
demand-side energy efficiency projects—the US$37.6 million Social Infrastructure Retrofitting Project (SIRP;
P044748) and the US$79.95 Post-Chernobyl Recovery Project (PCRP; P095115)—and a supply-side project aimed at
improving energy efficiency in heat and power generation—the US$215 million Energy Efficiency Project (EEP;
P108023). Moreover, thanks to relevant experience in other countries, the Bank was well positioned to help Belarus
introduce international best practices to scale up biomass-based district heating and to demonstrate renewable
electricity and modern energy efficiency technologies. The BDHP emerged in this context.
9. The Project was designed to help Belarus address the challenges and opportunities explained above
simultaneously—by reducing heat energy production costs, diversifying energy supply therefore reducing import
dependence, further unlocking the potential of the forestry industry, local jobs creation and mitigating the negative
social impact of phasing out heat subsidies.
Theory of Change (TOC; Results Chain)
10. The Project Appraisal Document (PAD) did not contain an explicit theory of change diagram or narrative;
therefore, a TOC has been constructed based on the Project design as presented in the PAD (Figure 1). The Project
development objective – to scale up the efficient use of renewable biomass in heat and electricity generation in
selected towns of Belarus – was expected to be achieved through two investment components focusing on energy
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Belarus Biomass District Heating Project (P146194)
efficiency and biomass utilization respectively, as well as a technical assistance (TA) component that provided
training and capacity building for heating utilities.
11. The “selected towns” (participating DH systems) were chosen using several criteria including heat density,
technical efficiency of the system, availability of sustainable biomass within a reasonable distance, and the
possibility to replace imported gas or oil with biomass for baseload heat generation. Originally, the Project included
thirteen towns (Volkovysk, Ivanovo, Baranovichi, Bereza, Zarechie, Kalinkovichi, Zyabrovka, Starye Dorogi,
Kholopenichi, Cherven, Kadino, Cherikov and Veremeiki) and seven new ones were added later during
implementation bringing the total number of sites to twenty.
Figure 1. Theory of Change of the Biomass District Heating Project in Belarus
Project Development Objectives (PDOs)
12. The Project Development Objective at approval was ‘to scale up the efficient use of renewable biomass in heat
and electricity generation in selected towns of Belarus’ and it did not change during implementation.
Key Expected Outcomes and Outcome Indicators
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13. The Project was expected to result in the following outcomes in the participating DH systems: achieved energy
savings due to improved generation efficiency and reduced transmission losses, increased use of local biomass and
reduced greenhouse gas (GHG) emissions due to achieved savings from efficiency improvement of networks,
substations, and gas boilers and switching from fossil fuels to sustainably managed biomass. Additional interrelated
outcomes were expected such as enhanced energy security due to reduced dependence on imported fuels and
enhanced reliability of the DH supply; reduced operational costs of DH utilities as a result of switching to less
expensive fuel and reduced transmission and distribution losses; and improved heating comfort for consumers due
to more reliable supply and better regulation of heat energy consumption at building level, as well as year-round
supply of hot water in some cities.
14. Three PDO-level outcome results indicators were used to measure the achievement of the first three
outcomes in each selected site as shown in Table 1. The end target values of the results indicators were adjusted
during two restructurings, which are explained in paragraphs 21-32 below; the new target values take into account
the additional seven sites listed in paragraph 11.
Table 1. Key Project Outcome Indicators and Targets
PDO result indicators Baseline Original End Revised End Revised End
(2014) Target Target at 1st Target at 2nd
(by Dec 2019) restructuring in restructuring in
2018 2019
Indicator 1: Projected lifetime energy savings
0.00 1,180,000 1,357,469 1,916,500
(MWh)
Indicator 2: Heat and electricity generated
from renewable biomass (MWh) 0.00 8,300,000 16,239,907 15,816,000
Indicator 3: Projected lifetime reduction in
CO2 emissions (metric tons) 0.00 2,100,000 4,465,178 3,607,600
Project Components
15. The Project Components at appraisal are described below.
16. Component 1: District Heating Energy Efficiency (US$23.35 million) included the following investments in the
selected district heating systems:
a. Modernization and/or construction of heat substations by installing individual building-level heat
substations with temperature controls. Converting 112 centralized heat substations (historically used by
most Belarusian DH companies) to building-level substations with heat exchangers and temperature
controls allowed for the delivery of heat to each building in accordance with outside weather conditions
and its heat demand.
b. Reconstruction and/or construction of district heating networks and upgrading of peak-load gas boilers .
This included replacing 64.27 km of obsolete heat pipes with pre-insulated heat pipes, as well as
constructing 14.26 km of new heat networks, in order to reduce heat losses in transmission. Installing
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new peak-load gas boilers with a total capacity of 147.5 MW to replace outdated ones was expected to
increase generation efficiency from 75–85 percent to more than 90 percent.
17. Component 2: Biomass Heat Generation (US$ 64.98 million). This component included investments in:
c. Biomass boilers and CHP plants. This component supported investments in baseload biomass boilers (with
a total capacity of 82 MW) and small CHP plants using wood chips or wood wastes as the main fuel (total
heat capacity 20.1 MWth and electricity 3.85 MWel), to replace existing base-load gas or oil boilers. The
investments covered the design and construction of boiler houses, biomass-fuel handling systems, and
ancillary equipment.
d. Wood chipping equipment and biomass storage facilities. The Project also planned to finance the purchase
of wood-chippers and the construction of biomass storage facilities near the boiler houses depending on
the sites.
18. Component 3: Technical Assistance (US$1.445 million). This component financed capacity building for the
participating DH utilities and implementation support to the Project Management Unit (PMU), including the
following:
e. Improvement of existing social accountability mechanisms. This included supporting participating utilities
to enhance social accountability practices and to communicate more proactively with their customers;
improving the monitoring by consumer groups on continuous information provision on all aspects of
service delivery and supporting utilities to develop/improve websites and display the information publicly
at the utilities’ premises.
f. Support for a shift to energy-content-based biomass pricing. As wood biomass pricing in Belarus was based
largely on volume (solid cubic meters of raw material), the Project provided technical assistance to support
a government effort to move toward pricing based on the energy content of the timber (that is, a unit
price per gigajoule or megawatt-hours (MWh) of delivered biomass), including financing the purchase of
equipment to measure the energy content of biomass. This was supposed to encourage greater focus on
the quality of the fuel and increased efficiency in the use of biomass resources.
g. Other project implementation support. This included (i) consultancy to support the PMU and the district
heating utilities in the implementation and supervision of the Project; (ii) training and capacity building
for the utilities based on international best practices for energy efficiency improvements in district heating
and proven biomass technologies; (iii) annual financial audits of the Project accounts; and (iv) other
consultancy services.
19. The originally approved costs by component are shown in Table 2 below. All the approved loan funds (US$90
million) were from International Bank for Reconstruction and Development (IBRD) resources. Further information
on costs is available in Annex 3.
Table 2. Project Costs by Component (US$ million)
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Project components Cost Estimate at
Appraisal
(US$, million)
Component 1: District Heating Energy Efficiency 23.35
Component 2: Biomass Heat Generation 64.98
Component 3: Technical Assistance 1.45
Front-end fees 0.22
Total Costs 90.00
B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE)
Revised PDOs and Outcome Targets
20. The Project Development Objective ‘to scale up the efficient use of renewable biomass in heat and electricity
generation in selected towns of Belarus’ did not change during Project implementation, neither did the Theory of
Change. However, the end targets of the PDO indicators and of six out of ten intermediary indicators were revised,
and one intermediary indicator dropped, as part of Project restructuring, as discussed below.
Revised PDO Indicators
21. The first restructuring took place in February 2018, following the request from the GoB in September 2016 4
and the Bank’s technical and safeguards clearance provided in June 2017. There were about US$26.3 million loan
savings out of the original US$90 million loan amount thanks to the costs of signed subprojects being lower than
initially estimated (see also paragraph 27 below). It was agreed to use these loan savings to finance biomass district
heating investments in seven additional sites: Baranovichi (new), Kobrin, Buda-Koshelevo, Novogrudok, Schuchin,
Vorontsy, and Borovliany. The following restructuring was approved along with the necessary adjustments in the
results indicators:
Increase of the end target values for PDO results indicators to include the seven additional sites in the
Results Framework (detailed in Table 1).
Increase of the end target values of five intermediary results indicators to include the seven additional
sites in the Results Framework (Generation capacity of renewable energy (biomass) constructed; Direct
Project beneficiaries; Site-specific designs completed; Supply and installation (S&I) contracts
competitively awarded; and Construction progress) (detailed in Annex 1).
Decrease of the end target value for the intermediary result indicator ‘Average cost-recovery rate for
residential district heating’ to reflect the changes in the GoB’s tariff policy (Annex 1); and
Dropping of the intermediary indicator ‘Number of forestry enterprises adopting energy-content-based
biomass pricing’ (detailed in paragraph 32).
22. The PDO indicators were revised again in 2019 during the second restructuring. In October 2019, following
the request by the Council of Ministers of Belarus in July, 2019 and the request by the Energy Efficiency Department
(EED) of July 19, the second restructuring was made to (i) extend the Project Closing Date from December 31, 2019
to October 31, 2021, (ii) add two new sites, Stolin and Kamenets, in lieu of Novogrudok and Baranovichi-new, and
(iii) expand the scope of work by adding heat network and individual heat substations for two existing sites (Buda-
4 Letter from the Energy Efficiency Department #02-07/467 as of September 23, 2016.
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Koshelevo and Cherikov) to be financed from the loan savings. This restructuring was supported by the Bank to
complete the construction of the ongoing sites and the bidding procedures of the remaining sites, as well as utilize
the uncommitted loan savings allocated to different sites.
23. Table 1 shows the original and the revised PDO results indicators. All three PDO level indicators significantly
exceed the original target established at appraisal: by 62 percent for ‘Projected lifetime energy savings (MWh)’, by
91 percent for ‘Heat and electricity generated from renewable biomass (MWh)’ and 72 percent for ‘Projected
lifetime reduction in CO2 emissions’.
Revised Components
24. There was an attempt to revise Component 3 via a restructuring, but it did not happen. In August 2018, the
GoB sent a request to the Bank to use the unspent balance under Component 3 (about US$ 150,000) to finance
the development of business plans for new Sustainable Energy Scale-Up Project (SESUP), being prepared and
expected to be co-financed by IBRD and the European Investment Bank. In September 2018, the Bank approved
the addition of new subcomponents to Component 3, provision of technical assistance on (i) scaling up wood
biomass-based heating in Selected Towns; and (ii) improving heating energy efficiency in selected towns, including
carrying out market assessments and feasibility studies, and development of business plans for SESUP. However,
the GoB was able to find another source of funds to finance these tasks, and in April 2019 requested the Bank to
cancel the proposed amendments to the Loan Agreement, resulting in the restructuring requesting being dropped.
Other Changes
25. The last restructuring took place in October 2021, when the Project closing date was extended from October
31, 2021, to April 30, 2022, to complete the installation works and put into operation the Baranovichi boiler house.
Rationale for Changes and their Implication on the Original Theory of Change
26. All these changes did not have an impact on the original theory of change since they did not notably alter the
activities implemented under the Project and were not deemed to affect the Project’s development objectives.
27. The rationale for the key changes in the Project scope and the PDO indicators was the intention to use the
available funds optimally. By the time of the first restructuring in February 2018, the Project implementation had
been progressing well: nine out of the thirteen contracts had been completed, and the remaining four were under
implementation. There were US$26.3 million loan savings out of the original US$90 million for the following
reasons: (i) good competition between local and international bidders for all contracts, (ii) economic downturn in
Belarus and increased competition among local companies for a few subprojects which had guaranteed
international financing, and (iii) the Belarusian Ruble’s (BYR) devaluation from US$1/BYR9,000 in October 2013
(when the Project’s final cost estimate was prepared) to US$1/BYR20,000 in beginning of 2016. In July 2016, the
Belarus currency was redenominated, and a new ruble was introduced (BYN), at a rate of 1 BYN = 10,000 BYR. The
strong devaluation of the Belarus ruble in 2016 resulted in significant savings in USD terms because most contracts
had been won by local bidders and signed in the local currency (these bidders purchased equipment from one of
the three Belarusian boiler manufacturers which produced everything in Belarus and, therefore, were not
significantly affected by the exchange rates, maintaining the same contract values). The Bank and the Borrower
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agreed to use the savings achieved due to high competition in bids and the devaluation to finance investments in
additional seven DH sites, thereby expanding the scope of the Project and increasing the results.
28. The key reasons for the second restructuring were i) the implementation delays in the Project activities at the
seven sites, which had been newly included in the Project scope during the previous restructuring, and ii) optimal
use of uncommitted fund available for remaining sites taking into account cost savings in several oblasts.
29. The implementation delays at the seven additional sites were due to (i) repeated bidding procedures, (ii)
insufficient experience of bidders who submitted the proposals, and iii) two sites (Novogrudok and Baranovichi-
new) had to be replaced with two other sites. In the process of public consultations, the PMU and DH utility faced
opposition from citizens in Baranovichi-new over the construction of biomass-based boiler houses near living
premises. After several roundtables to persuade the households were unsuccessful, the PMU decided to replace
Baranovichi-new with Stolin. Given that the uncommitted loan amount was not sufficient to finance the
Novogrudok site, a relatively smaller site, Kamenets, was selected to be funded by the Project. Novogrudok was
later included in the new energy project financed by the Bank, Sustainable Energy Scale Up Project (P165651).
30. Loan savings were achieved due to the price of signed contracts being lower than expected (thanks in part to
the favorable change in the exchange rate, as well as the initial costs being overestimated), resulting in
uncommitted loan funds in several oblasts. For instance, the Brest oblast had approximately US$1.3 million of
available funds and Gomel and Mogilev oblasts had about US$0.6 million and US$0.09 million, respectively. In
order to fully disburse the loan balances, the executive committees of the corresponding oblasts proposed to
implement additional activities under the Project, jointly financed from the local budgets as necessary. Therefore,
it was agreed to extend the Project’s Closing Date, replace two new sites (Stolin and Kamenets) instead of the sites
in Baranovichi-new and Novogrudok, and add additional activities in Buda-Koshelevo and Cherikov.
31. The third restructuring of the Project extension until April 30, 2022, was driven by the delay in the renovation
of the Baranovichi boiler house, which is detailed in paragraph 76. The other 19 out of 20 sites had been completed
and US$86.1 million (96 percent of the loan) had been spent by October 10, 2021. The Project extension was
expected to allow for the full disbursement of the loan and completion of all the planned works.
32. The intermediary result indicators were modified to keep up with the changing circumstances in the country.
The end target value for the intermediary result indicator ‘Average cost-recovery rate for residential district
heating’ was adjusted to reflect the changes in the tariff policy of the Government, which indicated a more gradual
increase of residential heat tariffs compared to the estimates at Project appraisal. The intermediary indicator
‘Number of forestry enterprises adopting energy-content-based biomass pricing’ was dropped because it became
clear that it would not be relevant during the Project’s lifetime: switching from the volume-based methodology to
energy-content based methodology would have required significant lead time for the development of relevant
sector regulations and standards as well as measuring equipment for all small biomass suppliers and users. The
removal of this intermediary indicator related to the forestry business did not have a significant impact on the main
target sectors of the Project, i.e., the energy sector and district heating industry.
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II. OUTCOME
A. RELEVANCE OF PDOs
Assessment of Relevance of PDOs and Rating
33. The relevance of the PDO is considered High because the Project’s objectives at completion were consistent
with the country strategies and the WBG engagement priorities. The Project implementation occurred during two
World Bank country engagement periods, the Country Partnership Strategy (CPS) for FY14–FY17 (Report No.
77458–BY) and the subsequent Country Partnership Framework (CPF) for FY18–FY22 (Report No. 123321-BY). The
PDO remained relevant at the close of the CPS (FY14–FY17), as it remained aligned with the second CPS pillar,
which was to support improvement of the quality and efficiency of public infrastructure services, use of agricultural
and forestry resources, and global public goods benefits.
34. The Project remained relevant to the CPF for FY18-FY22, specifically Focus Area 3: “Improving contribution of
infrastructure to climate change management, economic growth and human development”. The Project directly
contributed to CPF Objective 3A: “Enhanced climate change management” thanks to energy savings and switching
from fossil fuels to lower-carbon biomass fuel. Through these activities the Project also remained relevant to
Belarus’s efforts to comply with GHG emission reduction goals and to meet its Nationally Determined Contributions
under the Paris Agreement.
35. The Project was also relevant to all the aspects of CPF Objective 3C: “Enhanced efficiency, security, and quality
of energy utility provision”. The Project intended to enhance efficiency and quality of DH provision thanks to
improved generation efficiency, reduced transmission and distribution losses and better regulation of heat supply
at the building level. It was also expected to improve security of DH supply thanks to the reduced dependence on
expensive imported fuels and enhanced reliability of the participating DH systems.
B. ACHIEVEMENT OF PDOs (EFFICACY)
Assessment of Achievement of Each Objective/Outcome
36. The PDO, which is “to scale up the efficient use of renewable biomass in heat and electricity generation in
selected towns of Belarus”, has two aspects: (i) to increase the use of renewable biomass in heat and electricity
generation, and (ii) to improve efficiency of heat and electricity supply: this is implied through the reference of
‘efficient’ use of biomass as opposed to relatively inefficient use of resources at Project appraisal. The
achievement of the PDO (efficacy) is rated as Substantial according to the current and forecasted progress
towards meeting the PDO-level results indicators (Table A1.1 in Annex 1). Indicator 2 directly tracks the progress
towards meeting the increased use of renewable biomass while Indicator 1 tracks the progress towards meeting
the efficiency improvement. As a result of increased biomass use and improved energy efficiency, CO2 emission
reductions have also been achieved as captured by Indicator 3. In addition, the Project has made the following
achievements: reduced cost of DH supply, improved heating comfort for consumers, and enhanced energy
security. Core Intermediary indicators (Table A.1.2) and information from other sources have been used to analyze
these additional achievements.
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37. PDO-level results indicator 1 (Projected lifetime energy savings) has been overachieved, with projected
lifetime energy savings amounting to 2,111.5 gigawatt-hours (GWh) compared to the target of 1,916.5 GWh, as a
result of the investments implemented under the Project. Investment details realized under the Project are
summarized in Table A.1.3 in Annex 1.
38. PDO-level results indicator 2 (increasing heat and electricity generated from renewable biomass) has been
achieved substantially by the Project closing date. Also, for one of the intermediary indicators “Installed capacity
of energy sources operating on renewable wood biomass”, a total 179.4 MW of biomass-fired capacity was
installed by the Project closing date as planned. As Table A1.1 Error! Reference source not found. demonstrates,
the use of local renewable biomass for heat and electricity generation at closing is 13,500 GWh (~ 85 percent of
the end target 15,816 GWh) and is expected to reach 14,833 GWh (94 percent of the end target) by 2025. The
majority of sites have reached their individual target values at Project closing or will reach them by 2025, and only
four sites (i.e., Starye Dorogi, Kholopenichi, Cherven and Borovliany) have not achieved 100 percent of the end
target due to lower actual generation of heat than initially planned. As these four sites are relatively large-scale,
their under-performance has a negative impact on the achievement of the overall Project result indicators, despite
the successful performance of the other sixteen sites, as Table 3 demonstrates.
39. The key reason for partial achievement of the end targets at the four sites is that the actual heat demand
was lower than initially projected because of a combination of circumstances: i) New multi-apartment buildings
have not been constructed and connected due to economic slowdown (53 percent); ii) Some health and
community centers were less utilized and occupied than usual due to the COVID-19 pandemic and preventive
measures put in place for public health and safety (26 percent); iii) Actual heat loads of the existing housing stock
were lower than expected mainly due to capital renovation of buildings which improved energy efficiency and led
to lower heat demand, as well as disconnection of a number of existing customers as they decided to use
alternative heating (17 percent); and iv) Overestimation of loads at the design stage and warmer than average
temperatures during the 2021/2022 heating season resulted in lower heat demand (4 percent). Each local district
heating utility provided its heat load projection by 2025, assuming that these external factors will either be
removed or partially resolved when Belarus’ economy recovers, and taking into account the utilities’ business
plans. Detailed analysis of the four sites is available in Table 3, which presents the actual and forecasted result
indicators, along with the reasons for partially achieving the target values.
Table 3. Detailed Analysis of PDO Indicator ‘Heat and Electricity Generated from Renewable Biomass’
Sites Revised Actual Forecasted Difference Magnitude Reasons for not achieving the indicator
End Target Achieved by 2025 between for each
end target reason
Heat and Heat and Heat and and actual
electricity electricity electricity at Project
generated generated generated Closing
(megawatt- (MWh) / % (MWh) / % (MWh)
hours, of PDO of PDO
MWh) target target
Four sites (1 to 4) - partial achieved
1. Starye Dorogi 1,292,240 732,829 826,289 -559,411 -428,931 - Disconnected district heating services including hot
57% 64% water supply (substituted with electric heating)
- Overestimation from the design output in the
-103,660 feasibility study
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- Increased average temperature during the cold
-26,820 season
2. Kholopenichi 140,105 54,049 86,640 -86,056 -69,620 - Non-connected/lowered heating and hot water
39% 62% supply load of educational institutions (school and
art center) and health/recreation centers
- Overestimation from the design output in the
-14,685 feasibility study
- Increased average temperature during the cold
-1,751 season
3. Cherven 1,041,726 400,541 694,011 -641,185 -380,959 - Non-connected hot water supply load in 2021
38% 67% - Adjustment of loads at the design stage
-225,660 - Overestimation from the design output in the
feasibility study
-16,146 - Increased average temperature during the cold
season
-18,420
4. Borovliany 2,906,264 1,780,506 2,349,260 -1,125,758 -557,004 - Non connected hot water supply load in 2021
61% 81% - Non connected heating load in 2021
-551,414 - Increased average temperature during the cold
-17,340 season
Sixteen sites (5 to 20) – well achieved as detailed in Table A1.4 in Annex 1.
Total 15,816,000 13,500,465 14,832,644
(20 sites) 85% 94%
40. PDO-level results indicator 3 – Projected lifetime reduction in CO2 emissions – has been substantially met
due to the large fuel switching (13.5 GWh of heat and electricity generated from renewable biomass) as well as
efficiency improvement in the DH systems. The progress towards meeting this objective correlate to heat and
electricity generation from renewable biomass which is envisaged to increase, so the current achievement of 3.1
million tons of CO2eq is expected to increase to 3.4 million tons of CO2eq by 2025. Low-carbon biomass-based DH
systems made an important contribution to meeting Belarus’ international climate-related commitments.
41. All intermediate results indicators directly related to meeting the key Project objectives have been fully
achieved: (a) Generation capacity of renewable energy (biomass) constructed – fully achieved; (b) Direct project
beneficiaries – overachieved; (c) Site-specific designs completed – fully achieved, (d) Supply and installation
contracts competitively awarded – fully achieved; and (e) Construction progress – fully achieved. These outcomes
demonstrate that the activities financed by the Project have enabled the scaling up of biomass-fired generation
of heat and electricity, confirming attribution of outcomes to the Project’s activities. Other indicators were also
achieved: Strengthened social protection measures adopted and Consumer access to information - overachieved,
as Annex 1 demonstrates. The only underachieved indicator “Average cost-recovery rate for residential district
heating” is not directly related to the PDO objectives. The cost-recovery rate was lower than planned reaching
around 25% at Project closure: heat tariffs have increased at a slower rate because the tariff reform program has
not been approved by the GoB although the government recognized the need to increase the tariffs about five-
fold).
Justification of Overall Efficacy Rating
42. The Implementation Completion and Results Report (ICR) concludes that the overall efficacy rating of the
Project is Substantial given the satisfactory achievement of the PDO-level indicators, and clear evidence that the
objectives’ achievement is attributable to the Project. The PDO indicators are valid and measurable to show the
extent of achievement of the Project objectives.
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43. An important factor for this rating is that the Project was restructured to finance more sites with the loan
savings, thus all the three PDO-level indicators significantly exceeded the original targets established at appraisal:
‘Projected lifetime energy savings (MWh)’ was overachieved by 78.9 percent compared with the original target,
and by 62.7 percent for ‘Heat and electricity generated from renewable biomass (MWh)’ and by 46.7 percent for
‘Projected lifetime reduction in CO2 emissions’. In addition, these more ambitious end targets were either fully
achieved or significantly achieved, as well as are on track for essential achievement beyond the Project closure.
One PDO indicator ‘Projected lifetime energy savings’ overachieved the revised end target by 10.2 percent, while
two other PDO level indicators reached over 85 percent of the revised end target due to factors mainly outside
the Project’s control (i.e., warmer temperatures during the winter thus less demand for heat, COVID-19 pandemic
and the economic downturn), but this is expected to improve to more than 94 percent in the next few years. The
Project could have achieved even better results if the heat demand estimates had been less optimistic for Starye
Dorogi, Kholopenichi, Cherven and Borovliany, leading to less ambitious output designs in the respective feasibility
studies.
44. The ICR also concludes that the restructuring approved during the Project does not trigger a split rating. The
restructuring expanded the scope of the Project by adding seven new sites (in addition to the original thirteen)
without adding additional funds, thus increasing the end target values to achieve additional energy savings,
carbon emissions reductions and increased utilization of local renewable biomass. As the Project’s ambition has
been raised without any budget increases, the Project is assessed based on the revised outcome end targets.
45. The Project succeeded in increasing the efficiency of heat and electricity generation and enabling the use of
local renewable biomass in twenty district heating systems. Without the Project, the participating district heating
systems would have remained less efficient and would have needed to use more energy (about 2.1 terawatt hours
over the lifetime of the Project, i.e. 20 years) because of inefficient generation facilities and high losses during
heat distribution. This would have resulted in larger CO2 emissions (approximately 3.1 million metric tons over
the lifetime of the Project) and higher costs due to increased gas consumption. As two CHP plants with the capacity
of 2.69 MW were constructed under the Project, in the counterfactual, these two DH systems would have
remained as heat-only boilers with no power generation functionality and no associated economic benefits. In
the absence of this Project, the DH systems in twenty participating cities would have continued to use old
inefficient energy supply systems to meet the demand of more than 170,000 customers, resulting in poor supply
services and lower end-user heating comfort.
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C. EFFICIENCY
Economic Efficiency
46. In the context of the Project, efficiency is a measure of how efficiently resources and inputs are converted to
results, and this section analyzes the costs and the benefits of the project as estimated at this approval and the
aspects of the design and implementation that may have augmented or expected efficiency at closing. At appraisal,
an incremental (with and without Project) cost-benefit analysis was carried out for the 13 initial sites using the
Economic Internal Rate of Return (EIRR) and the Economic Net Present Value (ENPV) as indicators of economic
efficiency. The analysis was based on estimated results for thirteen subprojects that had been identified at the time.
Economic benefits included the followings: (i) reduction in network losses through network rehabilitation and
investments in more efficient peak-load gas boilers; (ii) reduction in heat consumption and corresponding heat
production costs through installation of individual building-level heat substations; (iii) fuel cost savings from
replacement of natural gas with local wood biomass; and (iv) economic benefits of reduced GHG emissions. Economic
costs included (i) capital investment costs and (ii) operating and maintenance expenses (including fuel, electricity,
materials, and services).
47. All costs and benefits were estimated net of taxes and duties. The indicators of economic viability used at
appraisal were the EIRR and ENPV at a discount rate of 10 percent. The estimation was carried out for a horizon of
20 years. On this basis, the weighted average EIRR was estimated at 18.3 percent with individual EIRRs for the
subprojects varying from 12.4 percent to 24.5 percent, and the total ENPV was estimated at US$42.4 million. The
economic price of natural gas used in estimating the incremental benefits was the international market price (at the
time US$300 per 1,000 cubic meters). However, for Belarus, the more appropriate economic price of natural gas for
estimating the economic impact on the national economy would have been Belarus’s long-term contractual price
with Russia (at the time US$128 per 1,000 cubic meters). This was less than half the international market price. The
appraisal analysis did not include an alternative assessment based on the contractual price for natural gas.
48. For the post-completion estimation of the economic efficiency, the EIRR and ENPV have been estimated using
generally the same methodology as used at appraisal but updated to reflect actual results and values during Project
implementation. The post-completion analysis presents estimates for two cases related to natural gas pricing (i) using
the international market price averaging about US$240 per 1,000 cubic meters, and (ii) the Belarus-Russia contractual
natural gas price averaging about US$128 per 1,000 cubic meters. Details for twenty subprojects and the main
assumptions are given in Annex 4, and key efficiency parameters are summarized in Table 4. below.
Table 4. Project-Level Weighted Average EIRR and Total ENPV
EIRR (%) ENPV
(US$, million)
Case 1: Under International Market Natural Gas Price 31.0% 293.9
Case 2: Under Belarus-Russia Contractual Natural Gas Price 17.4% 98.9
49. Also shown in Table 5 below, the analysis at the ICR stage indicates that the post-completion economic analysis
ranges from 17.4–31.0 percent. For these cases, the EIRRs are above the discount rates indicated under the Bank
guidelines for economic analysis of investment projects. ENPV at the ICR stage is estimated at US$293.9 million under
international gas price, and US$98.9 million under Belarus’ long-term contract price, which are both significantly
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higher than that of the economic analysis conducted in 2014 mainly because the Project was able to finance more
subprojects than its initial plan due to the cost savings during implementation.
Table 5. EIRR and Total ENPV Assessed at Appraisal and Completion
Stage Original ICR (range)
Appraisal
EIRR (%) 18.3% 17.4%–31.0%
ENPV (US$, million) 42.4 98.9–293.9
50. Economic efficiency rating: At appraisal, the Project’s economic efficiency was estimated taking into account
the international market price of natural gas. For comparability with the estimates at appraisal, and for purposes of
benchmarking with similar projects in other countries, the post-completion efficiency results considered are those
based on international market prices of natural gas. The economic analysis and sensitivity analysis carried out at
post-completion showed that the estimated EIRR and the ENPV are higher than the comparable estimates at
appraisal. With the above, this ICR concludes that the Project’s economic efficiency is rated Substantial.
Implementation Efficiency
51. This ICR also assessed implementation efficiency. The determination of the implementation efficiency is based
on the split assessment on cost efficiency and duration efficiency.
52. With respect to the project costs, most of the originally planned thirteen activities were completed within and
below the original cost estimate. All subprojects were completed within the cost estimate (US$90 million) at
appraisal. Significant cost savings were realized because of simple and straightforward design, good competition
between local (i.e., several local biomass boiler manufacturers) and international bidders, and favorable exchange
rate changes. The cost savings were applied to extend the scope of the Project by adding seven new sites for
construction of biomass boiler houses. This contributed to the overall benefits that were realized from the Project.
As the Project scope was expanded with the same budget (as described in detail in paragraph 27), the new PDO-level
indicators significantly exceed the original target established at appraisal. At project closing, the actual cost was
US$87.1 million after including seven additional sites (to the original 13 sites identified at appraisal).
53. Regarding project duration, eleven of the originally planned thirteen subprojects were completed prior to the
original scheduled closing date. The original closing date (December 31, 2019) was extended by 28 months to allow
for completion of (i) the seven additional subprojects added from cost savings realized under the Project and (ii) the
ongoing subprojects at the time. One Project site, Baranovichi, experienced unfortunate issues such as contract
cancellation because of fraudulent documents (bid security, references, etc.), and delays in issuance of the bank
guarantee for the direct contract. Although some delays occurred due to limited capacity of the DH utilities, the low
number of bidders and the site substitution as described in paragraphs 29 and 71, all subprojects under construction
were completed by the revised closing date (April 30, 2022).
54. Implementation efficiency rating. Based on the assessment of project costs and duration, this ICR concludes
that the Project’s implementation efficiency is rated Substantial.
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Belarus Biomass District Heating Project (P146194)
Assessment of Efficiency and Rating
55. The Project’s overall efficiency is rated Substantial based on the underlying ratings for economic and
implementation efficiency. The Project’s economic efficiency is rated Substantial, as the estimated post-
completion indicators (EIRR and ENPV) are substantially higher than those estimated at appraisal. In addition, the
Project’s implementation efficiency also is rated Substantial because large cost savings were realized during
implementation which were applied to increase the scope of the Project, thereby yielding substantial additional
economic benefits. Most of the originally planned activities were completed by the original closing date and the
extension of the closing date was largely to allow for completion of the additional subprojects added by utilizing
the cost savings realized during implementation.
D. JUSTIFICATION OF OVERALL OUTCOME RATING
56. The Overall Outcome Rating for the Project is rated Satisfactory based on High rating for Relevance, and
Substantial ratings for Efficacy and Efficiency. This is considered justified given that the Project implementation
has been successful, with all critical activities completed, and the key objectives met (with higher end targets than
initially planned thanks to substantial cost savings achieved during implementation). Moreover, the Project’s post-
completion base efficiency measure (EIRR) is higher than the discount rates indicated under the Bank guidelines
for economic analysis of investment projects
E. OTHER OUTCOMES AND IMPACTS (IF ANY)
Gender
57. The investments were system-wide in selected localities and accrued to all consumers including the female
population. Even though the Project was approved prior to the gender-tag, it still looked at female beneficiaries.
It is confirmed that the Project is and will be having a beneficial impact on women through creating better
conditions for provision of high-quality heat and hot water supply as well as electricity services. The gender related
indicator, which should have ensured that not less than 50 percent of direct project beneficiaries are female, was
included in the Project. From the total number of 170,220 people identified as direct project beneficiaries, more
than 88,000 women (52 percent of the total) benefited from improved heat and electricity service under the
Project. Therefore, the target of 50 percent for the intermediate result indicator ‘percentage of direct female
project beneficiaries’ was met. Although it is difficult to quantify the impact of the energy efficiency and district
heating services’ improvements on women, there are indications that the improvements in energy efficiency of
buildings may result in lower heating bills (compared to business-as-usual scenario) due to less heat needed. This
will enable low-income female customers spend more money on food, medication or other vital expenditures and,
in some cases, will reduce the need to seek state assistance. Thus, the Project had a positive impact on the female
population in the Project areas benefitting from improved energy services, and no adverse impacts to the female
population occurred from any of the Project components.
Institutional Strengthening
58. The Project helped strengthen international procurement practices of bidding and contracting, as well as
Financial Management (FM) and disbursement methods and advanced project management practices through
training and consulting support provided to PMU and DH utilities management and specialists. Even in the case of
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management changes, key technical staff are likely to stay; therefore, the capacity developed is likely to be
sustained beyond the Project period. Also, Component 3 of the Project, which covered training and capacity
building, directly contributed to raising awareness of the DH utilities’ staff about energy efficiency and biomass-
fired boiler technologies, and about operational improvements in DH system with optimized settings. The Project
also improved social accountability mechanisms that provide key information on government programs,
communicate with end-users of DH services, collect customer feedback and grievance on all aspects of service
delivery, and invite the public to the decision-making process.
Mobilizing Private Sector Financing
59. The Project did not pursue a goal of mobilizing the private sector financing as an immediate objective.
However, by creating demand for local biomass and for biomass-fired efficient DH equipment, it contributed to
the development of the forestry industry and equipment and service providers. The Project also showcased
international best practices for project management, including procurement, which can lay the ground for future
commercial financing.
Poverty Reduction and Shared Prosperity
60. The Project contributed to poverty reduction and shared prosperity in Belarus. All DH consumers across all
income levels benefited from the Project although it did not explicitly measure the direct impacts on low-income
populations and other vulnerable groups or on poverty reduction. The benefits from the Project were particularly
relevant to the poor and vulnerable households. The increased efficiency, improved reliability of heat supply, and
year-round supply of hot water in some cities, resulted in improved living standards of the poor who could not
afford sustainable alternatives to DH, and who otherwise may have been forced to get low-quality/insufficient
heat supply or switch to lower-quality solutions with negative environmental and health consequences. In
addition, poor district heating users who live in old apartment buildings, frequently poorly insulated, paid twice
the amount to heat the same surface area than those who can afford to reside in newer buildings 5. By improving
the quality of power and heating services for all users, including the lowest-income users, the Project has
contributed to sharing prosperity.
61. Another important outcome of the Project was reduced costs of DH supply in the participating companies.
This does not have an impact on end-users’ tariffs yet because heat tariffs are still subsidized and set at the same
level for the whole country at Project closure; however, this impact will be felt when subsidies are phased out and
consumers’ bills start reflecting the real costs. Fuel expenses of participating DH utilities have declined on average
32.4%, ranging from 8.5% to 58.5% thanks to the conversion from gas to biomass. As Annex 5 demonstrates,
average biomass prices have remained relatively stable in Belarus from the project start to 2021 (in USD
equivalent, they were even declining between 2013 and 2020). Although an increase in biomass prices was
observed in 2022, they still remain lower compared to the price of natural gas. Economic Efficiency section
(paragraphs 46-50) provides more details on gas prices. In the context of subsidized end user tariffs, lower heat
supply costs mean lower subsidies from the government, which can use the fiscal savings for other purposes. The
Project also contributes to local economic development and job creation by creating new markets for forestry-
5 World Bank. 2015. Adapting to Higher Energy Costs: Findings from Qualitative Studies in Europe and Central Asia .
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related businesses, equipment providers and service providers. In addition, by modernizing the DH infrastructure
and reducing heat losses and breakdowns, the Project helped improve the business environment in the country.
62. By reducing GHG emissions, the Project has resulted in climate change benefits for the regions and globally.
While these regional benefits of reducing GHG emissions are difficult to quantify, the values of emissions
reduction used in the economic analysis reflect some of the social benefits. These are also social benefits for the
less well-off, as they are again the population who are more negatively affected by climate change. 6
Other Unintended Outcomes and Impacts
63. The Project contributed to improving security of energy supply because it replaced imported natural gas by
local renewable biomass: approximately 0.21 million cubic meters of natural gas would have been needed to
generate the heat and electricity that is currently generated by biomass thanks to the Project (13.5 GWh over the
lifetime). This contributes to reducing import dependence and the risks of supply disruptions which can be caused
by any external factors. The Project also improved the reliability of heat supply thanks to refurbishment and
modernization of the DH systems, eliminating the need for the customers to consider alternative solutions for
heat supply that require extra funding.
64. Due to fuel replacement from natural gas that produces minimal amounts of pollutants, such as carbon
monoxide and nitrogen dioxide, and virtually no sulfur dioxide and particulate matter, the use of biomass fuel
resulted in some increase in local pollutant emission7. However, the total emissions of local pollutants do not
exceed the national regulatory limits established for heat production. The existing environmental regulation in
force8 establishes the following standards for biomass combustion boilers with the capacity between 2 MW and
20 MW (the range of the Project sites): particulate matter emissions must not exceed 50 mg/m 3 for boilers put
into operation from 2019 and 150 mg/m3 for boilers put into operation from 2006 to 2018. These requirements
are aligned with the World Health Organization recommendations. 9 Operators of all boilers must conduct
measurements in the field of environmental protection (including control of emissions of pollutants into the
atmospheric air) at least once a quarter. All Project sites are equipped with devices for cleaning flue gases from
solid particles (cyclones or bag filters). Boilers with emissions above 50 mg/ m3 must implement measures to
ensure the reduction of emissions up to a concentration of not more than 50 mg/m3 by January 1, 2028. It can be
concluded that, despite the increase of PM content, the emissions at Project sites are properly controlled and will
not have a serious impact on the health of residents of the cities where the Project was implemented.
65. The Project was able to support policy dialogue on the transition to energy-content-based biomass pricing.
Under the Component 3, a comprehensive analysis was conducted to assess the legislation and the practices of
trading biomass fuel for heat and power generation plants in Belarus and in leading European countries. The
assessment included recommendations for the transition to biomass trade based on its energy content, draft
instructions for acceptance and accounting of biomass at generation facilities in order to introduce a system of
trade settlements based on biomass moisture and energy content, as well as other quality characteristics, and
recommendations to transit local trading to energy content-based biomass pricing. Although the Ministry of
6 World Bank, 2016 Shock Waves: Managing the Impacts of Climate Change on Poverty. Climate Change and Development Series.
7 Particulate matter emissions increased by 62 tons per year, sulfur dioxide emissions by 279 tons per year, carbon monoxide
emissions by 316 tons per year and nitrogen dioxide emissions by 167 tons per year.
8 EkoNiP 17.01.06-001-2017 “Environmental protection and nature management. Requirements for environmental safety”
9 WHO recommended emission standards for small biomass-fired combustion plants (3-50 MW) are 50 mg/m3 , and 150
mg/m3 if justified by environmental expertise.
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Forestry was not ready to fully implement the new pricing approach, and the supplied fuel wood is still primarily
priced per solid cubic meter, without regard to moisture content or humidity, the following grading for fuel quality
started to be used - “moisture content less than 40 percent” and “moisture content of 40–60 percent”, so the
Ministry of Forestry and other agencies became more concerned about the issues related to biomass pricing.
66. The Project has contributed to the creation of sustainable biomass supply chains for Project sites. All the sites
are situated close to abundant sources of biomass and should be able to continue getting biomass supplies from
local forestry companies. Although the Project was relatively small for creating an organized and liquid biomass
market for the whole country (this was not the Project’s objective and not the Ministry of Forestry’s priority), it
has demonstrated technical, economic and financial viability of switching from gas to biomass, serving as a
successful example for other DH systems. The volume of wood fuel harvested and consumed in Belarus has
increased steadily since 2015 and amounted to about 10 million cubic meters in 2020 while all forestry
management standards were complied with. The Bank continued its involvement in biomass-based DH through
the Sustainable Energy Scale-up Project (P165651), including a Global Environment Facility Grant, which included
follow up analytics on energy content-based biomass pricing and developing a roadmap for the woodchip market
in the country.
III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME
A. KEY FACTORS DURING PREPARATION
67. Lessons learned from the Bank’s experience with similar projects in Belarus and other countries informed
the design of the Project. In Belarus, the previous Social Infrastructure Retrofitting (SIRP) and Post-Chernobyl
Recovery (PCRP) Projects, both financed small biomass boiler houses in addition to energy efficiency investments.
Under SIRP, a Japanese Policy and Human Resources Development (PHRD) Climate Change Grant (TF 25129)
financed studies and preparation of tender documents for a biomass fired boiler house in Borovliany-Lesnoy
hospital complex, located outside of Minsk, and the investment was financed partly from the Grant and the SIRP
Loan. The experience from the implementation and operation of the modern and fully automated biomass boiler
house from the previous projects was important in the preparation of BDHP including realistic objective setting,
design of the project and component structures, as well as readiness for implementation arrangement.
68. The GoB demonstrated its strong commitment to the Project by adopting several national programs for
energy efficiency and use of local fuels, detailed in paragraph 6. Local administrations were responsible for
achieving the energy efficiency and fuel switching objectives at the local level, and their commitment was
generally strong due to a highly centralized political governance and an awards and penalties system to enhance
compliance.
69. The Bank’s Energy Sector Management Assistance Program (ESMAP) support was key for the Project
preparation. In 2011, a preparatory consultancy for biomass-based district heating and an ESMAP analytical study
on Belarus10 assisted in reviewing Belarus heating sector, legal and regulatory framework for renewable energy
and formed a foundation for the possibility of using wood biomass in the country for heating purposes, suggested
harmonization with the European Union regulations and informed the GoB in drafting renewable energy
10 World Bank. 2011. ESMAP Study on Belarus: Renewable Energy Legal and Regulatory Framework Harmonization with the EU.
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secondary legislation including for biomass-based DH. In addition, a follow up ESMAP analytical work11, conducted
in 2012-2013, identified and analyzed options to increase energy security and improve affordability of heating
services in Belarus and provided guidance for the Project design including technical and economic options for
changing natural gas-based district heating with biomass. The analytics supported by ESMAP laid the foundation
for the legal, technical, and economic aspects of the Project during the preparation stage.
70. The Project started with an experienced PMU in place with most of the staff having worked with the
previous projects financed by the Bank. By the time of the Project’s approval, the PMU had about 15 years of
experience in implementing World Bank projects, including SIRP, which closed in 2010, PCRP which closed in 2013,
and EEP which closed in 2018. The PMU was staffed with qualified and experienced professionals, both in technical
and financial management and procurement aspects.
B. KEY FACTORS DURING IMPLEMENTATION
71. The human resources and organizational capacity of the PMU was considered adequate to the Project
needs, but district heating utilities required capacity building. The participating DH systems were selected
primarily based on technical and financial criteria, as explained in paragraph 11, to have the largest impact
possible; while the implementation capacity of the selected DH utilities was not the most critical factor in the
selection process. The PMU had strong procurement, financial management, and contract management capacity
and was familiar with the Bank’s policies and procedures from previous implementation of Bank-financed projects.
However, most of the participating utilities were unfamiliar with established Bank procedures and had technical
capacity constraints, so the PMU and the Bank worked closely with the participating utilities and provided training
and implementation support. In the first years of implementation, the Project faced delays resulting from slow
procurement and frequent rebidding. Some tenders took almost six months from bid opening to submission of
the bid evaluation report due to the poor performance of the technical consultant (i.e., lacking staff with adequate
skills and qualifications). Other reasons for the unsuccessful bidding included non-responsiveness of the lowest
bid and the absence of the environmental impact assessment for the first bidding of the site located near a water
protection/riparian zone. Technical capacity constraints in the participating utilities also resulted in monitoring
and reporting issues during the first years of implementation.
72. The Project was influenced by the macroeconomic instability and business activity slowdown to a minor
extent. The Project started in the context of a fragile macroeconomic situation, which was exacerbated during
implementation, and the Country Risk was upgraded from moderate to substantial in 2015. The last phase of the
Project took place during a significant political crisis, which started after the August 2020 presidential elections.
In October 2020, the EU imposed restrictive measures against Belarussian officials for violence against peaceful
demonstrators, opposition members and journalists, as well as for misconduct of the electoral process. This did
not significantly impact the Project implementation and finalization; however, the interrelated economic and
business activity slowdown affected the achievement of some Project results indicators due to reduced heat
demand at several sites (as discussed in paragraph 41).
73. The COVID-19 pandemic has also contributed to some delays in Project implementation, however
precautionary and mitigation measures were well implemented. Although Project implementation was not
significantly affected by the COVID-19 outbreak, some delays in construction, technical consultant work and
decrease of heat generation at several sites were observed. The Bank team closely monitored the situation related
11 World Bank, 2013, Belarus - Biomass based district heating case study of Bereza.
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to coronavirus infection cases in the subproject sites and the PMU, where major precautionary measures such as
personal protective equipment, hand sanitizers, and temperature check screening were applied.
74. The Project faced two cases of contractor misconduct, which prolonged the Project implementation period.
When the Project started, the Project Fraud and Corruption Risk was estimated Low, but this assessment primarily
focused not on the risk of fraud but the risk of corruption, taking into account the anti-corruption law adopted in
Belarus in 2007, mandatory anticorruption action plans for all government bodies, and the Bank’s Corruption
Vulnerability Scan in Belarus (2007). The assessment was also influenced by the fact that there were no cases of
fraud or corruption in Bank operations including the implementation of SIRP, PCRP and EEP.
75. The cases of contractors’ misconduct in two sites were investigated by the Integrity Vice Presidency (INT).
In 2015, one local company bid for Bank-financed contracts as a member of a consortium and was awarded two
contracts: i) a contract for the reconstruction of boiler house in Baranovichi; and ii) a contract for optimization of
heat supply system in Cherven. The contracts were signed in August 2015 and December 2015, respectively. In
bidding for these contracts, however, the local company had an undisclosed agent and submitted a few falsified
supporting documents in both the bids and during implementation (e.g., falsified financial statements, bank
guarantees and consortium agreements). After the Integrity Vice Presidency investigation was completed, both
contracts were terminated in May 2017 due to the misconduct, and then direct contracts were signed with new
service providers. In Cherven, the site was successfully completed by the newly awarded contractor, but due to
the investigation, the commissioning was delayed by seventeen months from the original planed completion date.
76. In Baranovichi, implementation was delayed further. A new contract for the mini-CHP biomass boiler was
awarded in 2019 but the contractor failed to fulfill the contractual obligations for the equipment supply, thus the
contract had to be terminated in July 2021. Furthermore, it was decided to change the technological solution of
the Baranovichi site from CHP to heat-only boiler with special heat exchangers, which required additional time to
prepare its feasibility study and tendering. For the timely completion of the site before the Project’s closing date
of October 31, 2021, it was agreed to proceed with direct contracting of a company which was already involved
in the construction of the gas portion of the Baranovichi boiler-house. However, the local banks refused to provide
the required bank guarantee because they considered the remaining time prior to the Project’s closing date was
too short for proper contract implementation. Thus, the Project’s closing date was extended to April 30, 2022,
and the direct contract was signed in December 2021. The Site was finally put into operation in April 2022.
77. The Russian invasion of Ukraine that started in February 2022 and has resulted in sanctions against Russia
and Belarus has not had an impact on the Project implementation because all material deliveries were completed
with only a few remaining installations pending commissioning at that time. If the sanctions continue for many
years, there may be issues with imports of spare parts from Western manufacturers. Another open question is
monitoring of the Project result indicators to 2025 in the context of the Bank’s Belarus program suspension 12.
12In light of the deteriorating operational environment resulting from the cumulative impact of the various restrictions and
sanctions imposed on Belarusian financial institutions, as well as substantial restrictions on travel and access to materials and
technology, the Bank suspended all projects in Belarus. The suspension went into effect on March 19, 2022.
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IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME
A. QUALITY OF MONITORING AND EVALUATION (M&E)
78. The assessment of the quality of M&E is based on three main elements: quality of M&E design, quality of
M&E implementation, and quality of M&E utilization.
M&E Design
79. The Results Framework is in line with the TOC presented in paragraph 11, and the PDO indicators are
considered to encompass all outcomes of the PDO statement, be adequate to capture the contribution of the
Project components, and be specific, measurable, achievable, relevant, and time bound. The three PDO indicators
measuring energy savings, heat and electricity generated from biomass, and GHG emission reduction under the
Project were adequately identified to monitor progress toward the Project’s objective of scaling up the efficient
use of renewable biomass in heat and electricity generation in selected towns of Belarus. These indicators were
monitored at the Project sites by periodically assessing gas consumption and the new technology installed to
enhance the boilers’ performance. The energy savings, biomass-fired energy generation, as well as CO 2 emission
reduction indicators were adequately updated as the scope of the Project expanded, after adding seven additional
sites thanks to the cost savings. Disaggregated data for these three indicators were collected for each of the boiler
plants. This way, the indicators could be made available for each of the sites at any point.
80. Intermediate indicators were included to help with timely monitoring of implementation progress and
progress towards achieving the objectives of the Project. For instance, the number of S&I contracts competitively
awarded and the construction progress were tracked on-site through regular site supervision conducted by the
site owners and the PMU. Similarly, it is observed that the number of site-specific designs completed was
rigorously tracked. Data regarding beneficiaries were estimated as the number of customers connected to the DH
system, and the number of female beneficiaries was estimated applying the share of female population in the city
where the Project was implemented to the overall number of beneficiaries.
M&E Implementation
81. M&E implementation was relatively well-done as the Bank team regularly collected data, conducted regular
missions, updated the progress in achieving results and reported the progress in the biannual Implementation
Status and Results Reports (ISRs). Normal review procedures for procurement, FM reports, and independent
audits were carried out. The ISRs are concise and clear documents that offer pertinent information needed to
follow the Project progress. In addition, good continuity of the project leadership was observed with three TTLs
over eight years of implementation. TTL turnover may produce inefficiency because of the steep learning curve in
understanding the project and building relationship with the counterpart, but no delay was introduced from the
TTL transitions under this Project.
82. The PMU was responsible for data collection, analysis and reporting Project progress to the Bank. The M&E
strategy included the following items: (a) biannual progress reports, (b) one midterm review of implementation
and outcome progress (more details in paragraph 94), (c) Bank team supervision visits to sites, (d) annual financial
audits, and (e) an ICR conducted by the PMU. The M&E elements discussed were officially formalized in the written
Project Operations Manual and during implementation, these M&E activities were fulfilled by the responsible
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parties in a timely manner. This arrangement was not difficult to implement for the PMU since it already had
experience in the implementation of other Bank-financed projects including the Energy Efficiency Project
(P108023). There were minor cases where the actual results monitoring data was mixed up with forecasted data,
or the PMU could not provide reliable data to track results indicators to the Bank team. Several discussions and
technical support from the Bank team enabled the PMU and the site owners to analyze data in a methodologically
sound manner and provide reliable data on results indicators. The PMU was encouraged to carefully check the
data if the information from the participating DH companies raised question marks. Therefore, at the Project
closure, the M&E rating was assessed as Satisfactory.
M&E Utilization
83. The PMU, the participating utilities and the World Bank team used the indicators to monitor physical
progress and make appropriate adjustments to the initial plans. Particularly, tracking the progress of works and
the S&I contracts competitively awarded was key to adjusting the closing date of the Project and determining the
need to reallocate funds among the sites. Those factors triggered the carrying out of project restructurings as
discussed in previous sections of this report. M&E findings were regularly communicated to the Borrower. The
results achieved helped nurture the collaboration between the GoB and the World Bank and created momentum
for subsequent interventions in the field of energy efficiency for heating and power, such as the Sustainable Energy
Scaling Up Project approved in 2019.
Justification of Overall Rating of Quality of M&E
84. The M&E system was sufficient to assess the achievement of the objectives and there were only moderate
shortcomings in the M&E system’s design and implementation and no shortcomings in its utilization. As discussed
earlier, the initial moderate weaknesses in the M&E implementation have been addressed, and the quality and
reliability of data reported by the PMU have been improved; therefore, the relevant information collected by the
Bank is considered adequate to assess the progress toward achievement of the Project’s outcomes. Therefore,
the ICR concludes that the overall rating of M&E quality is Substantial.
B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE
85. The Project was classified as a Category B Project according to the Environmental and Social (E&S) safeguard
policies at the time of appraisal with two safeguard policies triggered, namely Environmental Assessment OP/BP
4.01 and Involuntary Settlement OP/BP 4.12. The PMU prepared Environmental and Social Management
Framework and site-specific Environmental and Social Management Plans (ESMPs) during implementation, and
the ESMPs have been disclosed publicly and consulted upon in Project municipalities. The Project has been
implemented overall in compliance with the site specific ESMPs and has no outstanding environmental issues.
Furthermore, during its implementation there were not registered occupational health and safety incidents and
accidents. Lastly, no complaints on adverse environmental impacts had been received from the local population
or from the state inspection bodies.
86. Overall performance of social safeguards management of the Project remained Satisfactory. Both the PMU
and district heating utilities demonstrated good knowledge of social impact and risk management tasks of the
Project. Social accountability mechanisms have been well established and improved during the Project
implementation to enable citizens to access governmental information, lodge grievances and receive redress,
oversee the provision of public services, and take an active part in public management and decision-making
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processes. The PMU’s support and interaction led to the increased knowledge exchange during the Project
implementation thus increasing the capabilities of the district heating utilities.
87. During Project implementation before the COVID-19 pandemic, regular meetings were held between the
PMU and World Bank’s E&S specialists. The PMU facilitated reporting on E&S compliance in progress reports as
well as separately in line with the ESMP agreed principles. During the pandemic, because of the travel restrictions,
the PMU shared progress reports, providing additional information including photographs of construction works
and of completed sites. The World Bank team organized continuous and regular virtual meetings with the PMU to
receive relevant updates and provide recommendations, as needed, to improve the Project’s E&S performance.
88. According to the World Bank’s environmental performance assessment conducted in November 2021 to
analyze the environmental impact of the Project, it was determined the total emissions of local pollutants do not
exceed the national regulatory limits established for heat production. As mentioned in paragraph 64, the use of
biomass fuel resulted in some increase in local pollutant emission. In addition, it is also confirmed that GHG
emission were significantly reduced as recorded in the results framework (approx. 3.1 million tons of CO 2eq).
89. The Project maintained a Grievance Redress Mechanism (GRM) through the implementation period to deal
with the complaints related to DH investment activities under the Project. The GRM has been available to the
public through the channels (i.e., emails, phones) provided at EED, PMU and DH companies websites in order to
provide the opportunity to lodge written grievances and concerns related to DH companies activities. However,
there was very limited evidence of a well-functioning GRM as the PMU has not received any grievances or
complaints. Special information panels and signboards have been installed at the construction sites to present
specific information on the works under execution and the contact details. Overall, the Project complied with the
World Bank’ social safeguards requirements and produced positive social impacts by providing improved and
reliable heating systems to customers.
90. While a Resettlement Action Plan was prepared for the town of Kalinkovichi and disclosed to the public in
December 2013, it turned out there was no longer any need to implement it since the final technical design for
the civil works managed to avoid the need for land acquisition or any other types of resettlement-related impacts.
Also, during implementation of investment activities at sub-project sites there was no land acquisition, physical
displacement, or any issue with squatters.
91. Throughout Project implementation the FM arrangements have always been assessed as Satisfactory, and
adequate compliance with the Project FM covenants has been observed. There were no major issues impacting
performance and FM risk, which was preserved at either Moderate or Low levels. IFRs were submitted in a timely
manner throughout Project implementation and were confirmed to be of acceptable quality. All annual audits of
Project financial statements were carried out by private auditors acceptable to the World Bank based on the
agreed terms of references, and two outstanding audit reports (one for calendar year 2021 and the other from
January 2022 to the end of the Project) are pending. By far, the auditors have issued unmodified audit opinions
and did not note any significant internal control issues during the Project implementation period.
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C. BANK PERFORMANCE
Quality at Entry
92. The objectives defined in this Project were relevant for Belarus’ long-term goals, and the Project approach
proposed by the Bank was realistic for the country context. The Project was adequately prepared at appraisal
considering the urgent need to address the challenges of the Belarusian heating sector, which are described in the
section Project context and Objectives. Also, the design of the Project was sound and well targeted. The Project’s
investment components sought to scale up the renewable biomass use for heat and electricity generation and to
improve energy efficiency in heating networks through making technical improvements in areas where sustainable
biomass was available and network improvements were needed. Similarly, the TA component was well designed
to improve the stakeholders’ capacity and awareness. Although the scale and the target audience of the Project
were not sufficient to stimulate switching to biomass across the whole country, it was expected to serve as an
example for other DH systems. The planned implementation arrangements took proper account of the Bank’s
emphasis on fiduciary matters (finance, procurement, legal, safeguards), which partially benefited from the Bank’s
previous projects such as SIRP (closed in 2010), PCRP (closed in 2013), and EEP (closed in 2018). The Project’s
environmental aspects were studied carefully, and the expected environmental impact was positive as the Project
aimed to scale up the efficient use of cleaner energy and reduce GHG emissions. In addition, safeguard and
fiduciary policy compliance and institutional arrangements were strong. The World Bank’s risk assessment helped
identify mitigation actions and the consultancy and capacity building contemplated in this Project were pertinent
to the client’s needs to enable a successful implementation. The PDO level and intermediate level indicators were
well established to assess the Project’s achievement of its objective, which had positive implications for
supervision and facilitated the work on the ICR. Hence, the Bank's performance in the identification, preparation,
and appraisal of the Project was Satisfactory.
Quality of Supervision
93. The Bank supervision appeared to include good follow-up and resolution of implementation issues. Bi-
annual supervision missions were thoroughly conducted and documented, and the ISRs were generally well
detailed and offered a candid assessment of issues and progress. Supervision of environment and social
safeguards was conducted in a timely manner. Also, fiduciary matters were regularly monitored satisfactorily.
Intensified efforts to replicate training and capacity building of procurement, particularly in the early years of the
Project implementation, would have been needed to strengthen capabilities and expedite procurement
processes. However, the main shortcomings concerning implementation were resolved by completion.
94. The World Bank carried out a mid-term review mission in October 2017. During the mission, it was
confirmed that the PDO continues to be relevant, and the progress toward achieving the PDO was satisfactory.
Also, the mid-term review mission identified restructuring needs to utilize US$26.3 million of loan savings thanks
to the competitive bidding process and the significant devaluation of the Belarusian ruble since project appraisal.
The Project was restructured in 2018 in order to expand the scope due to the cost savings identified during
supervision, which helped maximize the development impact of the Project substantially. Also, the target values
of the PDO results indicators were revised and monitored regularly by the Bank team.
95. The supervision efforts became challenging in early 2020 given the safety guideline and restrictions related
to the global COVID-19 pandemic, which resulted in Bank supervision missions being carried out in a virtual setting.
However, the close supervision was underpinned by the experienced team members as well as the availability of
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a task team leader (TTL) in the country helped in improving coordination with the client’s team. The Project
experienced some turnover with three TTLs during implementation and good support from the country and
regional offices.
96. In summary, the World Bank was able to carry out all the requisite implementation support missions,
including the mid-term review mission. The size of the team and skill set have been adapted for the technical and
financial aspects that the project considered. The task team leadership changed during project implementation
did not affect the quality of the supervision due to the presence of a team member who was based in the country,
worked on the project throughout the entire cycle and became the final task team leader. The Bank team
successfully managed the implementation even though closing had to be extended twice, which was somewhat
inevitable due to the expanded scopes. Therefore, the ICR concludes that World Bank supervision quality was
Satisfactory.
Justification of Overall Rating of Bank Performance
97. The World Bank assisted the client in overcoming the challenges encountered throughout the preparation
and implementation of the Project. Based on the description of the successes and minor shortcomings in ensuring
the quality of supervision, the ICR assesses the rating of overall Bank performance as Satisfactory.
D. RISK TO DEVELOPMENT OUTCOME
98. The Project’s risk to development outcome is Low because (i) the Government of Belarus has demonstrated
its commitment towards increasing the efficient use of sustainable biomass energy in DH sector further; (ii) the
capacity of PMU has significantly improved, and (iii) the commitment of local utilities to continue using renewable
biomass in their DH system remains strong. The Sustainable Energy Scale Up Project (P165651) was expected to
continue assisting Belarus towards meeting the development outcomes (before its suspension). The risk to
development outcome could increase should the Belarus counterparts reduce their level of commitment.
V. LESSONS AND RECOMMENDATIONS
99. During the nine years of Project implementation, a lot of experience was gained, and many lessons were
learned, which will be valuable for other investment operations in Belarus and other countries. The BDHP was the
first transformational DH project in Belarus that financed primarily fuel switching from gas and oil to sustainable
wood biomass; therefore, it can serve as a successful case study for DH and fuel switching projects in countries
with a DH sector and comparable biomass resources.
100. Simple Project design, optimal site selection and a reasonable loan size (vis-à-vis the implementation
agency’s capacity) have facilitated implementation. The BDHP sites were all relatively small, and biomass was
available at a short distance of the boiler plants; biomass transportation logistics from the forests to fuel storages
and boiler houses was easy to arrange by the local forestry enterprises and municipal organizations. During
preparation of similar projects, it is important to consider the site location (close to sustainable and affordable
biomass supplies) and also the optimal size of investments that the implementation agency can undertake and
complete within the typical project lifetime of five-six years. Future projects should also take into account
potential risks related to the natural hazards (forest fires, floods, etc.) that can damage woody biomass supply
logistics and endanger the economics of biomass-fired boilers. Such risks did not materialize in Belarus during
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Project implementation; however, several forest fires and other events in Europe and US over the recent years
have demonstrated that natural disasters can severely limit availability of renewable fuel stock. Therefore,
biomass projects should include elements of resilience to ensure sufficient fuel supply and alternatives.
101. Biomass-fired district heating not only creates markets for wood resources, but also increases the market
price of biomass due to growing demand. This trend is widely observed in many other regions, where biomass,
initially a cheap resource with low commercial value, has become a good source of revenue for forestry
companies. From the country’s perspective, this is positive for local economic development, job creation and fiscal
revenues; however, this trend poses a significant risk to viability of DH projects that switch to biomass. To mitigate
this risk, several measures may be considered, including: i) contractual e.g., forward trading for 5-10 years before
the plant is operational, ii) regulatory e.g., measures to ensure fair competition when it is possible or price
regulation when competition is impossible (e.g., only one local supplier), or iii) vertical integration for self-
sufficiency of biomass supply. This kind of considerations can be useful for other projects with biomass DH
investments. TA to the government and/or the regulator to create an attractive legal, regulatory and institutional
environment for biomass trading could significantly help the scale up on biomass-fired heat and power generation.
102. Solid procurement capability of the implementing entities at the very beginning of the project is a critical
factor of project success. Due to the limited procurement capacity of the participating DH companies, the Project
experienced several rebidding cases which have disrupted the implementation progress of the Project. As the
procurement capacity and communication with bidders improved (leading to increased competition), the pace of
procurement accelerated, helping to complete all remaining investments before the closure. Therefore, it is
recommended for the Bank to provide TA to reinforce procurement capability of the implementing entities at the
very beginning of project implementation. In this case of small or absent competition, or likelihood of collusion,
Bank teams should be prepared to reach out to potential bidders proactively and use innovative procurement
solutions that can help attract international contractors. The Project also encountered two misconduct cases by
a contractor, who forged bid supporting documents. To prevent such cases in future projects, the PMU should
have a set of practices to conduct better due diligence, including checking the validity of key supporting
documents of the winning bidders such as the bank guarantees.
103. Modernization of heating networks and other supply-side improvements should go hand in hand with
energy efficiency measures at the building level (such as replacing windows, roofs, entrances, common areas, or
full weatherization of the building). If this is not done, supply-side measures could have only partial effects as
some of the residents might not get the intended benefits. The Project was designed with a focus on DH supply
only because the government had initiated several programmes focusing on building-level improvements.
Nevertheless, the impact of the Project could have been greater if it had addressed both heat supply and demand
side EE investments. Therefore, the follow-up project, SESUP, was designed to cover both supply- and demand-
side EE to maximize the impact of intervention on the whole DH value chain.
104. To achieve the optimal results, it is helpful to i) design the project taking into account the estimates of the
facility’s future load in different scenarios (optimistic and pessimistic); and ii) regularly request business plans of
participating utilities not only in the preparation stage but also in the implementation phase and update the load
estimates if needed before finalizing the bidding documents. The feasibility studies of several DH investment sites
developed during the BDHP appraisal stage calculated the facilities’ output on the basis of optimistic projections
regarding the connection of new consumers and heat supply to the existing ones. These projections, which were
based on historical trends of high energy demand growth, and the medium- to long-term urban development
plans (which are not updated frequently), influenced estimates of the Project's Results Framework (i.e., heat
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output and heating load). As the real heat load was lower than projected because of the COVID-driven economic
slowdown, warmer winter temperatures and other factors, the Project outcomes at several sites deviated from
the targeted results at the end of the Project. For better scrutiny, at a later stage, the Project requested business
plans from the participating utility companies, as well as their best estimates of heat load projections, which
helped improve the Project implementation monitoring. Such an approach was also used in the subsequent Bank
project, Sustainable Energy Scale-Up Project. This approach can help project teams identify any inaccurate
projections and minimize significant deviations in the results achieved from the established target at project
design stage. It can also allow the project to adjust its ambition and have a more realistic target, taking into
account the evolving market circumstances, if necessary.
105. Continued policy dialogue is important for successful sector reforms, but political economy factors beyond
the Bank control also play a key role. Despite very active cooperation between the Bank and the Belarusian
Ministry of Economy and Energy Efficiency Department at the Project start, and the latter’s willingness to move
the heating sector towards cost-recovery, the heat tariffs were not raised as quickly as expected for political
reasons. The average cost recovery rate increased from 15% to 25% instead of the target 80% (the only
intermediary indicator not met); therefore, the impact of the Project on the financial health of DH companies has
been smaller than expected, although the exact impact is difficult to estimate: the difference between the costs
and the tariffs is covered by subsidies, and heat supply represents only a part of the utilities’ business (they also
deal with water supply, waste management and other utility services). Heat tariff reforms could have been more
successful if a broad communication campaign and dialogue at different policy-making levels were organized, but
this was not part of the Project.
106. Finally, early adoption of the new modality of supervision was successful and can be widely used to extend
the success of the project. For instance, virtual missions were tested in the early stages of the pandemic instead
of directly performing missions with in-person setting in the country due to the travel restrictions. At first, it took
time to get used to virtual meetings especially for those in the field, but over time, the virtual setting has been
shown to be very effective in overseeing implementation progress. In addition, drone technology for photography
and filming13 was used on several exemplary boiler houses and biomass storage facilities renovated by the Project
in order to record the exterior finish as well as the inside of the facility, and to inform the public of the success of
the project. Building on the experience from the Project, this can be replicated in the other Bank projects in the
country and the region, as it has proven effective.
.
13Five sites (Volkovysk, Cherven, Kalinkovichi, Bereza, and Kobrin) financed under the Project were selected and the films were
taken in 2021. The video is available at:
https://worldbankgroup.sharepoint.com/:f:/s/BYMSQFiles/Et_d_0d59etItsJBgEeUYh8BKaeEtMwj3djaNeqsykBmdw?e=5%3ao8FiFO&
at=9
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Belarus Biomass District Heating Project (P146194)
ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS
A. RESULTS INDICATORS
A.1 PDO Indicators
Objective/Outcome: Reduce energy consumption and increase renewable energy use
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Projected lifetime energy Megawatt 0.00 1,180,000.00 1,916,500.00 2,111,416.00
savings hour(MWh)
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
Fully achieved.
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Heat and electricity Megawatt 0.00 8,300,000.00 15,816,000.00 13,500,465.00
generated from renewable hour(MWh)
biomass associated with
investments financed under 16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
the project
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Belarus Biomass District Heating Project (P146194)
Comments (achievements against targets):
Significantly achieved.
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Projected lifetime reduction Metric ton 0.00 2,100,000.00 3,607,600.00 3,081,517.00
in CO2 emissions due to
investments financed under 16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
the project
Comments (achievements against targets):
Significantly achieved.
A.2 Intermediate Results Indicators
Component: District Heating Energy Efficiency
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Average cost-recovery rate Percentage 15.00 80.00 35.00 25.00
for residential district
heating 16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
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Belarus Biomass District Heating Project (P146194)
In the course of implementation, the government presented a political will to raise energy tariffs more gradually than expected. Partial achievement at an
average cost recovery rate was also compounded by energy price volatility, supply disruption, and currency devaluation during the implementation period.
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Consumer access to Number 0.00 3.00 3.00 3.00
information
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
Fully achieved
Component: Biomass Heat Generation
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Generation Capacity of Megawatt 0.00 106.00 179.00 179.00
Renewable Energy (other
than hydropower) 16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
constructed
Generation Capacity of Megawatt 0.00 106.00 179.00 179.00
Renewable Energy
constructed - Other 16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
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Belarus Biomass District Heating Project (P146194)
Comments (achievements against targets):
Fully achieved
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Direct project beneficiaries Number 0.00 78,760.00 117,380.00 170,220.00
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Female beneficiaries Percentage 0.00 50.00 52.00
Comments (achievements against targets):
Over-achieved
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Strengthened social Yes/No No Yes Yes Yes
protection measures
adopted 16-May-2013 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
Achieved
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Belarus Biomass District Heating Project (P146194)
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Site specific designs Number 0.00 13.00 20.00 20.00
completed
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
Achieved
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
S&I contracts competitively Number 0.00 13.00 20.00 20.00
awarded
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
Achieved
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Construction progress Percentage 0.00 100.00 100.00 100.00
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Belarus Biomass District Heating Project (P146194)
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Construction progress Percentage 0.00 100.00 100.00 100.00
Kadino
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Construction progress Percentage 0.00 100.00 100.00 100.00
Zarechie
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Contruction progress Percentage 0.00 100.00 100.00 100.00
Zyabrovka
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Construction progress Percentage 0.00 100.00 100.00 100.00
Starye Dorogi
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Construction progress Percentage 0.00 100.00 100.00 100.00
Kholopenichi
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Construction progress Percentage 0.00 100.00 100.00 100.00
Cherikov
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Construction progress Percentage 0.00 100.00 100.00 100.00
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The World Bank
Belarus Biomass District Heating Project (P146194)
Veremeiki 16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Construction progress Percentage 0.00 100.00 100.00 100.00
Bereza
15-Aug-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Contruction progress Percentage 0.00 100.00 100.00 100.00
Kalinkovichi
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Construction progress Percentage 0.00 100.00 100.00 100.00
Baranovichi
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Contruction Progress Percentage 0.00 100.00 100.00 100.00
Volkovysk
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Construction progress Percentage 0.00 100.00 100.00 100.00
Ivanovo
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Construction progress Percentage 0.00 100.00 100.00 100.00
Cherven
16-May-2014 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
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Belarus Biomass District Heating Project (P146194)
Achieved
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Construction progress Kobrin Percentage 0.00 100.00 100.00 100.00
31-Dec-2017 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
Achieved
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Construction progress Buda- Percentage 0.00 100.00 100.00 100.00
Koshelevo
31-Dec-2017 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
Achieved
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
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Belarus Biomass District Heating Project (P146194)
Construction progress Percentage 0.00 100.00 100.00 100.00
Schuchin
31-Dec-2017 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
Achieved
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Construction progress Percentage 0.00 100.00 100.00 100.00
Vorontsy
31-Dec-2017 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
Achieved
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Construction progress Percentage 0.00 100.00 100.00 100.00
Borovliany
31-Dec-2017 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
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The World Bank
Belarus Biomass District Heating Project (P146194)
Achieved
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Construction progress Stolin Percentage 0.00 100.00 100.00 100.00
05-Jul-2019 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
Achieved
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion
Construction progress Percentage 0.00 100.00 100.00 100.00
Kamenets
05-Jul-2019 31-Dec-2019 30-Apr-2022 30-Apr-2022
Comments (achievements against targets):
Achieved
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The World Bank
Belarus Biomass District Heating Project (P146194)
B. KEY OUTPUTS BY COMPONENT
Objective/Outcome To scale up the efficient use of renewable biomass in heat and electricity generation
1. Projected lifetime energy savings (MWh)
2. Heat and electricity generated from renewable biomass
Outcome Indicators
(MWh/year)
3. Projected lifetime reduction in CO2 emissions (metric ton)
1. Generation capacity of renewable biomass energy constructed
2. Direct project beneficiaries
3. Strengthened social protection measures adopted
Intermediate Results Indicators 4. Average cost-recovery rate for residential district heating
5. Consumer access to information
6. Site-specific designs completed/Supply and installation contracts
competitively awarded/ Construction progress
1. Modern renewable biomass boilers and CHP plants installed
2. Biomass fuel storage facilities and wood chipping machines for
Key Outputs by Component biomass fuel supply
(linked to the achievement of the Objective/Outcome 1) 3. Rehabilitated and/or constructed district heating networks
4. Heat substations with temperature controls installed
5. Peak load gas-fired boilers installed
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The World Bank
Belarus Biomass District Heating Project (P146194)
C. ACHIEVEMENT OF INDICATORS BY COMPONENT
Table A1.1. Achievement for each PDO-level Results Indicator
PDO-level Results Indicators Baseline Actual Achieved Forecasted End Target
(2014) (2022) (2025)* (2022)
(relative to the end (relative to the
target) end target)
Indicator 1: Projected lifetime energy savings 0.00 2,111,416 2,189,780 1,916,500
(MWh) (110%) (114%)
Indicator 2: Heat and electricity generated from 0.00 13,500,465 14,832,644 15,816,000
renewable biomass (MWh) (85%) (94%)
Indicator 3: Projected lifetime reduction in CO2 0.00 3,081,517 3,385,294 3,607,600
emissions (metric tons) (85%) (94%)
*Note: the forecasted result indicators are based on the heat load projection by 2025, assuming that Belarus’ economy recovers and other external factors will
be partially or fully removed.
Table A.1.2. Achievement for Core Intermediate-level Results Indicators
Intermediate Level Results Indicators Baseline Actual Achieved (2022) End Target
(2014) (relative to the end target) (2022)
Installed capacity of energy sources operating on renewable wood 0 179.4 (100%) 179.4
biomass (MW)
Direct beneficiaries of the Project 0 170,220 (145%) 117,380
Percentage of female beneficiaries (%) 0 52 (104%) 50
Strengthened social protection measures adopted 0 Yes Yes
Average cost-recovery rate for residential district heating (%) 15 25 (71%) 35
Consumer access to information (number) 0 3 (100%) 3
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The World Bank
Belarus Biomass District Heating Project (P146194)
Table A1.3. Subproject Investment under the Project
Subproject Biomass Boilers Natural Gas Boilers Individual Building-level Heating Networks, km
Capacity, MW Capacity, MW Substations / Central Heating (two-pipe)
Substations (CHS), pcs (r) = replacement,
(с) = construction
Volkovysk 8 58.15 - 0.180 (с)
Ivanovo 10.5 13 - 1.7 (r)
Baranovichi 6 8 - 0.393 (r) /0.567 (с)
Bereza 4 - - 0.390 (с)
Zarechie 6.3 4.5 - 0.030 (с) / 2.120 (r)
Kalinkovichi 16.5 40 18 1.575 (с) / 1.425 (r)
Zyabrovka 5.4 2.6 - 0.332 (с) /0.968 (r)
Starye Dorogi 17 - 4 0,110 (с) /0.820 (r)
Kholopenichi 3 - 12 + 2 CHS 1.813 (с) /0.515 (r)
Cherven 12 6 - 1.283 (с) /2.217 (r)
Kadino 8 - 2 CHS 1.2 (r)
Cherikov 4.2 - 16 3.2 (r)
Veremeiki 2.5 2 28 0.070 (с) /2.432 (r)
Kobrin 12 - - 0.17 (с)
Buda-Koshelevo 10.5 - 23+1 CHS 0.060 (с) /3.472 (r)
Borovliany 21 - - 0.350 (с)
Rechitsa 6.5 - - 0.300 (с)
Shchuchyn 12 12 - 0.960 (с) / 0.170 (r)
Kamenets 4 - - 0.040 (с)
Vorontsy 10 - - 0.110 (с) /0.110 (r)
TOTAL 179.4 146.25 101+5 CHS 8.34 (с) /20.742 (r)
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The World Bank
Belarus Biomass District Heating Project (P146194)
Table A1.4. Achievement of PDO Indicator ‘Heat and Electricity Generated from Renewable Biomass’
Sites Revised End Target Actual Achieved Forecasted by 2025
Heat and electricity generated Heat and electricity generated Heat and electricity generated
(megawatt-hours, MWh) (MWh) / % of PDO target (MWh) / % of PDO target
1. Starye Dorogi 1,292,240 732,829 826,289
57% 64%
2. Kholopenichi 140,105 54,049 86,640
39% 62%
3. Cherven 1,041,726 400,541 694,011
38% 67%
4. Borovliany 2,906,264 1,780,506 2,349,260
61% 81%
5. Kadino 202,490 207,081 207,081
102% 102%
6. Veremeiki 113,494 111,550 111,550
98% 98%
7. Schuchin 1,208,117 1,114,270 1,265,809
92% 105%
8. Vorontsy 897,840 814,240 897,840
91% 100%
9. Volkovysk 1,110,120 1,045,030 1,150,000
94% 104%
10. Ivanovo 538,936 632,345 632,345
117% 117%
11. Baranovichi 467,086 615,343 615,343
132% 132%
12. Bereza 390,502 416,168 416,168
107% 107%
13. Zarechie 128,876 178,800 178,800
139% 139%
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Belarus Biomass District Heating Project (P146194)
14. Zyanrovka 264,828 276,993 276,993
105% 105%
15. Kalinkovichi 1,589,200 1,679,223 1,679,223
106% 106%
16. Cherikov 214,043 263,885 263,885
123% 123%
17. Kobrin 1,999,840 1,816,280 1,816,280
91% 91%
18. Buda-Koshelevo 657,952 657,952 657,952
100% 100%
19. Rechitsa (Stolin) 365,887 416,860 416,860
114% 114%
20. Kamenets 286,520 286,520 286,520
100% 100%
Total 15,816,000 13,500,465 14,832,644
(20 sites) 85% 94%
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The World Bank
Belarus Biomass District Heating Project (P146194)
ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION
A. TASK TEAM MEMBERS
Name Role
Preparation
Fan Zhang Task Team Leader(s)
Barbara Ziolkowska Procurement Specialist(s)
Iryna Babich Financial Management Specialist
Alexei Slenzak Social Specialist
Klavdiia Maksymenko Social Specialist
Supervision/ICR
Irina Voitekhovitch Task Team Leader(s)
Alexander Balakov Procurement Specialist(s)
Iryna Babich Financial Management Specialist
Pekka Kalevi Salminen Team Member
Rahmoune Essalhi Procurement Team
Arcadii Capcelea Environmental Specialist
Thuy Bich Nguyen Procurement Team
Elena Merle-Beral Team Member
Daria Gulei Procurement Team
Anastasiia Soltis Procurement Team
Warren Paul Mayes Social Specialist
Yae Jun Kim Team Member
Anastasiia Zakharova Social Specialist
Page 48 of 69
The World Bank
Belarus Biomass District Heating Project (P146194)
B. STAFF TIME AND COST
Staff Time and Cost
Stage of Project Cycle
No. of staff weeks US$ (including travel and consultant costs)
Preparation
FY14 42.451 166,596.60
FY15 .200 2,941.22
Total 42.65 169,537.82
Supervision/ICR
FY14 0 0.00
FY15 29.310 101,325.38
FY16 21.552 69,857.77
FY17 20.518 106,429.66
FY18 15.717 89,866.50
FY19 15.010 87,824.43
FY20 24.344 103,521.86
FY21 27.845 122,730.77
FY22 18.579 140,990.49
FY23 9.087 51,135.84
Total 181.96 873,682.70
Page 49 of 69
ANNEX 3. PROJECT COST BY COMPONENT
Components IBRD loan (US$, millions)
Amount at Appraisal Actual at Project Closing
Investment on DH system(A)/biomass heat 88.33 86.71
generation(B)
Technical Assistance(C) 1.45 0.84
Front-end fee 0.22 0.22
Total 90.00 87.77
Total disbursed (%) - 97.52
Undisbursed - 2.23
Page 50 of 69
ANNEX 4. EFFICIENCY ANALYSIS
Economic Efficiency: Substantial
1. At appraisal, an economic cost-benefit analysis was carried out using an incremental approach. The net
incremental costs and benefits were estimated by comparing estimated results for ‘With-Project’ and ‘Without-
Project’ scenarios. The analysis was based on estimated results for thirteen subprojects that had been identified
at the time.
2. Economic benefits identified at the cost-benefit analysis included the following:
a) reduction in network losses through network rehabilitation and investments in more efficient peak-load
gas boilers;
b) reduction in heat consumption and corresponding heat production costs through installation of individual
building-level heat substations;
c) fuel cost savings from replacement of natural gas with local wood biomass; and
d) economic benefits of reduced GHG emissions.
3. Economic costs included (i) capital investment costs and (ii) operating and maintenance expenses (including
fuel, electricity, materials, and services). All costs and benefits were estimated net of taxes and duties. The
indicators of economic viability used were the EIRR and ENPV at a discount rate of 10 percent. The estimation was
carried out for a horizon of 20 years. On this basis, the weighted average EIRR was estimated at 18.3 percent with
individual EIRRs for the subprojects varying from 12.4 percent to 24.5 percent, and the total ENPV was estimated
at US$44.3 million equivalent.
4. Regarding the economic price of natural gas, the appraisal analysis was carried out using the prevailing
international market price for natural gas of US$300 per 1,000 cubic meters. However, for Belarus, the more
relevant economic price (based on relevant opportunity cost for the country) for natural gas was its long-term
contracted price with Russia. This was less than half the international market price. The appraisal analysis did not
include an alternative assessment based on the contractual price for natural gas.
5. After project closure, the post-completion analysis has been carried out utilizing generally the same
methodology, including the same economic benefits and economic costs, as used at appraisal, but updated to
reflect actual results and values during implementation. The incremental benefits and costs of the project are
derived from projecting the heat supplied (heat production less heat losses) in the ‘with-project’ scenario and
comparing the resulting costs and benefits with the costs and benefits that would have been incurred under the
‘without-project’ scenario to deliver the same level of heat supplies to the consumers.
6. The post-completion analysis has been carried out based on results for a total of twenty subprojects financed
by the Project. Results of EIRR and ENPV are estimated separately for two cases: (i) international market natural
gas price averaging about US$240 per 1,000 cubic meters and (ii) the Belarus-Russia contractual natural gas price
averaging about US$128 per 1,000 cubic meters. On this basis, the weighted average EIRRs and the total ENPV (at
a discount rate of 10 percent) under the two cases are given in Table A4.1 below. Details for 20 subprojects are
given in Table A4.1 and A4.2, and the main assumptions in the analysis are given in Table A4.3 below.
Page 51 of 69
Table A4.1. Project-Level Weighted Average EIRR and Total ENPV
EIRR (%) ENPV
(US$, million)
Case 1: Under International Market Natural Gas Price 31.0% 293.9
Case 2: Under Belarus-Russia Contractual Natural Gas Price 17.4% 98.9
Table A4.2. Economic Efficiency Indicators (EIRRs and ENPVs) for Individual Subprojects
Subproject Total International market natural gas Belarus-Russia contractual natural
investment price gas price
(US$, million) EIRR (%) ENPV EIRR (%) ENPV (US$,
(US$, million) million)
1 Volkovysk 8.8 34% 30.8 24% 16.7
2 Ivanovo 5.3 27% 13.8 12% 1.6
3 Bereza 1.9 42% 10.3 20% 2.7
4 Zarechie 2.9 40% 12.6 40% 12.6
5 Zyabrovka 2.6 26% 4.6 15% 1.4
6 Kalinkovichi 14.4 25% 33.7 11% 2.3
7 Starye Dorogi 4.7 20% 6.5 8% -0.9
8 Kholopenichi 1.9 38% 7.0 18% 1.7
9 Cherven 5.5 32% 19.3 21% 9.4
10 Kadino 3.9 38% 17.3 18% 4.4
11 Cherikov 3.7 13% 0.9 3% -2.0
12 Veremeiki 1.3 17% 1.3 10% 0.0
13 Buda-Koshelevo 3.8 37% 16.0 23% 7.2
14 Vorontsy 3.1 35% 13.9 19% 4.6
15 Kobrin 3.7 53% 29.0 27% 10.3
16 Baranovichi 4.9 25% 5.6 10% 0.0
17 Borovliany 5.8 52% 55.0 34% 26.5
18 Rechitsa 1.9 37% 6.4 21% 2.8
19 Shutchin 5.5 18% 7.8 8% -1.9
20 Kamenets 1.1 21% 2.0 9% -0.2
Total 86.7 31% 293.9 17% 98.9
Table A4.3. Main Assumptions in Economic Analysis
Assumption Unit At Appraisal Post Completion
3
Economic price of natural gas US$/000m 300 $128 – Belarus-Russia contract
price
$240 – international market
price
Economic price of biomass US$/m3 20 22–26
Page 52 of 69
Social cost of carbon US$/tCO2 22 4214
Energy savings of individual building level heating % 15%–20% 15%
stations (IHS)
Efficiency of gas fired boilers & % 75%–85% 75%–85%
New gas fired boilers % 92%–93% 93%–95%
Efficiency of new biomass boilers % 84% 84%–86%
Transmission losses % 20% 10–15%
Discount rate % 10% 10%
Projection period years 20 20
7. Shown in Table A4.2 above, the analysis at the ICR stage indicates that the post-completion economic analysis
ranges from 17.4–31.0 percent. In these cases, the EIRR is above the discount rates indicated under the Bank
guidelines for economic analysis of investment projects. ENPV at the ICR stage is estimated at US$293.9 million
under international gas price, and US$98.9 million under Belarus’ long-term contract price, which are both
significantly higher than that of the economic analysis conducted in 2014 mainly because the Project was able to
finance more subprojects than its initial plan thanks to the cost savings.
8. Given the uncertainty of global energy supply and recent price volatility, additional sensitivity analysis was
also carried out to assess the impact on the EIRR and ENPV of variations in key underlying variables related to
energy price – (i) natural gas price decrease of 20 percent, (ii) natural gas price increase of 20 percent, (iii) biomass
price decrease of 20 percent, (iv) biomass price increase of 20 percent, and (v) natural gas price increase of 20
percent combined with biomass price increase of 20 percent. The results are reported in Table A4.4 below.
Table A4.4. Sensitivity Analysis for Various Scenarios on Energy Price
Base case Sensitivity Analysis
Natural Gas Natural Gas Biomass Price Biomass Price Natural Gas
Price -20% Price +20% -20% +20% -20% & Biomass
+20%
EIRR (%) 31.0% 26.3% 35.4% 32.4% 29.1% 24.2%
ENPV 293.9 221.5 366.4 320.3 261.6 189.1
(US$,
million)
9. In all cases, the EIRR remains robust with minimal impact of the price increases and the ENPV remains positive
at a discount rate of 10 percent. Under the worst-case scenario (natural gas price -20 percent & biomass price +20
percent), the EIRR is about 24.2 percent and the ENPV remains positive, indicating that the Project is economically
viable with potential price fluctuation in the next few years.
10. With all, the ICR concluded that the Project’s economic efficiency is rated Substantial. At appraisal, the
Project’s economic efficiency was estimated taking into account the international market price of natural gas. On
a comparable basis, as summarized in Table A4.5 below, the Project’s estimated post-completion EIRR and ENPV
using the international natural gas price are both higher than the levels estimated at appraisal.
14 According to the Bank’s Guidance Note on shadow price of carbon in economic analysis (2017).
Page 53 of 69
Table A4.5. EIRR and Total ENPV assessed at Appraisal and Completion
Stage Original appraisal ICR
EIRR (%) 18.3% 31.0%
ENPV (US$ million) 42.4 293.9
Implementation Efficiency: Substantial
11. This ICR also assessed implementation efficiency. The determination of the implementation efficiency is
based on the split assessment on cost efficiency and duration efficiency. Taking into account ratings - High in cost
efficiency and Substantial in project duration, the overall implementation efficiency is rated Substantial.
12. With respect to the project costs, most of the originally planned thirteen activities were completed within
and below the original cost estimate. All subprojects were completed within the cost estimate (US$90 million)
estimated at appraisal. Significant cost savings were realized because of simple and straightforward design, good
competition between local (i.e., several local biomass boiler manufacturers) and international bidders, and
favorable exchange rate changes. The cost savings were applied to extend the scope of the Project by adding
seven new sites for construction of biomass boiler houses. This contributed to the overall benefits that were
realized from the Project. As the Project scope was expanded with the same budget (as described in detail in
paragraph 27), the new PDO-level indicators significantly exceed the original target established at appraisal. At
project closing, the actual cost was US$87.1 million after including seven additional sites (to the original 13 sites
identified at appraisal). Therefore, this ICR concludes that cost efficiency is rated High.
13. Regarding project duration, eleven of the originally planned thirteen subprojects were completed prior to
the original scheduled closing date. The original closing date (December 31, 2019) was extended by 28 months to
allow for completion of (i) the seven additional subprojects added from cost savings realized under the Project
and (ii) the ongoing subprojects at the time. One Project site, Baranovichi, experienced unfortunate issues such
as contract cancellation because of fraudulent documents (bid security, references, etc.), and delays in issuance
of the bank guarantee for the direct contract. All subprojects under construction were completed by the revised
closing date (April 30, 2022). In addition, good continuity of the project leadership was observed with three TTLs
over eight years of implementation. TTL turnover may produce inefficiency because of the steep learning curve in
understanding the project and building relationship with the counterpart, but no delay was introduced from the
TTL transitions under this Project. Considering all above, the ICR assessed that implementation efficiency is rated
Substantial.
14. This ICR concludes that the overall rating of efficiency is Substantial based on the underlying ratings of
Substantial for both economic efficiency and for implementation efficiency.
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ANNEX 5. BIOMASS PRICES
Table A5.1. Selling prices for fuel chips, pellets sold by state forestry institutions (ex-stock of the supplier (warehouse of the enterprise))
without VAT
Product 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Fuel chips
(humidity from
40% to 60% 6.2 9.7 21,8 25 27 28 31 32 28.5 29 30 31 42*
inclusive),
rub./dense m3
Equivalent in
20.6 19.4 26.3 28 26 17.3 16.3 16.5 14 14.1 12.2 12.3 16.3
USD/dense m3
Fuel pellets,
221 226 270
rub/ton
Equivalent in
89.8 90 105
USD/ton
US dollar
exchange rate
BYN/USD 0.3 0.5 0.83 0.89 1.04 1.62 1.93 1.94 2.04 2.05 2.46 2.51 2.57
(National
Bank)**
*prices for wood chips in forestry companies fluctuated in the range of 30-45 BYN/square m3. The main factor is the location of the
enterprise: in the western forestries BYN 42-45 /m3, and in the eastern forestry enterprises – BYN 30 /m3.
** Exchange rates on the website of the National Bank https://www.nbrb.by/statistics/rates/ratesdaily.asp for the month of August. Old
prices and exchange rates (in thousand Belarus rubles) are brought to a comparable form by denomination (dividing by 10,000).
All prices for fuel chips and wood pellets were taken from the price lists of forestries for the domestic market of the Republic of Belarus.
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ANNEX 6. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS
BELARUS
Biomass District Heating Project
CONTENTS
1. INTRODUCTION
1.1. Project implementation feasibility
1.2. Contents of Project events
2. FINANCIAL MANAGEMENT
3. MAIN TASKS AND PROJECT BENEFICIARIES
3.1. Main tasks, to solution of which the Project contributed
3.2. Project beneficiaries
4. PROJECT IMPLEMENTATION
4.1. Project implementation objectives
4.2. Organizational structure and implementation mechanisms of the Project
5. PROJECT IMPLEMENTATION RESULTS
5.1. Monitoring and evaluation of Project implementation results
5.2. Sustainability of Project implementation results
6. MAIN FACTORS, WHICH PREVENTED FROM THE IMPLEMENTATION
7. WORLD BANK SAFEGUARD POLICIES
7.1. Grievance Redress Mechanism
7.2. Application of resettlement plans
7.3. Application of Environmental Safeguard Policies
7.4. Labor protection
8. OPERATING EFFICIENCY OF THE WORLD BANK
9. OPERATING EFFICIENCY OF THE BORROWER
10. LESSONS LEARNED
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1. INTRODUCTION
1.1. Project implementation feasibility
The main issues, resolving of which stipulated the Project implementation feasibility, are: reducing dependencies
on gas price fluctuations and interruptions in gas supply; reducing GDP energy intensity; increasing the use of
wood biomass potential; effective implementation of the State Program “Energy Saving” for 2016-2020;
increasing welfare of the population; increasing the use of wood biomass in the district heating systems and
introduction of the international best practices; expansion of electric energy production using renewable sources
and use of modern energy efficient technologies in Belarus.
1.2. Contents of Project events
The investment events of the Project were implemented on the sites in Brest, Gomel, Grodno, Minsk and Mogilev
Oblasts. The Project consisted of the following Components:
Component 1 “District Heating Energy Efficiency”:
a) modernization and/or construction of heat substations fitted with heat detectors;
b) (i) reconstruction, construction and (or) replacement of heating networks in the district heating systems;
and (ii) reconstruction of gas boiler houses and/or installation of new peak gas boilers.
Component 2 “Biomass Heat Generation”:
a) designing, supply and installation of boilers firing wood biomass to cover a base load and mini-CHP
operating on wood biomass, including provision of support in their operation and maintenance;
b) preparation of wood biomass through, inter alia, procurement of crushing equipment for woodchips
production;
c) construction of wood biomass storage warehouses.
Component 3 “Capacity Building, Project Management, Monitoring and Evaluation”:
a) Strengthening social accountability mechanisms when rendering district heating services through, inter
alia: (i) assisting in development by the district heating enterprises as a part of the Project of awareness-
raising plans for the consumers aimed at improvement of interactions with the consumers through, inter
alia: (A) web-sites creation and (B) upgrading information content of the existing web-sites and/or
information stands situated in the office of the enterprise; as well as (ii) assisting in strengthening the
existing Grievance Redress Mechanisms to increase quality of the provided services;
b) capacity building to transfer to the wood fuel sale system based on its calorific capacity, including through
provision of technical assistance and the equipment required to measure calorific capacity of wood;
c) (i) rendering to the Project Management Unit and the utility enterprises as a part of the Project of
assistance during the Project implementation, supervision and audit; and (ii) technical assistance
provision and training of specialists from heat supply utility companies as a part of the Project in the
energy efficiency area and application of tested and proven technologies of wood biomass usage.
2. FINANCIAL MANAGEMENT
Financing of the Project events stipulated by the Loan Agreement (the Biomass District Heating Project) between
the Republic of Belarus and the International Bank for Reconstruction and Development dated April 8, 2014 (90
million US dollars) was effected in the period from October 2014 till October 2021 from the funds of this loan.
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The financial management system when implementing the Project was organized according to the World Bank
requirements and guidelines in regard to financial procedures, ensuring economical and efficient loan funds
disbursement, prompt tracking of work progress under the Contracts, preparation of intermediate financial
reporting, performing audit procedures.
Using an automated accounting system, the FM specialists kept record of all bank operations under the loan,
including by Sites, by contractors, by components, by oblasts, etc., in US dollars and in the Contract currency,
drawing up reports for the World Bank, the Energy Efficiency Department, the Ministry of Finance, the Ministry
of Economy.
According to the Loan Agreement, the FM specialists drew up the Intermediate Financial Reporting quarterly,
which was acceptable in the format and form during the whole Project implementation period.
Financial audit was conducted annually by an independent auditor acceptable for the Bank and selected on a
competitive basis according to the World Bank requirements. Audit reports were provided in a timely manner.
Favourable audit opinions were given on all financial reports under the Project. In the audit opinions, there are
no references to major deficiencies of internal control and procedures conducted by the PMU under the financial
management.
During the Project implementation, the FM specialists completed training programs, participated in seminars and
trainings organized by the World Bank specialists, where they upgraded their qualification on financial
management:
1. International procurement management, June 2018, Turin, Italy.
2. Training on financial management and payments by the Project specialists, April 2019, Minsk, the
Republic of Belarus.
3. Training on closing procedures: aspects of financial management and payments, February 2021, online.
4. Regional fiduciary seminar of the World Bank, July 2021, online.
Herewith, a high level of preparation of the seminars and trainings by the World Bank specialists should be noted.
During these events, the FM issues were stated in an accessible and professional manner, as well as the issues of
monetary resources expenditure, financial reporting, audit. Specific examples of complying with the main IBRD
requirements were reviewed based on economic, efficient and tightly earmarked usage of the loan (credit) funds.
According to Order of the President of the Republic of Belarus dated October 1, 2014 No. 190рп, the loan funds
were provided for the Project events implementation and ensuring repayment of borrowings:
to Brest Oblast Executive Committee – 23 mln. US$;
to Gomel Oblast Executive Committee – 23,7 mln. US$;
to Grodno Oblast Executive Committee – 14,4 mln. US$;
to Minsk Oblast Executive Committee – 20,3 mln. US$;
to Mogilev Oblast Executive Committee – 8,6 mln. US$.
A right was granted to these Oblast Executive Committees to transfer, if required, upon completion of the loan
funds disbursement the funds stipulated in the budgets of the corresponding oblasts for energy saving purposes,
for financing of expenses under the contracts on implementation of the events stipulated by the Loan Agreement.
3. MAIN TASKS AND PROJECT BENEFICIARIES
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3.1. Main tasks, to solution of which the Project contributed
The main tasks, to solution of which the Project contributed, are the following:
achievement of heat and electric energy saving;
increase in heat and electric energy generation using renewable wood biomass;
greenhouse gas emission reduction (expressed as CO2).
3.2. Project beneficiaries
Project beneficiaries include:
the Republic of Belarus. The country achieved financial saving due to reduction of natural gas import;
the population residing in the cities included in the Project. The population took advantage of quality
and reliability increase of heating services and domestic hot water services;
the district heating enterprises, at which the events are held on improvement of heat supply efficiency
and increase of wood biomass use due to the investments under the Project. Implementation of these
events will allow to reduce operating expenses and to increase the level of fuel safety, and will also
allow to decrease on average by 20 percent net cost of generated energy, as well as to inhibit the
growth of tariffs for heat supply for the consumers (the population);
forestry enterprises. They will benefit from increase in demand for the biomass, as well as energy-
efficient goods and services;
suppliers of equipment and services. They will benefit from increase of demand for equipment and
services.
4. PROJECT IMPLEMENTATION
4.1. Project implementation objectives
The Project implementation objective is in increase of renewable wood biomass efficient use for heat and electric
energy production in the cities of the Republic of Belarus included in the Project.
According to the tasks solved by the Project, the Project implementation objectives were the following:
(a) Energy saving during the Project lifecycle through the investments under the Project (megawatt-hours
[MW*h]);
(b) Increase in the amount of heat and electric energy generated using renewable wood biomass (MW*h);
(c) CO2 emission reduction during the Project lifecycle obtained through the investments under the Project
(metric ton).
4.2. Organizational structure and implementation mechanisms of the Project
(i) Overall organization and Project implementation coordination
The Project was implemented by the Republic of Belarus through the Energy Efficiency Department of the
State Committee for Standardization (the Project Implementation Coordinator), the existing Project
Management Unit (RUE “Belinvestenergosberezhenie”) – an Executive organization for the Project – and
the district heating enterprises in the inhabited localities – Employers of the Sites included in the Project.
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The Energy Efficiency Department is a state administrative body responsible for implementation of the State
Program “Energy Saving” for 2016–2020 aimed at energy efficiency increase and expansion in the use of
local, including renewable, energy sources in Belarus.
(ii) Project Management Unit: Executive organization for the Project
RUE “Belinvestenergosberezhenie”, which is subordinate to the Energy Efficiency Department, was the
Executive organization under the Project. The Unit is familiar with World Bank procedures and has practical
experience in their application. It also possesses both the technical capacity and the ministerial and oblast
support required for preparation and implementation of the proposed Project. The Unit consists of
experienced managers, technical experts, procurement, and financial management specialists who will
receive further training in accordance with the specific tasks of the Project. Within the framework of the
Project, the Unit carried out:
organization and conduct of bidding processes for procurement of goods (works, services) to execute
the events stipulated in the Loan Agreement with the IBRD and accounting of the corresponding
economic operations;
drawing up accounting reports on the IBRD loan funds application and preparation of the required
reports;
through the designated bank accounts opened under the conditions of the Loan Agreement with the
IBRD effected payments from the loan funds under the Loan Agreement with the IBRD connected with
work execution under the concluded contracts, rendering consulting services, conducting audits and
training;
monitoring of contract current implementation, progress in achievement of the Project target
indicators, adherence by the Project management participants to the World Bank Safeguard Policies.
The Project Management Unit was acting according to the “Operational Manual” document under the
Project, which had been developed before conduct of the negotiations. This document describes the
Project implementation mechanisms, including mechanisms of procurement, contract management,
authorization of payments, environment protection, social protection measures, periodic reporting, as
well as interaction between the state administrative bodies, which are the Project executors, and the
beneficiaries.
The Project Management Unit’s specialists were developing the Bidding Documents for procurements
in close cooperation with the technical personnel of all district heating enterprises under the Project.
The technical specialists of these enterprises were responsible for preparation of the technical
documents, required for the Bidding Documents development, as well as evaluation of Bid technical
aspects. Herewith, they were not engaged for construction design development.
Bid and other proposals evaluation was carried out by the Evaluation (Working) and Bidding
commissions formed in the Project Management Unit. The Bidding commissions, which included the
representatives of the state bodies, technical staff and enterprise managers as a part of the Project,
reviewed and in the absence of objections approved the Bid Evaluation Reports before sending them
to the World Bank (in case of prior review for the procurement).
(iii) District heating enterprises – Employers of Sites
All district heating enterprises under the Project are subordinate to the Ministry of Housing and Communal
Services and oblast or district (city) executive committees. Each enterprise designated a Coordinator
(Project Manager) responsible for cooperation with the Project Management Unit. The district heating
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enterprises were responsible for development of the Terms of Reference for the design documents
(approval of the design documents when ready), ensuring required technical supervision over contract
execution, preparation of payment documents and sending them to the Project Management Unit for
preparation and signing of the applications for loan funds disbursement.
(iv) Provision of the Project power facilities with wood fuel
Provision of the constructed (reconstructed) power facilities with wood biomass is carried out by the state
forestry enterprises, which are in close proximity to the district heating enterprises under the Project (within
60 kilometers), based on long-term agreements on wood fuel supply.
In case only firewood is supplied, the district heating enterprises have a possibility to prepare woodchips on
their own.
All engaged state forestry enterprises received a confirmation in the area of sustainable forest management
according to the International Conventions requirements and have got certification under the Programme
for the Endorsement of Forest Certification and (or) Forest Stewardship Council standards.
5. PROJECT IMPLEMENTATION RESULTS
5.1. Monitoring and evaluation of Project implementation results
Monitoring and evaluation of the results received during the Project implementation were carried out according
to the Word Bank standard practice. Monitoring and evaluation of the Project efficiency included:
(i) monitoring of the Project indicator achievement;
(ii) preparation of Project progress reports;
(iii) preparation of mid-term Project progress review.
The Project Management Unit received monthly from the district heating enterprises under the Project the
information on actual indicators of the Site functioning to evaluate progress in achievement of the Project target
indicators.
In addition to monitoring of the intermediate results, which reflect the Project progress, monitoring of two
additional indicators was also conducted: average level of expense reimbursement for the district heating
services by the population and taking measures on increased social protection.
The indicator on the average level of expense reimbursement reflects compliance between raising of tariff rates
for heat supply and the plans, and the indicator on social protection – taking additional measures on protection
of low-income and vulnerable groups of the population after possible raising of tariff rates for heat energy.
During the Project implementation, analysis of operation of the individual heat substations (hereinafter – IHS)
was carried out on 5 constructed Sites (in Starye Dorogi, Kalinkovichi, Veremeiki, Kholopenichi, Cherikov), which
consisted in comparison of the energy consumption level in the buildings before and after installation of the IHS.
5.2. Sustainability of Project implementation results
Since the Republic of Belarus considers energy efficiency increase and extension of using local, including
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renewable, fuel types as the priority directions of energy safety increase and economic growth sustainability, the
national strategies and energy efficiency programs were adopted in the country, as well as the Law “On
renewable energy sources in the Republic of Belarus”.
The Local Executive Committees, which participated in the Project, and subordinate to them district heating
enterprises, as well as local suppliers of wood biomass fuel are also interested in the Project results. The Local
Executive Committees and their district heating enterprises have got their own established indicators on energy
efficiency and usage of local fuel types. The Project fully complies with these requirements.
The suppliers of biomass local fuel types are also interested in the Project because it allows to increase the
demand on underused wood products, including woodchips and industrial waste wood. To ensure the Project
sustainability, which depends on proper operation and maintenance by the district heating enterprises of the
production facilities created under the Project, technical assistance was provided in increase of the district
heating enterprises’ professional capacity in the sphere of energy efficiency increase, operation and maintenance
of boilers operating on biomass.
Investments in energy efficiency and expansion of renewable energy sources usage under the Project (wood
biomass) allows to mitigate influence of possible price increase on the low-income social groups and in such a
way to minimize potential non-acceptance of the tariff reform.
All these factors substantiate long-term sustainability of the Project implementation results.
6. MAIN FACTORS, WHICH PREVENTED FROM THE PROJECT IMPLEMENTATION
The main factors, which prevented from the Project implementation to a certain extent, were the following:
1. In some cases, low-quality development of the Feasibility Studies of the Project implementation, which
posed a threat of failure to achieve the established Project target indicators;
2. Absence at a certain Project implementation stage of a mechanism of ensuring by the successful Bidders of
Performance Bank Guarantees authenticity, which led to untimely discovery of unfair Bidder’s fraudulent
cases under 2 sites (in Cherven and Baranovichi).
In particular:
on the situation concerning the Site in Cherven.
The Employer and the recipient of the Performance Bank Guarantee on construction of the Site
“Optimization of Heat Supply System of Cherven Town including. Construction of a New Heat Source on the
Basis of “Gruppovaya” Boiler House” was housing and communal services organization District Unitary
Enterprise “Chervenskoye ZhKH”, and the Contractor determined following the results of the International
Competitive Bidding – the Consortium of Belarusian Limited Liability Company (LLC) “Armakom” and
Lithuanian boiler equipment manufacturer Closed Joint Stock Company “ENERSTENA”. This Consortium (LLC
“Armakom”) provided within the established term the Performance Bank Guarantee from the Russian bank,
the Contract was concluded, and the Contractor proceeded with its implementation. But during the Contract
implementation the World Bank notified that as a result of the verification activities undertaken by the Bank
the guarantor bank did not confirm the fact of issuance of the specified guarantee. Upon receipt of this
information from the World Bank, the Contract validity was terminated by the Employer. Subsequently,
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construction of the Site was completed successfully. But the delay in its commissioning made about 17
months.
on the situation concerning the Site in Baranovichi.
The Employer and the recipient of the Performance Bank Guarantee on construction of the Site
“Reconstruction of Boiler House in Tekser Housing Estate, Baranovichi Town with Capacity Increase and
Installation of Boilers Firing Domestic Fuels (6 MW)” was housing and communal services organization
Communal Unitary Production Enterprise “Baranovichi Kommunteploset” and the Contractor determined
following the results of the International Competitive Bidding – the Consortium of Belarusian LLC
“Armakom” and Spanish boiler equipment manufacturer – ATTSU Termica.
This Consortium (LLC “Armakom”) provided within the established term the Performance Bank Guarantee
from the Spanish bank, the Contract was concluded, and the Contractor proceeded with its implementation.
But during the Contract implementation (simultaneously with the information on the Site in Cherven) the
World Bank notified that as a result of the verification activities undertaken by the Bank the Spanish bank
did not confirm the fact of issuance of the specified guarantee. Upon receipt of this information from the
World Bank, the Contract validity was terminated by the Employer. Subsequently, the implemented set of
organizational and technical measures will allow to complete reconstruction of this socially important Site
only upon the condition of making by the World Bank upon the Belarusian party’s initiative a decision on
the loan validity extension for 6 months (till April 30, 2022). The delay in the Site reconstruction will make
about 56 months. Taking into account significant influence of the detected facts of the Bidders’ (contractor
organizations’) unconscientiousness on results of work, the additional measures on protection from such
occurrence were taken in regard to the Project Sites.
3. Absence of a possibility to apply the contract sanctions (liquidated damage) to the Technical Consultant in
case of low-quality or untimely provision of consulting services;
4. Insufficient qualification of some Site Employers (HCS organizations operating boiler systems), their
overhead organizations (oblast HCS associations), HCS administrations of Oblast Executive Committees in
application (or evaluation of application) of the World Bank requirements and policies in the sphere of
procurements and contract implementation;
5. Insufficient qualification of some Employers when performing the events stipulated by the Project;
6. Limitedness of a target market in regard to absence of a sufficient number of qualified organizations,
working in the price range of the power facilities planned to be constructed taking into account the necessity
and duration of expenditures under the Performance Bank Guarantee;
7. Insufficient control of some state bodies over Site construction (reconstruction);
8. Insufficient Bidders’ responsibility in preparation of their Bids (“human factor”), which led to a necessity of
sending an excessive number of additional requests during the Evaluation commissions’ operation and as a
consequence – to extension of Bid evaluation duration.
9. Absence with the Employers of a complete set of pre-design documentation under the Site or a
corresponding architectural design, which led to lengthening in preparation by the PMU and the Technical
Consultant of the corresponding commercial and technical parts of the Bidding Documents.
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10. Lack of a methodology for monitoring compliance with the requirements of the Project for the functioning
of individual heat substations created during construction (reconstruction).
11. Cancellation of some bidding processes.
5 bidding processes were cancelled under the Project:
- 3 bidding processes were cancelled as a result of Bid cost excess over the market price of the Site
construction (reconstruction);
- 2 bidding processes were cancelled because no proposals were received from any organization.
7. WORLD BANK SAFEGUARD POLICIES
When implementing the Project, all Safeguard Policies of the World Bank were observed.
7.1. Grievance Redress Mechanism
The mechanism applied in the Republic of Belarus (Law “On appeals of citizens and legal entities” №300-3 dated
18.07.2011) was used initially for grievance redress under the Biomass District Heating Project (hereinafter – the
Project). According to this mechanism, any individual or legal entity could address a complaint to any organization
by an email message to the e-mail address specified at the web-site of the organization or using the tab
“Electronic appeals” for citizens and legal entities.
In addition to it, an individual or a legal entity could send a complaint to the postal address of the organization
specified in the company details. When addressing RUE “Belinvestenergosberezhenie”, individuals and legal
entities could send complaints by referral to the e-mail address specified at the web-site info@bies.by,
www.bies.by, and also to the following postal address: 12 Dolgobrodskaya Str., Bldg. 2N, Minsk, 220037.
Further, taking into account improvement by the World Bank of the Project implementation procedure, additions
were introduced in the Operational Manual document under the Project, and the Grievance Redress Mechanism
started to be applied. The GRM fully complies with this Safeguard Policy of the World Bank.
The following appeals were received during the Project implementation:
1. from Closed Joint Stock Company “Enerstena” (on 26.02.2015) with a request to specify in the tender
documentation the characteristics on chip fuel, to include in it additional parameters of evaluating
performance efficiency of the equipment, to carry out an investigation in regard to supposed lobbying of
another Bidder (boiler equipment manufacturer), as well as to allow submission of alternative proposals to
the bidding process;
2. from LLC NG-Energo (on 10.08.2015) with a request to provide clarification on compliance of the commercial
proposal of another Bidder (LLC TekhnoServ AS) with the Bidding Document;
3. from A1 Development LLC (on 16.11.2015) with a proposal to carry out investigation in regard to supposed
lobbying for the interests of another Bidder;
4. from CREDINVEST INTERNATIONAL CORPORATE FINANCE (Malta) (undated) with a request to re-review the
bidding process results;
5. from LLC “Akvaekologiya” (on 21.03.2019) with a request to re-review the bidding process results.
All appeals were received from the legal entities. Clarifying answers were given to all received appeals in a timely
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manner. There were no complaints, which required taking remedial actions.
7.2. Application of resettlement plans
Within the Project implementation “Brief action plan in regard to resettlement” (hereinafter – the Plan) was
developed for the Site “Construction of local fuel-fired mini-CHP plant at boiler house at 10 Surkov Str.,
Kalinkovichi town”.
According to this Plan it was expected to withdraw a land plot from a self-employed citizen E.V. Leshchinskaya,
who rents a neighbouring plot at the address 12, Surkov Str.
But after development of the corresponding construction project, the exact sizes were determined in regard to
the land plot for construction and servicing of the mini-CHP plant. It was established that construction does not
interfere with a neighbouring plot rented by citizen E.V. Leshchinskaya, consequently, no measures on
resettlement (provision of another plot) were required.
7.3. Application of Environmental Safeguard Policies
According to the Safeguard Policies and Procedures of the World Bank, the Biomass District Heating Project is
referred to Category B, for which it is required to conduct Environmental Assessment (EA) and to prepare site-
by-site Environmental and Social Management Plans.
Taking this into account, the ESMP was developed for each Site. These ESMPs determined measures aimed at
decrease of a negative impact of the Project implementation on the environment.
Herewith, only one environmental Operational Policy of the World Bank – OP 4.01 is applied under the Project,
since the Project implementation could have some negative impact on the environment and social sphere.
Operational Policies of the World Bank OP 4.04 “Natural Habitat” and OP 7.36 “Forests” were not applied because
the Project is focused on the existing infrastructure in city districts and is not anticipated to impact natural
habitats of animal diversity or forests.
A negative impact of separate types of activities during construction and further operation on the environment
was within acceptable limits.
A negative environmental impact was mainly connected with construction works (dust, noise, elimination of
waste and/or old equipment; degradation of vegetation, traffic breakdown (depending on a specific place) and
labour protection (for example, when executing welding works). In most cases, these activities were in a short
time frame and were mainly limited by the territory of the project sites (excluding relocation of equipment and
materials to the construction sites and back). But these impacts were minimized due to the use of the
recommended engineering and construction practices, and also through preparation and implementation of
appropriate mitigation measures.
In addition to it, after the Project implementation there were some environmental and social benefits at the local
level, for example, greenhouse gas (CO2) emission reduction, as well as increase in living standards due to reliable
heat supply.
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7.4. Labour protection
During the Project implementation there were no cases of breach of the requirements of labour protection,
industrial safety, environmental safety or some emergency situations.
Since after the Project implementation there were no unresolved environmental and social issues, it is not
required to develop any remedial actions.
8. OPERATING EFFICIENCY OF THE WORLD BANK
The Project Team of the World Bank was rendering regular support to the PMU and the Energy Efficiency
Department (the Project implementation coordinator) in the Project implementation.
The Project Team was actively assisting in operative resolving of the emerging procedural matters, was finding
solutions and providing recommendations on regulation of non-standard situations, ensured substantiated
extension of the Project implementation terms, which allowed to implement its events (including additional
ones) successfully and to ensure loan funds disbursement in the maximum possible scope.
A proactive approach of the World Bank group of specialists to ensuring optimal Project implementation
duration, close control and efforts made for provision of the required consulting services to the PMU during the
whole Project implementation term supported sustainable dynamics of procurements, allowed to solve
problematic issues, to overcome the difficulties, which emerged during the Project implementation.
The World Bank specialists were regularly conducting meetings with the management of the PMU, the Energy
Efficiency Department, other republican state administrative bodies, local executive and regulatory agencies,
including in on-line mode.
On the whole, the World Bank operating efficiency for this Project implementation may be evaluated as
satisfactory.
9. OPERATING EFFICIENCY OF THE BORROWER
On the part of the Borrower, the following organizations participated in the Project implementation: the
Government of the Republic of Belarus, the Ministry of Finance, the Ministry of Economy, the State Committee
for Standardization, the Energy Efficiency Department of Gosstandart, Brest, Gomel, Grodno, Minsk and Mogilev
Oblast Executive Committees.
The Government of the Republic of Belarus demonstrated adherence to the Project Implementation Objectives
at all stages of its preparation and implementation. Monthly review of the Project implementation progress was
organized in the Council of Ministers of the Republic of Belarus with making the required decisions on
problematic issues.
Corresponding Project implementation reports were received by the Ministry of Finance and the Ministry of
Economy controlling disbursement and target use of the loan funds. Herewith, the Ministry of Finance carries
out redemption and servicing of the loan using the funds of the republican budget within the terms established
by the Loan Agreement.
The main structures ensuring the Project implementation according to the Loan Agreement, the World Bank
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principles and policies were the State Committee for Standardization, the Energy Efficiency Department (the
Project implementation coordinator) and RUE “Belinvestenergosberezhenie” (the Project Management Unit).
Being in Gosstandart system, these organizations carried out direct control of the Project implementation.
Herewith, the Energy Efficiency Department exercised control over implementation of the events specified in the
Loan Agreement, as well as coordination of actions of the republican state administrative bodies, corresponding
Oblast Executive Committees participating in implementation of the Project and the Loan Agreement. Being an
executive organization, RUE “Belinvestenergosberezhenie”:
carried out organization and conduct of bidding processes for procurement of goods (works, services) for
performance of the events stipulated by the Loan Agreement, as well as accounting of economic
operations under the Loan Agreement;
drew up accounting reports on application of the loan funds and submitted them to the Ministry of
Finance and the Energy Efficiency Department of the State Committee for Standardization;
opened a designated deposit account in US dollars in Open Joint-Stock Company “Belinvestbank” under
the conditions determined by the Loan Agreement, for remittance of the loan funds and their receipt;
acted as a party of the Contracts concluded upon the results of the competitive biddings, effected
payments from the loan funds under the Loan Agreement connected with work execution under the
concluded Contracts, rendering consulting services, conducting audits and training.
Brest, Gomel, Grodno, Minsk and Mogilev Oblast Executive Committees carried out:
upon agreement with the Energy Efficiency Department of the State Committee for Standardization,
making decisions on determination of Employers for execution of the events stipulated by the Loan
Agreement in the corresponding localities;
control over implementation of the events stipulated by the Loan Agreement and target use of the loan
funds by the subordinate organizations;
remittance to the republican budget of payments for the loan redemption, payment of percent and other
payments under it.
On the whole, the Borrower’s performance efficiency under the Project implementation and the Loan Agreement
execution should be considered satisfactory.
10. LESSONS LEARNED
The following main lessons have been learned based on the Project implementation experience:
1. To prevent the fraudulent cases by the Bidders and to increase reliability of financial operations confirmation
concerning Performance Guarantee provision and advance payment application, it is required to apply a
mechanism for confirming the fact of issuance by the Bidder’s bank and receipt by the Employer’s (PMU’s) bank
through message exchange in the STEP bank system. This approach has been tested when implementing the
Project and has proven its efficiency, having substantially increased reliability and accuracy of the corresponding
information.
2. Since the developed Feasibility Studies for heat and power facilities (HCS boiler houses) construction
(reconstruction) contain estimated quantitative indicators (both financial and technical), for more reliable
evaluation of such facilities cost in future, reduction of Bidding Document preparation term, specification of the
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main technical solutions, increase of Site Employer’s responsibility for correctness and efficiency of decisions
made on HCS heat and power facilities construction (reconstruction), it makes sense to stipulate two-stage
designing under these facilities including an architectural design, which received a favourable conclusion from
the State construction expertise (with conclusion from the environmental expertise and design solutions energy
efficiency expertise), in the Bidding Document.
According to the decisions made in the Government of the Republic of Belarus, such approach has been applied
when preparing a new joint with the IBRD and European Investment Bank Project “Sustainable Energy Scale-Up
Project” and shows positive results.
3. To prevent the difficulties when forming target indicators of the following similar projects implementation
(for example, Component 1, Sustainable Energy Scale-Up Project), before the bidding process beginning, it is
reasonable to conduct for specific Site by the efforts of the Oblast Departments for Supervision of FER Efficient
Use of the Energy Efficiency Department, Site Employers, HCS administrations of local executive and
administrative bodies and the PMU the relevant analysis of the planned heat source heating load and heat energy
generation making a decision on updating, if required, the values, which have been calculated earlier.
Such approach has been tested on the Sites of Component 1 (Sustainable Energy Scale-Up Project) and received
positive results.
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ANNEX 6. SUPPORTING DOCUMENTS (IF ANY)
List of Supporting Documents
1. The World Bank, Biomass District Heating Project (BDHP): Project Appraisal Document, Report No. PAD728,
March 5, 2014.
2. The World Bank, Loan Agreement, BDHP, between GoB and IBRD, Loan Number 8351-BY, dated April 8,
2014.
3. The World Bank, BDHP, Belarus - Aide Memoires, Management Letters, Implementation Status and Results
Reports, Official Letters, and all other Official Project Documents, 2014–2022.
4. Restructuring paper on a proposed restructuring of BDHP, 2018. Report number- RES30665.
5. Restructuring paper on a proposed restructuring of BDHP, 2019. Report number- RES38341.
6. Restructuring paper on a proposed restructuring of BDHP, 2021. Report number- RES48751.
7. Procurement Plans and Audit Reports, BDHP, 2014–2022.
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