The EBRD will provide up to 3 billion roubles (€75 million) to modernise and increase the energy efficiency of district heating systems in a permafrost area of Far East Russia where the heating season lasts 10 months a year and winter temperatures drop to -50 degrees centigrade for extended periods. The initiative could help private energy-service providers to work in Yakutia’s municipal sector.

The proceeds of the Bank’s 16-year loan will fund a capital investment programme in a number of northern settlements in the Republic of Sakha, also known as Yakutia. This vast territory in Eastern Siberia is almost as big as India but has a population of less than one million.

The cost of heating services per square metre in Yakutia is the highest in Russia. Fuel and transport account for 75% of such operational costs. There is, therefore, a large potential for savings, particularly if coal and gas can substitute expensive sea-borne fuel supplies.

The loan will finance the replacement of both heat-generating facilities and heat-distribution systems in the ports of Tiski and Cherskyi. The EBRD loan structure opens the way for the possible future involvement of the private sector in providing energy services to Yakutia’s municipalities.

The two ports targeted by this loan provide a lifeline for remote inland communities, storing supplies that are shipped by sea during the summer for onward transportation into the interior along frozen roads once winter sets in. Due to the permafrost, no roads exist for the rest of the year.

This is the second EBRD loan to the borrower, the State Unitary Enterprise for Municipal and Housing Services of the Republic of Sakha. In December 2006, they received a 1 billion rouble loan to upgrade heating and hot water systems to settlements which have no all-year road links.

The Republic of Sakha, which owns the borrower, will provide a guarantee for the latest loan, just as it did for the previous one in 2006.