92202
                                                                                                                April 28, 2004
Czech Republic - Kyjov Waste Heat Utilisation - Global Environmental Facility (GEF)
  The energy sector in the Czech Republic faces a set of challenges common to many other Central and East European
countries. The planned economies of the pre-1989 era measured progress in terms of increasing energy consumption
and did not properly recognize the true cost of indigenous resources versus world prices. The Czech Republic ranks near
the highest in the world in energy consumed per unit of national income produced. The Czech Government is tackling a
variety of energy policy issues with some success. In October 1993, the Czech Republic signed the UN Framework
Convention on Climate Change, and has since agreed to undertake efforts to reduce greenhouse gas emissions, and to
meet the requirement of stabilizing emissions at or below 1990 levels by the year 2000. In accordance with the Kyoto
Protocol of December 1997, the Czech Republic committed to reduce greenhouse gas emissions by 8 percent from the
1990 level.

This Project was proposed by the Government of the Czech Republic for GEF financing following a complicated and
lengthy process of project identification, analysis, and priority setting. Initially, about 10 projects were identified as
eligible for GEF financing, but the proposed Project has been selected in close cooperation with the Government. The
amount of GEF support for this project is US$5.8 million.

The Vetropak Moravian Glass (VMG) is the largest glass bottle manufacturer in the country producing for both domestic
and export markets. Prior to implementation of the project, the glass production facility produced substantial volumes of
waste heat continuously. The reconstruction of furnace 52 at VMG, coupled with the Combined Heat and Power plant
proposed in the project, offered an opportunity for much greater use of waste heat for both heat and electricity
production. As part of this reconstruction program, Teplarna Kyjov (TPK) -- a joint-venture of Moravia Glass (a holding
company), the regional gas and electricity distribution companies JMP and JME, and the City of Kyjov -- has agreed to
sell heat on a contract basis to VMG, the City of Kyjov, and the hospital in Kyjov. A combined heat and power (CHP)
plant will combine waste heat from VMG and new supplemental gas-firing to produce heat and electricity that would be
sold. It is envisaged that the Project would provide for the heating needs of VMG and the Kyjov district heating system
and would sell all excess electricity to the regional electric distribution company, JME.

The project would (a) reduce emissions of greenhouse gases from the Kyjov district heating system, by increasing the
energy efficiency and reliability of heat and power supply to the Vetropak Moravia Glass factory and heat supply to the
city of Kyjov; and (b) achieve local environmental benefits by reducing the proportion of lignite in the fuel-mix for heat
and power generation. The Project consists of the following components:

  Combined Heat and Power Plant (US$20.35 million). The construction of a new heat and power plant is the core
component of the project. It consists of the construction of a gas-fired combined cycle heat and power plant at the
Vetropak Moravia Glass Factory in Kyjov.

  Replacement and Retrofitting of Boilers at the Glass Factory (US$1.56 million). To one glass furnace at the Vetropak
Moravia Glass plant, a new steam-generating waste heat recovery boiler will be added. Another furnace will be
converted to steam production with increased capacity.

  Construction and Reconstruction of Buildings at the Glass Factory (US$0.745 million). Existing buildings at the Glass
Factory will be reconstructed to house the heat and power plant and water treatment plant. Administrative offices,
storage facilities, and an electric transformer station building at the Glass Factory will be constructed.

  Modernization and Expansion of the District Heating Network of Kyjov (US$1.638 million). A centralized district-heating
network for the City of Kyjov will be established through the supply and installation of pre-insulated pipes, along with
the accompanying instrumentation and control equipment. The existing district heating network of Kyjov will be
modernized and expanded to connect new customers and allow greater use of excess heat.

  Decommissioning of Gas-Fired Boilers and Replacement with Heat Exchangers (US$0.52 million). Gas-fired boilers in
13 Kyjov boiler houses will be decommissioned, and heat exchangers will be installed to link the customers to the
centralized District Heating Network.

 Project Supervision and Dissemination Activities by the Ministry of Environment (MoE) of the Czech Republic (US$0.12
million). This component will provide technical assistance and training to the Ministry and Teplarna Kyjov for project
monitoring and supervision, and carrying out dissemination activities.

Implementation of the Project started in spring 1997. Contract signature of the three turn-key contracts took place on
April 23, 1998. The Project Completion Date was initially set to December 31, 1999, and the Closing Date was set to
June 30, 2000, i.e. six months after the Project Completion Date. As of June 30, 2000, the GEF grant was 99.7%
disbursed, however, some remaining parts of the project (e.g., second heat recovery boiler of the glass factory) are still
unfinished. The closing date of the project has been extended from June 30, 2000 to March 31, 2001.