Project description
and objectives:

The EBRD is considering a senior loan to Volzhski Vodokanal, a municipal water services company under a financial guarantee of Volzhski City for the purposes of co-financing a priority investment programme on rehabilitation and upgrade of water supply and wastewater treatment facilities.

Transition impact:

(i) Improvement of municipal services and operational efficiencies of Volzhski Vodokanall
(ii) Commercialisation of municipal services (target is to reach full cost recovery for residential users)
(iii) Gradual elimination of current level of cross-subsidisation, step-by-step adjustment to tariff levels;
(iv) Improved management and skills transfer for Volzhki Vodokanal

The client:

Municipal Enterprise Volzhski Vodokanal fully owned by the municipality of Volzhski City that would be providing full financial guarantee for the project.

EBRD finance:

Senior loan of RUB 360 mln to finance reconstruction of the waste water treatment plant.

Total project cost:

RUB 450 million, including RUB 90 million co-financing from local sources.

Environmental impact:

Screened B/1. The project is expected to have significant positive environmental impact due to improved quality and efficiency of water supply and sewage services in the City of Volzhski. The environmental due diligence is a part of the Feasibility Study and brings forward environmental considerations, which are taken into account during the selection of the priority investment components.

Environmental Review Summary

1. Description of the project

Volzhski Municipal Water Services Company “Volzhsky Vodokanal” has requested the European Bank of Reconstruction and Development (the “EBRD”) to provide financing in support of their priority investment programme (PIP) to improve the quality and efficiency of drinking water supply and sewerage treatment services in Volzhski City. The Project is designed to address the main safety and environmental problems existing to date and includes the following investment components:

1) Construction of drinking water supply main from the 3rd lift pumping station (PS) to the 4th lift PS alongside the already existing pipeline;

2) Reconstruction of the chlorination unit at the 3rd lift PS;

3) Reconstruction of the 3rd line wastewater treatment plant (WWTP), including reconstruction and extension of the WWTP, reconstruction of the existing sludge beds and construction of the mechanical dewatering unit.

2. Environmental classification and rationale

The EBRD has classified the project B/1. The project is associated predominantly with the rehabilitation of the existing structures. This will result in limited adverse environmental and social impacts and in significant environmental benefits, which can be readily identified and quantified by means of an Environmental Analysis. As the existing facilities are involved, an Environmental Audit has also been undertaken.

3. Information reviewed during the environmental appraisal

The environmental appraisal has been based on the review of the Environmental and Technical Due Diligence Report of Volzhski Water Project, prepared by independent consultants from COWI in June 2008 in accordance with the requirements of the EBRD Environmental Policy (2003).

4. Environmental and social issues

The environmental due diligence revealed that Vodokanal developed a sound EHS management system and its operations are generally well organized and managed. The existing environmental, occupational health and safety and labour practices are mostly compliant with the applicable Russian laws and regulations. Major issues of environmental concern for Vodokanal are related to drinking water supply, wastewater treatment and sludge management. Water distribution and sewerage systems of the Volzhski City are considerably worn-out, and significant part of the existing equipment and facilities are in need of urgent modernisation. Corrosion of the network pipes leads to high level of leaks and water losses as well as to significant capital expenditure to maintain drinking water quality and stable water supply. Increased quantities of chemicals used for the purpose of water purification and treatment creates high potential for secondary contamination. The existing system of secondary chlorination at the 3rd lift PS is not compliant with the national safety requirements and presents a hazard to the environment and health. Existing wastewater collection and treatment in 1st and 3rd WWTP line is inefficient, their capacity is overloaded, and current wastewater treatment technology results in high levels of polluting substances being discharged into the watercourses. High effluent load in wastewater is to large extent a result of highly toxic discharges from some of the major industries based in Volzhski City. Finally, sludge is currently discharged onto sludge beds without any treatment, and the existing sludge beds are worn-out and do not have enough spare capacity to provide stable operation of the WWTP.

The project’s PIP measures are designed to address the most urgent environmental, occupational and public health and safety concerns revealed during environmental due diligence and they will support key improvements to water main, chlorination unit and existing WWTP. The PIP has been structured to meet Russian and EU environmental standards, and adequate mitigation measures have been incorporated in the project design and into the resulting Environmental and Social Action Plan.

The environmental investigations showed that the project would result in significant environmental, health and safety improvements, and that any adverse environmental impacts would be limited. Implementation of the PIP will provide a number of benefits including increased reliability of water supply services for the city, mitigation of risks associated with operation of the chlorination unit, increased capacity of wastewater treatment plant to ensure stable sanitation services for the growing city, increased quality of wastewater treatment, and mitigation of negative impacts of stored sludge on soil and groundwater by introduction of safe and reliable sludge management system. The operation will significantly contribute to decreasing the level of polluting discharges into Volga tributaries and the Caspian Sea basin.

There are no adverse impacts associated with the implementation of the PIP. Construction-related impacts are likely to be localised, short term in nature and they will be efficiently prevented or mitigated by applying international construction practice and planning. Any negative impacts and risks revealed can be fully mitigated through thorough implementation of the Environmental and Social Action Plan.

5. Summary of mitigation measures

A comprehensive Environmental and Social Action Plan (ESAP) has been developed to help Vodokanal implement the Project in the environmentally sound and sustainable manner. The ESAP has been structured to bring the facilities and the Company’s environmental performance into compliance with EU environmental, health and safety standards. The ESAP includes measures for managing and mitigating the impacts of the construction activities and operation stage of the Project, and guides Vodokanal to enhance the performance of its drinking water services, wastewater treatment facilities and sludge management operations.

6. Disclosure of information and consultation

Environmental information on the project will be disclosed to public in accordance with the planning and construction procedures of Russian law. In the context of EBRD’s participation in the project, this environmental summary will be disclosed locally at Volzhsky Vodokanal offices and local media as well as in English on EBRD website at www.ebrd.com

7. Monitoring and Reporting

Volzhsky Vodokanal will report to the EBRD annually on the measured environmental impacts and on the implementation of the ESAP. The Bank will evaluate the project's compliance with the applicable environmental and social standards during the lifetime of the project by reviewing these reports and by conducting monitoring visits to the project when and if deemed appropriate.

Technical
cooperation:

The project has benefited from the following technical cooperation programmes financed by the EBRD EC MISP II Fund:

• Technical Feasibility Study including the development of the Environmental Action Plan
• IFRS Audit of Volzhski Vodokanal
• Creditworthiness analysis of the City

It is foreseen that the proposed project would include further technical cooperation support (funding to be identified):

• Project Engineer for the engineering, procurement and design;
• Contract Supervisor for the project implementation, contract administration and disbursement support; and
• Financial and Operational Improvement Programme for preparation of public service contract, tariff policy, Corporate Development Programme aimed at enhancing its commercial viability and institutional capacity.

For consultant opportunities for projects financed by technical cooperation funds, visit procurement of consultants.

EBRD contact:

Anna Schin, Operation Leader: schina@ebrd.com

Procurement or tendering
opportunities:

Visit EBRD Procurement
Enquiries: Tel: +44 20 7338 6794; Fax: +44 20 7338 7472, Email: procurement@ebrd.com

General enquiries:

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168; Fax: +44 20 7338 7380
Email: projectenquiries@ebrd.com