CHISINAU WATER SERVICES REHABILITATION PROJECT

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Improving service levels for the population of Chisinau, including access to a reliable, continuous water supply, reducing the pollution to the rivers Byk and Dniester and enhancing the financial and operational performance of the Chisinau water and waste-water utility. Project objectives: To (a) improve service levels for the consumers, specifically access to a reliable, continuous water supply; (b) reduce pollution threat to the rivers Byk and Dniester and to the Black Sea; (c) reduce operational costs; (d) enhance the financial performance of the CWSC and transform it into a financially self-supporting company; (e) reduce the need for large investments in the expansion and rehabilitation of water production through water-demand management and leakage reduction programmes; and (f) introduce corporatisation in the water utility sector. Loan proceeds will be used for the following: (i) supply and installation of water pipes and pumps; (ii) mains metering and pumping control; (iii) laboratory and diagnostic equipment; and (iv) waste-water equipment. The project will support Moldova's economic transition by improving essential municipal and environmental services whose availability and quality have a direct impact on living conditions. It encourages reform in the funding and provision of municipal services and moves away from the traditional centrally funded investment process through its emphasis on the financial and economic feasibility of municipal infrastructure investments and on the system through which such investments are being funded. It has a strong demonstration effect by promoting cost recovery, furthering the corporatisation of municipal utilities, improving creditworthiness and supporting strategies for devolving responsibilities to the local level and for possible private sector involvement. The Chisinau Water Services Company (CWSC), the successor to the Regia Apa Canal, will be the borrower. The Republic of Moldova will be the guarantor. The CWSC is to be established as a joint state and local government owned joint-stock company, which will be responsible for providing water supply and waste-water utility services to the city of Chisinau. Sovereign guaranteed loan of US$ 30 million (ECU 26.5 million). US$ 60.1 million (ECU 53.6 million), to be co-financed from technical cooperation donors (US$ 2.9 million), the Moldovan state budget (US$ 10 million) and from other local sources and cash generated by the water utility. The project was screened as B/0, requiring an environmental analysis of the main impacts of the proposed rehabilitation and upgrading of ongoing operations in the water supply and waste-water management sectors. This was undertaken by international consultants and reviewed by the Bank's environmental specialists. The study highlighted environmental and public health concerns, including the lack of a reliable potable water supply, high water losses and inadequate sludge treatment. These issues will be addressed in a Priority Investment Programme, which is a central part of the project. This programme will have considerable environmental benefits, principally through: ECU 1.1 million to fund the corporate development assistance to CWSC, which will support the corporatisation process and transition towards establishing an efficient and financially self-supporting commercial water operator. Funding of US$ 1.5 million is also to be provided for consultants to carry out engineering supervision, industrial waste-water management and hydraulic modelling.