Karlovac Wastewater Management Project

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The proposed project is expected to finance: Karlovac is located approximately 60 kms southwest of Zagreb, the Croatian capital. The project is expected to significantly improve the environmental quality of rivers in the area, which ultimately feed into the Danube. The proposed project is expected to provide significant transition impact through increased commercialisation of the municipal water company, including improved cost efficiency, long-term planning, implementation of a cost recovery tariff model, and preparation of a Public Service Contract. Vodovod i Kanalizacia Karlovac is the municipal water and sewer Company, which is majority-owned by the City of Karlovac. The Company provides water and sewer services to a population of approximately 60,000 in and around the City of Karlovac. The EBRD is expected to provide a long-term loan of approximately EUR 10 million to the Karlovac water and sewer company with a guarantee from the City of Karlovac. A portion of the project costs may be provided by grants from the Croatian government and the European Union. The proposed project is expected to cost approximately EUR 20 million. Screening categories and rationale for classification Environmental impacts associated with the construction and operation of drinking water treatment and distribution as well as wastewater collection and treatment facilities are considered to be temporary and could be readily identified and mitigated through the implementation of appropriate measures. The wastewater treatment plant will not exceed the capacity of 150,000 PE. Therefore, the project has been classified as B/0, requiring an Environmental Analysis. Information reviewed during the environmental appraisal Environmental Analysis was prepared as a part of the Feasibility Study carried out by EU-funded consultants in 2004. Environmental impacts and mitigation measures The information provided showed that the proposed project will result in significant environmental benefits. The investment programme is associated with very limited environmental impacts which are considered to be temporary. Mitigation measures are defined and will be incorporated in the project design, construction and operation. These are as follows: Environmental opportunities The proposed project has mainly environmentally related objectives: it will contribute to drinking water and effluent quality improvement. Wastewater treatment will consequently help protect rivers Kupa, Sava, Danube and Black Sea from further pollution caused by untreated sewerage. Monitoring The Bank will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing annual environmental reports (AERs) prepared for the project covering: (i) ongoing performance of project-specific environmental, health and safety activities, (ii) the status of implementation of environmental improvement measures. The Bank’s representatives will also conduct periodic site supervision visits when deemed appropriate. It is expected that Technical Cooperation funding will be provided to assist the Company in improving its financial and operating performance and improving the creditworthiness of the City.