Kazan Municipal Water and Wastewater Loan

complete

The proposed project involves a loan to the municipal water and wastewater utility of the City of Kazan, capital of the Russian Republic of Tatarstan. The proceeds of the loan would be used to finance priority capital investments to improve the municipal water and wastewater infrastructure and services in the City, which will contribute significantly to decreasing the level of polluting discharges into the Volga River and the Caspian Sea basin. The proposed project will have an impact on the transition process through: (i) corporatisation and commercialisation of the Company (ii) billing according to actual consumption; (iii) transfer of skills during the implementation phase including the procurement, design, installation and contracts supervision in accordance to the best available international engineering practice. The borrower will be the municipal water and wastewater utility “Vodocanal” (the Company) of the City of Kazan. A senior Rouble loan equivalent to 350 million RUR with two priority investments: waste water treatment plant upgrade waste water pumping station rehabilitation. Equivalent to EUR 26 million. Description of the project Kazan Municipal Water and Wastewater Management Utility “Kazan Vodocanal” has requested the European Bank of Reconstruction and Development (the “EBRD”) to provide financing to support the priority capital investments to improve the municipal water and wastewater infrastructure and services for the City of Kazan. The Project includes 3 investment components: Rehabilitation and of the Main Wastewater Treatment Plant to enhance its operational efficiency and to improve sludge dewatering Rehabilitation of Iskohz Wastewater Pumping Station Construction of new networks in a new housing area Environmental classification and rationale The EBRD has classified the project B/1 for components 1 and 2. Component 3 of the priority investments programme has been classified as IEE and will require further environmental investigations prior to disbursement of the Bank’s funds toward this component. The level of further investigations will depend on the location and scale of the new networks. The project is associated predominantly with the rehabilitation of the existing structures. This will result in limited adverse environmental impacts and in significant environmental benefits, which can be readily identified and quantified in an Environmental Analysis. As this project involves existing facilities, and environmental audit has also been undertaken. Information reviewed during the environmental appraisal The environmental appraisal has been based on the review of an Environmental Audit and Environmental Analysis sections of the Feasibility Study of Kazan Municipal Water and Wastewater Services, prepared by Poyry Environment in January 2007 (Final Report). Environmental issues The Environmental Audit has identified that Vodocanal’s operations are generally well organized and managed. The environmental, health and safety (EHS) issues are addressed and dealt with systematically, and a clear system of allocation of EHS responsibilities exists, in particular in the areas related to waste management, chemicals management and laboratory, garage and workshop operations. The existing EHS management system is compliant with the applicable Russian laws and regulations. Major issues of environmental concern are as follows: Inadequate sludge disposal and treatment at the disposal areas, sludge fields and , landfill. The sludge fields are almost full and if disposal is continuing there one can expect a breakdown of the embankments of the sludge ponds resulting in sludge flowing into the surrounding with residential areas and river Volga. The disposed sludge at the sludge fields is an environmental and safety hazard for humans and animals in the area, because it is not fenced and one cannot walk on the surface of the sludge; The sludge fields generate a considerable amount of methane emissions into the atmosphere as they are now. Proper management of the sludge would reduce these emissions; There is also an environmental risk of wastewater exfiltration from the sewer system and overflows from pumping stations of poor condition, which pose a significant risk of soil contamination and a hygienic risk to the population in the vicinity. Further measures and financial resources would be required to reduce the environmental risks caused by that. Carefully selected PIP measures will partly address these environmental issues of concern by improving overall condition at the main WWTP and upgrading the pumping station. The environmental investigations showed that the project would result in significant energy efficiency and environmental improvements, and that any adverse environmental impacts would be limited. The project has been structured to meet Russian and EU environmental standards and adequate mitigation measures have been incorporated in the project design. However, it should be noted that the project alone will not be able to bring the operations of Vodocanal into full compliance with the EU environmental standards, as much greater financial resources would be required for that (estimated at Euro 600 million). Further projects focussing on sludge disposal and management issues are under consideration. There are no adverse impacts associated with the implementation of the Priority Investment Programme. Construction-related impacts are likely to be localised, short term in nature and they will be efficiently prevented or mitigated by applying international construction practices and planning. The project will improve wastewater collection and treatment facilities and result in better quality of effluent and energy savings. The operation will significantly contribute to decreasing the level of polluting discharges into the Volga River and the Caspian Sea basin. Summary of mitigation measures An Environmental Action Plan (EAP) has been developed to help the Company and the City (i) to implement the priority investment Project in the environmentally sound and sustainable manner as well as (ii) to guide them towards a long term goal to provide a wastewater service which meets the EU and national Russian standards for effluent discharges. The EAP will identify further measures that would be needed for the existing water and wastewater treatment facilities to meet applicable Russian and EU environmental standards and help prioritising the most cost-efficient measures to improve environmental, health and safety conditions in water and wastewater management in the City of Kazan. One of the EAP measures will also address existing sludge disposal and management problems by introducing temporary environmentally sound and safe measures until a proper solution for final disposal can be arranged. 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. No environmental impact assessment has been required for the planned scope of the project under components 1 and 2. Environmental information for the Component 3 of the priority investments programme will be disclosed at a later stage once more information on the location and scale has been provided to the Bank and appropriate environmental investigations have taken place. In the context of EBRD’s participation in the project, this environmental summary will be disclosed locally at Kazan Vodocanal and the City of Kazan’s offices and local media as well as in English on EBRD website at www.ebrd.com. Monitoring and reporting Kazan Vodocanal will continue monitoring its performance in accordance with the Russian regulatory requirements. The Company will report to the EBRD annually on the measured environmental impacts and on the implementation of the EAP mitigation measures. 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. The EBRD may also conduct monitoring visits to the project when and if deemed appropriate. It is foreseen that the proposed project would include further technical cooperation support: