Khanty-Mansi Municipal Services Development Programme: Pyt'Ya

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The proposed project is a loan to the municipal services management company (the Company or “UGH”) to finance priority investment programme to improve efficiency of the municipal discrict heating and water services in the city of Pyt’Yakh (the City) of the Khanty-Mansy Autonomous Okrug. The project will demonstrate the benefits of a systematic reform approach in a Russian region focused on tariff reform - introduction of a cost reflective tariff methodology with gradual elimination of cross-subsidies and improvements in the contractual relationship through the introduction of a service contract between the municipality and the utility company. Additionally restructuring milestones will be set to improve the operational, technical and financial efficiency of the utility company, including possible improvements in corporate governance and more transparency through the introduction of IFRS financial reporting. UGH will be the Borrower. The financial quarantee will be provided by the Khanty-Mansi Autonomous Okrug and project suppport from the City of PytYakh The loan up to UGH in the amount of RUB 350 million (equivalent to EUR 10.2 million). RUB 550 million (equivalent to EUR 16 million) Screened B/1. Environmental, health and safety auditing of the existing municipal district heating, and water and wastewater facilities of the City of Pyt'yakh and environmental analysis of potential environmental impacts of the priority investment programme (PIP) have been required by the Bank and were carried out by COWI, Russia and co-operation with the local consultant, Yurga-Consulting, September 2007 according to EBRD's Environmental Policy. Based on the finding and recommendations of the environmental due diligence report, an EAP has been prepared and approved by the Client. The Company will report annually on EAP implementation. This project presents significant environmental opportunities regarding improvement of the reliability and the quality of the City of Pyt’yakh’s drinking water supply and thus will help reducing public health hazard. It will also improve wastewater collection facilities as well as district heating facilities. The environmental due diligence has assessed the ability of the project to bring the water and wastewater management facilities into compliance with applicable Russian Federation and EU environmental standards. Environmental analysis of potential environmental impacts of the priority investment programme has shown that these will involve minor short-term impacts; however implementation of the programme will result in significant improvements, especially in quality and stability of drinking water supply and energy savings. An EAP has been prepared by the Consultant and it has been approved by the Company. The EAP will be included in the Loan Agreement and the Company will report annually on the implementation of EAP as well as on the Company's EHS conditions annually. The project will have the following environmental benefits: (i) improving the quality and supply of drinking water quality; (ii) improving water distribution and supply network (iii) improving wastewater collection network and facilities (iv) reducing heat loss and improving energy efficiency of district heating system. 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 mitigation and improvement measures. The Bank’s representatives will also conduct periodic site supervision visits when deemed appropriate All TCs will be financed by the Okrug.