Vologda Municipal Water Services Project

complete

The proposed project involves a loan to the municipal water and wastewater treatment utility of the City of Vologda. 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 Vologda River and the Beloye Sea basin and improved drinking water and decreased pollution in Vologda. The Project components include: Investment programme: modernization/ reconstruction of the water treatment facilities for drinking water in the city of Vologda (EBRD loan); in addition upgrade the wastewater treatment system (NDEP grant). Institutional support: Improvement of service standards and tariff setting policies, improvement of financial and operational performance of the Vologdagorvodokanal, as well as management support through the project implementation and supporting TCs. (i) Improvement of municipal services and operational efficiencies of Vologdagorvodokanal (ii) Commercialisation of municipal services (target is to reach full cost recovery for residential users, motivated by the improvement of water quality and services); (iii) Lowering current level of cross-subsidisation, step-by-step adjustment to tariff levels; (iv) Improved management and skills transfer for VGVK. The borrower will be the municipal water and wastewater utility (tVologdagorvodokanal) of the City of Vologda under guarantee of the Vologda region A senior loan of RUB 367 million to Vologdagorvodokanal. Investment program amounted to RUB 550 million. The project has been classified B/1. This project presents significant environmental opportunities regarding improving the quality of Vologda city drinking water and the quality of effluent, thereby reducing the threat to public health and reducing pollution of the Vologda River. The environmental due diligence will assess the ability of the project to bring the facilities into compliance with applicable Russian Federation and EU environmental standards. It will also assess possible environmental liabilities associated with current potable water supply system both in summer and winter, as well as wastewater collection and treatment facilities. The project has benefited from the following technical cooperation programmes: Technical Feasibility Study including the development of the Environmental Action Plan, financed by the Finnish Ministry of Trade and Industry. IFRS Auditof Vologdagorvodokanal, funded by the European Commission. It is foreseen that the proposed project would include further technical cooperation support: Project Engineer for assistance to PIU in procurement, design and contracts supervision. Funding to be identified. Corporate Development Support Program to enhance the company’s financial, managerial and operational performance. Funding to be identified.