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13-year EBRD rouble loan to NW Russian city
Funding to improve water quality and services in the city of Vologda
The European Bank for Reconstruction and Development has extended a 13-year
local currency loan to enable the northwest Russian city of Vologda to improve
the quality of its drinking water and diminish the level of untreated sewerage
being discharged into the Vologda river, thus protecting the population’s
health as well as the environment.
The 367 million rouble loan (equivalent to €10.6 million) will mainly finance
the construction of a new chemical water treatment plant as well as the
rehabilitation of the city’s water supply networks. A four percent portion of
the loan will be used to install water metres in 1,270 residential buildings.
This will allow virtually all households in Vologda to measure how much water
they consume and should encourage a major decrease in wasteful use of this
precious asset.
One of the main goals of the EBRD’s rouble borrowing programme is to raise
funds allowing Russian borrowers relying exclusively on rouble revenues to
borrow in local currency and thus avoid foreign exchange risks. This
particularly applies to municipalities and Vologda is the eighth Russian city
to have taken advantage of this EBRD facility in the past six years.
The EBRD loan is being made to VologdaGorVodokanal, the municipal enterprise
responsible for supplying water and wastewater services in the city. The main
problems being faced by this company are a high level of water losses,
estimated at 30 percent, due to the deterioration of the distribution network,
and an over-consumption of water due to insufficient metering.
The EBRD’s loan represents an important step towards commercialising water
services in Vologda and helping the city achieve the tariff reforms needed to
meet its legal requirement to achieve full cost recovery, said Alexander
Auboeck, the EBRD’s Director of Infrastructure.
The project is part of a broader EBRD efforts to find ways of financing local
infrastructure projects without burdening central government budgets, and more
specifically to help clean up the environment of one of Russia’s North-Western
regions, Mr. Auboeck added.
Finland and the EU contributed to the project through the grant of donor
funds. The Finnish Ministry of Trade and Industry gave €300,000 to finance a
technical feasibility study for the borrower and an EU grant of €50,000
allowed the company to produce its first audit according to international
financial accounting standards.
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