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EBRD helps improve water supply in northwestern Romania
€18 million to help regionalisation of water utility in Oradea
Some 26,000 people living in northwestern Romania, near the Hungarian border,
will benefit from cleaner water and reduced pollution as a result of a €18
million EBRD loan that will also extend the reach of the local water network.
The significant environmental benefits of the loan also include the reduction
of cross-border groundwater pollution in the Crisul Repede River on the border
between Hungary and Romania.
A €12 million portion of the loan will be used to co-finance the extension of
the water and wastewater network in Oradea by constructing water and sewage
pipes in parts of the city and 8 adjacent communities which are not currently
connected to the network.
These investments will be the first step in the company’s transformation into
a sustainable regional operator - one of the key criteria for eligibility for
EU cohesion funds. An additional €200,000 of technical cooperation funds for
consultancy services will assist the company in its regionalisation, achieving
substantial efficiency gains and greater access to commercial capital.
The remaining €6 million portion of the loan will be used to restructure the
original City-backed loan into a direct finance to the local utility without
recourse to a sovereign guarantee. Of the total €18 million loan, €8 million
will be syndicated to Raiffeisen Zentralbank Österreich Aktiengesellschaft.
The EBRD has been cooperating with the Oradea water utility company since
1997, when the Bank extended a $9.6 million sovereign loan to the company to
finance critical water and wastewater investments, improving the quality of
water for 220,000 inhabitants. The Bank extended an additional €6 million in
2004 to Oradea to finance the rehabilitation of the wastewater treatment plant
along an EU grant.
Dana Craciunescu, EBRD Senior Banker, said this project reflects the EBRD’s
strong emphasis on supporting Romania in its drive to develop regional
infrastructure and support the regionalisation of the water operators. As the
process of convergence continues after the country’s accession to the EU, the
Bank supports regionalisation as a means of improving water services in
smaller towns and achieving greater economies of scale. Regionalisation also
underpins the sustainability of investments and operations and the development
of a long-term water sector strategy while also promoting regional balanced
growth, Ms Craciunescu said.
The EBRD is a major investor in regional infrastructure including the water
and waste-water sector projects in Romania, which have been identified as one
of the highest priorities during Romania’s discussions on environment for its
EU accession. This project is the third EBRD project with a regional water
utility in Romania, following the signing of the projects in Cluj Salaj in
2005 and Timisoara in 2007.
These projects had a significant impact on the reform of this sector in terms
of building institutional and regulatory framework and tariff reform. The
benefits of reforming municipal finance in Romania are beginning to show. Ms
Craciunescu added that those service utilities and local governments that have
implemented tariff reform and commercialisation are now in a position to
obtain capital directly.
Petru Filip, Mayor of Oradea, said that this is another project made possible
because of water sector reforms, enabling local water companies to improve
creditworthiness and take loans without sovereign or local financial
guarantees and to operate on a commercial basis.
Ioan Ciursas, General Manager of the Oradea water company, said this loan is a
result of our long-standing cooperation with the EBRD and will not only
improve the quality of water for its users, but also contribute generally to a
reduction in pollution.
The EBRD is one of the largest investors in Romania, having invested more than
€ 3.5 billion in 231 projects which have mobilised a total funding of €6.4
billion.
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