Project summary document

Project description
and objectives:

The project includes two components. The first entails co-financing to Cohesion Fund of up to EUR 21 million for key investments in the County of Brasov to meet EU water and wastewater directives. The Bank’s loan would co-finance a regional investment programme of up to of EUR 190 million, which will include significant grant funding from the European Union, the Government of Romania and the local governments under Romania’s Cohesion Fund Programme. The Cohesion Fund investment programme will result in the implementation of a large scale investment programme to rationalise and improve operating efficiency. These investments will also optimise available water resources in Brasov County. The Bank will finance the rehabilitation of the water and wastewater pipelines. The second component includes a restructuring of the existing EBRD Municipal Environmental Loan Facility- OpId 18595, signed on 18 May 2002 with a committed amount of EUR 12.2 million, to take into account the company's transformation into a commercial company and regional operator and the change in security.

Transition impact:

Transition goals of the change to the operation include:

(i) Sector consolidation and corporate development:

As a result of this Project, previously unserved area of Brasov County will receive water and wastewater services. More importantly, the company will absorb water and wastewater operations from surrounding towns, many of which were not managed on a commercial basis. As a regional operator, the company will be able to take advantage of economies of scale to achieve substantial efficiency gains and will gain access to capital both from EU and commercial sources. By restructuring itself as a regional operator, the company will have the basis to provide water services for the entire county in a commercially viable way as well as to optimise water resources. The company will have the size and capacity to absorb the funds, implement subprojects and ensure that the consolidated cash flow will provide a sound basis to service external debt.

(ii) Framework for markets:

The project will promote cost recovery principles at the local level by increasing tariffs to cover costs. In addition, the project will ensure 100 per cent metering in Brasov area, which will enable the company to accurately bill for water services. The Service Agreement to be reviewed by the Bank will ensure balanced regional growth and appropriate allocation of risk between the IDA (Inter- Development Association) and the Company. This structure will enable the company to continue to operate in a commercially viable way.

(iii) Demonstration Effect of new ways to finance the sector:

EBRD’s willingness to lend on a non recourse basis will contribute to establish new financing structures for Romanian municipal customers. EBRD is well placed to assess and structure such a transaction given its experience with municipal loans in the country. The EBRD can also play a role in ensuring that appropriate corporate governance systems are put into place for the company once it transforms into a commercial company and regional operator. The Service Agreement with the IDA will also provide effective corporate governance of the regionalised company, balancing the needs of the various communities for additional investment in infrastructure and services

The client:

Compania APA Brasov

EBRD finance:

Senior loan of up to EUR 33.2 million.

Total project cost:

Up to EUR 202.2 million.

Environmental impact:

Screened B/1 - The project has been reclassified to B/1 from the initial A/1 classification at concept review stage. This is due to the redefinition of the scope of the project. The revised scope includes the financing of only water and wastewater pipeline rehabilitation works and excludes the financing of construction and rehabilitation of any treatment plants including the new wastewater treatment plant in Feldioara (203,000 p.e.) and the rehabilitation of the wastewater treatment plant Brasov (476,000 p.e.). Any potential adverse future environmental and social impacts are likely to be site-specific, limited in number, and can readily be identified, assessed and mitigated. For the above reasons, the project will be required to undergo an Environmental Analysis. As the company is an existing client, the Bank will update previous reviews and determine whether an Environmental Audit of the existing facilities and operations is needed. An Environmental Action Plan to address any identified corrective measures and EHS risks associated with the planned operations will need to be developed as part of the environmental due diligence and agreed with the company. This section will be revised to include the findings of the due diligence and the implementation and monitoring requirements as soon as the due diligence is finalised.

Technical
cooperation:

Consultancy services of up to EUR 300,000 to the company for institutional development for regionalised operations. The assignment will assist the company in integrating its operations and enhancing financial and operational efficiency of the regionalised operator. Donor to be identified.

For consultant opportunities for projects financed by technical cooperation funds, visit procurement of consultants.

EBRD contact:

Dana Craciunescu , Operation Leader: craciund@ebrd.com

Procurement or tendering
opportunities:

Visit EBRD Procurement
Enquiries: Tel: +44 20 7338 6794; Fax: +44 20 7338 7472, Email: procurement@ebrd.com

General enquiries:

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168; Fax: +44 20 7338 7380
Email: projectenquiries@ebrd.com