The EBRD is considering providing a loan of up to €15.86 million loan to S.C. Aquaserv S.A., Mures County, as sub-project under the framework for Romania EU Cohesion Fund Co-Financing for regionalised water companies (the “Framework”), approved on 23 November 2010.
The project involves two components. The first component consists of a loan of €11.45 million for upgrading and extension of the water and wastewater infrastructure in line with the relevant EU directives. It will be co-financed by a regional investment programme of up to €115.7 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 second component of €4.41 million will be used to re-finance the Bank’s existing Municipal Environmental Loan Facility, signed on 23 October 2003.
The Project will support environmental improvements as well as efficiency gains from continued regionalisation of water and wastewater services and transfer of commercial and managerial skills to less-developed localities.
Aquaserv has been an EBRD client since 1995 under the Municipal Utilities Development Programme I (“MUDP”) then under the MELF facility that co-finances its EU ISPA programme The Company reorganised in 2005 into a regional water company serving today 7 towns (Targu Mures, Reghin, Sighisoara, Tarnaveni, Ludus, Iernut and Cristuru Secuiesc) and other rural communities.
€15.86 million loan for Mures Sub-Project.
€115.7 million for Mures Sub-Project.
Categorised B in accordance with EBRD’s 2008 Environmental and Social Policy. The potential E&S impacts of construction/rehabilitation of wastewater treatment plants and extension and rehabilitation of water distribution and sewerage networks are site-specific and readily identified and addressed through adequate mitigation measures.
Environmental and social due diligence (ESDD) was undertaken by independent consultants and included a review of the Company's existing E&S management systems, available technical and environmental documentation prepared in accordance with Romanian permitting requirements and the project appraisal documents prepared for the EU Cohesion Fund application as well as assessment of the project against EU environmental requirements and the EBRD Performance Requirements (PRs).
The ESDD confirmed that the competent environmental authorities undertook an EIA screening procedure for individual project components in accordance with applicable Romanian EIA legislation that is harmonised with the EU EIA Directive. Following the screening and public consultations, the authorities decided that an EIA was not required for any of the sub-projects. One of the sub-projects involves a WWTP with capacity of more than 150,000 population equivalent (pe), however, this will only be rehabilitated without increasing its capacity. The sub-project to be implemented in Sarmasu-Voiniceni involves building a 500m section of discharge pipes along an existing county road across a Natura 2000 site. In the Niraj sub-project, the raw water intake will be built 100 m within the Natura 2000 site. Based on the screening procedure, a Natura 2000 Declaration was issued by the competent authority for each of these two sub-projects concluding that the proposed activities are not likely to have significant impact on the integrity of the Natura 2000 site and, therefore, no Appropriate Assessment was required.
The ESDD showed that the project will result in significant environmental benefits and improve the quality of the local environment and minimise public health risks by extending the drinking water supply and wastewater collection networks as well as by improving drinking water treatment and quality, sewage collection and wastewater treatment systems. As a result of the project, connection rates will be increased to 100 per cent in the 7 towns and 57 communes covered by the project by 2014. This will benefit 60 per cent of the population of Mures County (total population 350,000 inhabitants) by providing access to safe and improved water supply and sanitation services.
The ESDD concluded that the implementation of the sub-projects will bring the beneficiary municipalities into compliance with national and EU requirements within the transition period agreed for meeting requirements of Directive No. 98/83/EC on drinking water quality (by 2015) and Directive 91/271/EC on urban wastewater (from 2013 to 2018 depending on the agglomeration size). The construction works will have limited, localised and short-term adverse impacts, which can be mitigated or prevented by adhering to good construction practice. The planned tariff increases are not expected to generate affordability challenges for the average and lower income households. No significant adverse impacts or non-compliances with the EBRD PRs were identified.
Project implementation will result in improvement of water quality in the water bodies receiving wastewater discharges. Two of the sub-projects involve construction activities within Natura 2000 sites:
- Sarmasu-Voiniceni: main pipe will be built across Natura 2000 site ROSCI0079 Fanatele de pe Dealul Corhan - Sabed, on a distance of approx. 500 m along an existing county road.
- Niraj: water intake will be built 100 m within Natura 2000 site ROSPA0028 Dealurile Tarnavelor - Valea Nirajului.
The total area affected by each of the sub-projects is small compared to the total area of the affected Natura 2000 site, and the proposed activities will not have significant impact on the integrity of the site providing that good construction practices are adhered to. The ESDD ascertained that the Natura 2000 Declarations issued by the competent authority include measures for mitigating the impacts on the Natura 2000 sites during the construction and operation periods. These measures will be included in tender documents for the award of works contract. For each sub-project, the Contractor will be required to develop a specific Environmental and Social Management Plan (ESMP), which will include all the mitigation measures as required in the Natura 2000 declaration and environmental permits as well as any other measures that are required for complying with the EBRD PRs.
The EIA and Natura 2000 screening decisions were disclosed to public for comment prior to the competent authority issuing the environmental permits and Natura 2000 Declarations. No comments were registered from Civil Society or NGOs regarding the proposed works.
The ESDD established that the Company’s existing EHSS management systems are well developed and it has an integrated ISO 14001, ISO 9001, and OHSAS 18001 management system in place. However, further improvements to the Company’s contractor management practices are needed to meet the Bank’s PRs.
An Environmental and Social Action Plan (ESAP) has been developed for mitigation of identified E&S issues and impacts during preparation, construction and operation of the project, and to bring the client's operations into compliance with the EBRD's PRs. The ESAP commits the Company amongst others to: developing site specific E&S Management Plans for each sub-project; establishing procedures for monitoring of contractor's compliance; renewing Land Planning Certificates; revising its current Sludge Management Action Plan; developing and implementing work instructions for handling and disposal of materials containing asbestos; developing and implementing a specific procedure to ensure any land acquisition and/or temporary use of land and possible economic displacements that may result from the sub-projects is carried out in accordance with the national requirements and EBRD PRs; developing and implementing a cultural heritage chance find procedure and management plan; and adopting and implementing Stakeholder Engagement Plan compliant with EBRD PR10.
The client will provide the Bank with annual environmental and social reports, including updates on the implementation of the ESAP. The Bank will commission a completion audit and may also conduct monitoring visits, as required.
The sub-project will benefit from overall TC under the Framework, including an analysis of the environmental and social impacts, issues and risks and a gap analysis (EUR 125,100 - financed by Spain), institutional and financial due diligence (EUR 74,800 - financed from the EBRD’s own resources) as well as a benchmarking and FOPIP programme (EUR 750,000 - financed by the EBRD’s Shareholder Special Fund).
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