The proceeds of the sovereign loan to the Kyrgyz Republic will be on-lent to the city of Isfana for the benefit of the municipal water company in Isfana. A sovereign loan of up to €1.6 million under the KR Water and Wastewater Framework - Extension will support the modernisation of the Isfana water supply infrastructure. The loan will be co-financed by a €2.4 million investment grant from the EU Investment Facility for Central Asia
The Project will focus on the rehabilitation of water systems, the introduction of household metering and the modernisation of operational and maintenance equipment. The investments are expected to significantly improve access to clean water, reduce water losses, improve resilience to climate change and optimise operating costs for the Isfana water company.
ETI score: 80
Transition impact is expected to derive from:
- Primary Quality Well-governed through continued tariff reform and implementation of a Public Service Contract ("PSC") and Stakeholder Participation Programme ("SPP");
- Secondary Quality Competitive through enhancement of operational efficiency and individual household metering.
KYRGYZ REPUBLIC SOVEREIGN
EBRD Finance Summary
A sovereign loan in the amount of up to €1.6 million to the Kyrgyz Republic
Total Project Cost
The Project is financed from two sources: (i) an EBRD loan of up to €1.6 million and (ii) a capital grant of up to €2.4 million from EU IFCA.
The Bank is additional because of its:
- Terms: long-term financing from commercial banks is not available in the KR. The Bank's loan will play a key role in ensuring that the Company operates as a commercial entity.
- Attributes: the Bank has been active in providing long-term financing for municipal infrastructure projects in the KR since 2009, and is seen as an increasingly important financing partner thanks to its project preparation and implementation capacity and attractive grant co-financing arrangements.
Conditionalities: the Bank will require credit and transition impact-related covenants in the form of tariff increases to cost recovery level, as pre-conditions to extending the loan and the grant.
Environmental and Social Summary
The Project has been categorised B in accordance with the EBRD's Environmental and Social Policy 2014. The Environmental and Social Due Diligence (the "ESDD") for the proposed Project PIP was carried out as part of the Feasibility Study by independent consultants. It included a review of current practices, an assessment of the Project's potential E&S impacts and a review of the Company's E&S provisions and management capacities. The PIP is designed to achieve compliance with national drinking water standards and the EBRD Performance Requirements (the "PRs"). An Environmental and Social Action Plan (the "ESAP"), a Stakeholder Engagement Plan (the "SEP") and a non-technical summary (the "NTS") have been developed for the project.
Due diligence showed that the Company has overall weak EHSS management capabilities and underdeveloped EHSS management systems, and that its current occupational health and safety and stakeholder engagement practices require further improvement to meet the EBRD's PRs. The Company's facilities are currently in very poor operating condition, resulting in unreliable and low quality water supply, high water losses and energy consumption.
Currently the drinking water quality meets national and EU standards for the limited number of parameters that are currently monitored, apart from some high chlorine readings due to poor management of chlorination. Microbiological quality data is not monitored but is considered to be poor. The Project will improve the current poor microbiological quality of drinking water in the City through rehabilitating existing water infrastructure, also contributing significantly to public health improvements. After implementation of the Project, the number of people with access to safe water will increase from 4,600 in 2017 to up to 10,000 after 2021. However, given the limited financial resources and the local population's affordability constraints, the Project will not be able to achieve full compliance with the EU's Urban Waste Water Treatment Directive. As such, the Project will require derogation from the Environmental and Social Policy (2014), which was approved by the Board for all Framework Extension sub-projects on 25 November 2015. The Project's benefits are assessed to be significant compared to the human health implications of the shortfalls from EU standards.
Any negative impacts are expected to be of a short-term nature, relate to the construction stage and to be localised within construction sites. These impacts include noise generated by equipment, local short-term increases in traffic intensity and corresponding air pollution, and soil and landscape disturbances during excavation works. These impacts can be mitigated by proper organization of the works. The Project will necessitate no land acquisition, resettlement or economic displacement. There will also be no impacts on biodiversity or sensitive areas. Limited tree cutting may be necessary, and compensation will be granted where they belong to private owners, a process that will be overseen by the iity.
The ESAP has been agreed with the Company for implementation during the Project to ensure that it complies with both national regulations and EBRD PRs, where financially feasible. The ESAP describes the improvements necessary for the Company's capacity and EHSS management systems, including among others environmental and social requirements in contracts; preparation and implementation of a Construction, Environmental and Social Management Plan; development of a formal HR policy; contractor management; development of a structured and integrated Environmental Health and Safety Management System; improvements in water monitoring, formalisation and development of better labour and OHS practices; improvement of fire safety and emergency response procedures.
The EBRD will monitor the implementation of the Project and the ESAP, as well as the Company's environmental and social performance, by reviewing the Company's annual environmental and social reports and undertaking monitoring visits as needed.
Technical Cooperation and Grant Financing
Pre-signing: (i) Technical due diligence, to support scoping and structuring of the project, financial analysis and an environmental and social assessment (cost is €193,000).
Post-signing: (i) Project Implementation Support, including tender support and contract supervision (cost is €600,000) and (ii) Corporate Development and Stakeholder Participation Programme, including public awareness programme and improvement of equal opportunities policies and procedures (cost is €400,000).
Company Contact Information
Mr. Alaberdi Karimov
Municipal Enterprise Isfana Taza Suu; 23 Leninskaya street, Isfana, Kyrgyz Republic
PSD last updated
12 Feb 2020
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Independent Project Accountability Mechanism (IPAM)
If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).
IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.
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