Zagreb Waste Water Treatment - 3rd Phase

Location:

Croatia

Project number:

49695

Business sector:

Municipal and environmental infrastructure

Notice type:

Private

Environmental category:

B

Approval date:

15 Dec 2021

Status:

Cancelled

PSD disclosed:

16 Sep 2019

Translated version of this PSD: Croatian

Project Description

Provision of a long-term senior loan to Zagrebacke otpadne vode d.o.o., concessionaire of a local wastewater treatment plant, for the upgrade of the existing facility to tertiary treatment on order to meet EU/national environmental standards.

Total project costs are estimated at EUR 60 million, of which EBRD is envisaged to finance up to EUR 20 million and a co-financier up to EUR 40 million.

Zagrebacke otpadne vode d.o.o. is an existing EBRD client. The first loan to the borrower was provided in 2001.

Project Objectives

The EBRD loan will support the upgrading of the existing wastewater treatment plant to tertiary treatment to meet EU/national environmental standards.

The project is a follow-on operation to the Bank's previous projects for the construction and capacity increase of Zagreb's central waste water treatment plant.

Transition Impact

The project will be implemented under the Green Economy Transition (GET) direct-track approach as it qualifies 100% as a green project.

The project includes investments to upgrade the existing wastewater treatment facilities to include tertiary treatment which will result with significant reduction in nutrients (Nitrogen &Phosphorus) returned to the natural environment to meet the EU/National environmental standards. Improved wastewater treatment is expected to result in significant environmental benefits in and around the area. Furthermore, it is expected that the Project will lead to improved energy efficiency of the Borrower's operations as biological technology for wastewater treatment will also provide sludge fermentation for the purpose of biogas generation, as well as a combined heat and power station for the generation of electricity in order to minimize energy costs and residual materials.

Risk to transition impact arises from the technical implementation risks related to the construction of facilities for the tertiary treatment of wastewater which is crucial for the green transition quality (GET eligibility). This risk is significantly mitigated by the EU/national legislation which requires compliance with the directive on urban wastewater treatment starting from 2021 which makes the Project a priority investment for the City of Zagreb.

Client Information

ZAGREBACKE OTPADNE VODE DOO

Zagrebacke otpadne vode d.o.o. is a limited liability company established in Croatia, providing wastewater treatment services to the City of Zagreb (the "City") and the City of Sveta Nedelja under a concession agreement.

EBRD Finance Summary

EUR 20,000,000.00

Senior corporate loan of up to EUR 20 million

Total Project Cost

EUR 60,000,000.00

The total value of the investments is EUR 60 million.

Environmental and Social Summary

The Project has been categorised B under the Bank's 2014 ESP. The Project involves a phase 3 upgrade of the existing WWTP facility to optimise its performance and further enhance the efficiency of phosphorus and nitrogen removal fully in line with EU requirements. The proposed project would not increase the current operational WWTP capacity of 1.25 million.

The Environmental and Social Due Diligence (ESDD) for the Project was carried out alongside the technical review by independent consultants to structure the project in compliance with EBRD's PRs. ESDD confirmed that potential adverse environmental and social impacts will be site specific and mainly related to the construction works. The impacts of the proposed project were assessed through the national Environmental Impact Assessment (EIA) that was developed and approved for the Project in 2014. The local EIA determined adequate mitigation measures to minimise and address potential impacts. The Project will bring substantial environmental and health benefits for the local communities and will further improve the water quality of the Sava River through reduction of pollutant discharges.

ESDD also included a review of the existing sludge management and disposal arrangements and future plans of the City regarding treatment and disposal of sludge. A sludge options study conducted in 2018 reviewed all alternative options, and the City is currently in the process of selecting the future viable solution. Since 2016, the City has been using an interim arrangement of transporting stabilized sludge to Hungary for safe treatment and disposal, and the rest has been stored at the CWWTP site. The City in coordination with ZOV will need further to prepare a longer-term sludge management and disposal plan in line with EU requirements for sewage sludge. In case proposed future solutions involve incineration, such plans will require a comprehensive ESIA and public consultation, and relevant provisions have been included in the ESAP to ensure that the Bank will be able to influence the process to ensure it will be undertaken in accordance with good international practice in line with EBRD ESP and PRs. A side letter of agreement is expected to be signed with the City to stipulate this requirement.

ESDD confirmed that all works will take place within the footprint of the existing WWTP, hence no new land acquisition will be required, and no resettlement, livelihood impacts or impacts to cultural heritage are expected. The project is also not expected to have any significant impacts on biodiversity or adversely affect any sensitive areas. While no significant wastewater tariff affordability concerns are expected from the implementation of the project, the Company will work with the City on developing and implementing a monitoring system to assure continued affordability of tariffs to low-income and vulnerable groups of the City of Zagreb.

ZOV has a good organisational capacity at CWWTP in relation to environmental, health and safety management. As part of WTE Wassertechnik GmbH, ZOV has an integrated management system in place and operates in accordance with ISO 9001, ISO 14001, and ISO 50001 certificates for quality, environmental management and energy management systems. The Company has occupational health and safety management system in place as well in line with both national requirements and good international good practice such as ISO 45001. 

The implementation of the previous 2 phases of the Zagreb WWTP development since 2000 have had positive environmental and social effects and greatly contributed to improving quality of wastewater treatment, reducing public health risks and overall increase of life quality standards. The Company has largely implemented the previously agreed Environmental and Social Action Plan (ESAP), and ZOV's past reporting has been satisfactory.

Any adverse impacts will be localised and temporary. The identified impacts include construction-related noise, dust, vibration, waste management, in particular sludge management and disposal, hazardous materials management, worker and community health and safety, odour, labour and contractor management, construction traffic management. All potential adverse impacts can be prevented or mitigated by adhering to good construction practices and appropriate mitigation measures included in the ESAP that has been developed for the Project. Emergency response plan will be in place to handle accidental pollution and/or natural disasters. Dust emissions will be minimized by optimizing construction traffic, maintaining speed limits and use of water as dust suppressant. Stakeholder Engagement Plan (SEP) has also been prepared for the Project. 

The ESAP requires the Company to implement a number of further improvements designed to meet the EBRD's PRs. The key ESAP actions are related to: producing design documents and obtaining the required construction and operation permits for the new facilities; development of construction phase E&S management and monitoring plan; periodic monitoring of contractors' and suppliers' performance on labour and HR issues; further enhance internal grievance mechanism for workers; development of working procedures such as for excavation and confined space working; developing a chance finds procedure for the construction phase; developing procedures for better incident and near misses reporting; further sludge management and disposal planning together with the City of Zagreb; implementation of the SEP  including grievance mechanism. The ESAP will be attached to the respective legal agreements for the Project.

The Bank will continue to monitor the implementation of the project and the ESAP as well as the Company's E&S performance by reviewing their annual E&S reports and undertaking monitoring visits as needed.

Technical Cooperation

None.

Company Contact Information

Ivan Čović
info@zov-zagreb.hr
+385 1 2415 700
Čulinečka cesta 287, 10040 Zagreb, Hrvatska
 

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