ESIF: Burgas Water Project

Location:

Bulgaria

Project number:

52115

Business sector:

Municipal and environmental infrastructure

Notice type:

State

Environmental category:

B

Approval date:

27 Jul 2021

Status:

Signed

PSD disclosed:

09 Oct 2020

As per section 1.4.2 (iii) of the Directive on Access to Information: "For Projects approved by Bank management where the Board of Directors has delegated the approval authority, the PSD shall be disclosed at the start of the relevant no-objection notification period to a member country of the Bank in accordance with Article 13 (iii) of the Agreement Establishing the EBRD."

Project Description

Provision of EUR 17.3 million loan to Burgas Water Supply and Sanitation Company ("Burgas WSSC" or the "Company"). The proceeds of the loan, blended with OPE investment grants, will co-finance Stage 1 of a wider investment programme, targeting improvement of water supply and sanitation infrastructure in the region of Burgas. With agreement of the EC the project was split in two stages i Stage 1, factoring investments that involve construction mostly in urbanized areas or outside Natura areas (representing broadly 45% of the envisaged investments) and Stage 2, which includes investments where construction potentially could affect some of the protected areas and species and requires further investigations.

The EBRD provides financing only for Stage 1, which already received the grant financing approval from the EC. Should Stage 2 of the investment be deemed eligible for grant financing by the EC at a later stage, and the Company is required to co-finance its implementation, the Bank may consider providing additional financing for its completion.

The Stage 1 investments aim at rehabilitating over 76 km of water supply pipelines, revamping over 10 km and constructing over 42 km of wastewater collection infrastructure, as well as constructing and recuperating over 5,000 cub.m. tanks and reservoirs.

Project Objectives

The project's main objectives are (i) increasing compliance with the EU directives on potable water and wastewater treatment in large agglomerations and (ii) enhancing Burgas WSSC's operational efficiency.

Transition Impact

ETI score: 60

  • Project's Green quality, via: (i) annual potable water savings, (ii) increasing the share of the population connected to wastewater treatment and (iii) increasing the volume of wastewater treated before being discharged.; and
  • Project's Resilient quality via: (i) reducing the Company's dependence on 100 per cent grant-based funding and (ii) strengthening its financial and operational performance and asset management practices.

Client Information

Burgas Water Supply and Sanitation Company, a 100% state owned utility company, is the sole provider of water supply and sanitation services to roughly 410,000 inhabitants in Burgas Region. In addition, the company provides services to approximately 300,000 tourists per day during the peak summer season.

The Company has signed a 15-year Public Service Contract ("PSC") with the Regional Water Supply and Sanitation Association, which gives it the exclusive right to provide services in the region and collect revenues from end consumers.

EBRD Finance Summary

EUR 11,700,000.00

The total financing of Stage 1 of the project will amount to up to EUR 17.3 million, of which EUR 11.7 million will be funded by EBRD's ordinary capital resources and will include an investment tranche of EUR 8.4 million ("EBRD Investment Tranche") and a working capital tranche of EUR 3.3 million ("EBRD WCap Tranche"). The Bank's resources will be complemented by EUR 5.6 million ESIF financial resources ("ESIF Tranche"). The ESIF contributions are managed by the EBRD pursuant to an Operational Agreement between the Bank and the Fund Manager of Financial Instruments in Bulgaria signed in October 2018.

Total Project Cost

EUR 91,800,000.00

The total cost of Stage 1 of the project  is estimated at EUR 88.5 million excluding VAT and working capital and will be majority financed with investment grants from the EU's Operational Programme Environment 2014-2020 ("OPE"). In addition, the Company will require approximately EUR 3.3 million to cover working capital needs related to the investment. 

Additionality

The EBRD offers financing not available in the market, e.g. tenor above market average and an innovative financing structure on commercial terms, which is necessary to structure the project. EBRD's involvement and expertise will mobilise the necessary resources for the proper implementation of the project.

Environmental and Social Summary

Categorised B (2019 ESP). Environmental and Social Due Diligence (ESDD) for the Project (Stage 1) under the ESIF/EBRD Water and Waste Water Financing Framework was carried out as part of the Feasibility Study by independent consultants. It included an update on the E&S management capacity and performance of Burgas WSSO, a review of the EU application conditionalities, an assessment of the Project's potential E&S impacts and scope for mitigation and/or management of the Project's E&S impacts and ability to comply with the Bank's PRs and with national and EU requirements. The Framework is designed to achieve compliance with the EU's Urban Waste Water Treatment Directive, and the Project, including existing and future components, will meet the relevant EU standards on drinking water quality, wastewater discharge and sludge management.

The Project ESDD assessed only Stage 1 components that will cover 8 agglomerations and involve construction mostly in urbanized areas or outside Natura 2000 sites. The financing application for Stage 1 was approved by the European Commission on 4 March 2021. Follow on Stage 2 investments, where construction potentially could affect some of the protected areas and species are outside of the scope of this Project and will be subject to further assessment, including Appropriate Assessment (AA) and setting N2000 site conservation objectives, in line with EU requirements and an update of the ESDD report. An Environmental and Social Action Plan (ESAP) has been developed for implementation during the Project (Stage 1). A Stakeholder Engagement Plan (SEP) and a non-technical summary (NTS) have also been developed and will be disclosed locally by the Company.

The Competent Authority Regional Environment and Water Inspectorate Burgas issued the Screening Decisions that no EIA is required for the Project (Stage 1) components due to them unlikely having a significant impact and that adverse impacts are local, short-term and relate only to the construction period. While no Appropriate Assessment (AA) are required for Stage 1, the Screening Decisions include specific conditions for any developments streaming from the Project, including the provision for AA where applicable for consistency with the conservation objectives of N2000 sites.

Three N2000 sites may be affected by the Project (Stage 1) components and will require precautions. The reconstruction of Aytos WSS network will take place along the existing streets in the city and a minor section of the planned works (few square meters) among existing houses will enter the boundary of the N2000 site BG0000119 "Trite bratya".  No critical habitats will be affected in the site, and the impacts are likely to be negligible considering the urbanized area where the works will take place. At another site BG0000149 "Rishki prohod" the construction of process wastewater treatment facility for DWTP Kamchia will take place entirely within the N2000 site, yet within the boundaries of the existing DWTP land plot that does not have presence of natural habitats. Precautions during construction works will be required to avoid any disturbance of the potential habitats of species subject to conservation within that N2000 site. In addition, the reconstruction of WWTP Obzor will take place entirely within the BG0002044 "Kamchiyska planina" N2000 site, yet in the boundaries of the existing WWTP land plot. The site is designated under the Birds Directive; however, ESDD confirmed that no loss or fragmentation of any critical habitats is likely to occur. No high-rate impacts are likely to result from the planned developments in Stage 1 and no natural habitats subject to conservation within the relevant N2000 sites are likely to be affected. No habitats of priority species under the Habitats Directive or any critical habitats of species subject to conservation within the relevant N2000 sites have been identified. The EIA screening process concluded that no potentially significant negative impact is expected on the protected sites, and it was concluded that there is no need for an Appropriate Assessment to be undertaken for Stage 1. This is because the location, type, specifics and the scale of the Project do not presume direct or indirect negative impacts on the subject and goals for protection of the Natura 2000 sites. The independent ESDD consultants confirmed this; however, actions have been added in the ESAP to undertake further biodiversity assessments in line with the PR6 requirements and performing the construction works outside the bird-nesting season and in coordination and consultation with the custodians of the Natura 2000 sites.

There will be no permanent land acquisition due to the project, but economic displacement and temporary inconvenience/disturbance during the construction phase is anticipated. An easement procedure for the new pipes will be enacted over 321 private land plots within the project area, affecting 9.59 ha of agricultural land. No residential or other buildings will be affected. The economic displacement involves potential loss of harvest and other potential losses for formal landowners and/or formal or informal land users. WSSO Burgas will be responsible for the process of compensating the private landowners/users for the loss of harvest and other potential losses resulting from the construction works. Furthermore, the WSSO may occasionally need access to the pipes for maintenance/repair purposes and will pay landowners and users compensation for any loss of harvest or other damages resulting from such work. The Client will manage and coordinate the preparation and implementation of a Resettlement Plan (RP) in line with EBRD's PR5 prior to start of the construction.

ESDD also showed that the Company has an integrated quality, environmental and occupational health and safety management system certified to the international standards ISO 9001, ISO 14001 and ISO 45001, as well as WSSO has a well-established HR system and procedures aligned with PR2. The WSSO does not have specific EHSS management procedures for management or oversight of contractors, which have been included in the ESAP.

E&S risks and impacts will be mainly related to the construction phase, including health and safety of workers and public during excavation activities. An ESAP includes a list of various management and mitigation measures that will require WSSO to: establish an organisational structure that defines roles, responsibilities and develop capacity for EHSS management of Contractors; enhance the internal grievance mechanism; implement pollution prevention measures during construction; include community health and safety provisions in tenders and contractual agreements; undertake pre-construction biodiversity surveys and develop a Biodiversity Action Plan (BAP) for construction works that may impact Natura 2000 sites and ensure its implementation during construction and operation, and implement the SEP including grievance mechanism. The ESAP will be agreed with the Client prior to signing and included in the legal agreements. Additional E&S implementation support will need to be provided to the Company and its PMU through the extended FOPIP TC under the ESIF Framework.

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 annual environmental and social reports and undertaking monitoring visits as needed.

Technical Cooperation and Grant Financing

  • Pre-signing TC covers the following activities: (1) technical and operational review of the Projects; (2) analysis of the key contractual arrangements; (3) financial modelling and analysis; (4) environmental and social due diligence and gap analysis; (5) procurement review and (6) confirming Projects' compliance with EBRD's Green Economy Transition framework. The TC is funded by the EBRD's Sustainable Infrastructure Policy and Project Preparation.
  • The Company is expected to benefit from a TC for financial and operational improvement to support the Company in strengthening its operations and financial performance and long-term debt service capacity. The budget will be potentially financed by funds form EBRD's Shareholders Special Fund.

Company Contact Information

Eng. Gancho Tenev, Executive Director
gtenev@vik-burgas.com
00359 56 871 444
00359 56 842 979
www.vik-burgas.com
3 Gen. Vladimir Vazov Str. 8000 Burgas, Bulgaria

Implementation summary


PSD last updated

29 Jul 2021

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Business opportunities

For business opportunities or procurement, contact the client company.

For business opportunities with EBRD (not related to procurement) contact:

Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

For state-sector projects, visit EBRD Procurement:

Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

Specific enquiries can be made using the EBRD Enquiries form.

Environmental and Social Policy (ESP)

The ESP and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”.  The ESP and the PRs include specific provisions for clients to comply with the applicable requirements of national laws on public information and consultation as well as to establish a grievance mechanism to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project. Proportionate to the nature and scale of a project’s environmental and social risks and impacts, the EBRD additionally requires its clients to disclose information, as appropriate, about the risks and impacts arising from projects or to undertake meaningful consultation with stakeholders and consider and respond to their feedback.

More information on the EBRD’s practices in this regard is set out in the ESP.

Integrity and Compliance

The EBRD's Office of the Chief Compliance Officer (OCCO) promotes good governance and ensures that the highest standards of integrity are applied to all activities of the Bank in accordance with international best practice. Integrity due diligence is conducted on all Bank clients to ensure that projects do not present unacceptable integrity or reputational risks to the Bank. The Bank believes that identifying and resolving issues at the project assessment approval stages is the most effective means of ensuring the integrity of Bank transactions. OCCO plays a key role in these protective efforts, and also helps to monitor integrity risks in projects post-investment.

OCCO is also responsible for investigating allegations of fraud, corruption and misconduct in EBRD-financed projects. Anyone, both within or outside the Bank, who suspects fraud or corruption should submit a written report to the Chief Compliance Officer by email to compliance@ebrd.com. All matters reported will be handled by OCCO for follow-up. All reports, including anonymous ones, will be reviewed. Reports can be made in any language of the Bank or of the Bank's countries of operation. The information provided must be made in good faith.

Access to Information Policy (AIP)

The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form.

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.

Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM  via email ipam@ebrd.com to get guidance and more information on IPAM and how to submit a request.

 

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