Armenian Small Municipalities Water Project

Location:

Armenia

Project number:

40718

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Target board date:

12 Jul 2011

Status:

Repaying

PSD disclosed:

14 Jan 2011

Translated version of this PSD: Armenian

Project Description

The EBRD is considering providing a sovereign-guaranteed loan of up to €6.5 million to Armenia, to be on-lent to the Armenian Water and Sewerage CJSC (“AWSC”) to finance:

(i) municipal water supply improvements in Tavush, Lori, Shirak, Gegharkunik, Kotayk, Syunik municipalities and Vayots Dzor province; and
(ii) rehabilitation of the water treatment plants and sewerage collectors in Tavush (Town of Dilijan) and Vayots Dzor (Town of Jermuk) provinces.


The EIB is considering disbursing a co-financing loan of €6.5 million and the European Union Neighbourhood Investment Facility (the “NIF”) has given approval for a capital expenditure grant of €7.0 million.

Transition Impact

Transition Impact of the project comes from:

(i) Commercialisation of the Company through improved incentive based contracts that should lead to better cost control and higher realistic and achievable collection rates
(ii) Move to consumption based billing with improved water metering
(iii) Tariff reforms towards cost-reflective water and wastewater tariffs for all consumer groups

The Client

The Armenian Water and Sewerage CJSC, a state owned company currently operated by SAUR France SA under a long-term management contract.

EBRD Finance

€6.5 million.

Project Cost

€21.2 million, including related technical cooperation.

Environmental Impact

The project is categorised B. The environmental and social due diligence (ESDD) confirmed that the Company has an environmental, health and safety (EHS) management system with a well-structured set of procedures and defined staff responsibilities to manage many risks associated with environment, and health and safety of workers and communities during the Company’s day-to-day operations and during implementation of investment projects. However, these are not equally developed for all facilities and do not cover all aspects of the Company’s operations.

The Company’s current wastewater discharges are currently not in compliance with applicable EU EHS requirements and with the national regulatory requirements as none of the towns have a wastewater treatment plant in operation. Design and construction are ongoing for Sevan, Gavar, Vardenis and Martouni. Four villages (Jrashen, Saroukhan, Shatin and Getap) have no wastewater collection at all.

ESDD concluded that the project will not result in any significant adverse E&S impacts. Positive impacts of the project, on the other hand, will be significant. The project will improve the performance of the Company, reduce water losses and enhance the efficiency of the sewage system, thus having high social and environmental benefits for the participating communities. The project will also provide input to the programme of water demand management actions with installation of water metering equipment for adequate billing and collection management, which will contribute to the strengthening of the Company's financial position for implementation of future investment projects. The project will enable the Company to maintain the existing compliance of water supply facilities, result in major improvements of water supply and sanitation systems in the involved communities, and pave the way for more of the Company operated facilities to achieve compliance with the national and EU environmental requirements. However, bringing all of the Company’s operations into compliance with the EBRD PRs, especially EU environmental requirements, will require the implementation of additional long-term investment programmes that require substantial additional funds, which are currently not available. Therefore, due to constraints arising from affordability and limited financial resources, the Company will not be able to meet the relevant EU requirements for drinking water quality and wastewater discharges for all the customers, and derogation from the Bank’s Environmental and Social Policy is sought.

The risk posed to public health in downstream areas of the Arpa River and the Aghstev River arising from the continued wastewater discharges that do not meet national or EU environmental requirements is mitigated by a number of international projects that are under way. These investment projects funded by the World Bank and the Asian Development Bank involve the extension of the existing sewage collection system. The new wastewater treatment plants in Dilijan and in Jermuk to be financed by the EBRD are expected to further reduce the pollution loads on the Aghstev and the Arpa rivers and also the transboundary impacts further downstream along these rivers in Azerbaijan and Iran.

Public information and consultation activities are being carried out by the Company for the ongoing investment projects financed by other IFIs. There is already a mechanism in place for stakeholder engagement. This needs to be extended to include the activities of the Project.

An ESAP addressing the issues identified during the ESDD so as to allow achieving compliance with the Bank’s PRs (with the exception of water and wastewater quality standards) is being finalised.

The Company will provide the Bank with Annual Environmental and Social Reports and notify on any material accidents or incidents. The Bank will evaluate the Project’s environmental and social performance in accordance with the Bank’s PR’s through reviewing annual reports and monitoring visits, when and if necessary.

Technical Cooperation

Pre-signing:

  • Technical review - Including technical, financial, environmental and social due diligence to assist the Bank with assessment of the proposed project (€0.2 million, funded by the Government of Canada).

Post-signing:

  • Engineering Services, Implementation and Procurement Support for the Project Implementer - Support to the Armenian Water and Sewerage Company for engineering design, tender evaluation, contract award and administration, financial control, project management, and reporting services (€1.0 million to be funded by a NIF TC grant and an international donor).
 

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

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

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Text of the PIP

Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.