Astana Water Modernisation

Location:

Kazakhstan

Project number:

47592

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Target board date:

20 Jun 2017

Status:

Board Approved

PSD disclosed:

14 Mar 2016

Translated version of this PSD: Russian

Project Description

The EBRD is considering a senior loan of up to 5 billion Kazakh tenge (KZT), or its equivalent in EUR, to GKP "Astana Su Arnasy" (the "Borrower", or the "Company"), a water and wastewater company fully owned by the Astana city administration.

Project Objectives

The Project aims at improving financial and operational efficiency of the Company through implementation of the priority investment programme (the "PIP"). Detailed components of the PIP will be confirmed during technical due diligence, and may cover the following: (i) modernisation of the water and wastewater pumping stations via introduction of energy efficient pumping equipment and automated systems for water pressure regulation, (ii) introduction of automated systems for Company operation and technological processes, (iii) further development of hydraulic management system, (iv) sludge management facility, and (v) technical support for the Project implementation and corporate development of the Company.

Transition Impact

Transition impact for this Project is expected to stem from supporting institutions, laws and policies that promote market functioning and efficiency.

The project will include the introduction of a Public Service Contract ("PSC") to define on a performance-basis the expected level of service to be delivered in exchange for any support mechanism needed on affordability grounds. The PSC will include the principle of a move towards full cost reflective tariffs for all customer groups, backed by an objective tariff methodology and approval procedure.The Project will also benefit from a Financial and Operational Performance Improvement Programme ("FOPIP")/Corporate Development Programme ("CDP") effort supported by technical cooperation (TC) with the objective of raising managerial, financial and operational performance at the Company level.

In addition, the Project will include an analysis of the specific methodology on the establishment of cost reflective tariffs for user groups. While respecting any affordability constraints, the goal will be to reach cost recovery levels for both water and wastewater provision. The Bank will work closely with the regulatory authorities.

Client Information

ASTANA SU ARNASY
Astana Su Arnasy is one of the largerst water and wastewater companies in Kazakhstan. It is fully owned by the Astana city administration (Akimat).

EBRD Finance Summary

KZT 5,000,000,000.00

EBRD will provide a senior loan of KZT 5 billion.

Total Project Cost

KZT 9,000,000,000.00

The Government of Kazakhstan is expected to contribute KZT 1 billion to co-finance the investment programme.

Environmental and Social Summary

The Project has been categorised B under the 2014 Environmental and Social Policy (ESP). An Environmental and Social Due Diligence (ESDD) including and E&S analysis of the proposed PIP and an E&S audit/review of the existing facilities, operations and management practices of the Company have been carried out as part of the Feasibility Study. The ESDD concluded that the implementation of the proposed PIP will significantly improve efficiency and reliability of water supply in the city, increase access to safe drinking water and reduce public health risks, reduce risk of groundwater pollution from untreated wastewater. Adverse environmental and social impacts are expected to be limited to construction works and will be localised, short-term and prevented or mitigated by adhering to good construction practice. The adverse social impacts caused by temporary restriction of access and disruptions in water supply and wastewater collection during the refurbishment works will be mitigated by timely disclosure of information for affected population/stakeholders and good construction practices, as stipulated in the Environmental and Social Action Plan (ESAP) and Stakeholder Engagement Plan (SEP), which have been developed for the project as part of ESDD.

Water supply facilities operated by the Company require improvements, but the Company is in principle compliant with national environmental, social, health and safety requirements including regulations on drinking water, wastewater treatment and sludge disposal/management. A number of issues that require further action in order to achieve full compliance with the PRs of the EBRD have been identified in the assessment and added to the Environmental and Social Action Plan. However, no material non-compliance with EBRD’s PRs was detected.

The project including existing and future components, will generally be able to meet the relevant EU standards on drinking water, wastewater treatment and sludge disposal/management. The following actions are however necessary to improve/reach the required effluent quality:

  • Upgrade of the WWTP to increase the WWTP capacity so that all incoming wastewaters will be treated and no more untreated wastewater will be discharged into lake Taldykol in order to minimise impacts on the lake and its adjacent groundwater body. This upgrade will be reached with the finalisation of the 2nd WWTP line tentatively in 2017 as well as with the implementation of measures included in the PIP/LTIP;
     
  • Even though all Kazakh legal requirements are met and valid permissions for discharging treated wastewater into the recipients are available, a further reduction of the “total nitrogen” concentration in the WWTP’s effluent by operational optimisation of the nitrification and denitrification processes in the biological treatment step to be in line with DIRECTIVE 91/271/EEC on urban wastewater treatment is recommended;
     
  • Collection of effluents from landfills of unstabilised sludge (currently discharged into lake Taldykol without further treatment) and feedback of effluents to WWTP for treatment in line with DIRECTIVE 1999/31/EC on the landfill of waste.

According to information from the City, no further discharge of untreated water to Taldykol is taking place from mid-2016.

The ESAP requires the Company, among others, to further develop its E&S and occupational health and safety (OHS) management systems, improve its stakeholder engagement practices and establish a grievance mechanism, upgrade water quality monitoring laboratory facilities, and develop safe asbestos handling and disposal procedures. 

The Bank will monitor the project’s environmental and social performance and compliance with EBRD PRs by reviewing annual reports prepared by the Company on environmental and social matters, and implementation of the ESAP. The TC funded Project Implementation Support consultants will also monitor day-to-day E&S performance and issues and provide assistance in the implementation of the ESAP. The Bank may also undertake monitoring site visits.

Non-technical summary

Technical Cooperation

Pre-Signing

TC1: Project due diligence to include: (i) technical review of the proposed operations to improve the water and wastewater services including demand, revenue and operational cost projections; (ii) preparation of technical and functional specifications of the PIP components; (iii) economic analysis of the proposed investments, including cost estimates and economic IRR; (iv) environmental and social due diligence; and (v) legal due diligence on the envisaged project structure. The estimated cost of the assignment is up to EUR 290,000, proposed to be financed by the Government of Kazakhstan ("GOK") under the terms of the Enhanced Partnership Framework Arrangement ("EPFA"), or alternatively international donorsor the EBRD Shareholder Special Fund ("SSF").

Post-Signing

TC2: Project Implementation Support for the Company to include: (i) assistance with procurement of the goods and services under the PIP including development of the tender documentation, tenders evaluation, contracting, assistance with technical acceptance, documentation and training; and, (ii) assistance with the implementation of the ESAP. The estimated cost of the assignment is EUR 250,000, proposed to be financed by the GOK under the terms of the EPFA, or alternatively
international donors or the SSF.

TC3: Corporate Development Programme for the Company to support operational and financial improvements to secure sustainability of its operations via implementation of a Financial and Operational Performance Improvement Programme, the introduction of a PSC between the Company and the City, and the development of a Corporate Business Plan and Management Information System. The estimated cost of the assignment is up to EUR 290,000, proposed to be financed by the GOK under the terms of the EPFA, or alternatively international donors or the SSF.

Company Contact Information

Mr Valikhan Dossayev
k_lyazzat@inbox.ru
+7 717 2379900
+7 717 2374403
http://astanasu.kz/
103, Abay street, 010008, Astana, Republic of Kazakhstan.
 

Business opportunities

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Public Information Policy (PIP)

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Text of the PIP

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