The EBRD is considering providing a senior loan of up to EUR 8 million to the Blagoevgrad Regional Water company (“the Company”) to rehabilitate and up-grade key water mains and wastewater collectors in the city of Blagoevgrad. The investment will target reduction of water losses and other operating costs, and help improve the quality and reliability of provided services. The implementation of the project will coincide with the modernisation of major streets of Blagoevgrad, under which the targeted networks are located.
The proposed project will also improve the Company’s financial and operational performance.
The sources of transition impact will originate from the following:
1. Demonstration of successful utility company restructuring
The Bank intends to mobilise technical co-operation to promote commercialisation of the Company and improve its financial and operational performance. Milestones and targets agreed with the Company will be included as covenants in the Loan Agreement. The capacity building to take place during the project implementation should allow Blagoevgrad RWC to access EU structural funds to further support its major rehabilitation programme.
2. Promoting decentralisation/improved governance structure in water sector
The Bank will work closely with the Company, Government authorities and the City to promote further reforming of the sector and will assist in substantiating the institutional changes at Company level by achieving efficiency and environmental improvements.
3. Improve contractual arrangements, incentives and accountability
The Bank will work closely with local authorities and the Company to establish contractual arrangements in the form of a public service contract that promotes management incentives and increase the Company's accountability towards local stakeholders.
Blagoevgrad Regional Water Company is a regional water supply and sewage company, 100 per cent owned by the State through the Ministry of Regional Development and Public Works, providing services to 10 municipalities including Blagoevgrad itself.
Proposed EBRD financing is a senior loan to the Company of up to EUR 8 million.
The total project cost is expected to be between EUR 11 and 12 million.
The Project has been screened B under the EBRD’s 2008 Environmental and Social Policy. The project involves priority investments in rehabilitation of the Company's existing water supply and wastewater collection networks along several streets in the City of Blagoevgrad and is expected to improve the environmental situation in Blagoevgrad region and to provide better quality and efficiency of drinking water supply in line with EU requirements. Rehabilitation of networks will lead to elimination of leaks in water and wastewater pipes, overall reduction in water losses, reduction in soil and water pollution and positive health benefits for the population.
The environmental and social due diligence for the Project has been completed in June 2009 with the help from independent consultants. It assessed Project’s compliance with the Bank's Performance Requirements and included
(i) environmental and social review of the existing facilities and operations of the Company, and of their corporate management policies, procedures and approaches to environmental, heath and safety and labour/social issues, and
(ii) analysis of the environmental and social impacts and benefits of the proposed priority investment programme components.
The investigations showed that the proposed project components would not result in any significant negative environmental or social impact and would provide substantial environmental and social benefits. The potential adverse environmental and/or social impacts of the PIP implementation will be mainly associated with the construction, they will be site-specific and will be addressed through adequate mitigation measures. The potential adverse environmental and social impacts have been identified and assessed during the due diligence. Corporate environmental and social management system is in need of further development, and BWC will require capacity building on E&S issues. Environmental issues will be mainly associated with the construction stage and might include increased noise and dust levels, and management and disposal of the construction waste.
Potential issues may be associated with the presence of asbestos containing materials during pipes replacement, and appropriate procedures will be required to prevent and minimize any negative impacts. Health and safety issues are mainly associated with the use and movement of construction machinery and work in excavated trenches, associated road safety and traffic restrictions, provision of proper signage and adequate notification of any temporary road closures during replacement of the pipes.
Labour issues might be associated with the use of temporary construction labour, their working hours and remuneration levels, provision of adequate safety arrangements and use of personal protection equipment for construction personnel. No issues of physical or economic displacement (permanent or temporary) or any impact on sensitive areas or cultural property have been identified during due diligence. However, adequate planning and coordination for the construction phase of the project will be necessary in order to mitigate the expected impacts of the construction works.
Environmental and Social Action Plan (ESAP) has been developed for BWC and includes specific measures that would help the Company to further improve corporate management system and procedures on environmental and social matters, as well as to avoid, minimise and mitigate any potential adverse environmental and social impacts and liabilities arising from the project's construction and operation stages. ESAP will guide the Company to compliance with the relevant environmental and social requirements in EBRD’s PRs, and it will be agreed with the Company as a condition of the EBRD's investment. A Stakeholder Engagement Plan has also been prepared for the Company in accordance with provisions of the Bank’s PR10 for category B projects. The implementation of SEP will ensure that communication with the identified stakeholders is handled properly throughout project preparation and implementation, including the appropriate grievance procedure.
Associated TC programme:
Development of Financial and Operational Performance Improvement Plan: EUR 300,000 to be identified.
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