The water utility of the city of Brno in the Czech Republic is seeking financing for the extension and upgrading of the Brno-Modrice Waste-water Treatment Plant and part of the city’s sewerage network. EBRD financing is envisaged to consist of a direct loan to the water utility without a sovereign or full municipal guarantee. The initial project was board approved on 16 November 1999. A loan increase of €10 million was board approved on a no-objection basis in April 2001.
The project aims to:
- support private sector involvement through careful risk allocation, involvement of private sector management expertise and turnkey contracting;
- provide for cost recovery through user charges;
- provide, through the tariff formula, incentives for efficiency gains and for sharing them between BVK and the consumers;
- meet EU environmental standards for waste-water collection and treatment.
This form of utility financing will have a strong demonstration effect and will transfer construction and project management risk to the private sector. It will also change BVK’s remuneration to a system that gives incentives to improve financial and operational efficiency.
Brnenske Vodarny a Kanalizace (BVK) is a partly privatised municipal utility company holding a lease and operating contract to operate and maintain the water and sewerage system of the city of Brno. The system serves a population of approximately 400,000. BVK is owned by the city of Brno (51 per cent), Suez Lyonnaise des Eaux (39 per cent) and private investors (10 per cent).
External financing of the project is envisaged to consist of an EBRD loan of € 47.5 million, possibly in CZK, and grant co-financing from EU Phare’s Large Scale Infrastructure Facility of € 14.2 million.
Total project costs are estimated at € 84.8 million.
The project was screened B1, requiring an environmental impact assessment, which was undertaken by independent consultants. The investigations revealed that the main environmental issues associated with the upgrading and extension of the waste-water treatment plant have been identified and appropriate mitigation measures have been included.
The project has mainly environmentally related objectives and once fully operational will make a significant contribution to the further reduction of the pollution of the River Svratka and a man-made lake. The plant will be in compliance with relevant Czech and EU standards. In addition, the operation of the plant will not shift pollution to other environmental media (from water to soil/land). The intention of the project is also to reduce land impact and to recover energy by utilising biogas created during sludge.
Approximately € 1.5 million.
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