Minsk VK

Location:

Belarus

Project number:

49483

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

A

Target board date:

31 Oct 2018

Status:

Board Approved

PSD disclosed:

29 Jun 2018

Translated version of this PSD: Russian

Project Description

Provision of a sovereign loan of up to EUR 84 million to Minsk Vodokanal (UE "Minskvodokanal" or "Company"), a municipal enterprise wholly owned by the City of Minsk (the "City"), to finance rehabilitation and reconstruction of the Minsk wastewater facilities. The proposed EBRD loan will be co-financed in equal amount by the European Investment Bank (EIB).

The EBRD loan will be used to co-finance: (i) reconstruction of the Minsk wastewater treatment plant to eliminate odour, optimise use of the existing facilities and enhance wastewater treatment efficiency of the plant in line with national and EU requirements; and (ii) construction of sludge treatment facilities (including digestion, dewatering, drying and incineration) in line with EU best available techniques on the premises of the wastewater facilities.

Project Objectives

The Project aims to rehabilitate the existing wastewater treatment plant to enhance wastewater treatment efficiency and its performance, and construct a cost efficient, modern sludge management and disposal facility, including energy and heat recovery technology from sludge biogas utilisation in the City.

Implementation of the Project aims to provide environmental benefits and improve social conditions in the project area of influence. In particular, the following positive effects are envisaged:

  • More reliable waste water disposal services and more efficient waste water treatment;
  • Improved quality of life across the Project area;
  • Significant reduction of impacts on local communities and environment, including air, soil and ground water, River Svisloch and its ecosystems (and subsequently the Dnieper River and the Black Sea basin) as well as minimization of odour emissions;
  • Reduction of risks to community health and safety related to the wastewater plant operations, enhanced safety of the Company's operational sites;
  • More efficient use of natural resources due to a reduction of water losses and enhanced energy saving performance of the processes, utilization of energy content of the wastes;
  • Improved working conditions and enhanced OHS performance at the Company's facilities;
  • Employment generation at contractor companies for the period of construction;
  • Procurement opportunities generated for national and local businesses during project implementation;
  • Reduction of greenhouse gas emissions in the long run.

The Project will facilitate the advancement of tariff reform and improvement of the Company's corporate governance and capacity. The Project also aims to introduce better contractual arrangements between the Company and the City.

Transition Impact

The expected transition impact objectives of the Project are:

  • significant contribution towards reduction of environmental pollution;
  • improved resource efficiency;
  • advancement of tariff reform;
  • improvements in social standards;
  • capacity building of the largest water and wastewater company in Belarus;
  • improvement in corporate governance and business conduct standards.

Client Information

MINSK VODOKANAL

Unitary Enterprise "Minskvodokanal" is a municipal company wholly owned by the Minsk City Executive Committee. The Company with a history of 140 years is the largest water company in Belarus and provides water and wastewater services to around 2 million residents of the City and adjacent areas.

EBRD Finance Summary

EUR 84,000,000.00

A sovereign loan of up to EUR 84 million to the Republic of Belarus on-lent to the Company.

Total Project Cost

EUR 168,000,000.00

The total project cost (excluding technical cooperation) is estimated at EUR 168 million.

Environmental and Social Summary

Categorised A (ESP 2014). The Project involves the reconstruction of the Minsk wastewater treatment plant ("WWTP") through overall increase by 205,000 population equivalent (P.E.) to reach 2,200,000 P.E. design capacity, construction of sludge treatment facilities (including digestion, dewatering, drying and incineration) with the capacity of the incinerator under 100 t/d. The project will result in a number of environmental and social ("E&S") benefits, including: eliminating odour, enhancing wastewater treatment efficiency to meet national and EU requirements, providing an EU-compliant solution for sludge management and disposal in line with EU Best Available Techniques, reducing environmental harm and public health risks from the current unsustainable sludge transportation and disposal off-site in the open lagoons. The Project is expected to substantially contribute to the reduction of pollution in the river Svisloch, and subsequently Dnieper River and the Black Sea basin. The Project will also achieve an estimated Green House Gas emissions reduction of 132,200 tCO2e per annum (over 82%) from improved energy efficiency and avoided emissions from abandoning the use of the open sludge lagoons, including in particular significant reduction of methane emissions by 445 t/year.

In April 2016, the Project received a positive conclusion of the State Ecological Expertise ("SEE"), with a number of requirements to be included in design of the project, which have been included into the project Environmental & Social Action Plan ("ESAP"). The Bank's environmental and social due diligence ("ESDD") included an initial scoping site visit by the Bank, a gap analysis of the national Environmental Impact Assessment/OVOS and other available documentation from Minskvodokanal against the Bank's Performance Requirements ("PRs"), preparation of supplementary studies and the Environmental & Social Impact Assessment ("ESIA") disclosure package by an independent Consultant, the disclosure of the ESIA documentation for public review and comment on 16 April 2018 and consultations with the stakeholders. The ESIA disclosure package includes (i) national Environmental Impact Assessment/OVOS, (ii) Supplementary ESIA including Social Impact Assessment; (iii) Non-Technical Summary, (iv) Stakeholder Engagement Plan ("SEP"), and (v) Environmental and Social Action Plan. All documents have been disclosed in English and Russian on the Client's website and on the Bank's website. The Supplementary ESIA studies include a Social and socio-economic impact assessment in the Project area and region, analysis of alternatives, noise assessment, air dispersion modelling, sludge and ash management options, biodiversity and climate change impact assessment, as well as assessment of the cumulative impacts. The comparison analysis of four different alternatives for sludge management and disposal concluded that the proposed solution combining biogas facilities and incineration route will provide the optimal solution. Stakeholder engagement activities are ongoing, and public hearings on the ESIA package took place in May 2018. No significant concerns were raised during the public consultation meetings held, and all questions were answered.

The project implementation and construction of the proposed facilities will take place within the boundaries of the existing Minsk WWTP, not requiring any additional land acquisition, involuntary resettlement and/or economic displacement of the local communities. For the same reason, no significant adverse biodiversity impacts or impacts on sensitive environmental or cultural areas are expected. Tariff affordability analysis showed that no significant affordability concerns are expected from the project, as water and wastewater services are expected to remain affordable, including for the lower decile households. Operational sites of the WWTP are situated near Shabany industrial area, and the closest settlements are at the distance of 700-1,000 m. The project will enable over 90% odour reduction, which will provide adequate living environment for local communities and prevent odour nuisances. 4 houses remain in the vicinity of WWTP sites, including three houses in the existing sanitary protection zone ("SPZ") of the treatment plant with 7 people living in them. Adequate engagement and consultations with these affected residents have been conducted in line with PR10, and they do not wish to move. ESDD has carefully reviewed and concluded that there will be no worsening of the environmental or health situation for these several houses within SPZ area from the proposed project, and instead there will be substantial improvement from the reduced noise and elimination of odours. Air dispersion modelling results indicate that the resultant estimated pollution concentrations will still remain within the permissible limits within 500 m from the boundary of WWTP site.

Minskvodokanal is a well-managed enterprise with adequate E&S capacity to implement the project in line with EBRD PRs. PR2 due diligence has not identified any major non-compliances on the Company's part. Minskvodokanal employs 3,130 people with 1/3 of them women. The Company has a collective bargaining agreement in place and an active Trade Union organisation, and the workers are free to join the organisation of their choosing. The Company carries out own maintenance and repairs without recourse to external contractors, hence its staffing is higher than the typical standard for municipal water companies in the EBRD region. Any future optimisation of staffing, should it be required, will need to include preparation of an adequate Retrenchment Plan in line with PR2.

ESDD also reviewed options for ash management and disposal, as sludge incineration will result in estimated 9,855 t/year (27t/d) of ash. According to the preliminary assessment of the quality and pollutant composition of the sludge, it is anticipated that it will be acceptable to use the resulting ash as part of the road surfacing materials in road construction, or alternatively be disposed of in an EU-compliant way at the Trostenets landfill near Minsk. This will need to be verified and a specific ash management plan will then be prepared at the detailed design stage.

The Project is structured to comply with the Bank's PRs, including relevant national and EU environmental requirements. An ESAP has been prepared to address the findings of the ESDD and improve E&S performance and risk management. The core ESAP requirements include: (i) enhancing and updating Company's Environmental Management System in line with ISO 14001 and Occupational Health and Safety Management System in line with ISO 45001; (ii) preparation of design documents for the updated project scope based on the recommendations of the 2016 SEE and outcomes of the international ESIA process, and obtaining the necessary environmental and construction permits; (iii) enhancing human resources practices on equal opportunity and non-discrimination, with particular attention to any retrenchment planning in line with PR2; (iv) preparation and implementation of the Construction E&S Management and Monitoring Plan; (v) ensure adequate contractor management and tender preparation to include key E&S requirements in line with the ESAP; (vi) preparation of the strategic Sludge Management Plan covering decommissioning of the existing off-site Volma sludge lagoons; (vii) Ash Management Plan; (viii) regularly updating the SEP. The Company will also need to develop and implement a robust E&S monitoring plan during project implementation. ESAP will be attached to the legal agreements with the Company.

The Project will benefit from substantial post-signing Technical Cooperation assistance to support the implementation of the ESAP and SEP, including through Project Implementation Unit support, Corporate Development Programme and Social Support Programme, as well as Construction Supervision and Lender's Monitor. The Client will be required to provide the Bank with annual E&S reports. The Bank will monitor the Project's performance and compliance with the ESAP, regulatory requirements and the EBRD's PRs by reviewing these reports and site visits, as required.

There is an Environmental and Social Impact Assessment available for this project.

Technical Cooperation

The following Technical Co-operation assignments are envisaged as part of the Project:

Pre-Signing

  • Technical Due Diligence
  • Environmental & Social Impact Assessment
  • Audit and restatement of financial accounts

Post-Signing

  • Project Implementation Support will support the Company in all aspects of project implementation, including preparation of preliminary design, technical specifications, tender documentation, assistance with tendering, tender evaluation and contract finalisation, set up of the disbursement system, and assistance with reporting to the Bank.

  • Corporate Development Programme and Social Support Programme will support: (i) the development of the Corporate Development Plan which includes improvements in the Company's operational efficiency, reporting practices, and financial management; (ii) implementation of the Environmental & Social Action Plan and set up of the relevant reporting process; (iii) preparation and signing of the Public Service Contract between the City and the Company; and (iv) implementation of the Social Support Programme, including the Stakeholder Engagement Plan.

  • Lender's Monitor will assist the EBRD and its co-financing partner in monitoring implementation to ensure that the investments are implemented on time and within budget, and in accordance with all legal agreements.

  • Construction Supervision to provide Project Engineer under FIDIC "design and build" contract terms and respective project ESAP requirements, and assist the Company with construction supervision.

Company Contact

Zaitseva Olga Mihailovna
info@minskvodokanal.by

+375 17 327 64 02
+375 17 389 42 61

https://minskvodokanal.by/

Pulikhova Street 15, Minsk, Belarus 220088

 

 

 

 

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