GrCF2 W2 - Skopje Wastewater Project

Location:

North Macedonia

Project number:

50376

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

A

Approval date:

27 Nov 2019

Status:

Signed

PSD disclosed:

03 Jun 2019

Translated version of this PSD: Macedonian

Project Description

The project aims to introduce first time wastewater treatment services for the majority of population of Skopje through the construction of a large-scale Wastewater Treatment Plant ("WWTP").

For this purpose EBRD envisages the provision of a sovereign loan of up to EUR 60 million to the Republic of North Macedonia ("North Macedonia"), co-financed by a EUR 60 million sovereign loan from the European Investment Bank ("EIB") for the construction of a WWTP in Skopje (the "Project").

Additional grant funding for the Project is also being considered.

The sovereign loan will be extended to the Ministry of Finance. Other key entities in the Project include: (i) JP Vodovod i Kanalizacija Skopje ("Vodovod", the "Company") as the final beneficiary of the investment; (ii) City of Skopje (the "City"), the owner of Vodovod; and (iii) the Ministry of Environment and Physical Planning, given the Project's environmental importance.

The Project is complemented by a Technical Cooperation ("TC") package that will support Vodovod in its goal to improve its operational and financial performance and build the necessary institutional and technical capacity to implement a large scale investment and successfully start its activity in the wastewater treatment sector.

Furthermore, the Project will be the second investment in Skopje under the Green Cities Framework ("GrCF") which is established to provide loans to governments, municipalities, municipal owned and private companies providing municipal services. The over-arching aim of the GrCF is to serve as a sector-wide catalyst for addressing environmental challenges at the Municipal/City level. This is underpinned through the implementation of a Green Cities Action Plan ("GCAP"), which is a strategic document whereby environmental challenges are benchmarked, priority areas for environmental improvements identified, environmental objectives defined and indicative investments determined.

Project Objectives

The Project will introduce for the first time wastewater treatment services for the majority of the 560,000 residents of the capital city of Skopje, helping to reduce environmental pollution in the Vardar River and the surrounding areas, linked to the current lack of wastewater treatment. As such, the Project is of unique national, regional and environmental importance for North Macedonia.

Moreover, the Project is a 'follow-on' investment under the GrCF in Skopje and as such will provide broader support for tackling the critical environmental issues faced by this City.

Transition Impact

Strong Good

The Bank's involvement in the Project carries transition impact potential both in terms of its environmental benefits as well as though enhancing the Company's governance through the associated Technical Cooperation. The implementation of the GCAP will also build capacity for improved governance at the City level.

Client Information

NORTH MACEDONIA SOVEREIGN

EBRD Finance Summary

EUR 60,000,000.00

Total Project Cost

EUR 120,000,000.00

Environmental and Social Summary

Categorised A (2014 ESP). As the Project involves the construction of a greenfield wastewater treatment plant with a capacity exceeding 150,000 population equivalent, a comprehensive Environmental and Social Impact Assessment ("ESIA") was required. An ESIA was developed to meet national regulatory requirements. EBRD retained a consultant to review this ESIA and develop a Supplementary Information Package as well as a Non-Technical Summary (NTS) and Stakeholder Engagement Plan ("SEP"). These documents along with an Environmental and Social Action Plan ("ESAP") were disclosed on EBRD's website for 120 days.

As part of the disclosure process, a public meeting was organised on 5 February 2019, which was attended by around 40 people. Representatives of the Ministry of Environment and Physical planning, the ESIA consultants and lenders' environmental and social consultants presented details of the Project. No substantive questions or comments have been received at the meeting or to date during the disclosure period.

The Project involves the construction of a new Wastewater Treatment Plant for Skopje to be situated in the south-east part of the Skopje Valley, within the Municipality of Gazi Baba. This Municipality is located in the eastern part of the City. The Vardar River is located south from the site, flowing in west to east direction. The current state of the site is modified and semi-modified due to agricultural activities. There is a nationally protected area "Ostrovo" located to the east of the site

The Project has two phases. Wastewater treatment will consist of pre-treatment and biological treatment units that will be constructed in the first phase up to 2030. The upgrade of biological treatment to include removal of nitrogen and phosphorus will be constructed in the second phase of the Project (up to 2045). The treated effluent will be discharged into the Vardar River. The design capacity of the WWTP is 625,000 PE in 2030, and 650,000 PE in 2045. The wastewater to the WWTP will be transported through two wastewater collectors on the left and right bank of the Vardar River, which are being financed by the EU and the Government of the Republic of North Macedonia.

Completion of the Project will end the current practice of discharging untreated sewage into the Vardar River. Expansion of the sewage collector and installation of a comprehensive system for wastewater treatment in the City of Skopje will lead to improvements in the environmental and health situation of the population of the City and downstream areas. More than 500,000 residents of the City (almost 1/3 of the entire population of North Macedonia) will benefit from improved wastewater management, as will residents of the downstream settlements of North Macedonia and Greece up to the Aegean Sea.

The WWTP requires the acquisition of land over an area of up 13ha. 22 land-plots are affected including, 21 of which are state-owned and 1 which is a private land-plot used for agricultural purposes. The private land-plot will be acquired through a negotiated settlement at full replacement cost. There is no physical displacement associated with this Project and no Land Acquisition Plan has been developed. The nearest settlement is located at 400m from the planned location of the WWTP.

Risks and impacts identified during the construction phase include potential disturbance to land and habitats and the need to ensure adequate environmental and safety standards for contractors. During the operation of the Project there will be emissions from generators, sludge digestion and incineration, some increased noise and visual impacts from the new facility.  The Project is designed to meet applicable EU standards and North Macedonian legal requirements. An Environmental and Social Action Plan has been agreed with the Public Enterprise that requires, amongst other things, the implementation of an Environmental and Social Management System and the adoption of Environmental and Social Management Plans for the construction and operation phases. There will be 50m buffer zone around the Ostrovo area and measures to protect biodiversity in the vicinity of the Project. Implementation for the ESAP will enable the Project to comply with applicable EBRD Performance Requirements. EBRD will monitor the environmental and social aspects of the Project through annual monitoring reports from the client and site visits if required.

Technical Cooperation

Technical Cooperation for this operation will be provided to assist with: (i) Environmental and Social Gap Analysis, financed by the Municipal and Environmental Infrastructure ("MEI") Team budget, as well as (ii) Flow measurement and geotechnical studies, funded by Instrument for Pre-Accession Assistance ("IPA"), (iii) assistance with project preparation, funded by the Western Balkans Investment Framework ("WBIF") Infrastructure Project Facility, and (iv) preparation of the Financial and Operational Improvement Programme for the Company - to be financed by the SSF or an international donor.

Company Contact Information

Lindita Sakiri
lindita.atanasova@vodovod-skopje.com.mk
+ 389 2 3240320
www.vodovod-skopje.com.mk
JP Vodovod I Kanalizacija Lazar Lichenoski 9, Skopje 1000

 

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