Jalalabad Water Rehabilitation Project

Translated version of this PSD: Russian

Project Description

The EBRD is considering providing resources to establish a framework of up to €20 million to co-finance with international donors priority water and wastewater rehabilitation sub-projects across the Kyrgyz Republic. When established the framework will envisage sovereign loans for on-lending to the water companies involved as appropriate and would address urgently needed water and wastewater infrastructure rehabilitation needs.

The Jalalabad Water and Wastewater Rehabilitation Sub-Project will consist of a €3 million sovereign loan. The proceeds of the loan would be on-lent to the water company. The sub-project, which will be co-financed by SECO, will address urgently needed water and wastewater infrastructure rehabilitation needs.

Transition Impact

Transition Impact of the sub-project would be:

• Improved access to basic public utilities;
• Introduction of tariff reform within affordability limits including support to low income groups;
• Increased collection rates;
• Establishment of the contractual arrangement between the city and the company;
• Improved operational and financial management of the Jalalabad Water Supply company (including a community based shareholder participation programme, preparation and publication of IFRS and business plan, training on procurement, etc).

The Client

Government of the Kyrgyz Republic.

EBRD Finance

If agreed by the EBRD’s Board of Directors, the Bank will disburse a loan of €3 million to the Kyrgyz Republic which will be on-lent to the Jalalabad Water Company.

Project Cost

The total sub-project cost is €8.85 million including technical cooperation (TC) funds. The sub-project will be co-financed by SECO.

Environmental Impact

The Jalalabad Water and Wastewater Rehabilitation sub-project has been categorised B under the 2008 Environmental and Social Policy. An Environmental and Social Audit/Review of the Jalalabad Water Company’s current environment, health, safety and social (EHSS) management practices, operations and facilities, as well as an Environmental and Social Analysis of the proposed Priority Investment Programme (PIP) were carried out as part of the feasibility study by independent consultants.

The due diligence showed that the overall EHSS management capability of the Company is weak and the EHSS management systems are underdeveloped. The present occupational health and safety, as well as stakeholder engagement practices require further improvement to meet EBRD's Performance Requirements (PRs).

The Company’s facilities are currently in very poor operating condition resulting in unreliable and low quality water supply, high water losses and excessive energy consumption. Wastewater collection networks are incomplete and wastewater treatment is inefficient and in need of urgent rehabilitation.

The implementation of the PIP will lead to significant socio-environmental improvements. In particular, it is expected that implementation of essential improvements to the existing sewerage system and renovation of the WWTP will lead to significant improvements in treated wastewater quality, and minimize the risk of groundwater contamination.

The replacement of 50 km of obsolete pipe works in the water supply system will decrease the risk of waterborne diseases in the long-term, in addition, reducing operational costs. Impact during the construction period is limited in duration and extent, and can easily be mitigated by means of adequate measures undertaken with planning and accurate supervision.

The affordability analysis did not identify any concerns for the affordability of water and wastewater services. The two post-signing technical cooperation projects to be developed for Corporate Development and Stakeholder Participation Programme would help ensure that the low income levels and social conditions are taken into account when reforming water and wastewater tariffs. They would further address issues such as increased communication with customers about the quality of services, upkeep and repairs, payment of tariffs, the importance of paying in a timely fashion and public health issues.

As a result of comprehensive analysis of the needs for improvement of the water supply and sewerage water collection and wastewater treatment, the PIP proposed to use available funds to address most urgent and effective actions to improve the quality and safety of provided services. Although the project will have significant positive impacts on public health and environment, it will not be able to bring the Company into full EU compliance in the short term, mainly due to the fact that there will still be untreated wastewater. To minimise the associated health risks to the local communities, awareness raising programmes will be developed as part of mitigation plans and implemented to prevent risks of water borne diseases.

Additional long-term investments required for Jalalabad to achieve full compliance with EU water and wastewater requirements are substantial and beyond the Company’s current borrowing capacity. Therefore, due to affordability constraints and limited financial resources, the sub-project requires derogation from the EBRD’s Environmental and Social Policy.

An Environmental and Social Action Plan (ESAP) has been developed for the Jalalabad Water Company to bring it into compliance with national regulations and EBRD PRs, where financially feasible. The ESAP includes the necessary improvements in the Company’s EHSS management systems and capacity, improvements in water monitoring practices, cleaning procedures, formalising and developing better labour and OHS practices, fire safety and emergency response procedures, improving solid waste management practices, as well as managing potential construction EHS impacts. The associated TCs will also assist the Company in building its EHSS management capacity and implementing the ESAP.
The EBRD will monitor Jalalabad Water Company’s environmental and social performance and its implementation of the Project and the ESAP through annual E&S reports and site visits when deemed necessary. The project completion review will also assess whether the EHSS objectives are met.

Technical Cooperation

Pre-signing

Joint Feasibility Study for Osh and Jalalabad Water sub-projects: Preparation of a financial, technical, environmental feasibility study for the sub-projects, including an economic rate of return analysis of the proposed investment, operational review and recommendations for improvements, a brief municipal credit update, and an Environmental and Social Action Plan. (€600,000, funding provided by the EBRD Shareholders’ Special Fund).

Post Loan Signing

Sub-Project Implementation Support. International consultants to assist the sub-project implementation unit with engineering design, procurement, preparation and evaluation of tenders, contract award and administration, financial control, sub-project management and reporting. (€750,000 to be financed by SECO).

Corporate Development and Stakeholder Participation Programme to

(i) support institutional development in form of operational improvements and financial improvements to secure sustainability of the water utilities, and (ii) implement a Stakeholder Participation Programme. (€400,000 to be financed by the EBRD’s Water Fund).

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