Kafr El Sheikh Wastewater Expansion Programme

Location:

Egypt

Project number:

45245

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Target board date:

10 Dec 2014

Status:

Disbursing

PSD disclosed:

21 Jul 2014

Translated version of this PSD: Arabic

Project Description

The Bank is considering sovereign co-financing alongside EIB for the Wastewater Expansion Programme in the governorate of Kafr El-Sheikh (“KES”) in Egypt, which entails (i) the construction of 2 new WWTPs; (ii) the expansion of 3 existing WWTPs; and (iii) the laying of about 700 km of pipes with the installation of their 52 pump stations (“project”).

The project will address urgent socio-economic needs of the Egyptian people and lead to the improvement in health and related economic opportunities in three rural districts (Motobas, Desouk, Burullus) of the KES governorate, where 24 per cent of households have one or more members affected by water-related health issues, which generates substantial economic burdens. Improvements will be achieved by providing first time sanitation to 470,000 residents, raising sanitation coverage from 26 per cent to 39 per cent in KES. The project will also help alleviate contamination in Lake Burullus, Egypt’s main fishing lake, and one of the main sources of income for the residents of the area.

Transition Impact

Contribution to market framework through a public service contract (“PSC”) which aims at formalising the independent status of the water company in KES. The PSC will also define obligations and rights, will establish performance and regulations, providing for accountability and clear definition of roles.

Contribution to market expansion will occur as a result of the wastewater services expansion. The company will provide wastewater services to 470,000 new customers and increase the wastewater service area and its revenue base.

Contribution to demonstration effect is raised through offering a Design Build Operate (“DBO”) contract to the private sector for the project alongside a Corporate Development Technical Assistance to optimise staff allocation, reduce costs and enhance corporate revenues. Newly introduced IFRS reporting will enhance corporate governance measures reflecting increased transparency.

Contribution to economic inclusion will be achieved through the improvement of health and related economic opportunities for 470,000 new, often low income, individuals in the KES region. The target area is characterised by the highest percentage of bacterial contamination of waters (52 per cent) compared to any other governorate in Egypt. This is due to a lack of adequate wastewater management systems, which leads to health and related economic problems for the local population. This will be achieved by decreasing the incidents of water borne diseases in households within the target area from 19 to 14 per cent and thereby substantially reducing related costs and time losses for economically productive activities. The systemic impact stems from the scale of impact in the target communities and will be supported through the capacity building of local community groups and civil society groups to increase their awareness of safe water management practices.

The Client

Kafr El Sheikh Water and Sanitation Company (“KWSC”) was incorporated in 2004 as part of the sector reform in Egypt and is an affiliate of the national Holding Company for Water and Wastewater (“HCWW”). It is the sole provider of piped drinking water and wastewater services in the KES governorate serving an area of approximately 3,500 km2 with a total population of around 3 million.

EBRD Finance

Sovereign loan of up to €55 million to the government of Egypt, to be co-financed with an EIB sovereign loan of €77 million and a NIF investment grant of €10.4 million.

Project Cost

€164.1 million.

Environmental Impact

Categorised B.

The project is expected to result in significant community health and environmental benefits by providing first time wastewater collection and treatment services to rural communities in the Motobas, Desouk and Burullus districts in the KES Governorate. Wastewater in these districts, treated or not, is either discharged into cess pits or into open canals, which eventually flow into Lake Burullus, a Ramsar site and Important Bird Area and one of Egypt’s main fishing lakes, or into the Mediterranean Sea. Lake Burullus is heavily polluted and any improvement in wastewater collection and treatment will significantly improve the environmental conditions, with the associated improvements in public well-being and health, in and around the Lake and the canals that flow into it.

The project may be associated with some potentially adverse environmental and social impacts, particularly during construction, although independent due diligence has confirmed that these impacts will be site-specific, readily identifiable and addressed through appropriate mitigation and management measures. The project does not involve the extension of an existing WWTP or the construction of a new WWTP with a capacity of 150,000 p.e. or more and therefore is not considered a Category A project under the EBRD’s Environmental and Social Policy. The project will be developed in two phases. Phase one focuses on priority areas (two clusters) in the Motobas and Desouk districts while phase two focuses on the remaining six clusters.

Independent due diligence on the project included a review of existing environmental and social documentation including a feasibility study and two initial environmental and social impact assessments (ESIA) and associated management plans, a review of the capacity of KWSC to meet the EBRD’s Performance Requirements (PRs), an analysis of the potential impacts associated with the project; a site visit; and the development of a resettlement framework, Stakeholder Engagement Plan (SEP) and Environmental and Social Action Plan (ESAP).

A baseline survey of socio-economic conditions, in particular health issues has also been carried out to enable a better understanding of the relationship between water/sanitation conditions, disease and mortality characteristics and economic impacts, such as health care costs due to water related diseases and loss of economically active time (such as for employment, business or education). This survey will not only enable an assessment of the regional economic inclusion impact of the project but also help to develop mitigation measures and enable the monitoring of the effectiveness of the project.

ESIAs were undertaken for phase one of the project on behalf of the EIB during the feasibility stage. The ESIAs, which were developed in line with Egyptian and EU EIA requirements, have not been submitted to the Egyptian Environmental Affairs Agency (EEAA) as yet and will be subject to revision during detailed project design and prior to submission to the EEAA for permitting purposes. ESIAs will also be developed for the six remaining clusters.

The project will be implemented through a Project Implementation Unit (“PIU”) within KWSC. The PIU will be supported by a technical cooperation (TC) funded Implementation Consultant who will introduce and transfer the necessary capacities, capabilities and procedures to KWSC to successfully implement and operate the project in line with the PRs, implement the ESAP and assist in the appropriate mitigation and management of environmental, social and health and safety impacts and risks. This would include the management and monitoring of project contractors.

The project is designed to meet EU requirements for Urban Wastewater Treatment (91/271/EEC) as well as Egyptian standards, particularly with respect to the wastewater treatment technologies and the quality of treated wastewater. The project design is in line with current treatment techniques and infrastructure in Egypt.

The construction phase will involve a large number of contractor teams (mainly local contractors) laying pipelines and connecting lines to individual households in sometimes very narrow and irregular village streets. This is likely to result in impacts such as noise, dust, access restrictions, health and safety issues, utilities interruptions (power and drinking water) and issues related to worker presence. Different sections of the local population may be affected including woman and children. The management plans developed for the project and the ESAP include various measures to avoid and manage these impacts as well as those associated with waste management, emissions and the handling of hazardous substances.

The project is not expected to impact biodiversity although the project will reduce pollutant loads being discharged into surface water in the area, including Lake Burullus, and an overall improvement in baseline conditions is therefore expected. The project will develop a Habitat Restoration Programme and Habitat Survey and Management Study to ensure that any impacts on biodiversity and habitats are avoided or minimised.

The project has sought to avoid the need for land acquisition and resettlement of people through making use of existing servitudes, right of ways and Government land. Private land required for the project is generally agricultural land. In some cases the local communities have donated land to the project. As part of the ESDD, a resettlement framework has been developed to guide and ensure that land acquisition is undertaken in line with Egyptian requirements and PR5. The framework further stipulates that in areas where there is an impact on people through physical resettlement or economic displacement, then a full resettlement plan or series of plans will be developed.

Some consultation has been undertaken for the project during the feasibility study, through KWSC’s work in the project area and through the ESDD including the socio-economic survey. An appropriate stakeholder engagement plan has been developed for the project, which incorporates both local ESIA and stakeholder engagement requirements as well as those of PR10.

An ESAP has been developed for the project as part of the ESDD. This includes actions to be implemented during project planning, implementation and operation to ensure that the EBRD PRs are met and that impacts and risk are mitigated. The ESAP will be implemented by KWSC with support of the Implementation Consultant. Key ESAP actions include: update of the existing ESIAs; undertaking of new ESIAs for the remaining clusters; development and implementation of an environmental management system and associated capacities and procedures; development of various issue specific management plans including a health and safety plan and Habitat Restoration Programme and Habitat Survey and Management Study; development of Resettlement Action Plans (including livelihood restoration frameworks) and the implementation thereof if resettlement and economic displacement is unavoidable; development and implementation of a cultural heritage chance finds procedure; and implementation and continuous update of the Stakeholder Engagement Plan.

The project will provide the Bank with annual environmental and social reports, including updates on the implementation of the ESAP. The Bank will commission a completion audit and may also conduct monitoring visits, as required.

Technical Cooperation

Pre-signing:

  • Environmental and Social Due Diligence. €42,060, financed from the Bank’s budget.
  • Economic Inclusion Analysis. €29,290, financed by the SEMED Cooperation Funds Account.

Post-signing:

  • Preparation of a Tariff strategy, to include a conceptual approach to a targeted subsidy strategy for the water utilities sector in Egypt, which would form a basis for future policy dialogue by the Bank on tariff reform. The estimated cost of this assignment is €120,000, to be financed by an international bilateral donor, a multi-donor fund or the SEMED window of the Shareholder Special Fund (“SSF”).
  • Preparation of the Public Service Contract, to include a basic business plan and IFRS auditing. The public service contract will determine key performance benchmarks as well as a formula based methodology. The estimated cost of this assignment is €300,000, to be financed by an international bilateral donor, a multi-donor fund or the SEMED window of the SSF.
  • Awareness raising among local community groups and organisations regarding public health issues. To engage an international development consultancy (expert on community and public health issues) to conduct a series of capacity building workshops with local community groups and organisations in the districts of Desouq, Motobas and Burullus in the period of January 2016 - December 2017. The estimated cost of this assignment is €150,000, to be financed by a bilateral donor, a multi-donor fund or the SEMED window of the SSF.

Additional post-signing TCs financed by NIF and managed by EIB are:

  • Procurement Implementation Support to assist the PIU with project preparation and implementation including review of the technical requirements, procurement cycle, and contract management and administration as well assistance with compliance to loan requirements (disbursement, covenants and reporting) covering at least 5 tender contracts. €3.9 million.
  • Corporate Development Programme and Stakeholder Participation Programme, to include financial, managerial and operational performance improvement, including procurement of Management Information System, design and implementation of reporting standards and management training. €700,000.
 

Business opportunities

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