Kokshetau Water sub-project

Location:

Kazakhstan

Project number:

48413

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Target board date:

20 Jun 2017

Status:

Cancelled

PSD disclosed:

03 Apr 2018

Translated version of this PSD: Russian

Project Description

The Project will be complemented by a comprehensive TC package to support preparation and implementation of the Project, as well as corporate development support to the Company. The State Communal Enterprise "Kokshetau Su Arnasy", the municipal water and wastewater utility of the City, wholly owned by the City Akimat. The Project envisages a senior loan (the "Loan") to the Company of up to KZT 1.5 billion (EUR 4.3 million). Two co-financing grant contributions from the state budget under EPFA of up to KZT 1.5 billion (EUR 4.3 million) and Oblast Akimat in the amount of up to KZT 0.7 billion (EUR 2.0 million) are also envisaged.

Project Objectives

The proposed project is aimed to finance priority capital investments, including the modernisation of the Water Treatment Plant ("WTP") and rehabilitation of other infrastructure components with the majority of the investments directed towards improvement of the water quality and water supply security. The Project will result in higher service quality for customers, improved energy efficiency, more efficient water use, more cost efficient maintenance and improved environmental standards in the City of Kokshetau ("City"), Akmola Oblast.

Transition Impact

Good.

As a sub-project under the Framework, the proposed transaction adds further to practical implementation of the Framework's objectives and aims at the following: (i) the PSC will be developed and signed between the City Akimat and the Borrower; (ii) full cost recovery tariffs will be set for the Company starting from 2021; (iii)meter-based billing will be launched for at least 95 per cent of population in 2022; (iv) collection rates will be maintained at least 95 per cent starting from 2018; (v)The Financial And Operational Performance Improvement Programme (FOPIP) and Management Information Systems (MIS) will be introduced.

Client Information

WATER AND SEWAGE COMPANY OF THE CITY OF KOKSHETAU

The State Communal Enterprise "Kokshetau Su Arnasy", the municipal water and wastewater utility of the City, established in the 1960s, is mainly involved in: (i) water supply to 55,100 and 2,200 state and legal entities, and (ii) collection and treatment of wastewater services. The Company supplies circa 6.4 million m3 of potable water annually, 70 per cent to the population and 30 per cent to legal entities, and treats 4.6 million m3/cubic metres of wastewater.

EBRD Finance Summary

A senior loan (the "Loan") to the Company of up to KZT 1.5 billion (EUR 4.3 million).

Total Project Cost

KZT 3.9 billion (EUR 10.6 million).

Environmental and Social Summary

Categorised B (2014 ESP). The implementation of the PIP involving rehabilitation and modernisation of the existing water and wastewater infrastructure is expected to result in significant environmental and social benefits. The risks and impacts are mainly associated with the reconstruction activities, which will be mitigated by good construction practice. The reconstruction of obsolete and largely depreciated water supply infrastructure will have mainly positive long-term social and environmental impacts by improving drinking water quality and reducing water losses. It will provide the City with a sound and reliable water production facility, which will meet the needs of the population for the coming decades.

The Environmental and Social Due Diligence ("ESDD") has been carried out as part of the Feasibility Study by independent consultants and involved an Environmental and Social Audit of the Company's current Environmental and Social ("E&S") management practices, operations and facilities, and an Environmental and Social Analysis of the proposed PIP, as well as a gender assessment. As the Project envisages improvements in the WTP and WWTP facilities, the ESDD assessed compliance of the drinking water and effluent quality with European Union requirements.

The PIP includes priority measures for the reconstruction of the WTP, rehabilitation of the water network sections, new laboratory equipment, modernisation of water pumping stations, replacement of water pipes, flow metering equipment and refurbishing of the aeration system at the existing WWTP. Through the implementation of the PIP, the reliability of the water supply services will be significantly improved and water losses will be reduced (savings of 1.2 million ms/year). Seasonal water quality problems (colour, hardness and iron parameters do not currently comply with applicable Kazakh and EU requirement) will be addressed by improvements of water treatment facilities to fully meet both standards of drinking water quality. The energy consumption of the system will be decreased (savings of 2.5 MWh/year). Provision of laboratory equipment and facilities will enable better monitoring and control of the water quality. Exposure to waterborne diseases will be significantly reduced by improved and better controlled water quality and improved sanitation.

Although the PIP will improve the WTP's overall treatment efficiency , it will not improve the WWTP's treatment efficiency . Wastewater discharge quality currently do not meet both local requirements and international standards on nitrogen and phosphorus, which may create eutrophication issues for the receiving body. In order to achieve compliance with national and EU requirements, long term investments of around KZT 1.15 billion (EUR 3.2 million) will be required for large-scale reconstruction of the WWTP facility.

Further expansion of and improvements to the water supply system, expansion of the wastewater infrastructure and construction of a new WWTP will be included in the long term investment programme. At this time financing for the LTIP from the Company's own revenues cannot be confirmed and no potential sources of external funding have been identified. The blanket derogation from EBRD's Environmental and Social Policy for all sub-projects under the Framework was approved by the Board of Directors on May 27, 2015.

The human health implications of the shortfalls from EU standards are assessed to be minor relative to the benefits of implementing the PIP, and resulting reliable water supply for the local population. The ESAP commits the Company amongst others to developing an environmental, health and safety management system, E&S training sessions, provision of laboratory facilities for improvement of water and wastewater monitoring, hazardous materials handling, waste management, operational health and safety improvements, management and monitoring of contractors, asbestos handling and disposal, implementation of the Stakeholder Engagement Plan and improving human resources practices. A technical assistance programme will be developed to help the Company to build its
currently low corporate E&S capacity and implement the ESAP.

The Company's environmental and social performance and implementation of the ESAP will be monitored through annual E&S reports and site visits when deemed necessary. The Project completion review will also assess E&S compliance.

Technical Cooperation

Pre-signing

  • TC 1: Feasibility Study to develop the PIP for the rehabilitation and upgrade of the water and wastewater systems, including financial analysis of the Company, preparation of procurement and project implementation plans and the environmental and social action plan (ESAP). The assignment cost EUR 195,000 and was financed by the GoK under the terms of the Enhanced Partnership Framework Arrangement (EPFA).

Post-signing

  • TC 2: Project Implementation Support for management, design, procurement, engineering, supervision work, and staff training related to the Project, as well as assistance with implementation of the ESAP. This assignment is proposed for inclusion into the project implementation unit (PIU) Support Water/Wastewater Consultancy Framework. Under the Framework, the assignment's cost is estimated at up to EUR 360,000, proposed for financing by the GoK under the terms of the EPFA.
     
  • TC 3: Corporate Development Support Programme, including: i) the introduction of the PSC for the provision of water and wastewater services, ii) the implementation of the FOPIP to secure sustainable Company operations, iii) institutional capacity building, iv) development of a strategic plan for the Company, and v) implementation of a Stakeholder Participation Programme ("SPP") in the City. It is proposed that this assignment be included under the CDP Consultancy Framework, which covers a range of corporate development support envisaged for projects under EPFA. The assignment's cost is estimated at up to EUR 230,000, proposed for financing by the GoK under the terms of the EPFA.

Company Contact Information

Zeinur Ismailovich Albekov, Director GKP #Kokshetau Su Arnasy#
suarnasi@mail.ru
+7 (7162) 770078
Valikhanov street, 175 A, Kokshetau City, Akmola Oblast, 475006

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