Kyzylorda Water

Translated version of this PSD: Russian

Project Description

The EBRD is considering providing a loan up to USD 10 million to the State Communal Enterprise Kyzylorda Su Zhuyesi (the “Company”), a water supply and wastewater management company in the city of Kyzylorda (the ”City”) in Kazakhstan to support the rehabilitation and upgrade of the water and wastewater system in the City.

The loan will allow to replace and modernise parts of the obsolete water supply and wastewater management infrastructure operated by the Company. This will reduce energy consumption and water losses, increase reliability and quality of provided water services, reduce maintenance and operating costs, as well as reduce the negative environmental impact.

Transition Impact

This project would deliver:

(i) Energy efficiency improvements in the operations of the Company through the modernisation of the water supply and wastewater management facilities;

(ii) Introduction of commercial water tariffs covering the full costs of service for all customer groups as part of the priority investment programme (“PIP”) agreed with the tariff regulator and the commercialisation of the Company by means of introduction of a public service contract with the City Akimat and business planning;

(iii) Contribution to modern water management business practices through the demonstration of new replicable products and processes to operate water sector utilities in Kazakhstan, including introduction of the Management Contract with the private operator;

(iv) Higher environmental standards.

Additionally, the transaction aims to increase transparency and improve business standards through the introduction of International Financial Reporting Standards (“IFRS”) and the implementation of an Environmental and Social Action Plan (“ESAP”).

The Client

State Communal Enterprise Kyzylorda Su Zhuyesi, a municipally owned water and wastewater company in the city of Kyzylorda, Kazakhstan.

EBRD Finance

A senior loan to the Company in the amount of up to USD 10 million (EUR 7.6 million equivalent).

Project Cost

USD 16.8 million (EUR 12 million equivalent) including related technical cooperation to support the Company with the project preparation and implementation.

Environmental Impact

Categorised B. The Project will provide substantial environmental and health benefits for the Company by bringing its water and wastewater systems into compliance with relevant EU standards. The Project will also improve the energy efficiency of the Company’s facilities as well as reduce its water losses.

Future adverse environmental and social impact of modernising and rehabilitating water and wastewater systems are likely to be site-specific and readily identified and addressed through adequate mitigation measures.

The Environmental and Social Due Diligence (“ESDD”) is currently underway including

(i) an analysis of the proposed components of the Project;
(ii) a review of the Company’s current operational activities and facilities, and its environmental compliance records; and
(iii) the Company’s corporate management systems and capacity to implement the Project in accordance with the Bank’s Performance Requirements.

The ESDD is also assessing labour and community Environmental Health and Safety (“EHS”) issues, the suitability of the proposed locations for any possible expansion in the water and/or wastewater networks in terms of sensitive historical areas; and potential or temporary disturbances for people during the construction phase of the Project.

Based on the findings of the due diligence an ESAP will be prepared and agreed with the Company to address identified risks and associated mitigation measures that shall be implemented by the Company. A Stakeholder Engagement Plan (“SEP”) will be also developed to identify the Company’s key stakeholders and outline the way in which the Company will disclose and consult with its stakeholders through the project planning and implementation. A Non-Technical Summary (“NTS”) will also be released to the public to inform about of

(i) the Project components and operational activities;
(ii) environmental and social benefits;
(iii) ESAP including associated risks and mitigation measures; and
(iv) Stakeholder Engagement Plan (“SEP”). PSD will be further updated upon the completion of the ESDD.

Implementation Summary

The project was intended to modernise the water and wastewater infrastructure in Kyzylorda. The EBRD financing was reduced from USD 10 million to USD 1.1 million by a decision of the borrower following the deterioration of its financial situation as it was unable to increase tariffs to a full cost recovery level. The following components were implemented under the revised investment programme: the installation of a hydraulic model, including an electronic water and wastewater map and updated laboratory equipment. It helped the company resolve a few specific issues associated with technical modernisation to  achieve a sustainable water supply. The project resulted in: (i) the increase in water supply reliability and safety; (ii) the improvement of drinking water quality; and (iii) the upgrade of the company’s laboratory equipment.

The project, with Technical Cooperation financed by the Government of Kazakhstan, supported the improvement of the company’s operational and environmental performance. It meets the minimal requirements for drinking water supplied to the population and is reporting on its environmental and social performance. While the company has made some progress in implementing relevant measures under the Environmental and Social Action Plan (the “ESAP”), limited progress was made with regards to the improvement of standards for water supply and wastewater treatment. This was due to the significant reduction of the originally approved investment programme. Water and wastewater infrastructure in Kyzylorda will need further improvement. This may be achieved through future investment from other financing sources.

Technical Cooperation

Pre-Signing

• TC 1: Project due diligence including the water supply and wastewater PIP and the development of a comprehensive ESAP (EUR 295,000, funded by the EU’s Framework for Technical Assistance in Kazakhstan);

Post-Signing

• TC 2: Project Implementation Support including assistance with procurement of goods and services under the PIP and implementation of the ESAP. The estimated cost of the assignment is up to EUR 500,000, to be financed by an international donor;
• TC 3: Corporate Development Programme to support operational and financial improvements of the Company, including introduction of a Management Contract between the City Akimat and the private operator. The estimated cost of the assignment is up to EUR 500,000, to be financed by an international donor.

 

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