Lida Wastewater Subproject

Location:

Belarus

Project number:

47427

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Target board date:

16 Dec 2015

Status:

Signed

PSD disclosed:

30 Jun 2015

Translated version of this PSD: Russian

Project description and objectives

Assisting the city of Lida in reconstruction and modernisation of the wastewater treatment facilities.

A sovereign loan of € 21 million, of which up to € 6 million will be allocated for the benefit of Unitary Enterprise Lida GUP JKH, a municipally owned company that provides water, wastewater, district heating and other socially important services in the city of Lida.

The Loan will finance a Priority Investment Programme (the “PIP”) aimed at reconstruction and modernisation of the wastewater treatment facilities (the “Project”) to ensure compliance with the national and the EU standards and HELCOM recommendations for effluent quality treatment.

Transition impact

Framework for Markets: In line with the objectives of the earlier engagement in the water sector, the current framework including this project will aim to introduce tariff reforms for the participating utilities.

Demonstration of Successful Restructuring: due diligence will identify restructuring measures that will be implemented as part of the Corporate Development Programme.

Setting Standards of Corporate Governance and Business Conduct: the Company will improve its disclosure standards, including publication on the website of annual IFRS financials, investment summary and performance against KPIs set in the PSC.

The expected transition impact rating is ‘good'.

The client

Sovereign loan to the Republic of Belarus with on-lending to Unitary Enterprise Lida GUP JKH, a municipally owned company that provides water, wastewater, district heating and other socially important services in the city of Lida located in the Grodno Oblast of Belarus with a population of 98,000 people.

EBRD finance

A sovereign loan of € 21 million, of which up to € 6 million will be allocated for the benefit of Unitary Enterprise Lida GUP JKH. The project will be co-financed with a grant from an international donor in the amount of up to € 3 million. Grant funds are proposed to be sought from the Northern Dimension Environmental Partnership (“NDEP”) as Lida falls into the Baltic Sea catchment area.

Total project cost

€ 10.23 million.

Environmental and social categorisation, impact, and mitigation

The Project has been categorised B under the 2014 Environmental and Social Policy. An Environmental and Social Due Diligence (“ESDD”), including an assessment of the proposed priority investment programmes and an audit/review of the existing facilities, operations and management practices of the Company, including a gender assessment, have been carried out as part of the feasibility study by independent consultants. The studies concluded that the implementation of the proposed priority investment programmes will bring wastewater discharges into compliance with HELCOM recommendations, and that this will result in substantial environmental and public health benefits and reduce pollution entering into the Baltic Sea. Any adverse environmental and social impacts are limited to construction works and will be localised, short-term and prevented or mitigated by adhering to good construction practice. 

The current wastewater treatment is not in compliance with the national or EU requirements and represents an old-fashioned technology with no provisions for nutrient removal. The capacity of the existing wastewater treatment plant is not sufficient for the current volumes of and the pollution load variations in the incoming wastewater, which is mainly caused by lack of preliminary treatment or equalization capacity at local industrial enterprises. The existing sludge management practices are elementary with the utilisation of the sludge dewatering beds and drying ponds in the area of the wastewater treatment plant. The sludge cannot currently be used in agriculture due to its high heavy metals content. Drinking water supply operations are not part of the Project; however, the ESDD has confirmed that drinking water quality in the City of Lida generally meets the applicable national and EU requirements.

PIP will improve biological treatment at the existing wastewater treatment plant and introduce nutrient removal, bringing effluent phosphorus (P) and nitrogen (N) levels into compliance with EU standards and HELCOM recommendations. BOD5 will be reduced by 25 per cent (57 t/a), total N reduced by 36 per cent (120 t/a) and total P load reduced by 85 per cent (31 t/a).  The national requirements for effluent quality will be reached except for the total N, due to the requirement that each individual sample throughout the year‎ complies with the 15 mg/l threshold. This can be achieved by constructing additional aeration and sedimentation facilities, which will require an additional investment of EUR 2.7 million and will be implemented in phases as part of the Company’s long-term investment programme. This is estimated to result in an additional N reduction of 10 t/a on top of the reduction of 120 t/a achieved with the compliance with HELCOM recommendation. ESDD confirmed that the phased implementation of this further N reduction will not pose significant risk to public health or the environment.

The PIP will also improve sludge management practices and the Environmental and Social Action Plan (ESAP) includes a requirement for the Company to prepare a sludge management and disposal plan in compliance with the EU requirements for sewage sludge.

The ESDD identified that the Company’s capacity to manage E&S issues is limited, although the Company has adequate HR policies and procedures, and an Occupational Health and Safety Assessment Series (“OHSAS”) 18001 certified occupational health and safety (OHS) management system with the respective procedures in place.  The site visits observed several OHS risks related to falls, trips, physical/mechanical obstacles and biochemical hazards as well as to work practices in excavation pits and confined spaces‎. The ESAP requires the OHS management practices to be further enhanced and specific OHS provisions to be introduced in tender documentation for contractors.

The ESAP also requires the Company to develop further their environmental management system; obtain all required environmental permits for the project under Belarusian regulatory requirements; carry out a study to analyse the impacts of industrial wastewater load to the wastewater treatment plant and develop a plan for reducing these impacts and mitigating the variations in industrial discharges; develop safe asbestos handling and disposal procedures for reconstruction works; improve stakeholder engagement and grievance mechanism as well as ensure adequate communication with consumers in respect of the tariff increases.

The Bank will monitor the project’s environmental and social performance and compliance with EBRD PRs by reviewing annual reports prepared by the Company on environmental and social matters, and implementation of the ESAP. The TC funded PIU Support and CDP consultants will also monitor day-to-day E&S performance and issues, provide the necessary capacity building support and provide assistance in the implementation of the ESAP.

Technical cooperation

Pre-Signing

  • TC 1: Project due diligence to include: (i) a technical review of the proposed operations to improve the water and wastewater services in the City, demand, revenue and operational cost projections; (ii) preparation of technical and functional specifications of the PIP components; (iii) financial and economic analysis of the proposed investments, including cost estimates and the preparation of the financial model; and (iv) environmental and social assessment in line with EBRD’s 2014 E&S Policy and Performance Requirements; and a legal due diligence on the envisaged project structure.  € 250,000, funded by the Government of Sweden.
     
  • TC 2: Audit and restatement of the Company’s accounts in accordance with IFRS.  € 29,600, funded by the Bank’s own resources.

Post-Signing

  • TC 3: Project Implementation Support. The TC will support the PIU with procurement, preparation and evaluation of tenders, contract award and administration, financial control, project management and reporting including assistance to the Company in implementation of ESAP and preparation of annual E&S reporting.  The estimated cost of the assignment is € 600,000, proposed to funded by an international donor or the EBRD Shareholder Special Fund (“SSF”).
     
  • TC 4: Corporate Development Programme. The TC will (i) support institutional development in the form of operational improvements and financial improvements and (ii) implement a Social Support Programme. The estimated cost of the assignment is € 300,000, proposed to be funded by an international donor or the SSF.


 

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