Moldova - Water Utilities Development Programme

Location:

Moldova

Project number:

40267

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Approval date:

26 May 2010

Status:

Signed

PSD disclosed:

23 Feb 2011

Translated version of this PSD: Moldovian

Project Description

The EBRD is considering providing a sovereign loan of up to €10 million to support municipal utilities in most reform-minded municipalities. The programme comprises the regionalisation of water companies by expanding their operations into neighbouring localities and is structured as priority investments focusing on the water utilities from Floresti, Soroca, Hancesti, Orhei, Leova and Ceadar-Lunga, municipalities committed to adjust the tariffs and introduce cost recovery of their water companies to ensure financial viability. The programme also aims at strengthening these municipal utilities to ensure provision of adequate supply of drinking water and improve wastewater treatment systems.

Transition Impact

Transition impact will derive from the following aspects:

(i) the involved utilities will undergo a series of restructuring and cost cutting measures (for technical, operational and financial sustainability) while rehabilitating existing water supply and waste water facilities).

(ii) the regionalisation/expansion of service provision to the neighbouring localities of each of the selected towns, providing investments for smaller localities otherwise little or not included in other programmes in this sector.

(iii) Introduction of Service Agreements defining the rights and obligations (and performance indicators) of the municipalities and their water operators.

(iv) The project will foster commercial financing for the water sector to complement donor supported programmes. The EBRD loan is extended on a cost recovery basis to the water utilities. The Financial and Operational Performance Improvement Programme will result in improved financial capability of the involved utilities, which will eventually lead to future possible commercial financing, on a non-sovereign basis.

The Client

The Borrower will be the Republic of Moldova, represented by the Ministry of Finance. The end beneficiaries will be the utilities from 6 towns: Floresti, Soroca, Hancesti, Orhei, Leova and Ceadar-Lunga, willing to restructure and expand operations at regional level.

EBRD Finance

EBRD expects to provide an up to €10 million sovereign loan.

The project is expected to be co-financed in equal amount (€10 million) by the European Investment Bank (EIB) and to be supported by a grant of equal amount (€10 million) from the EU’s Neighbourhood Investment Facility (NIF). EBRD acts as leading IFI for this transaction.

Project Cost

The project entails a programme of €30 million total.

Environmental Impact

The project has been categorised B under 2008 Environmental and Social Policy, following an Initial Environmental and Social Examination (IESE) of the proposed Priority Investment Programmes (PIPs) for the six Participating Utilities. PIP components will involve rehabilitation and expansion of the water supply and wastewater collection system in the Participating Utilities, with the prime focus on rehabilitation and expansion of the existing water supply networks in all six municipalities, and rehabilitation and expansion of the wastewater networks, not involving any land acquisition or resettlement. The implementation of the PIPs is expected to improve efficiency of water supply and wastewater collection across Moldova, thus contributing to the provision of uninterrupted access to clean drinking water, prevention of watercourses from pollution and improving of public health. Any adverse impacts are expected to be limited primarily to issues typical to civil works, including service disruptions and traffic disturbance, which are localised and temporary and can easily be mitigated.

As part of the IESE, the EBRD undertook a screening procedure compliant with EBRD's Environmental and Social Policy and in line with EU EIA Directive, Annex III, which concluded that none of the PIP components require an EIA. The environmental and social due diligence consisted of an analysis of the adverse future environmental and social impacts and benefits of the proposed PIPs and a corporate environmental and social review of the Participating Utilities' management practices and capacities, their existing facilities and operations. The due diligence showed that the Participating Utilities have limited capabilities in Environmental, Health and Safety Management and that their current occupational health and safety and stakeholder engagement practices require further improvement to meet EBRD's Performance Requirements (PRs). For all six localities the quality of the drinking water will meet Moldovan requirements and the EU Drinking Water Directive, with no requirement for additional investments in drinking water treatment. EU standards for urban wastewater treatment are either already achieved for some municipalities (Hincesti, Ceadir-Lunga and Leova) with existing WWTP infrastructure, while for others (Soroca, Orhei and Floresti) either new WWTPs will be constructed or existing facilities rehabilitated with financing from national sources or external loans (e.g. from the World Bank) to fully meet national and EU effluent quality standards. Further wastewater treatment and sludge management related investments and improvements have been included into the corresponding Environmental and Social Action Plans (ESAPs).

The affordability analysis identified that although water and wastewater services will remain affordable for average households, some lower income households in several municipalities will face challenges. Corresponding actions have been included in the ESAPs and post-signing technical assistance based on the outcomes of this analysis so as to ensure that the low income levels and social conditions in Moldova are taken into account when reforming water and wastewater tariffs.

ESAPs have been developed for the Participating Utilities to bring them into compliance with national regulations and EBRD's PRs. Draft Stakeholder Engagement Plans (SEPs) commensurate with the impacts of each Participating Utility's PIP have been prepared. Participating Utilities will be required to finalise and implement these SEPs prior to any construction taking place. The implementation of the ESAPs for all Participating Municipalities will be monitored through annual environmental and social reports and monitoring visits.

Technical Cooperation

€500,000 was approved by the EBRD ETC Fund for Pre-signing due diligence services (Technical, Financial, Institutional, Affordability, etc). Due Diligence Phase I (€162,000) a multilateral initial assessment to select participating utilities (completed on 4 December 2009). Due Diligence Phase II (€338,000) an in-depth assessment with ultimate conclusions and recommendations (to be completed by mid April 2010).

EBRD will further seek €1.5 million in TC funds for the post-signing/implementation phase. The assistance will take the form of:

(i) a Financial and Operational Performance Improvement Plan (“FOPIP”) to assist the Companies to identify and implement the necessary corporate, financial and operational improvements so that they work towards becoming commercial operations.

(ii) Implementation Assistance to assist the Companies in implementation of the Investment, including all aspects of procurement, contract administration, engineering supervision and disbursement to provide access to best practice in the implementation of projects and procurement, as well as advice on specific technical issues.

 

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

Public Information Policy (PIP)

The PIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. Please visit the Public Information Policy page below to find out how to request a Public Sector Board Report.
Text of the PIP

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