North Western Regional Waste Water Project

Translated version of this PSD: Croatian

Project Description

The EBRD is considering providing a loan to finance priority investments aimed at extending the Company’s wastewater collection and treatment in order to increase the coverage of sewage service in the area and to reach compliance with EU directives. The investments will be concentrated on the area of the City of Cakovec, the capital of Medjimurska county.

Transition Impact

This project, if approved by the EBRD’s Board of Directors, will be the first regional wastewater programme financed by the Bank in Croatia without any recourse to the municipalities or county governments.

The Project is expected to provide significant transition impact through increased commercialisation of the municipal water company, including improved cost efficiency, long-term planning, and implementation of a cost recovery tariff model.

The Client

Medjimurske vode d.o.o. (the “Regional Company”), limited liability company, jointly owned by the County of Medjimurje (North-Western region of Croatia) and 24 municipalities in the County of Medjimurje.

The Company is a regional operator and provider of the water and wastewater services in the County of Medjimurje.

EBRD Finance

Senior loan of up to €10 million to Medjimurske vode.

Project Cost

Up to €49 million.

Environmental Impact

The project has been categorised B in accordance with the EBRD Environmental and Social Policy 2008. Environmental and social due diligence (ESDD) including a site visit has been carried out by ESD and independent consultants. The ESDD reviewed the Company's existing corporate E&S management systems, facilities and operations; analysed the E&S impacts and benefits of the priority investment programme to be financed by the Bank; assessed the extent to which the project would bring the Company’s existing facilities and water, wastewater and sludge management/disposal operations into compliance with national and EU environmental requirements and EBRD Performance Requirements (PRs); as well as identified additional corrective, mitigation and improvement measures.

The ESDD showed that the project will result in significant environmental benefits and improve the quality of the local environment and mitigate public health risks in the City of Cakovec by extending the coverage of the wastewater collection network, improving efficiency of wastewater collection, reducing sewerage infiltration and introducing biological waste water treatment system. The implementation of PIP involves construction works that will result in limited, localised and short-term adverse environmental impacts, which can be mitigated or prevented by adhering to good construction practice. The planned tariff increases are expected to affect the lower income households, however, the associated grant components and subsidies will mitigate and address affordability constraints.

The quality of drinking water delivered to consumers complies with the EU and local requirements. Further medium and long-term investment plans (Phases 2-4) have been prepared to construct further sewage collection networks and a new wastewater treatment plant for the City of Mursko Sredice. These further investments are to be financed by municipal and budget contributions and EU Structural funds.

The ESDD established that the Company’s existing EHSS management systems are well developed and its operations are in compliance with the national requirements. However, further improvements to Company’s E&S risk management procedures need to be developed for managing impacts of the Company’s operations on sensitive areas in terms of biodiversity and cultural heritage, as well as potential land acquisition and associated displacement. Contractor management practices will also need to be improved to meet the Bank’s PRs.

An Environmental and Social Action Plan (ESAP) has been developed for mitigation of identified E&S issues and impacts during preparation, construction and operation of the project, and to bring the Client's operations into compliance with the EBRD's PRs. ESAP commits the Company to improve its E&S management systems, policies and risk management procedures; occupational health and safety benchmarks, procedures and management systems for own employees and contractors; follow appropriate project approval and public consultation process in line with EU EIA Directive and undertake Environmental Protection Study as requested by the competent authorities; implement specific water and wastewater management improvements and odour abatement measures; develop site-specific Construction Environmental Management Plan; adopt fire and emergency response procedures; and implement Stakeholder Engagement Plan and introduce a grievance mechanism.

The Client 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

Consultants funded by the EBRD Shareholders’ Special Fund are engaged to conduct a technical and environmental review of the project. A Financial and Operational Performance Improvement Programme (including project management assistance) will also be financed through the EBRD’s technical assistance programme (€350,000).

Implementation Summary

The Project enabled increased coverage of sewage services in the North Western region of Croatia, while reducing the pollution of the Drava river, by co-financing priority investments in the extension of wastewater collection network and construction of a wastewater treatment plant (“WWTP”) for the settlements of Totovec, Novo Selo na Dravi, Sandrovec and Kursanec in the City of Cakovec suburban area. The Project was successfully completed mid-2018, with a time delay, but with significant capex savings.

The Project is an example of non-recourse financing of a regional wastewater programme. It ensured adherence to environment and social standards, which helped the regional operator and provider water and wastewater services reach full compliance with national laws, regulations and EU effluent quality standards regarding the output wastewater from the WWTP. The Company has fully implemented the Environmental and Social Action Plan.

As part of Transition Impact, the Project benefited from donor-funded FOPIP consultants who supported the commercialisation of the Company through preparation and implementation of a corporate development plan with improvements in such areas as tariff setting, business planning, managerial accounting and long-term financing. Additionally, to ensure a high-quality and cost-effective service provision, and monitor the progress in quality improvement of service provision in the form of key performance indicators, a Public Service Contract was signed between the Company and the City of Cakovec, the Municipality of Nedelisce and the Municipality of Prelog. 

 

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