Osh Water and Wastewater Rehabilitation

Translated version of this PSD: Russian

Project Description

The EBRD is considering establishing a sovereign framework of up to €20 million to co-finance with international donors priority water and wastewater rehabilitation sub-projects across the Kyrgyz Republic. The framework envisages sovereign loans that would be on-lent to the water companies involved as appropriate and would address urgently needed water and wastewater infrastructure rehabilitation needs.

The Osh Water and Wastewater Rehabilitation Sub-Project comprises a €3 million sovereign loan. The proceeds of the loan would be on-lent to the water company. The sub-project, which will be co-financed by SECO, will address urgently needed water and wastewater infrastructure rehabilitation needs.

Transition Impact

Transition Impact of the sub-project would be:

• Access to basic public utilities;
• Introduction of tariff reform within affordability limits including support to low income groups;
• Increased collection rates;
• Establishment of the contractual arrangement between the city and the company;
• Improving operational and financial management of the Osh Water Supply company (including a community based shareholder participation programme, preparation and publication of IFRS and business plan, training on procurement, etc).

The Client

Government of the Kyrgyz Republic.

EBRD Finance

The proposal is for a loan of €3.0 million to the Kyrgyz Republic on-lent to the Osh Water Company.

Project Cost

The total sub-project cost is €8.8 million including TCs. The sub-project will be co-financed by SECO.

Environmental Impact

Osh Water and Wastewater sub-project has been categorised B under the 2008 Environmental and Social Policy. An Environmental and Social Review of the Osh Water Company’s current EHSS management practices, operations and facilities, and an Environmental and Social Analysis of the proposed Priority Investment Programme (PIP) were carried out as part of the Feasibility Study by independent consultants.

The due diligence showed that the Water Company has overall weak EHSS management capabilities and underdeveloped EHSS management systems, and that its current human resources, occupational health and safety and stakeholder engagement practices require further improvement to meet EBRD's Performance Requirements (PRs). Company’s facilities are currently in very poor operating condition resulting in unreliable and low quality water supply, high water losses and energy consumption. Wastewater collection networks are incomplete and wastewater treatment is inefficient and in need of urgent rehabilitation.

The implementation of the proposed PIP is expected to significantly improve efficiency, reliability and quality of water supply and wastewater collection in Osh, thus contributing to the provision of uninterrupted access to safe drinking water, prevention of ground and watercourses pollution and improvement of public health. The project will also reduce overall water consumption and improve energy efficiency, thus contributing to reduction of greenhouse gas emissions. Existing untreated discharges into River Changet-Say and Ak-Buura will also be partly reduced. The construction works may be associated with some limited, localised and short-term adverse environmental impacts, which will be mitigated or prevented by adhering to good construction practice.

The PIP will allow for the drinking water quality to meet local requirements; however additional further long-term investments into water networks and treatment would be required to bring those in full compliance with EU standards. National and EU standards for urban wastewater treatment and sludge management will also not be achieved in full due to poor wastewater collection and inefficient wastewater treatment infrastructure, however for some parameters such as BOD5 and Phosphorous the standards of effluent quality will improve and be brought close to compliance with EU requirements. Additional long-term investments required for Osh to reach full compliance with EU water and wastewater requirements is estimated at EUR 80-90 million, which is beyond the Company’s borrowing capacity. Therefore, due to constraints arising from affordability and limited financial resources, the sub-project requires derogation from the EBRD’s Environmental and Social Policy.

The ESDD showed that the project will have a significant positive impact on public health and the environment despite the project not being able to achieve full EU compliance in the short term. However, untreated wastewater discharges will continue to present health risks to the local communities in the short term. Awareness raising programmes to prevent risks of water borne diseases will be developed and implemented as part of mitigation plans.

The affordability analysis did not identify any concerns for the affordability of water and wastewater services. Post-signing technical cooperation (TC) project for Corporate Development and Stakeholder Participation Programme will ensure that the low income levels and social conditions are taken into account when reforming water and wastewater tariffs. Stakeholder Engagement Plan (SEP) for the project has also been prepared to address issues such as, inter alia, increased communication with customers about the quality of supplies, upkeep and repairs, payment of tariffs and the importance of paying in a timely fashion and public health issues.

Environmental and Social Action Plan (ESAP) has been developed for the Osh Water Company to bring it into compliance with national regulations and the EBRD PRs, where financially feasible. ESAP includes the necessary improvements in Company’s EHSS management systems and capacity, improvements in water monitoring practices (laboratory to be financed with help from ADB) and chlorine handling procedures, formalising and developing better labour and OHS practices, fire safety and emergency response procedures, improving solid waste management practices, and managing potential construction EHS impacts. The associated TCs will also assist the Company in building its EHSS management capacity and implementing the ESAPs.

Osh Water Company will be monitored in terms of its environmental and social performance and implementation of the ESAP through annual E&S reports and site visits when deemed necessary. The project completion review will also assess EHSS compliance.

Technical Cooperation

Pre-signing
Joint Feasibility Study for Osh and Jalalabad Water and Wastewater sub-projects: Preparation of a financial, technical, environmental feasibility study for the sub-projects, including an economic rate of return analysis of the proposed investment, operational review and recommendations for improvements, a brief municipal credit update, and an Environmental and Social Action Plan. (€ 600,000, funding provided by the EBRD Shareholders’ Special Fund).

Post Loan Signing
Sub-Project Implementation Support. International consultants to assist the sub-project implementation unit with engineering design, procurement, preparation and evaluation of tenders, contract award and administration, financial control, sub-project management and reporting. (€ 750,000 to be financed by SECO).

Corporate Development and Stakeholder Participation Programme to

(i) support institutional development in form of operational improvements and financial improvements to secure sustainability of the water utilities, and

(ii) implement a Stakeholder Participation Programme. (€400,000 to be financed by the EBRD’s Water Fund).

 

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