Polotsk Wastewater Subproject

Location:

Belarus

Project number:

47422

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Target board date:

22 Dec 2015

Status:

Disbursing

PSD disclosed:

30 Jun 2015

Translated version of this PSD: Russian

Project description and objectives

To assist the city of Polotsk in the construction of the wastewater treatment facilities.

A sovereign-guaranteed loan of € 21 million, of which up to € 8 million will be allocated for the benefit of Unitary Enterprise Polotskvodokanal, a municipally owned company that provides water and wastewater services in the city of Polotsk.

The Loan will finance a Priority Investment Programme (the “PIP”) aimed at construction of the wastewater treatment facilities in the City including aeration tanks, sedimentation tanks, sludge pumps, air blowers, etc.

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 client

Sovereign loan to the Republic of Belarus with on-lending to Unitary Enterprise Polotskvodokanal is a municipally owned company that provides water and wastewater services in the city of Polotsk located in the Vitebsk Oblast of Belarus with a population of 85,000 people.

EBRD finance

A sovereign loan of € 21 million, of which up to € 8 million will be allocated for the benefit of Unitary Enterprise Polotskvodokanal. The project will be co-financed with a grant from an international donor in the amount of up to € 4.2 million. Grant funds are proposed to be sought from the Northern Dimension Environmental Partnership (“NDEP”) as Polotsk falls into the Baltic Sea catchment area.

Total project cost

€ 14.6 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 PIP 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 PIP will bring wastewater discharges into compliance with national and EU requirements and 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.

Environmental and Social Due Diligence (ESDD) carried out by independent consultants as part of the Feasibility Study confirmed that the capacity of the new WWTP is well below the category A threshold of 150,000 PE, and it will be constructed at the existing premises, not requiring any new land acquisition or resettlement. The main collector will be laid along the existing roads, and the discharge pipe will go through unpopulated public land requiring some vegetation clearance and affecting several areas where local farmers harvest grass for their animals. Any temporary disturbances and restriction of access will need to be carefully managed through adequate stakeholder consultation and information disclosure, in particular avoiding construction during grass harvesting season.

ESDD also confirmed that the Company will need to develop and implement a human resources (HR) policy focussed on equal opportunities. The Company already has OHSAS 18001 certified occupational health and safety management system in place, however it needs to develop an Environmental Management System, improve internal E&S capacity and stakeholder engagement practices. Local EIA (OVOS) will need to be carried out for the Polotsk WWTP design to obtain the necessary environmental approvals before the start of construction and to assess and manage any potential negative environmental impacts on the local recipient river Ushacha, the tributary of Western Dvina, and its local ecosystems from the treated effluent flow during operation.

The current wastewater treatment of municipal discharges is handled by an external Polymir WWTP and it is not in compliance with the national or EU requirements with no provisions for nutrient removal. PIP will include construction of a new modern municipal Polotsk WWTP with the treatment capacity of 67,000 PE which will include biological treatment and nutrient removal leading to annual reduction of BOD5  by over 93 per cent (1,272 t/a), total N by 79 per cent (267 t/a) and total P load  by 97 per cent (93 t/a). Compared with the existing situation where Polotsk wastewater is currently treated at the Polymir WWTP, the first year of operation is estimated to reduce total N by 158 tons and total P by 20 tons to the recipient Western Dvina River.

The local population benefitting from the sub-project will include about 880,000 people in Polotsk and along the recipient Ushacha and Western Dvina rivers downstream from the sub-project location. The reduction of bacteriological and organic pollution and nutrient discharges would also benefit these people through contributing to reducing public health risks and increasing the usability of the rivers as a source for drinking water as well as for agricultural purposes, fishing and recreation. Drinking water supply operations are not part of the Project; however, the ESDD has confirmed that drinking water quality in the City of Polotsk generally meets the applicable national and EU requirements.

The ESAP has been developed to structure the project to meet EBRD requirements. It requires the Company to develop and implement their HR policy and Environmental Management System; obtain all required environmental permits for the project under Belarusian regulatory requirements; develop and implement a plan for management and utilisation of sludge from the new WWTP in accordance with the EU requirements; prepare a construction EHS management plan and a chance finds procedure, introduce  specific EHS provisions in tender documentation for contractors, finalise and implement SEP including external grievance mechanism.

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. € 280,000, funded by the Government of Sweden.
     
  • TC 2: Audit and restatement of the Company’s accounts in accordance with IFRS. € 21,466, 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 € 750,000, to be financed by the Government of Austria.
     
  • 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 € 350,000, to be financed by the Government of the Czech Republic.


 

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