R2CF Valcea sub-project

Location:

Romania

Project number:

43082

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Target board date:

18 Sep 2012

Status:

Repaying

PSD disclosed:

03 Jul 2012

Translated version of this PSD: Romanian

Project Description

The EBRD is considering providing a loan of up to €13.85 million alongside up to €76.9 million from EU Cohesion Funds to SC APAVIL SA Ramnicu Valcea for water and wastewater infrastructure improvements in Valcea County.

The financing consisting of a tranche of up to €8.55 million for the Bank’s own account and a tranche of up to €5.3 million funded by the Green Energy Special Fund (“GESF”) administered by the Bank, is a sub-project of the €130 million extension of the initial €200 million Framework for Romania EU Cohesion Fund Co-Financing for regionalised water companies (the “Framework”). The project summary document for the Framework was published on 23 September 2010.

The proposed project will assist the Company in extending and rehabilitating the water and wastewater infrastructure in the City of Ramnicu Valcea and other administrative territorial units representing nearly half of the population in Valcea County. Investments are expected to significantly reduce water losses, optimise operating costs and expand water supply and wastewater collection and treatment services in Valcea County in line with relevant EU directives.

Part of the proceeds will be used for improving the overall hydropower capacity installed inside the main water supply pipelines used to deliver fresh water to the county. These small-scale installations are very effective in converting the hydraulic energy of the water streams which would be otherwise lost.

The project includes the full reconstruction and capacity expansion of the existing Stan Valley hydropower plant and the construction of a set of new power plants (in Vladesti and Ramnicu Valcea) downstream of new water reservoirs which will be connected to the overall network within the current investment project.

Part of the proceeds will also be used for implementing a modern Energy Management System which will allow the company to substantially enhance its capability of monitoring and optimizing the operation of the water/wastewater facilities.

Transition Impact

The Valcea sub-project will support environmental improvements and continued regionalisation of water and wastewater services in Valcea County, which will result in efficiency gains and the transfer of commercial and managerial skills in water and wastewater operations to less-developed regions of the county.

Under the Framework, the Bank is providing technical assistance to the Company, to identify and analyze potential investments for improving the energy efficiency of its operations. The TC project focuses mainly on energy recovery from waste (treatment of wastewater sludge to produce biogas, used for on-site electricity production), hydroelectric energy recovery from the water supply network (small hydropower turbines inside the main pipes to exploit the height difference between water reservoirs and towns) and a comprehensive Energy Management System (to provide supervision and control capability to the Company across its water and wastewater facilities in the county).

The investments under this sub-project will focus on the hydroelectric energy recovery component expected to substantially improve the operational efficiency of the Company by cutting energy costs.

The Client

SC Apavil SA Ramnicu Valcea provides water and wastewater services to the City of Ramnicu Valcea as well as to nine other localities (Dragasani, Calimanesti, Baile Olanesti, Govora, Babeni, Brezoi, Balcesti, Horezu and Ocnele Mari) and nine other smaller rural communities in the County of Valcea. A new client of the Bank the Company became a regional operating Company in 2008 and began extending its service area throughout the entire County of Valcea.

EBRD Finance

A loan up to €13.85 million to Valcea Sub-Project. The loan will comprise a tranche of up to €8.55 million for the Bank’s own account, and a tranche of up to €5.3 million funded by the GESF administered by the Bank.

Project Cost

Up to €104.25 million for Valcea Sub-Project.

Environmental Impact

Categorised B in accordance with the EBRD Environmental and Social Policy 2008, following Initial Environmental and Social (“E&S”) Examination. The construction/rehabilitation of wastewater treatment plants and extension and rehabilitation of water distribution and sewerage networks will improve water and wastewater services and the sub-project is expected to result in significant environmental and community health benefits. Potential adverse E&S impacts are site-specific and readily addressed through mitigation measures. Environmental and social due diligence (“ESDD”) was carried out by independent consultants. The ESDD included a site visit, review of the Company's existing E&S management systems, available technical and environmental documentation prepared in accordance with Romanian permitting requirements and the sub-project appraisal documents prepared for the EU Cohesion Fund application as well as assessment of the sub-project against EU environmental requirements and the EBRD Performance Requirements (“PRs”).

The ESDD showed that the competent environmental authority (EPA Valcea) undertook EIA screening procedure for individual project components in accordance with applicable Romanian EIA legislation that is harmonised with the EU EIA Directive, concluding that none of the sub-project components to be implemented in Ramnicu Valcea, Dragasani, Calimanesti, Olanesti, Babeni, and Balcesti agglomerations require an EIA. The sub-project involves no extension or new WWTP with a capacity of 150,000 p.e. or more, and none of the sub-project components fall under category A in accordance with the Bank's Environmental and Social Policy.

The Company has obtained all the environmental approvals required for the implementation of the sub-project, such as Environmental Notifications, Water Management Approvals, and Natura 2000 Declarations. Before these were issued by the competent authorities, the EIA and Natura 2000 screening decisions were disclosed to public for comment in accordance with pertinent Romanian law and permitting procedures aligned with relevant EU Directives. No comments were registered from Civil Society or NGOs in relation to the respective works. The Land Planning Certificates issued in the sub-project framework are valid, and the Company is in the process to obtain the Construction Authorisations.

The ESDD showed that the sub-project will result in significant environmental benefits and improve the quality of the local environment and mitigate public health risks by extending the drinking water supply and wastewater collection networks, improving drinking water treatment and quality, improving sewage collection and wastewater treatment systems. Investments are expected to significantly reduce water losses, optimise operating costs and expand water supply and wastewater collection and treatment services in Valcea County in line with relevant EU directives and result in an increase of connection rates to 95 per cent from the current averages of 87 per cent for water and up to 90 per cent from current 56 per cent for wastewater. As a result of this sub-project, the population of the County will benefit from improved water and wastewater services, and physical water losses in the network will be reduced from 34 per cent to 27.5 per cent, corresponding to over 5,000 m3/d. Following negotiations, the EU and the Romanian Ministry of Environment have agreed that the connection rate to the centralised water systems above 90 per cent is considered compliant with the EU Directives. This is due to the fact that there are some sparsely populated rural areas where connection to the centralised networks is not cost-efficient.

Under the GESF tranche, the sub-project will introduce the use of renewable energy and a modern Energy Management System for the water utility. A detailed energy and water audit was commissioned by the Bank, and it determined that all small-scale HPPs would be installed within the existing main water supply networks, and no additional land acquisition would be required. Recovering electricity from existing in-pipe downwards water streams will allow to generate up to 10,000 MWh/year of renewable energy and result in reduction of GHG emissions by about 6,000 tonnes/year, as well as improve measurement, monitoring and control of the energy and water streams.

The sub-project will reduce wastewater discharges and have positive impacts in the receiving natural water bodies. At present, the Company is not in compliance with EU wastewater discharge standards. The implementation of the sub-project will help the Company achieve compliance with national and EU requirements within the transition periods agreed for meeting requirements of Directive No.98/83/EC on drinking water quality (by 2015) and Directive 91/271/EC on urban wastewater (from 2013 to 2018 depending on the agglomeration size).

No significant adverse impacts or non-compliances with the EBRD PRs have been identified. The construction works will have limited, localised and short-term adverse impacts, which can be mitigated or prevented by adhering to good construction practice. The sub-project is not expected to require significant land acquisition or cause any significant displacement or resettlement impacts. However, some temporary disturbance may occur during the construction phase. The ESAP includes the requirement for relevant procedures and a compensation action plan/policy to be established by the Company so as to meet the requirements of PR5, in the event of any such impacts. The planned tariff increases are not expected to generate affordability challenges for the average and lower income households.

According to Natura 2000 declarations, the sub-project components are not likely to have significant impacts on Natura 2000 sites, therefore it is not necessary to carry out an appropriate assessment. For three agglomerations (Ramnicu Valcea, Dragasani, and Babeni) some components (WWTPs and water supply system) are located closely or within Natura 2000 area ROSPA-0106 “Valea Oltului Inferior” designated for conservation of some species of birds. However, the works will be carried out on areas already occupied, and the execution of the sub-project will not affect the protected bird species and will not split, reduce or otherwise affect their habitats. The works will be carried out in urbanised areas, on the existing locations (rehabilitation works) or along the existing roads. The protected bird species which nest on the site prefer wetland habitats that are not affected by the works. Moreover, the works will not be carried out during the breeding season of the birds. The proposed activities will not have significant impact on the integrity of the site providing that good construction practices are adhered to. The screening decision, environmental notification and Natura 2000 declarations issued by the competent authority include measures for mitigating the impacts on the Natura 2000 sites during the construction and operation periods. These measures will be included in tender documents for the award of works contracts. For each sub-project component, the contractor will be required to develop a specific Environmental and Social Management Plan (“ESMP”), which will include all the mitigation measures as required in the Natura 2000 declaration and environmental permits as well as any other measures that are required for complying with the EBRD PRs.

The ESDD established that the Company’s existing EHSS management system is a well-developed Integrated Management System (“IMS”) designed based on ISO 14001 (Environment), ISO 9001 (Quality) and OHSAS 18001 (Occupational, Health and Safety) standards. However, further improvements to the Company’s contractor management practices are needed 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 sub-project, and to bring the Company's operations into compliance with the EBRD's PRs. The ESAP commits the Company to, inter alia, collecting basic social data about the sub-project’s social impacts; developing site specific construction ESMPs for each sub-project component; enhancing Company’s EHS training programmes; establishment of procedures for performance monitoring, land acquisition, compensation, cultural heritage chance finds, handling and disposal of materials containing asbestos; developing a sludge management action plan including consideration of biogas production from sludge for the new WWTPs, and adopting and implementing Stakeholders Engagement Plan (“SEP”) compliant with EBRD PR 10 including a grievance mechanism.

The Company 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

The sub-project will benefit from TC under the original Framework and its extension, including:

  • Analysis of the environmental and social impacts, issues and risks and a gap analysis. (€125,000 financed by the Government of Spain under the original Framework) and extended for an additional €100,000 to support sub-projects under the Framework extension.
  • Financial due diligence of sub-projects under the Framework extension (€75,000, to be financed from the Bank’s own resources), which will be extended to support sub-projects under the Extension).
  • Benchmarking and FOPIP programme (€750,000 financed by the Shareholder Special Fund under the original Framework), which will be extended to cover water utilities financed under the Extension.
  • Energy Efficiency (€24,000) initially funded as a pilot for two sub-projects under the Regional Energy Audit Programme for the Corporate Sector funded by CEI Centre for European Initiative.
 

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