Semey Water

Location:

Kazakhstan

Project number:

47458

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Target board date:

18 Dec 2015

Status:

Signed

PSD disclosed:

03 Dec 2015

Translated version of this PSD: Russian

Project Description

The EBRD is considering providing a loan of up to KZT 1,156 million (EUR 3.5 million equivalent) to GKP Semey Vodokanal, a municipal water and wastewater treatment company in the City of Semey, East-Kazakhstan oblast in the Republic of Kazakhstan, to support the rehabilitation and upgrade of the water and wastewater infrastructure in the City.

Project Objectives

The Loan will be used to finance priority capital investments, including modernisation of pumping stations, rehabilitation of depreciated sections of water supply and wastewater networks, introduction of SCADA system and expansion of zonal and building-level water metering (the "Project"). This will result in enhanced energy efficiency, reduced consumption of water and losses in the system, and improved environmental standards.

Transition Impact

This project would deliver:

(i) Energy efficiency improvements in the operations of the Company through the modernisation of the water supply and wastewater management facilities;

(ii) Introduction of commercial water tariffs covering the full costs of service for all customer groups as part of the priority investment programme ('PIP') agreed with the tariff regulator and the commercialisation of the Company by means of introduction of a public service contract with the City Akimat and business planning;

(ii) Higher environmental standards.

Additionally, the transaction aims to increase transparency and improve business standards through the introduction of International Financial Reporting Standards ('IFRS') and the implementation of an Environmental and Social Action Plan ('ESAP').

Client Information

STATE COMMUNAL ENTERPRISE SEMEY VODOKANAL

GKP Semey Vodokanal is a municipally owned sole water distribution and wastewater management company in Semey, Kazakhstan.

EBRD Finance Summary

KZT 1,156,300,000.00

A senior loan to the Company in the amount of up to KZT 1,156.3 million (EUR 3.5 million equivalent).

Total Project Cost

KZT 2,573,392,646.00

KZT 2,573,392,646.00 (EUR 7.9 million equivalent) including co-financing from the Government of the Republic of Kazakhstan ("GOK") under the Enhanced Partnership Framework Agreement ("EPFA"), support by the Akimats of East-Kazakhstan Oblast and the City of Semey, and related technical cooperation to support the Company with the project preparation and implementation.

Environmental and Social Summary

Categorised B under the 2014 Environmental and Social Policy (ESP). An Environmental and Social (E&S) analysis of the proposed PIP and an E&S audit/review of the existing facilities, operations and management practices of the Company have been carried out as part of the Feasibility Study by independent consultants originally in 2012 under 2008 ESP, and an update has been carried out in 2015. The investigations concluded that the implementation of the PIP will improve efficiency and reliability of water supply in the city of Semey, increase access to safe drinking water and reduce public health risks.

The PIP will mainly focus on rehabilitation of drinking water supply and distribution systems and operations, as well as wastewater collection. Adverse E&S impacts are expected to be limited to construction works and will be localised, short-term and prevented or mitigated by adhering to good construction practice. The adverse social impacts caused by temporary restriction of access and disruptions in water supply and wastewater collection during the refurbishment works will be mitigated by timely disclosure of information for affected population/stakeholders and good construction practices, as stipulated in the Environmental and Social Action Plan (ESAP) and the Stakeholders Engagement Plan (SEP).

Water supply facilities operated by the Company are currently in poor operating condition resulting in unreliable water supply, substantial water losses and high energy consumption. The current water quality is generally good with the available analysis results showing only a few non-compliances with microbiological quality standards. Through the implementation of the PIP, the reliability of the water supply services will improve, while water losses and electricity consumption will reduce. Improvements of the water supply system and wastewater collection will contribute to the improvement of public health through mitigating the risk of water cross-contamination and waterborne diseases.

Modernisation of the laboratory facilities will improve overall control of the water quality allowing both national and EU standards for drinking water quality to be met.

Wastewater treatment improvement is not part of PIP. The existing WWTP facility in Semey is old and worn out. A new WWTP has been under construction since 2004, but due to absence of biological treatment has not yet been put into operation. The upgrading of new WWTP with this component to meet both national and EU standards for treated effluent quality is estimated at EUR 14 million. Due to affordability constraints, derogation from the EBRD E&S Policy is required.

No major impacts on health or the environment are expected form this non-compliance. The E&S review identified that the capacity of the Company to manage E&S issues is low and their E&S management systems, occupational health and safety (OHS) and stakeholder engagement practices require further improvement to meet EBRD's Performance Requirements (PRs).

The Environmental and Social Action Plan (ESAP) requires the Company among others to further develop their environmental, health and safety management system, procedures and practices; provide adequate EHS training, upgrade water quality monitoring laboratory facilities, provide adequate management and monitoring of OHS practices for staff and contractors, develop safe asbestos handling and disposal procedures, design and construct a biological treatment facility at the new WWTP as part of their long-term investment plan, improve stakeholder engagement and
grievance mechanism practices.

A draft SEP has also been developed for the Company. The Bank will monitor the project's E&S performance, compliance with EBRD PRs and implementation of the ESAP.

Technical Cooperation

Pre-signing

Feasibility Study EUR 150,000, financed by the EBRD Shareholder Special Fund ("SSF").

Environmental and Social Due Diligence Update EUR 11,330, financed from the Bank's own resources.

Post-signing

Support to the Project Implementation Unit ("PIU") including Procurement, Engineering, Design and Contract Supervision. The consultants will assist the Company's PIU with technical design, procurement, contract award and administration, financial control, overall project management, and quality assurance. The estimated cost of this assignment is EUR 600,000, proposed to be financed by the GOK under the terms of EPFA.

Corporate Development Programme to (i) assist the Company to improve its corporate, financial and operational efficiency measures to meet the related covenants included in the EBRD financing documents as well as on-going corporate development and (ii) assist the Company to prepare and implement the PSC with the City. The estimated cost of this assignment is EUR 320,000, proposed to be financed by the GOK under the terms of EPFA.

Company Contact Information

Evgeniya Ganeeva
pto@semey-vodokanal.kz
+7 7222 515528
semey-vodokanal.kz

Business opportunities

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Public Information Policy (PIP)

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Text of the PIP

Project Complaint Mechanism (PCM)

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Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.