Shymkent Water Sub-Project

Location:

Kazakhstan

Project number:

47489

Business sector:

Municipal and environmental infrastructure

Notice type:

Private

Environmental category:

B

Approval date:

27 May 2015

Status:

Repaying

PSD disclosed:

27 Mar 2015

Translated version of this PSD: Russian

Project Description

The EBRD is providing a senior loan of up to EUR 10 million with a 13 year tenor to TOO “Vodnye Resoursy Marketing” (the “Company”), a private water company, to address the emergency situation in the City of Shymkent (the “City” or “Shymkent”) in the Southern Kazakhstan.

The Project would improve the city’s wastewater system through implementation of the emergency investment programme, comprising of the partial rehabilitation of the main wastewater collection network.

In 2016 the extension of the capacity of the wastewater treatment plant (“WWTP”) is envisaged as a change to the original design of the Project’s priority investment programme.

Transition Impact

Transition impact for this Project is expected to stem from:

  • Institutions, laws and policies that promote market functioning and efficiency through tariffs and metering:
  • Implementation of the new tariff methodology; and
  • Tariff optimisation.
  • demonstration effect of replicable behaviour and activities which is new to the economy through environmental standards:
  • Implementation of the wastewater investment in compliance with EU environmental standards; and
  • Replications of similar investment.
  • More widespread private sector participation:
  • Continued economic viability of the Company even after the environmental investment; and
  • More management contracts and private sector participation in other cities in Kazakhstan.
  • Setting standards for corporate governance and business conduct and demonstration effect:
  • A workshop for promoting full metering and introduction of meter-based billing will be organised by the Company with participation of the key stakeholders; and

Replication of good practices in other cities in Kazakhstan.

The Client

TOO “Vodnye Resoursy Marketing” provides water supply and wastewater collection services to both residential and industrial customers in Shymkent, the 3rd largest city in Kazakhstan with the population of circa 0.8 million people and coverage area of approximately 670 km2.

Project Cost

Total project cost is EUR 18.03 million.

Environmental Impact

Categorised B under the 2014 Environmental and Social Policy. The upgrading of an existing wastewater system will mainly have environmental and social benefits. The Environmental and Social Due Diligence (“ESDD”) will expand on the due diligence undertaken for the two previous projects with the Company and include an independent environmental and social review of the Company's current operations and facilities, and an analysis of potential environmental and social benefits, risks and impacts associated with the proposed investment programme. The annual environmental and social reporting on the two previous projects shows a good progress with Environmental and Social Action Plan (“ESAP”) implementation and a good overall Environmental and Social management.

The ESDD for Phase II undertaken in 2010 concluded that the Company had made significant progress in the implementation of the ESAP agreed for the Phase I project. The ESDD had also established that the quality of drinking water supplied to customers and discharges of treated wastewater were in compliance with both national requirements and the relevant European Union Directives. However, further improvements were still needed on a number of issues including management of water protection zones; management of asbestos-containing materials; control over use of treated effluent; dumping of solid waste; potential risks associated with contaminated silts at the bottom of Burzhar reservoir; and technical conditions of the WWTP sludge treatment system. These issues were addressed in the ESAP developed for Phase II and, reportedly, good progress has been made with the implementation of the ESAP. The ESAP will be updated for the new loan to reflect the status of implementation and to include any new mitigation measures required for the proposed project.

Update on Environmental Impact (as of 17/10/2016)

An environmental and social due diligence (“ESDD”) has been carried out in August-October 2016 by independent consultants to help with the decision for the envisaged changes to the project as well as the new project components to be included under OPID 47489. The ESDD has confirmed a good progress with respect to the implementation of the Environmental and Social Action Plans (“ESAP”) for this project as well as the other projects with the Client. In addition to the completed improvements to the wastewater collection and treatment infrastructure implemented with the previous EBRD loans, one of the main achievements since 2008 has been introduction of a certified environment management system in accordance with ISO 14001:2004, and an occupational health and safety management system in accordance with OHSAS 18001:2007.

The Emergency Investment Programme under Opid 47489 was to replace a 21 km long sewage collection pipeline which had collapsed at three locations in 2014 and 2016. Following visual inspection with CCTV equipment, the Company now plans to replace only 14 km of this pipeline, instead of the whole length of it, and postponing to a later date the replacement of 7 km of the sections of the pipeline which were assessed as having at least 10 years remaining serviceable life. To date, 5.4 km of the pipeline has been replaced. A technical inspection of a 2 km section of the collapsed part of the existing pipeline has been carried out by independent consultants to assess the safety risks to the residents of the 37 houses located above or in the immediate vicinity of the collector. The inspection concluded that there exists a significant risk of new failures and collapses occurring at any location along the inspected section of the already collapsed pipeline at any time, even after it ceases operation. As recommended by the inspection, the collector will be required to be filled with grout or removed and backfilled to avoid further collapses of the pipeline and, consequently, potential resettlement of the residents of these houses. Gas monitoring at these houses will also be required to ensure no hazardous gases emitted from the pipeline could affect the residents. The Company is required to adopt a Resettlement Action Framework (RAF) compliant with PR5 in case any of the residents need to be evacuated or either temporarely or permanently resettled. These measures will be covenanted as CP for disbursement.

The Company supplies drinking water to 100% of the citizens and the drinking water quality complies with the national and EU drinking water standards. However, less than 52 per cent of the Company customers are connected to the sewerage system at present. The proposed extension of the sewerage network coverage area by constructing new sewage collection pipelines is not the Company’s responsibility. Most houses which are currently not connected to the sewerage system are equipped with cesspits and septic tanks from where sewage is regularly pumped out to tank trucks and transported to the WWTP. The WWTP effluent discharges are compliant with the national and EU standards. Completion of new sludge management facilities in 2016, as required by the current ESAP, will bring the Company's wastewater operations fully into compliance with the applicable EU standards.

ESDD has shown that any potential adverse E&S impacts associated with the proposed extension of the WWTP will be site specific and limited to the construction period and can be mitigated by good construction practices. The expanded capacity of the WWTP will improve public health and environmental pollution by elimination of bypassing untreated storm water into Burzhar Reservoir.

The ESAP for the project has been updated to cover the issues of all three projects. The key additional actions in the updated ESAP relate to monitoring, formalising health and safety practices, asbestos management, traffic management, redefinition of the sanitary protection zone, strengthening of laboratory control procedures and increasing environmental, health and safety training of staff. The Stakeholder Engagement Plan has also been updated. Both the ESAP and SEP are covenanted in the Loan Agreement to be implemented by the Company.

Technical Cooperation

EBRD Small Business Support programme supported a technical, financial and environmental due diligence for an amount of up to EUR 20,000, the assignment was cost shared with the client.

Company Contact

Name: Turdaliev Zhanatbek
Telephone: +7 7252 272297
Email: tju63mail.ru
Web: http://www.wrm.kz/
 

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

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Email: projectenquiries@ebrd.com

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