Shymkent WWT Essential Modernisation

Translated version of this PSD: Russian

Project description and objectives

The EBRD provided a loan of up to EUR13.6 million to VRM LLP, the water company in Shymkent, Kazakhstan, to finance the modernisation of the wastewater treatment facilities. The investments were based on the immediate needs of the Company as identified in the Feasibility Study completed by international consultants in close collaboration with the Company. The investment programme consists of (i) upgrade of the existing WWTP; and (ii) sludge treatment and bio-gas plant.

The first component consists of civil works for a number of new facilities construction, rehabilitation and upgrade of current structures, installation of completely new electro-mechanical equipment and basic SCADA system control.

Implementation of the second component will result in sludge humidity reduction to 40 per cent and improved sanitary-bacteriological safety. A substantial reduction of gases emission will be achieved due to sludge digestion in pressurized tanks, generated gas collection, treatment and use for power generation. According to estimates provided for power generation from bio gas, it is expected that up to 63 per cent of the WWTP power consumption will be covered by bio gas power.

The Project will enable VRM LLP to provide an efficient and reliable operation of the wastewater treatment facilities thus ensuring operating efficiencies and smooth functioning of the system while facilitating development of energy efficient wastewater infrastructure and improving environmental standards. In 2013 the Bank extended Bank’s loan by an additional EUR 10,3 million to enable TOO VRM to continue the rehabilitation programme of the wastewater and water supply infrastructure in the city of Shymkent.

Transition impact

The transition impact is expected to come from the following areas:

(i) significant environmental impact from new WWTP + development of bio-gas plant;
(ii) cost recovery tariff on waste water segment; and
(iii) further corporate development and/or transparency measures.

The client

VRM LLP is one of the most advanced water companies in the country, which owns and operates water and wastewater systems in the city of Shymkent in the South Kazakhstan Oblast. In April 2009 the Bank signed a loan agreement (USD 8 million) under the Shymkent Vodokanal Project to finance the first phase of the Company’s priority investment programme.

EBRD finance

Senior loan of up to EUR 13.6 million.

Total project cost

EUR14.8 million.

Environmental impact

Categorised B in accordance with EBRD's 2008 Environmental and Social Policy. This is a follow-on project from the one appraised by the Bank under the 2003 Policy for essential water-related investments. Environmental and social (E&S) due diligence focused on establishing compliance of the new investment project in essential wastewater modernisation with EBRD PRs.

An E&S audit/review of the Company's current EHSS management practices, operations and facilities, an E&S analysis of the proposed investment project and a review of the existing Environmental and Social Action Plan (ESAP) implementation progress were carried out by independent consultants. The due diligence confirmed that the Project will substantially improve quality, reliability and efficiency of wastewater treatment and sludge management practices in the City of Shymkent, reduce untreated wastewater discharges into the environment and reduce GHG emissions. The Company will be required to obtain the necessary operation permits, including compliance with the local EIA requirements. Any adverse future environmental and social impacts associated with the Project are site-specific and readily addressed through adequate mitigation measures.

After the previous project investments, the quality of drinking water supplied by the Company meets the national and EU requirements. The Company has made a good progress on ESAP implementation for the previous project and introduced the potable water disinfection system, upgraded the laboratory and completed the PCB pollution survey. The Company has introduced an environmental management system in compliance with ISO 14001:2004 and an OHS management system in line with OHSAS 18000 requirements.

ESDD established that the effluent is discharged into the artificial Burzhar reservoir, not into natural water bodies and, therefore, EU wastewater standards do not apply. The water from the reservoir is used for irrigation of technical crops. Some of the effluent will eventually enter the natural waters of the river Arys (Syr-Darya river basin) through a water exchange canal between the reservoir and the river, but in much diluted form. The impact on natural watercourses is deemed insignificant. The effluent quality is currently not meeting the national requirements in full. The anticipated modernisation of the existing WWTP as part of the PIP will bring the quality of effluent into compliance with the Kazakh MPC norms. The current permit for discharge of treated effluent was obtained by the Company in 2009, and it is still valid. The Company is currently exceeding the strict national effluent limits (MPCs) and pays pollution charges for non-compliance. Regular monitoring of the river water quality will be introduced as part of the ESAP to ensure that the discharges do not cause significant impacts in the future.

The ESAP requires the Company to undertake/implement additional Phase II investments of up to EUR 40 million to bring the Company's operations in full compliance with the national requirements by 2015. This would involve WWTP capacity extension to 200,000m3/d including mechanical and biological treatment, sludge treatment and bio-gas plant, tertiary treatment for the whole capacity and phosphorus removal.

The PIP will allow for environmentally sound management and disposal of sludge. It will introduce a new sludge treatment facility with generation of methane gas in order to reduce the quantity and enhance quality of the treated sludge. The new biogas plant will generate 4.7 million kW of electricity annually, covering 63 per cent of electricity needs of the WWTP. Reduction of greenhouse gas (GHG) emissions will amount to 29,000 tCO2 equivalent annually. The Company will implement a programme on the sludge lagoon remediation owing to the potential reduction of sludge volumes discharged both to the lagoons and to the landfill. ESDD has also identified that there is a possibility to use dewatered sludge as a fertilizer, and for that purpose the sludge composition shall be analysed and certified. Sludge from the lagoons, beds and Burzhar reservoir (following remediation) can be used for that purpose.

The implementation of the PIP involves construction works that will result in limited, localised and short-term adverse environmental impacts, which can be mitigated or prevented by adhering to good construction practice.
The revised ESAP has been prepared following completion of the due diligence for the follow-on investments into wastewater treatment and sludge management. It includes further improvements to EHSS practices of the Company, as well as specific measures during design, construction and operation phases. In particular, compliance with the national legal requirements for local EIA and obtaining the necessary permits, maintaining Sanitary Protection Zone control at the WWTP, emergency preparedness and response, development and implementation of access control programme for the WWTP territory, educating and informing the local residents of the health and safety hazards, rigorous and regular monitoring of the effluent quality at the points of discharge to natural water bodies (e.g. river Arys), implementation of the Stakeholder Engagement Plan (SEP) and grievance mechanism prior to the start of construction works.

The Company will provide the Bank with annual environmental and social reports, including updates on the implementation of the updated ESAP. The Bank will commission a completion audit and may also conduct monitoring visits, as required.

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 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 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.

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

Technical Assistance was provided from the EBRD Shareholders’ Special Fund (EUR 300,000) to finance preparation of the Feasibility Study.

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