Department of Economics

Russian Federation: Vologda Municipal Services Development Programme. Environmental Review Summary

08.08.2006

Description of the Project

EBRD is considering a senior loan denominated in RUR367 million (equivalent of up to €10.6 million) to VologdaGorVodoKanala, a Water Company of the City of Vologda. The loan will be supported by a full financial guarantee and a project support undertaking from the City of Vologda and the Region of Vologda.

Currently water is supplied from surface waters, mainly the Vologda River and in winter when the water level in the river is too low water is supplied from the Kubenskoye Lake or the Toshnya River. All of these sources are susceptible to pollution and current water treatment facilities are not efficient. Wastewater is discharged into the Vologda River. The current wastewater treatment plant is not efficient and environmental standards are not complied with.

The proceeds of the EBRD loan, NDEP-grant will be used to co-finance (with the Guarantor) rehabilitation and upgrade of the municipal water and wastewater infrastructure in the City. The priority investments will cover:

  • rehabilitation of the water treatment facilities;
  • rehabilitation of wastewater treatment and pumping stations;
  • strengthening of financial and operational performance of the Water Company.

A PIU is planned to be established and external funding for feasibility and future post sinning programme is being identified.

Screening categories and rationale for classification

Environmental impacts associated with the improvement of drinking water quality, its supply as well as the improvement of wastewater treatment facilities can be readily identified and quantified in an Environmental Analysis. For the above reasons, the EBRD has classified the project B/1, requiring an Environmental Analysis and Audit of the proposed investment programme.

Information reviewed during the environmental appraisal

Vologda Municipal Water Services Development Programme, Feasibility Study, Task 4 - Environmental Analysis and Audit, Plancenter, Finland, July 2006.

Environmental Impacts and Mitigation Measures

This project presents significant environmental opportunities regarding improvement of the reliability and the quality of the City of Vologda's drinking water supply and thus will help reducing public health hazard. It will also improve the effluent quality, thereby reducing pollution of the local surface bodies within the White Sea basin.

The environmental due diligence has assessed the ability of the project to bring the water and wastewater management facilities into compliance with applicable Russian Federation and EU environmental standards. It has concluded that the available financing of the priority investments will not be sufficient to bring the drinking water and effluent quality to fully comply with national and EU standards.

Mitigation measures will not fully protect public health and protect the local surface water bodies from further pollution. Water loss (reported as 25-30%) will need to be addressed adequately since drinking water quality is seriously affected by intrusion of contamination probably causing accidents of infection diseases in the City.

Based on the Consultant recommendation, the Water Company will need to further develop an EAP addressing the following issues:

  • implementation of the drinking water sanitary zone protection;
  • further study, optimisation or abandon pre-chlorination of drinking water;
  • consideration of using hypochlorite instead of gas chlorine for drinking water disinfection;
  • monitoring and controlling wastewater quality generated by the local industries and discharged into sewerage system to reduce negative impact on the wastewater treatment plant system and its efficiency.

Environmental Opportunities

The project will have the following environmental benefits:
(i) improving the quality and supply of drinking water and working towards achieving compliance with national and EU environmental standards related to drinking water and effluent quality;
(ii) improving water distribution and supply network;
(iii) improving the Vologda Water Company's operational performance.

Monitoring

The Bank will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing annual environmental reports (AERs) prepared for the project covering: (i) ongoing performance of project-specific environmental, health and safety activities, (ii) the status of implementation of environmental mitigation and improvement measures. The Bank's representatives will also conduct periodic site supervision visits when deemed appropriate.

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