FOR OFFICIAL USE ONLY Report No: PAD3125
Public Disclosure Authorized INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN
IN THE AMOUNT OF EURO 90 MILLION (US$101 MILLION EQUIVALENT)
Public Disclosure Authorized TO THE
REPUBLIC OF BELARUS
FOR A
UTILITY EFFICIENCY AND QUALITY IMPROVEMENT PROJECT
May 23, 2019
Public Disclosure Authorized
Water Global Practice Europe and Central Asia Region
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
Public Disclosure Authorized
CURRENCY EQUIVALENTS
(Exchange Rate Effective April 30, 2019)
Currency Unit = Belarusian Ruble (BYN) BYN 2.1089= US$1
BYN 2.3528= Euro 1
US$ 1.1212 = Euro 1
FISCAL YEAR January 1 - December 31
Regional Vice President: Cyril Muller Country Director: Satu Kähkönen Senior Global Practice Director: Jennifer Sara Practice Manager: David Michaud Task Team Leader(s): Stjepan Gabric, Sanyu Lutalo, Silpa Kaza
ABBREVIATIONS AND ACRONYMS
AF Additional Financing APA Alternate Procurement Arrangements BOD Biological Oxygen Demand CERC Contingent Emergency Response Component CIS Commonwealth of Independent States CO2 Carbon dioxide CPF Country Partnership Framework DLI Disbursement Linked Indicator EA Environmental Assessment ECA Europe and Central Asia EHS Environmental, Health, and Safety EIB European Investment Bank ESMF Environmental and Social Management Framework ESMP Environmental and Social Management Plan ESIA Environmental and Social Impact Assessment EU European Union FI Financial Intermediaries FM Financial Management FS Feasibility Study GDP Gross Domestic Product GHG Greenhouse Gas GRM Grievance Redress Mechanism GRS Grievance Redress Service IFI International Financial Institution IFR Interim Financial Report IPCC Intergovernmental Panel on Climate Change IPF Investment Project Financing IPF Investment Prioritization Framework IRR Internal Rate of Return ISA International Standards on Auditing IT Information Technology LAP Land Acquisition Plan M&E Monitoring and Evaluation MCF Methane Correction Factor MFD Maximizing Finance for Development MHU Ministry of Housing and Utility MPA Multiphase Programmatic Approach MRF Materials Recovery Facility MSW Municipal Solid Waste NPV Net Present Value
NRW Non-Revenue Water O&M Operation and Maintenance OCCR Operating Cost Coverage Ratio OP Operational Policy P/NP RLF Polotsk/Novopolotsk RLF PAD Project Appraisal Document PCT Project Coordinating Team PDO Project Development Objective POM Project Operational Manual POPs Persistent Organic Pollutants PPP Purchasing Power Parity PPSD Project Procurement Strategy for Development QCBS Quality- and Cost-Based Selection RAP Resettlement Action Plan RDF Refuse Derived Fuel RFB Request for Bids RFQ Request for Quotation RLF Regional Landfill RPF Resettlement Policy Framework SCD Systematic Country Diagnostic SOE State-Owned Enterprise SOP Series of Projects SORT Systematic Operations Risk-Rating Tool STEP Systematic Tracking of Exchanges in Procurement SWM Solid Waste Management TA Technical Assistance TTL Task Team Leader ToRs Terms of Reference UNDESA UN Department of Economic and Social Affairs UPIP Utility Efficiency Improvement Plan WB World Bank WSS Water Supply and Sanitation WTO World Trade Organization WUPI Water Utility Performance Indicators WWTP Wastewater Treatment Plant
The World Bank Utility Efficiency and Quality Improvement Project (P164260)
TABLE OF CONTENTS
DATASHEET ...... 1 I. STRATEGIC CONTEXT ...... 6 A. Country Context...... 6 B. Sectoral and Institutional Context ...... 7 C. Relevance to Higher Level Objectives ...... 15 II. PROJECT DESCRIPTION ...... 17 A. Project Development Objective ...... 17 B. Project Components ...... 18 C. Project Beneficiaries ...... 22 D. Results Chain ...... 24 E. Rationale for Bank Involvement and Role of Partners ...... 24 F. Lessons Learned and Reflected in the Project Design ...... 25 III. IMPLEMENTATION ARRANGEMENTS ...... 27 A. Institutional and Implementation Arrangements ...... 27 B. Results Monitoring and Evaluation Arrangements...... 27 C. Sustainability ...... 28 IV. PROJECT APPRAISAL SUMMARY ...... 29 A. Technical, Economic and Financial Analysis (if applicable) ...... 29 B. Fiduciary ...... 35 C. Safeguards ...... 37 V. KEY RISKS ...... 41 VI. RESULTS FRAMEWORK AND MONITORING ...... 44 ANNEX 1: Implementation Arrangements and Support Plan ...... 57 ANNEX 2: Water Supply and Sanitation (WSS) Background...... 62 ANNEX 3: Detailed Description of Solid Waste Management (SWM) Investments ...... 68 ANNEX 4: Financial and Economic Assessment ...... 70 ANNEX 5: Greenhouse Gas Accounting Analysis ...... 87 ANNEX 6: Map of project sites ...... 95
The World Bank Utility Efficiency and Quality Improvement Project (P164260)
.
DATASHEET
BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Project Name
Belarus Belarus Utility Efficiency and Quality Improvement Project
Project ID Financing Instrument Environmental Assessment Category Investment Project P164260 A-Full Assessment Financing
Financing & Implementation Modalities
[ ] Multiphase Programmatic Approach (MPA) [ ] Contingent Emergency Response Component (CERC)
[ ] Series of Projects (SOP) [ ] Fragile State(s)
[ ] Disbursement-linked Indicators (DLIs) [ ] Small State(s)
[ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country
[ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster
[ ] Alternate Procurement Arrangements (APA)
Expected Approval Date Expected Closing Date
14-Jun-2019 31-Mar-2025
Bank/IFC Collaboration
No
Proposed Development Objective(s)
The Project Development Objective (PDO) is to improve the quality and efficiency of water and wastewater services, and support the introduction of regional solid waste management.
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Components
Component Name Cost (US$, millions) Component 1. Improving water and wastewater services at utility/service 73.00 provider level
Component 2. Strengthening utility performance 2.00 Component 3. Enhancing the solid waste management process in the 25.00 country
Component 4. Project Management 1.00
Organizations
Borrower: Republic of Belarus Implementing Agency: Ministry of Housing and Utilities
PROJECT FINANCING DATA (US$, Millions)
SUMMARY -NewFin1
Total Project Cost 101.00 Total Financing 101.00 of which IBRD/IDA 101.00 Financing Gap 0.00
DETAILS-NewFinEnh1 World Bank Group Financing
International Bank for Reconstruction and Development (IBRD) 101.00
Expected Disbursements (in US$, Millions)
WB Fiscal 2019 2020 2021 2022 2023 2024 2025 Year
Annual 0.00 5.05 15.15 20.20 30.30 20.20 10.10
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Cumulative 0.00 5.05 101.0 20.20 40.40 70.70 90.90 0
INSTITUTIONAL DATA
Practice Area (Lead) Contributing Practice Areas Water Social, Urban, Rural and Resilience Global Practice
Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks
Gender Tag
Does the project plan to undertake any of the following? a. Analysis to identify Project-relevant gaps between males and females, Yes especially in light of country gaps identified through SCD and CPF b. Specific action(s) to address the gender gaps identified in (a) and/or to Yes improve women or men's empowerment c. Include Indicators in results framework to monitor outcomes from actions Yes identified in (b)
SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)
Risk Category Rating
1. Political and Governance ⚫ Substantial
2. Macroeconomic ⚫ Substantial
3. Sector Strategies and Policies ⚫ Substantial
4. Technical Design of Project or Program ⚫ Moderate
5. Institutional Capacity for Implementation and Sustainability ⚫ Substantial
6. Fiduciary ⚫ Moderate
7. Environment and Social ⚫ Substantial
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The World Bank Utility Efficiency and Quality Improvement Project (P164260)
8. Stakeholders ⚫ Substantial
9. Other
10. Overall ⚫ Substantial
COMPLIANCE
Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✓] No
Does the project require any waivers of Bank policies? [ ] Yes [✓] No
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 ✔ Performance Standards for Private Sector Activities OP/BP 4.03 ✔ Natural Habitats OP/BP 4.04 ✔ Forests OP/BP 4.36 ✔ Pest Management OP 4.09 ✔ Physical Cultural Resources OP/BP 4.11 ✔ Indigenous Peoples OP/BP 4.10 ✔ Involuntary Resettlement OP/BP 4.12 ✔ Safety of Dams OP/BP 4.37 ✔ Projects on International Waterways OP/BP 7.50 ✔ Projects in Disputed Areas OP/BP 7.60 ✔
Legal Covenants
Sections and Description Prior to the start of operation of the Polotsk/Novopolotsk RLF, Vitebsk Oblast shall develop a roll- out plan for closure of existing dump sites in the area serviced by said RLF and shall have allocated sufficient resources for the purpose, all in form and manner satisfactory to the Bank (Schedule 2, Section IV. A (i) of the Loan Agreement).
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Sections and Description (a) Within twelve (12) months of the Signature Date, the MHU develops a rollout plan (Plan) acceptable to the Bank for public WSS utility benchmarking at the national level and (b) within twenty four (24) months of the Signature Date, the Plan be implemented (Schedule 2, Section IV. A (ii) of the Loan Agreement).
Conditions
Type Description Effectiveness The Borrower has adopted a Presidential decree successor to Presidential Decree 417 dated August 12, 2008 which established the Project Coordinating Team (PCT), assuring the continuity of the functions of the PCT in respect of the Project. Article V: 5.01
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I. STRATEGIC CONTEXT
A. Country Context
1. The Republic of Belarus is a landlocked country situated in northeastern Europe. It is bordered by Latvia and Lithuania to the northwest, Poland to the west, Ukraine to the south, and Russia to the east and covers an area of about 207,595 km2 (80,153 square miles). Belarus has a total population of about 9,491,823 people, about 21 percent of whom live in rural areas and about 54 percent of whom are female.
2. Since the collapse of the Soviet Union, Belarus has pursued a transition path characterized by the gradual opening of the economy to private sector development and limited reform of the governance system of state-owned enterprises (SOEs). Until 2008, Belarus performed extremely well in terms of per capita gross domestic product (GDP) growth, human development, and poverty reduction, but at the expense of increased external debt and dependence upon primary commodity prices. From 1996 to 2000, real GDP growth averaged roughly 6.3 percent per year, and in 2001–2008, it accelerated further to 8.3 percent per year—more rapidly than the 5.7 percent average for both the Europe and Central Asia region, and the 7.1 percent average for the Commonwealth of Independent States. Economic growth was accompanied by a remarkable decline in the number of households below the national poverty line and an increase in the incomes of households at the bottom 40 percent. From 2003 to 2014, Belarus posted the largest reduction in poverty rates in the Europe and Central Asia region. Measured at the internationally comparable purchasing power parity (PPP) of US$5 per day threshold, the poverty headcount in Belarus fell from 32 percent in 2003 to less than 1 percent in 2014, compared to the Europe and Central Asia average which fell from 38 percent in 2003 to 13 percent in 2013. Inequality declined along with poverty and is low by regional standards.
3. The financial crisis of 2008 and the gradual revision of the terms fixing the price of oil imports from the Russian Federation ushered the end of Belarus’s growth boom. In 2009, the economy expanded by only 0.2 percent, and while demand-management measures led to a short-term growth rebound in 2010–2011, the economy never resumed the vigorous expansion path of the previous decade. From 2009–2014, annual growth averaged 3 percent, and in 2015–2016, the economy entered a recession (in 2015 and 2016, real GDP decreased by 3.8 percent and 2.6 percent respectively). The downturn put real income growth on hold, rendering households more vulnerable. In 2015, the poverty headcount (at PPP US$10 per day) increased by 2 percentage points at the national level and even more in rural areas, where the poverty headcount increased by 4.4 percentage points in just one year.
4. The cyclical recovery of Belarus’s economic recovery continued in 2018 and early 2019, supported by stability-oriented macro policies, including several fiscal adjustment measures. Over 2015-2017, the fiscal adjustment of 2.7 percent of GDP has been achieved, consisting of the pension age increase, hike in utility tariffs, and revenue mobilization measures. However, rapidly rising public debt, largely (about 90 percent of the total) denominated in foreign currency and uncertainty about negative spillovers from new energy taxation system in Russia, pose macro risks. General government public debt, including publicly guaranteed debt, increased sharply in the wake of economic downturn, from 38 percent of GDP in 2014 to 53 percent in 2015, and remained at this level into 2018. According to the latest DSA available (by IMF as a part of the 2018 Article IV Consultation) public sector debt is projected to peak at
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56 percent of GDP in 2023 under the assumption of modest economic growth of around 2 percent over the medium term, while public gross financing needs are forecasted to reach 6-8 percent of GDP.
5. Going forward, such high exposure to foreign currency-denominated public debt, coupled with exchange rate volatility may require adjustment of fiscal expenditures to ensure macro-fiscal sustainability. Given that a half of Belarus’s GDP is produced by SOEs, tightening of the external environment and volatility of economies of the main trading partners, will add to these pressures, narrowing the fiscal space. Under these circumstances, the ability of the government to finance utility sectors, including water, sanitation, and solid waste management, – which are almost exclusively owned and run by the government – may become limited. Consolidation measures, focused on reducing a primary balance, would inevitably require decrease in capital expenditures, including on infrastructure and public utilities sectors.
6. Belarus faces a number of climate and disaster risks. ThinkHazard1 indicates that the country faces high risk of river and urban flooding, as well as high risk of wildfires, and medium risk of water scarcity, extreme heat and earthquakes. A high risk of flood hazard indicates that potentially damaging and life-threatening floods are expected to occur at least once in the next 10 years, and that with climate change, there is high confidence that the present hazard level is expected to increase in the future due to the effects of climate change (more frequent and intense precipitation days in winter and an increase in the number of extreme rainfall events). Damaging floods occurred in Belarus 10-12 times over the last 50 - 70 years. Water utilities infrastructure can also be affected but impact is usually localized and temporary in nature. Modeled projections of future climate identify a likely increase in the frequency of fire weather occurrence in this region, including an increase in temperature and greater variance in rainfall. Simultaneously, the country faces a medium water scarcity risk, meaning that there is up to a 20% chance that droughts will occur in the coming 10 years, and this will likely be exacerbated by climate change.
B. Sectoral and Institutional Context
Water Supply and Sanitation
7. The available water resources in Belarus are sufficient to meet both current and future demands. Surface water resources are mainly represented by river runoff, which in average years constitutes 57.9 km3. Rivers of the Black Sea basin comprise about 55 percent of annual flow, and rivers of the Baltic Sea basin 45 percent. A big part of the river water flow (34 km3 or 59 percent) is formed within the country. Groundwater resources are abundant, and the yearly volume of fresh water abstraction represents less than 3 percent of the total volume of fresh water generated. Water utilities are the main users of water resources—31 percent of the water is used for agriculture, 20 percent for industries, and the remaining 49 percent for residential consumption.
8. Excessive iron content is the main drinking water quality issue in urban areas, while insufficient wastewater treatment leads to surface water quality problems in some places. A large majority (about 84 percent) of the country’s water supply needs are met by groundwater supplies, with the notable exception of the capital city, Minsk, where surface water is used for the production of potable water.
1 ThinkHazard! provides a general view of the hazards, for a given location, that should be considered in project design and implementation to promote disaster and climate resilience. Online: http://thinkhazard.org/en/
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Excessive iron content is the main water supply concern; about 20 percent of citizens are currently supplied with water whose iron content exceeds national standards (0.3 mg/l). Excessive iron in potable water can lead to a number of health and aesthetic issues, including bad taste and increased risk of iron overload which can lead to hemochromatosis a condition that can affect the liver and other organs, staining of materials such as clothes, and clogging of pipes due to iron compound residues. Iron residues can also be secondary contaminants because they can harbor harmful bacteria. Bacteriological tests reportedly fail to comply with national standards in 1–3 percent of cases, which could be further improved. The main potable water quality standards are largely aligned with the World Health Organization recommendations and with European Union (EU) standards. However, there is inadequate wastewater treatment. Evidence of this situation is particularly visible downstream from large regional and industrial centers. The largest proportion of wastewater is generated in the housing and communal services sector (around 75 percent of the aggregated volume of wastewater); industrial polluters also contribute considerably to water pollution. Surface water quality is extensively monitored and reported using the Water Pollution Index (multiparameter composite indicator), and a report suggests that the majority of surface water is classified as moderately polluted. The quality and quantity of wastewater effluents discharged into the surface waters of the main river basins differs significantly. Due to population and industrial density, water bodies in the Dnepr River basin are exposed to the most significant anthropogenic impact, while rivers in the basins of Neman, Zapadnaya Dvina, and Zapadnyi Bug receive a much smaller pollution load. For treated wastewater effluent quality standards, in Belarus the maximum concentration requirements are comparable to those of the EU (outside of environmentally sensitive areas) and are dependent on the water quality status of receiving waters.
9. The Government’s policy orientation in the water and wastewater sector is well defined. Sector responsibilities are clearly assigned, and the main functions (policy formulation, regulation, service provision) are unbundled, a key condition for good sector governance. The sector’s policy is oriented toward (a) full coverage of services, including in rural areas; (b) continuous provision of safe potable water; (c) affordable services for all segments of the population; (d) improvement of systems’ operational efficiency (with reduction of water losses and increased energy efficiency); and (e) environmental protection.
10. The water supply and sanitation (WSS) sector is governed by the 1998 Water Code, which is the key legislative document defining the main components of the sector’s institutional and regulatory framework. The Central Government develops sector policy and strategy and controls their implementation. At the national level, the Ministry of Housing and Utilities (MHU) is the sector line ministry which coordinates management of the sector with other national authorities, implements the state water policy, monitors and supervises water provider operations, and compiles sectoral data. Regional administrations at the oblast level are closely involved in sector coordination and financing, while local authorities and their service providers are responsible for water service provision. At the district and city levels, local councils of deputies and executive committees are ultimately responsible for water and wastewater services. These services are provided in major towns by utilities specialized in the provision of water and wastewater services, while elsewhere multiutilities provide services across several sectors, including solid waste management (SWM). In 2016, there were 26 specialized WSS utilities (vodokanals) providing WSS services to customers, and 113 multiservice utilities providing a range of communal services, including WSS. The Ministry of Antimonopoly Regulation and Trade is responsible for establishing the WSS tariff methodology, monitoring its implementation, and endorsing WSS utilities’ tariff requests before they are approved at the oblast level by the respective executive committees.
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11. Belarus is currently developing its new Water Strategy, which will run to 2030. It is expected that the main goal of the new strategy will be to achieve long-term water security by delivering on long- term targets in the field of protection and use of water resources, such as the provision of universal access to clean and affordable potable water, access to adequate sanitation services for households, improving the quality of natural waters, halving the share of untreated effluents and increasing the reuse of water, and improving water-use efficiency in all sectors of the economy.
12. Current residential tariff levels guarantee access to services at an affordable cost despite recent increases, but they still do not cover long-term operating costs. Belarus water service tariff structure is fairly unique, with affordability in mind, but with the recent trend of tariff increases toward cost recovery. The residential tariff is made of two blocks: the first block is subsidized (below unit cost) national tariff for a maximum daily consumption of 140 L per person, while the second block is tariff for consumption exceeding this amount (above unit cost). Even though WSS tariffs could legally be set at the regional (oblast) level, in practice, there is a national first block tariff, as well as a cap on its increase (total utility costs cannot increase more than US$5 per year per household). In June 2012 (the most recent data available), an average monthly household consumption of 3.5 m3 would lead to a water and wastewater bill of BYR 5,100, which represents less than 1.2 percent of the monthly disposable resources for more than 99.8 percent of the population.2 Tariffs and their evolution are represented in table 1.
Table 1. Residential Tariff Evolution (water/sanitation) in Constant BYR per m3
Service Tariff January 2010 January 2011 January 2013 Evolution 2010–2013 Water Average 1,164 1,767 1,447 +24% Base 1,350 900 Additional 4,150 3,750 Wastewater Average 732 1,071 970 +32% Base 700 550 Additional 3,190 2,800
13. The Ministry of Antimonopoly Regulation and Trade calculates the subsidized first block household tariff for consumption of up to 140 litres per person per day by following a methodology called ‘target estimated tariff’ for the WSS services. In simplified terms, the methodology uses economically justified standardized costs for materials, labor, electricity and overheads, depreciation, taxes, and planned savings for the determination of the tariff. This means that norms are set for all basic cost components. These uniform rates apply to all utilities irrespective of their specific cost structure and needs. The result is that despite significant differences in unit costs for service provision, service providers end up with the same national first block household tariff, which is leading some of them to chronic financial difficulties. The Government’s objective of eliminating operating subsidies and cross- subsidization and to bring tariffs to cost recovery level over the midterm period is being gradually achieved through annual tariff increases. The Government’s projection is that recovery of utility costs by the population will exceed 70 percent in 2018, while plans have been made to ensure 100 percent recovery of the costs of services such as the technical maintenance of water supply and disposal, collection, disposition, and recycling of household wastes.
2 World Bank. 2013. Republic of Belarus Municipal Water Sector Review. Report No: ACS4459.
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Sector Service Performance
Water Supply and Sanitation
14. Water and wastewater infrastructure exists but it is aging and requires urgent modernization. Although significant national investment programs throughout the last decade have enabled Belarus to considerably improve the quality of water and wastewater services, major challenges remain, and substantial additional investments are required to close coverage gaps in rural areas, expand wastewater treatment capacity, address remaining water supply quality issues, and improve the performance of water utilities and service providers. The level of access to water supply and wastewater services is high by regional standards and has shown steady improvement in the last period. Due to large investments since 2006, access is high—water supply (centralized piped) coverage is above 86 percent and sewerage coverage is 74 percent. However, while in urban areas 95 percent to 100 percent of the population is served by centralized water systems, in rural areas, 20 percent of the population lacks access to centralized water systems.
15. Improving the quality of drinking water is a Government priority. The Clean Water Program (aiming to provide 100 percent of the population with adequate quality drinking water by 2025) set clear nationwide baselines and targets for indicators, such as coverage of services and the quality of potable water. The Clean Water Program included the installation of about 50 new iron removal plants. The program also stressed the need for introducing advanced technologies, improving utility management and structure, and reducing costs through energy-saving technologies, optimization of processes, and so on.
16. Due to obsolete equipment and technologies, wastewater collection and treatment often fails to meet acceptable service quality standards. Most municipal wastewater treatment plants (WWTPs) were built in the 1970s and 1980s and were, therefore, not designed to remove nutrients like nitrogen and phosphorus. Furthermore, the lack of proper maintenance and technological upgrades have degraded a significant portion of existing wastewater facilities, rendering them effectively nonoperational.
17. In many cities, low operational efficiency coupled with below cost-recovery user charges strains public utility and communal budgets, forcing local authorities to postpone important infrastructure rehabilitation and expansion investments. Local-level efforts to push for operational efficiencies and proper planning are limited due to the lack of financial incentives in the sector and strong dependence on the Central Government. The result of the application of a national first block household WSS tariff, which does not cover the cost of services, leads to significant cross-subsidization between customer categories and cross-subsidization representing a vulnerability for the entire sector since less than 2 percent of customers account for 77 percent of revenues. The difference between the revenues generated by household tariffs and local utility costs associated with WSS services provision is generally covered either by cross-subsidies or transfers from the local and central governments. The cross-subsidization between customer categories is extremely high by international standards—a clear source of financial vulnerability for the sector. At the country level, nonresidential tariffs are on average eight times the residential tariffs.3
3 World Bank. 2013. Republic of Belarus Municipal Water Sector Review. Report No: ACS4459.
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18. A 2013 World Bank Municipal Water Sector Review highlighted the acute priority of improving the sector’s performance and efficiency in several ways, with a number of key recommendations as summarized in the following paragraphs:
• Performance improvements, planning, and benchmarking. Utility regulation could be reinforced by the introduction of benchmarking. While reports from oblasts and the MHU show that a large number of indicators are currently measured, this information is not translated in a way that allows managers to assess performance or monitor progress. As a result, business planning at the utility level is limited—where prepared business plans are not medium- or long-term plans, instead they provide forecasts for the year to come.
• Operational efficiency. Water losses and electricity expenses are major contributors of utility costs, with potential for large efficiency savings. Human resources policies are not geared toward utility performance: incentives are rare and generally not linked to the achievement of targets. Efficiency gains could be fostered at all levels by developing a performance-oriented culture.
• Financial and economic sustainability. Investment planning is not geared toward efficiency. Investments are often identified without reference to a master plan and appraised without clear procedures to guarantee efficiency. A capital financing strategy could help balance contributions from taxpayers and service users. High dependence on subsidies (investment and operational), high cross-subsidization between categories of customers, a lack of transparency in financial management (FM), and a significant proportion of service providers not being able to recover the costs of service provision aggravate these challenges.
• Performance-orientated management. There should be measures to improve the efficiency of utility operations including the development of a performance-oriented management culture, the recruitment of managers on a competitive basis, and the development of business management competencies.
19. The Water Sector Review concludes that the preparation of a national sector strategy document would help foster understanding of and support for the new sector policies from all stakeholders and development partners, serving as a detailed road map for the development of the sector’s service provision, performance, and efficiency.
Solid Waste Management
20. Belarus generates 3,656,000 tons of municipal solid waste per year at an average of 1.05 kg per capita per day, compared to an average of 1.18 kg per capita per day for the broader region of Europe and Central Asia. It is estimated that about 42 percent of mixed waste is organic and 16 percent is dry recyclables, for the country.4 In urban areas, organic waste makes up 38–46 percent of the mixed waste,
4 United Nations Economic Commission for Europe (UNECE) 2016.
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while dry recyclables comprise 20 percent.5 All municipal solid waste is collected and managed in some form.
21. Municipal solid waste collection in Belarus is available for the entire urban and rural population although the quality of disposal services available varies. Approximately 80 percent of total collected waste is disposed of in more than 156 primary landfill sites at both the rayon and city levels. In general, these landfills utilize a bottom liner and leachate collection with recirculation rather than treatment. At larger landfills, a gas collection system is used. In addition, there are approximately 1,700 mini-landfills used by rural communities that are not maintained with a bottom liner. These small disposal sites do not have environmental protection controls in place and are inefficient to operate because such a large number exist. They are difficult to control or upgrade and are an environmental liability. This is a large reason why a regional approach to SWM has been decided.
22. Waste collection and disposal services are mainly provided by public enterprises, although a few private operators have been active in the past few years for collection of household waste in partnership with public enterprises. State-owned organizations are responsible for integrated waste collection, transport, landfill operations, and any sorting/separation activities. These organizations are organized under the municipal department of public utilities, which also coordinates local public services like heat supply, water supply, electricity supply, maintenance of infrastructure, and so on. Approximately, 90 percent of these services are provided by municipally owned organizations, while in Minsk, they are provided by a joint venture between the municipality and a (foreign) private company. Private sector participation is limited to a specific portion of services like collection and transport services for legal entities and condominiums. There are no waste pickers at the disposal sites. The total share of the private sector in municipal SWM is estimated at 13 percent measured in terms of quantities collected and moved.
23. The SWM system is centrally controlled, including the setting of minimum and maximum fees to cover operational expenditures. The fees are low relative to the region and estimated to be at maximum 0.18 percent of the average household income. There is some subsidization of the waste management sector by the district and city budgets although operating costs are largely covered by the fee. Investments in the system are however hampered by low fees and are subsidized by general revenues. Information on waste quantities, which is the basis for all sector planning, should be taken with some caution as reporting is measured in cubic meters based on estimates of collected volumes, and then converted into tons using a waste density norm. More generally, the waste reporting system is fragmented and divided across several organizations. Public awareness about the generators of waste is low; few substantial awareness programs are carried out due to the lack of budget support, apparently as it is not considered to be of high priority by the Government.
24. Belarus’ legislation on waste management is gradually being harmonized with international law and practices, particularly those of the EU. The recently adopted 2017–2035 National Strategy on Municipal Solid Waste and Recyclables Management, promotes several important principles, including the respective (a) waste hierarchy, (b) polluter pays, (c) sustainable waste management, (d) best available and most cost-effective technologies, and (e) openness and transparency principles. The strategy includes five main actions to be implemented before 2030, among others, (a) improvement of existing infrastructure, including introduction of regional landfills (RLFs) and supporting infrastructure; (b)
5 Data provided by the MHU 2018.
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introduction of a deposit system for plastic, glass bottles, and cans; (c) production of refuse derived fuel (RDF); (d) introduction of biological treatment (composting) in addition to mechanical treatment; and (e) construction of an incinerator in Minsk with a capacity of 500,000 tons per year. Total investment needs are estimated at €1.2 billion. To fund these improvements, an environmental charge on landfilled waste and a near doubling of the current tariff after 2021 are being considered. The proposed project will support the Government’s efforts toward regionalization of the solid waste disposal service in Belarus.
25. The National Strategy has undergone the first year of implementation with significant results. The legal and regulatory framework are being prepared, designs for an RDF facility from the sorted Grodno waste are being developed, pilot projects with regard to organic waste management are being undertaken, and plans are being developed for additional projects in 8–10 cities focused on organic waste management. Through the National Strategy, the Government is targeting the majority of waste to be recycled and additional legal and regulatory frameworks to be in place, such as for extended producer responsibility. For Minsk specifically, waste-to-energy is being contemplated, although the financial costs are considerably higher than for landfills.
World Bank Involvement
26. The World Bank has been successfully supporting the water sector in Belarus since 2008, with specific focus on improving the quality of WSS services. The Water Supply and Sanitation Project (P101190) constituted the World Bank’s first engagement in the sector. Approved in September 2008, this US$60 million project, succeeded in completing 18 WSS subprojects that are currently operational. In March 2014, following a Government request for additional assistance, US$90 million Additional Financing (AF) was approved, adding another 27 project sites to the original project scope. The AF also supports the preparation of feasibility studies for future investments and activities that aim to improve the efficiency of water supply and wastewater services. By the end of 2018, an estimated total of 324,000 people living in 20 districts across the country had benefited from the project through improved access to clean and reliable water services.
27. The World Bank has also supported the sector through the 2013 Municipal Water Sector Review of the Republic of Belarus (Report No. ACS4459) which provides a comprehensive diagnostic of the water and wastewater sector’s institutional, organizational, technical, and economic aspects, with a specific focus on urban areas. It documents achievements made to date, identifies areas in need of strengthening, and suggests policies to help guide the Government as it seeks to increase the efficiency and sustainability of water and wastewater services.
28. The World Bank has supported analytical work, policy dialogue, and a loan focused on SWM in Belarus. As part of an Advisory Services and Analytics product titled ‘Municipal Solid Waste Management Road Map for Policymakers’, there is a dedicated case study on the solid waste sector in Belarus for the global audience. Additionally, the World Bank has been involved in a national policy dialogue with the Government regarding the broader SWM sector through the platform of the Grodno project, titled ‘Integrated Solid Waste Management Project’. The policy dialogue focused on the need to create economic incentives and more generally, an enabling environment to encourage the diversion of waste toward recycling and recovery, including RDF. Finally, the Grodno project resulted in increased environmental benefits from integrated SWM in the City of Grodno through the recovery and reuse of
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recyclable materials. It also strengthened national capacity to manage hazardous wastes associated with persistent organic pollutants.
Future WSS and SWM Sector Development
29. In December 2017, the Council of Ministers approved the Concept of Improvement and Development of the Housing and Utilities Sector until 2025, which focuses on the following areas of WSS sector: (a) strengthening the control function of Government authorities in the provision of quality water to households; (b) developing oblast-level WSS systems and utilities; (c) constructing wastewater treatment facilities instead of filtration fields at the oblast level, wherever economically efficient; (d) replacing water supply and sewerage networks that have exceeded their service life; (e) optimizing water supply schemes in rural residential communities; (f) providing high-quality drinking water to 100 percent of consumers by 2025; (g) developing a mechanism to engage households in the construction of municipal WSS systems; (h) introducing modern methods of WSS network diagnostics and automated process management systems; (i) creating methodological mechanisms to assess the technical status of WSS utilities; (j) developing a national strategy for sludge utilization; (k) creating and implementing geoinformation systems; and (l) introducing water recycling systems at iron removal stations.
30. Future development of the SWM sector aims at: (a) improving legislation in the field of municipal solid waste (MSW) and recyclables management, particularly in terms of tightening control over the operation of landfill facilities; (b) establishing uniform requirements for the organization of separate waste collection and disposal; (c) developing a separate MSW collection system with renovation and unification of containers and garbage trucks; (d) developing a program for consumer waste management based on best international practices and for construction of new landfills and waste transfer stations, and closure and recultivation of landfills and mini-landfills; (e) improving tariff regulation; (f) optimizing the accounting system to record the amounts of produced and landfilled waste and its morphological composition; (g) introducing technologies for the production of alternative fuel such as RDF from MSW and incineration of waste for heat and power generation; (h) introducing technologies of aerobic composting of the organic part of solid waste; (i) introducing a deposit system for packaging management; and (j) conducting an outreach campaign on solid waste and recyclables management and implementation of environmental education programs in educational institutions.
31. The MHU is undertaking a national feasibility study to operationalize the National Strategy for Municipal Solid Waste and Recyclables Management through a state program. The feasibility study, still in draft, is defining the exact number of RLFs6 based on a range of scenarios for treatment and disposal of waste and varied assumptions for demographics, income growth, and other factors. The results of the feasibility study will be put into a State Program which will be mandatory to implement through the five- year utility implementation programs developed by each utility. By 2035, full regionalization is expected. The State Program will divide the country to establish clear regional boundaries for waste sheds.7 Each
6 An RLF is a landfill where waste is consolidated and managed from multiple jurisdictions in a defined region. For this project, an RLF is assumed to be a sanitary landfill for the region. A sanitary landfill is a landfill managed in an environmentally sound and safe manner with the necessary monitoring in place. A sanitary landfill includes a bottom liner and systems to collect and treat leachate and landfill gas. It involves daily compaction and covering of waste and monitoring of the landfill gas as well as the surrounding soil, water, and air. 7 A waste shed is a defined geographical area over which waste management services are provided. It most commonly covers multiple jurisdictions.
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waste shed will be made up of multiple jurisdictions that will apply a regional approach to SWM within their boundary. The State Program aims to improve SWM treatment and disposal practices and efficiency of operations by ensuring management of a larger quantity of waste in an environmentally sound manner. The Polotsk/Novopolotsk RLF (P/NP RLF) will be the first regionalization effort with sanitary landfills and the subsequent waste sheds, targets, and timelines will be determined through the State Program.
C. Relevance to Higher Level Objectives
Relationship to CPF
32. The World Bank Group has prepared a Country Partnership Framework (CPF) for Belarus for FY18–FY22,8 which aims to support sustainable and inclusive growth and improve living standards by focusing on three interlinked focus areas: (1) creating opportunities for private sector to grow and for more efficient public investment; (2) maintaining the country’s human capital edge; and (3) improving the contribution of infrastructure to climate change management, economic growth, and human development, supplemented by a cross-cutting theme related to promoting the greater use of data and access to information in public decision making. The proposed project contributes to Focus Area 1 and Focus Area 3 of the CPF and directly contributes to the cross-cutting area of greater public access and use of data through its benchmarking activities.
33. Focus Area 1. The project’s financing of key WSS and SWM infrastructure and support to utilities is geared toward stimulating efficiency at the operational level, creating opportunities for more sustainable public investment, encouraging cost recovery within utilities, and perhaps in the long term, increasing the likelihood of commercial financing.
34. Focus Area 3. Improving utility efficiency and performance, supporting the Government’s capacity to manage water and waste, and enhancing the enabling environment for cost recovery of service providers is closely linked to improving the contribution of infrastructure to economic growth and human development. Increasing access to water and sanitation services and establishing regional SWM through environmentally sound methods are key to improving livelihoods and health and protecting natural resources. The project has significant potential for mitigation of climate change and its co-benefits, as energy efficiency and other performance improvements (for example, nonrevenue water [NRW]) link directly with climate-smart activities, while improvements in the management of waste, including incorporation of a landfill gas collection system for the RLF, will result in a positive impact with regard to climate change mitigation. The improvements in the management of waste, including incorporation of a landfill gas collection system for the RLF, will reduce greenhouse gas (GHG) emissions. Additionally, more than half of the water supply and wastewater investments comprise the rehabilitation of existing facilities, with positive impacts on GHG emissions due to modernization of equipment. It should be noted that Belarus currently imports 87 percent of its energy that is largely comprised of natural gas.9 Ensuring water security for its people, economy and environment is key to Belarus’ ability to manage the physical risks from climate change. In terms of climate adaptation, the anticipated impact of climate change will be
8 Report No. 123321-BY, endorsed by the World Bank Board of Directors on April 3, 2018. 9 World Bank. 2014. Belarus Net Energy Imports. https://data.worldbank.org/indicator/EG.IMP.CONS.ZS?locations=BY&view=chart; International Energy Agency. 2015. Belarus Energy Factsheet. Online: https://www.eu4energy.iea.org/Documents/Belarus-Infographic-FINAL.pdf
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reflected in the design of both WSS and SWM facilities that will be financed by the project through consideration of flood protection, supply norms, and surface and ground water level changes. In addition to being designed to be resilient to floods and the expected future climate impacts of increased weather variability and possible water scarcity, they will also directly limit the impact of floods. Both wastewater and SWM investments are designed to decrease the risk associated with pollution following heavy precipitation and/or flooding. In the case of wastewater treatment, upgraded and expanded treatment plants will limit the quantity of effluent and untreated wastewater flowing into water bodies following a flood, thereby reducing the impact of floods and reduce the chance of water infrastructure being overwhelmed (thereby likewise reducing the impact of floods. Similarly, with SWM, regional landfills will be designed to prevent leachate impact after heavy precipitation events.
35. Poverty and shared prosperity. The operation is aligned with the World Bank Group’s twin goals of ending extreme poverty and promoting shared prosperity among the poorest 40 percent of the population. Belarus is in the top third of countries in Europe and Central Asia in spatial inequality, and the project’s investments will be targeted at nonmetropolitan areas. The low levels of operational efficiency and service provision to be addressed by the project disproportionately affect the low-income and rural areas where economies of scale are the lowest, while project WSS investments will be targeted toward populations where there is a demonstrated need for urgent WSS intervention (see annex 2 for the WSS project choice methodology). The SWM investments will significantly benefit the populations, mostly rural, living by the mini-landfills and landfills without environmental controls. The landfill fires, leakage of methane, dust, odor, and general lack of environmental controls affect citizens in surrounding areas. The poorer populations who tend to be located closer to these sites are disproportionately affected.
36. The project is aligned with the principle of maximizing finance for development (MFD) as it seeks to support improvements in the enabling environment for high performing utilities to enhance their credit-worthiness and gradually advance towards the level of maturity that could attract commercial financing. This will be achieved both in addressing some of the long-term upstream constraints to commercial investment, namely low efficiency and cost recovery, and assisting high- performing utilities prepare for commercial financing. Additionally, the proposed utility performance ladder for WSS utilities described under Component 1 of the project and in Annex 2 of this document builds on the World Bank Investment Prioritization Framework methodology, where a transparent, rules- based approach to project/utility screening and prioritization is adopted to maximize impact and alignment with sector and utility plans. For SWM, the anticipated economies of scale for treatment and disposal of waste will make investment more efficient and attractive for the private sector. On the solid waste side, the project is also geared towards improving the enabling environment for private sector participation due to regional landfills having economies of scale which, in the future, may become commercially viable and thus may be able to crowd in private finance. The project does not itself directly crowd in commercial financing during its lifetime, which is not an immediate possibility in the water and waste sectors in Belarus.
37. The project is being prepared in collaboration with other international financial institutions active in Belarus, in particular, the European Investment Bank (EIB) to leverage financing for greater impact. As a result, the proposed operations to be financed in parallel will align objectives for WSS service improvement, sector modernization, and performance/efficiency improvement, and adopt a joint approach to investment screening and selection/qualification. EIB financing, which would be provided under a separate parallel project, is expected to be equal to World Bank financing under the project for
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the WSS sector. A separate EBRD-funded operation will support investments only in the capital city, and therefore has no geographical overlap with this project.
II. PROJECT DESCRIPTION A. Project Development Objective
38. The Project Development Objective (PDO) is to improve the quality and efficiency of water and wastewater services and support the introduction of regional solid waste management.
PDO Level Indicators
39. The Project’s achievement of the PDO will be measured via the following indicators:
• People provided with enhanced water supply services10 as a result of the Project (out of which female); • People provided with the required level of wastewater treatment11 (as per national standards for BOD) as a result of the Project (out of which female); and • People provided with environmentally-sound solid waste disposal services as a result of the project (out of which female). • Number of utilities that have prepared and implemented utility performance improvement plans.
10 People provided with enhanced water supply services are defined as people provided with drinking water of satisfactory quality (as per national standards) as a result of the project. 11 People provided with the required level of wastewater treatment (as per national standards for BOD), where required level of wastewater treatment covers access to new sewerage connections connected to improved wastewater treatment, or existing connections made to improved wastewater treatment plant.
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B. Project Components
40. The project creates an incentive framework encouraging the gradual modernization of WSS service providers toward operational and financial sustainability, good practices, and eventually, creditworthiness; and supports the Government of Belarus’ introduction and piloting of a regional SWM approach.
41. The WSS’s aim will be implemented through the performance improvement ladder approach as presented in figure 1.
Figure 1: UEQIP Framework for WSS Performance-Based Project Design
42. Component 1: Improving Water and Wastewater Services at Utility / Service Provider Level (€64.8 million or US$ 73 million). Component 1 aims to improve the operational performance of WSS service providers and enhance the quality of water and wastewater service provision to the people of Belarus through packages of support tailored to the needs of utilities. The component is designed as a comprehensive range of technical assistance (TA), capacity building, and investment support and aims to lift service providers with varying levels of performance to higher levels of performance and increase their eligibility for further support, leading to gradual and continuous improvements. Specifically, this component will finance the following subcomponents:
• Component 1a. Service providers with lower performance (according to the applied two-stage screening criteria) will receive assistance to (a) prepare Utility Performance Improvement Plans (UPIPs), and (b) implement measures identified in the UPIPs to improve performance before being given access to financing in Component 1b.12 The activities may include physical activities (such as the purchase, rehabilitation, or replacement of meters, creation of pressure control zones, NRW reduction measures, energy efficiency measures, and so on) and nonphysical activities (improving the customer database, improving the billing collection ratio, and so on).
• Component 1b. Service providers with better performance (according to the applied two-stage screening criteria) will receive financial support to (a) prepare UPIPs; (b) implement performance
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improvement measures identified in UPIPs (physical and nonphysical activities as above, including NRW and energy efficiency measures); and (c) construct, upgrade, and modernize WSS infrastructure, including water treatment and distribution facilities and wastewater collection and treatment facilities. All utilities in category 1b are required to develop UPIPs within the first year of accessing finance for infrastructure, but UPIP preparation is not a precondition for access to infrastructure financing.
• Component 1c. Service providers with best performance (according to the applied two-stage screening criteria) will receive (a) financial support to construct, upgrade, and modernize WSS infrastructure, including water treatment and distribution facilities and wastewater collection and treatment facilities; (b) TA to improve creditworthiness, develop viable investment plans, and prepare financing proposals for these investments (including proposals to access nongovernment financing from the domestic financial market) and pilot co-financing to improve financial sustainability. 13 Utilities in category 1c are not required to develop UPIPs.
43. A two-stage selection process is used to assess the level of utility performance based on key performance indicators, and to categorize the utilities into categories 1a, 1b and 1c, after which the indicative level and type of support can be determined. The first-stage screening involves a detailed quantitative assessment of the utilities across 13 key Water Utility Performance Indicators (WUPIs). The screening criteria cover the quality of service, economic efficiency, and operational efficiency aspects of utilities. Utilities shall be assessed periodically (at least annually) using a standard framework such as the one suggested, so that performance over time can be assessed. Measuring performance improvements over time will ensure that utilities are incentivized to move up the performance ladder during the project’s implementation. This approach also allows for the assessment of the type and level of support required by utilities, as well as the suggested basis on which to build the national-level benchmarking approach included in Component 2. Based on the categorization of utilities, subprojects are assessed through the second stage screening to ensure their alignment with the project’s overall principles (high impact and value-for-money, demonstrated need, sustainability, and expected positive environmental externalities), as well as their level of readiness. The approach represents a transformational shift in the sector towards evidence-based planning and project prioritization, particularly geared towards encouraging operational and financial sustainability of service providers. Utilities were screened through the above process and categorized under the said categories 1a), 1b) and 1c). Some of the project funds will be initially unallocated and retained for later years of implementation to create additional incentives for lower performing utilities, based on performance improvements and other factors such as readiness. Should the Government of Belarus demonstrate its commitment to the project’s innovative design and if its implementation proceeds well, additional resources could be added to the project in due time.
44. Component 2: Strengthening utility performance (€1.8 million or US$ 2 million equivalent). Component 2 will finance Government activities that support the strengthening of national and local water services institutions. It will support performance improvement implementation and monitoring through the development of long-term strategic sector planning, including improving and/or developing national-
12 The system of performance points provides an assessment of utilities’ relative performance based on a number of Water Utility Performance Indicators (WUPIs) covering operational, efficiency, and economic aspects of utility performance. See annex 2 for the full list of indicators and scoring methods. 13 Pilot own project co-financing, initially recommended to be 5–10 percent of project cost; WUPIs covering operational, efficiency, and economic aspects of utility performance. See annex 1 for the full list of indicators.
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level policies that build on the Clean Water Programs and the implementation of the Water Strategy 2030. Additional activities in Component 2 include (a) development of utility-level information collection and analysis, including developing and/or updating of an information platform (benchmarking); (b) strengthening the national water utility sector regulatory framework; (c) developing guidelines and standards for performance criteria for service providers; (d) strengthening the customer orientation of water utilities and citizen engagement (for example, through supplementing the benchmarking with participatory monitoring elements such as scorecards) and public dissemination of information; (e) introducing a remote meter reading system to collect data from individual water meters in the housing stock in Belarus; (f) developing capacity-building and knowledge-sharing activities based on existing best practices; and (g) carrying out preparatory investment studies as required, including site selection studies, feasibility and detailed design studies, ESIAs, and RAPs. The development of a utility-level information platform aims to link with the CPF’s cross-cutting theme of greater public access and use of data as is described in more detail in this section. Component 2 includes a set of enabling activities linked to the performance ladder of Component 1.
45. Component 2 support will build upon activities developed under the Danube Water Program14 (DWP) and the associated learning program Danube Learning Partnership (D-LeaP), including the following activities:
• Piloting of the data collection and management (DCM) system in a number of selected utilities and their subsequent participation in the Utility Benchmarking Program or associated Danube Regional Benchmarking initiative. The primary objective is to help leading utilities to further improve their services by benchmarking drinking water- and wastewater activities with high- performing utilities of similar size and conditions. Next to a thorough assessment of a utility’s performance, the program offers participants benchmarking workshops and a platform/utility network to learn from leading/best practices and innovations. This subcomponent might specifically finance (a) the adaptation of the DCM to the Belarusian water utility sector context, (b) the contracting of a national coordinator for the benchmarking activities, and (c) the participation of selected utilities in the benchmarking program. This would also include strengthening customer orientation of water utilities and citizen engagement (for example, through supplementing the benchmarking with participatory monitoring elements such as score cards) and public dissemination of information, building on DANUBIS as an example of best practice in public access to information in the WSS sector.15
• Adaptation of D-LeaP curriculum and participation in capacity-building activities. The D-LeaP is designed as a regional, integrated, and sustainable capacity-building initiative and provides a comprehensive curriculum to the staff of water and wastewater utilities. Courses on asset management, energy efficiency, and NRW reduction (leak detection) have been developed by an international technical consultant and have been subsequently adapted, tested, and delivered
14 The Danube Water Program is a regional TA program supporting smart policies, strong utilities, and sustainable services in the Danube region by partnering with regional, national, and local stakeholders. It is implemented by the World Bank and the International Association of Water Supply Companies in the Danube River Catchment Area (known as ‘IAWD’), to develop policy and regulatory instruments and capacity development in the water and wastewater sector in the region’s countries. The activities supported by the program fall under four broad categories: analytical and advisory work, knowledge-sharing, capacity development activities, and a competitive grant window to finance local utility-led initiatives. 15 http://www.danubis.org/eng/about-us/danubis-data-collection-and-management-platform/
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under a trainer-of-trainers model at the national level by national utility associations in various Danube countries. In the project, this subcomponent could finance (a) the training of a set of trainers (ideally from the Belarusian Water Utility Association) in the abovementioned topics, (b) subsequent adaptation and translation of the curriculum to the Belarusian context, and (c) the delivery of these courses to a number of preselected utilities (criteria for selection would be aligned with the screening selection outlined in annex 2).
• Participation in knowledge-sharing activities. The DWP regularly organizes knowledge-sharing activities that are relevant to the challenges of water and wastewater utilities in the region. This subcomponent would finance the participation of Government officials and utility representatives in various conferences, workshops, and seminars. Some of the relevant topics would include access to utility financing, the use of performance-based contracting, regionalization of WSS services, water governance and utility reform, and so on.
46. Component 3: Enhancing the solid waste management process in the country (€22.5 million or US$ 25 million equivalent). Component 3 will pilot a regional approach to SWM and TA to further develop the sector more broadly. One site and waste shed have been identified and the remaining sites will be determined during project implementation. This component includes the following:
(a) (i) Construction of the Polotsk/Novopolotsk Regional Landfill (P/NP RLF), including through the carrying out of civil works for associated infrastructure such as transfer stations and provision of equipment for waste collection, transportation, and handling; (ii) carrying out of the closure and remediation of the existing Polotsk landfill; (iii) development of detailed designs for activities under (i) and (ii) mentioned earlier; and (iv) carrying out of associated construction management and investment monitoring.
(b) (i) Carrying out of preparatory investment studies, such as site selection studies, feasibility and detailed design studies, Environmental and Social Impact Assessments (ESIAs), and Resettlement Action Plans (RAPs); and (ii) construction of RLFs (other than under (a)(i) mentioned earlier), comprising through the carrying out of civil works for associated infrastructure such as transfer stations, material recovery facilities, dumpsite closures, and provision of equipment for waste collection, transportation, and handling, and carrying out of associated construction management and investment monitoring.
(c) Carrying out of sector development studies related to improving the efficiency of the sector such as improvements to the reduction and recovery of waste, financing studies, and public communications campaigns to raise environmental awareness.
47. The Polotsk/Novopolotsk (P/NP) RLF site is the one site identified by the MHU for construction of a RLF serving four rayons. The remaining RLF sites and waste sheds have not yet been selected but will follow criteria detailed in the Technical Analysis under the Project Appraisal Summary. They will be evaluated during project implementation and will follow the requirements of the project’s Environmental and Social Management Framework (ESMF).
48. Component 4: Project management (€0.9 million or US$ 1.0 million equivalent). This component will finance travel, training, audits, and general consulting services support to the Project
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Coordinating Team (PCT). More specifically, this component will finance TA to support the PCT to (a) execute project screening and prioritization, (b) conduct monitoring and evaluation (M&E) activities, (c) implement environmental and social safeguards, (d) train PCT staff, and (e) conduct annual audits for the project and providers.
49. The project has significant potential for mitigation and adaptation co-benefits both in terms of WSS and SWM. Its efficiency sub components under Component 1a and b, particularly efficiency gains, including NRW reduction and energy savings (which are both considered climate-smart activities through their potential to reduce emission), as well as in the modernization of infrastructure across 1b and 1c, are expected to result in large mitigation benefits, while the management of waste via a sanitary landfill rather than the current disposal sites that typically lack environmental controls is also expected to have strong climate benefits. NRW is expected to support utilities better withstand climate shocks to water supply, including water scarcity and drought. Given the existing and future climate vulnerabilities, including river and urban floods, wildfire, and to a lesser extent water scarcity, all project investments will account for climate aspects in their design. The WSS activities, especially those addressing wastewater, will be designed in a flood-resilient manner to ensure environmentally sound and safe transport and treatment of wastewater. For the SWM activities, a regional solid waste management approach creates a more resilient solid waste management system since transport and waste disposal will be streamlined, following the operations and maintenance manual, and will follow safe, environmentally-sound practices to withstand rain and natural disasters. By transitioning from non-sanitary landfills to sanitary landfills, the waste system will drastically improve in how heavy storms and flooding affect the surrounding environment. The leachate collection and treatment systems in the sanitary landfills will be designed to prevent contamination of surrounding areas during periods of heavy rain.
50. The project is expected to reduce GHG emissions, where net emissions reduction over the economic life of the project is estimated to be -1,371,757tCO2-eq. While the project applies a framework approach and details of the subprojects have not yet been finalized, initial findings based on the size of the budget envelope suggest that on average, the project will generate estimated net emissions of -54,870 tCO2-eq annually (full project WSS and SWM results). Refer to paragraphs 90 (WSS) and 96 (SWM) for more information.
C. Project Beneficiaries
51. WSS: The main project beneficiaries are estimated to be around 550,000 people (53.5 percent of them women) residing in all six oblast (regions) of Belarus. Of these, 400,000 will benefit from improved sanitation activities (including wastewater treatment), primarily through the construction, rehabilitation, and modernization of treatment facilities and sewerage systems and 150,000 from access to improved water supply services, including water treatment works, the construction of water supply networks and facilities, and iron removal plants. Service providers directly, and consumers indirectly, will benefit from operational and efficiency improvements, whereas local governments and communities will gain from enhanced services, better quality of drinking water, and cleaner aquatic environments.
52. As illustrated in the CPF for the period FY18–FY22, Belarus is regarded as a leader among Europe and Central Asia countries in giving priority to gender equality. However, there are still gender gaps with low representation of women in the provision of infrastructure and water supply services, especially in managerial and technical positions. In the latest Global Gender Gap Index (2017), Belarus was ranked 26
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out of 144 countries, and compared to its peers, Belarusian women are more educated than men and have a high level of labor force participation. Nevertheless, there are almost three times less women than men employed in electricity, gas, and water supply services, and women’s pay level in these sectors is 17 percent lower than men’s (Belarus Gender Profile, World Bank, 2016). This may be the result of women’s educational choices driven by social stereotypes and discriminatory workplace practices, leading to less women entering the utility sector and if so, in lower paying positions. Thus, only 8 percent of all women employed in electricity, gas, and water supply services held managerial positions in Belarus in 2017.16 Career progression is also limited and the same study found that women are 2.5 times less likely to be given a managerial position than men in white-collar jobs, a trend that is likely mirrored in the utility sector. Research finds that quality training and upskilling opportunities that focus on both technical and management skills can support promotion and an upward professional trajectory.17 However, access to such career enhancing training opportunities can be a barrier for women who are not already heading for promotion.18
53. The findings of the gender analysis19 for the project is that additional education and advanced training, are organized as part of working duties and are standardized. Thus, implementation of investment projects in the communal utilities sector calls for new skills, that go beyond the curriculum of existing training programs. The analysis also shows that there is a national legal framework on training for the WWS service which is regulated by several resolutions that are provided by the Ministry of Housing and Communal Services and the Ministry of Labor and Social Protection. The advanced training of employees and specialists is housed by The State Center for Advanced Training of Executives and Specialists of the Ministry of Housing and Utilities. The Project would work with national institutes20 where appropriate to provide additional specialized courses that would respond to the utility performance improvement plans, ensuring that both men and women from the utilities under the Project participate.
54. The project will carry out rapid gender equality assessments for utilities participating in the Utility Efficiency and Quality Improvement Program. With support from World Bank-executed funds, a tool is currently being developed and tested in two utilities, before a rollout as part of utilities’ efforts in preparing their UPIPs under Component 2. These UPIPs will identify a range of capacity building, investment, and management measures addressing gender disparities in career advancement. The subjects and capacity needs could be very diverse and include both technical subjects (for example, asset management, commercial performance, access to finance, wastewater treatment operations, customer orientation and business planning, water safety planning, and NRW reduction) as well as project management training (for example, management training and training related to World Bank operational policies) which will be determined in the results of the gender analysis and gender equality assessment of specific participating utilities. Utility staff assuming key roles in the implementation and related trainings will thus have increased opportunities for career enhancement especially of women employees through such training and participation in critical assignments. The UPIPs will include measures to ensure that both male and female employees are benefiting from the proposed capacity-building program with the aim to narrow the gender gap. The project will measure to what extent women are participating in career-
16 Labor and Employment in Belarus. National Statistics Committee, Belarus, 2018. 17 World Bank. (forthcoming). Women in STEM: Promoting Women’s Employment in Infrastructure Sectors. October 2018. 18 World Bank. (forthcoming). Women in STEM: Promoting Women’s Employment in Infrastructure Sectors. 19 World Bank. Belarus: Gender Analysis (available upon request). 20 The State Center for Advanced Training of Executives and Specialists; The Technical Accreditation Center; The Belarusian State Center for Accreditation (BSCA).
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enhancing training activities related to the UPIPs with a target of female employees making up at least 35 percent of participants.
55. SWM: The project beneficiaries for the initial SWM investments include four rayons in the Vitebsk Oblast—Rossony, Ushachi, Polotsk, and Novopolotsk. The total population included in the project area is 237,375, and they will benefit from improved waste treatment and disposal services. The total number of project beneficiaries will be greater as the additional investments are determined during project implementation. Waste is currently being disposed of at mini-landfills without environmental controls at the landfill in Polotsk, but after project investments, the waste will go to the P/NP RLF with all environmental controls in place for safe disposal. The Vitebsk Oblast will develop a plan to close the mini- landfills and other area landfills lacking environmental controls in the waste shed, before the start of operations at the RLF.
D. Results Chain
E. Rationale for Bank Involvement and Role of Partners
56. The World Bank has been engaged in supporting Belarus’ water sector for more than a decade and has established a strong partnership with the Government. Through this experience, the World Bank is not only well-positioned to support additional water and sanitation infrastructure investments in Belarus,
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as proved through successful implementation of the ongoing WSS project, but also brings extensive experience with utility efficiency improvement projects involving best practices in different countries. One such TA program is the Danube Water Program that the World Bank has been implementing since 2013 in the Danube River basin and is focused on supporting WSS policy and utility reforms. During this period, this program has supported the development of a large number of asset management, service efficiency improvement, sector governance, and benchmarking activities in the WSS sector and has developed significant capacity. The World Bank is thus positioned to support Belarusian utilities in taking the next step to improve their overall efficiency and effectiveness in delivering water and wastewater services, by not only focusing on infrastructure improvements, but also strengthening their operational and financial performance through the introduction of an innovative incentive framework encouraging the gradual modernization of utilities toward commercial, operational, and financial sustainability and eventually creditworthiness.
57. The World Bank has also been engaged in supporting Belarus’ solid waste sector for eight years, has a strong partnership with the Government, and has provided critical TA to shape the sector. In addition to directly investing in SWM infrastructure in Belarus, the World Bank has worked closely with the Government through policy dialogue and TA, especially regarding the strategy to employ a regional SWM approach nationally. The World Bank brings strong global expertise in helping countries transition to a regional solid waste system. The World Bank has supported governments on multiple fronts, including with technical system design, governance and institutional arrangements, policies, contractual arrangements, operational models, private and informal sector engagement, financial sustainability, and citizen engagement. This experience will add value as Belarus transitions to embrace a regional waste management approach according to the National Solid Waste Management Strategy and the State Program.
58. The World Bank loan is expected to leverage additional resources for greater impact in the sector from the EIB, which is currently preparing a parallel WSS operation in Belarus. Design of the two operations is expected to adopt a similar approach and both operations would be managed by the same project implementation unit.
F. Lessons Learned and Reflected in the Project Design
59. The World Bank’s global experience in water supply, sanitation, and SWM, and its involvement in the water sector in Belarus since 2004 and waste sector since 2010 has provided a number of useful lessons. Several relevant lessons have been highlighted in the following paragraphs and are reflected in the design of the proposed project.
60. Integration: Most similar projects suffered from a disconnect between investment in infrastructure and investment in the efficiency of service provision, leading to an increased risk of substandard and unsustainable service provision. This project therefore conditions investments in infrastructure upon the satisfactory efficiency and performance of utilities and provides support in a form that depends on each utility’s performance level to incentivize performance improvement. This concept has been developed and adopted by the Government.
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61. Clear strategy: The process of upstream analysis and formulation of a sector-wide strategy creates the foundation for successful project execution. This is a lesson learned from the previous solid waste and WSS projects in Belarus. By having a clear set of objectives and the policy environment to support it, through the National Strategy for Municipal Solid Waste and Recyclables Management, and the Clean Water State Program for improving the quality of drinking water, it will be easier to implement a statewide investment program.
62. Stakeholder commitment: Stakeholder commitment at all levels amplifies project impact and sustained outcomes. Commitment from the National Government down to the citizens is essential for successful project outcomes. The Government has shown commitment through coordination between different levels of Government and service providers, as well as with the World Bank, throughout the project preparation process.
63. Due diligence: Rigorous site assessment and studies are critical to minimize cost overruns, capacity constraints, and delays. The World Bank is working closely with the Government and the service provider to provide technical guidance and support with regard to the regional approach to municipal SWM. While the World Bank’s involvement in in-depth site studies cannot be offered in the WSS sector due to the large number of potential project sites, the project team and the Project Coordinating Team (PCT) have lot of experience in the successful implementation and management of infrastructure investments in the WSS sector, thus minimizing the risk of project cost/time overruns.
64. Piloting and scaling: The demonstration effect can help overcome capacity barriers when paired with clear policy direction. This lesson was learned from the SWM project in Grodno and is directly applicable. Given that this is the Government’s first time applying the regional approach for waste management, this project’s RLF pilots will be a strong foundation for the State Program to learn from and build on. This project allows for clear establishment of implementation arrangements, administrative arrangements, technical design, and financing which can be adjusted as needed before the State Program scales up regionalization to the whole country.
65. Supporting client objectives. The World Bank experience in Belarus shows that technical capacity in the country is generally high, and that implementation can proceed satisfactorily. This project objectives are closely aligned and pre-agreed with the MHU and reflect the Government’s plan for the development of the water sector and the impending State Program regarding regionalization of the solid waste sector.
66. Economies of scale: The regionalization of waste management can allow for improved environmental controls, economies of scale with waste management, less land requirements, and opportunities for private sector engagement among other benefits. Regionalization through construction of an RLF and supporting infrastructure and equipment, such as transfer stations, is a common practice globally which is expected to result in improvements in efficiency and effectiveness of operations.
67. Clarity on operational and ownership arrangements: The regionalization of SWM needs clear operational and administrative arrangements. The decision-making process, financing, contractual arrangements, selection of operator(s), and risk mitigation of service exclusion should be agreed upon by all jurisdictions along with the technical design. The agreement should ensure incentives for all jurisdictions to manage and pay for waste collectively and prevent mismanagement of it.
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III. IMPLEMENTATION ARRANGEMENTS A. Institutional and Implementation Arrangements
68. The project will be implemented through the PCT that is implementing the ongoing Water Supply and Sanitation Project AF (P146493, 2014–2019) and has successfully implemented two now- closed projects—the Water Supply and Sanitation Project (P101190, 2009–2016) and the Integrated Solid Waste Management Project (P114515, 2010–2017). Implementation arrangements essentially remain unchanged from the ongoing WSS project. The MHU is responsible for the overall project coordination and monitoring of implementation progress. The PCT, set up within the SOE ‘Belcomtehinvest’ has overall responsibility for disbursement, financial and procurement management, and coordination and is subordinate to the MHU. The PCT will be responsible for daily project implementation and monitoring and adherence to World Bank requirements. The PCT has experienced and trained technical and fiduciary staff. The PCT, as part of the Government administration, is limited in its ability to hire qualified staff on attractive terms, therefore, the focus in the last period has been on increasing its capacity. The PCT has been reinforced with two additional specialists (procurement and technical), from the recently closed solid waste project PCT. For Component 2, the MHU will lead on national-level activities while procurement and FM will be done by the PCT.
B. Results Monitoring and Evaluation Arrangements
69. The M&E of outcomes and results during implementation would follow standard World Bank practice. Reporting of progress toward achieving the PDO and results indicators will be the responsibility of the PCT. Both the respective unit at the MHU dealing with the project and the PCT staff are already trained to carry out M&E activities covering all WSS service providers receiving support through the project. For SWM, the PCT is responsible for verifying the construction and operationalization of infrastructure. Quarterly reports will be prepared by the service-providers, in a format to be agreed with the World Bank, and submitted to the World Bank, PCT, and MHU. The reports will ensure that service providers’ management and owners, as well as the PCT and the MHU, are fully informed on progress and issues encountered and can respond on time. The PCT will consolidate the data at the project level and produce semiannual reports.
70. The development of a functional utility benchmarking system for the WSS sector is integrated into the project design. The project preparation has already included the collection and assessment of utility performance as a tool for selection of the optimal form of assistance to each utility under the project. The project aims to support development of a benchmarking system that would go beyond current data collection and evolve into a management tool.
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C. Sustainability
Water Supply and Sanitation
71. Technical and operational sustainability. The sustainability of water supply and wastewater infrastructure investments to be financed through the project will be ensured through (a) the utility selection process, and (b) implementation of the targeted performance improvement activities. The sustainability of investments financed is one of the focuses of the project. To achieve this, the project will deploy a two-stage utility selection process to ensure that well-performing utilities are given access to funds for infrastructure financing. In parallel, all other utilities will be required to prepare and implement adequate UPIPs. As noted earlier, the UPIPs will aim at addressing factors affecting the operational and financial performance of utilities, such as improved energy efficiency, better assets management, system optimization through computer modelling, and reduction of water losses, and operation and maintenance (O&M) costs.
72. Environmental sustainability. The rehabilitation of existing wastewater treatment facilities will have a long-lasting positive impact on the environment as environmental protection through pollution elimination is the main reason for the construction of treatment facilities. All investments proposed for financing under the project will undergo environmental screening before approval and will be conditioned by adequate supervision during construction.
73. Financial sustainability. The project concept is designed to support the improvement of the operational and financial performance of participating utilities, which by itself will positively impact financial sustainability and support the principle of maximizing finance for development (MFD) as it seeks to support improvements in the enabling environment for high performing utilities to enhance their credit- worthiness and gradually advance towards the level of maturity that could attract commercial financing. Additionally, the project is aligned with the Government’s objective to ensure operational cost recovery of utility services and eliminate Government subsidies, which are currently allocated on a recurrent basis to systematically cover losses incurred by the utilities, a practice that does not encourage operational efficiency.21
Solid Waste Management
74. Technical and operational sustainability. The system is being designed to be efficient in terms of transportation and disposal operations. The feasibility study for the Polotsk/Novopolotsk RLF and waste shed examined several options and found the most cost-effective option for transportation of waste to be direct hauling to the materials recovery facility and/or RLF. Biomekhzavod Domestic Resource (Biomekh) will provide all collection and waste management services across the four rayons. With one service provider, the incentives will be aligned to bring all waste to their facility rather than dump in existing sites. There is currently a recycling facility to sort and manage recyclable waste in Polotsk/Novopolotsk and even process some materials onsite. The remaining waste is anticipated to be treated and disposed of in an environmentally sound and safe manner at the Polotsk/Novopolotsk RLF in accordance with the O&M manual as part of the design work to support sustainable operations in line with standard sanitary landfill guidelines. Capacity building for the Government in related areas such as studies or trainings related to waste recovery and technical aspects can support operational sustainability.
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75. Environmental sustainability. The RLF is designed to have all appropriate environmental measures associated with a sanitary landfill, including leachate collection and treatment, landfill gas collection and treatment, and monitoring of the air, gas, soil, and water. With the Polotsk/Novopolotsk RLF and subsequent RLFs, waste will be diverted to the RLFs which will have adequate environmental control measures in place.
76. Financial sustainability. Costs to operate the regional system (excluding depreciation) have been calculated to be slightly higher than current costs, which is due to economies of scale and optimization of operations under the regional system. Current costs represent around 0.20 percent of disposable income and are essentially covered by the tariff. The estimated operating costs of the regional system (with depreciation included) will be around 0.30 percent of the disposable income. For comparison, the internationally used benchmark for affordability in SWM is 1 percent of disposable income.
IV. PROJECT APPRAISAL SUMMARY A. Technical, Economic and Financial Analysis (if applicable) SWM Water Supply and Sanitation
77. The WSS components of the project will cover water supply and wastewater subprojects with a total value of close to €65 million based on the currently available funding envelope under the project. Selection of the individual subprojects was done based on the two-stage screening process described under the Component 1 description earlier, and in further detail, in annex 2 of this PAD, considering factors such as expected impact in terms of population, identified needs including serving the most vulnerable, sustainability, environmental considerations, and level of readiness. Utility screening, the first stage and suggested approach on which to build national benchmarking in the sector, covers quality of service, economic efficiency, and operational efficiency aspects of utilities. Approximately 30 percent of the loan funds for the Water Supply and Sanitation Component is expected to be spent on water supply and treatment, primarily on iron removal from groundwater supplies and on water distribution systems, and 70 percent will be spent on rehabilitation of wastewater collection, treatment facilities, and sludge management. The wastewater investments will include rehabilitation of wastewater collection systems, necessary sewerage pipelines, and the urgent reconstruction of wastewater treatment facilities and improving the efficiency of their operation.
78. The level and form of project support to individual subprojects or utilities will depend on the results of the two-stage screening process. Service providers with the lowest level of performance22 (Component 1a) will be required to first develop UPIPs and implement measures to improve performance before accessing finance for infrastructure. The effective initiation of performance improvement activities (UPIPs prepared and key activities under implementation) is a condition for moving in to Component 1b, which comprises better performing utilities that still face some performance and efficiency challenges and are required to develop UPIPs within the first year of accessing finance. Funds will be made available for the implementation of performance-improving activities once identified in UPIPs. The best performing utilities (those categorized under Component 1c), are not required to develop UPIPs as their performance
21 Municipal Water Sector Review of the Republic of Belarus (Report No. ACS4459), World Bank 2013. 22 The levels of performance and respective categories under Components 1a, 1b, and 1c are described in annex 2.
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is considered to be sufficiently good. In addition to being able to access finance for project-related activities, these utilities can access TA support aimed to attract commercial financing for development. Guidelines for the preparation of UPIPs and preparation of individual UPIPs will be financed and developed by the project and supported by the World Bank.
79. A preliminary list of WSS subprojects envisaged for the first period of project implementation has been prepared by the MHU based on the eligible screened subproject activities. These subprojects are included in the Procurement Plan for the first year. Sub-projects estimated at about €7,2 million have detailed designs, while an addition estimated €43.2 million have feasibility studies prepared. Subsequent subproject proposals will be prepared and submitted to the MHU/PCT for review annually in accordance with the criteria established in this PAD and with those procedures described in the Project Operations Manual (POM). The draft POM is substantially completed and will be approved with the Government before project effectiveness.
80. Individual subprojects are at varying levels of readiness, with several subprojects prepared under the ongoing project advanced. Feasibility studies or detailed designs were prepared for five WSS subprojects under the ongoing World Bank-financed project, and similar studies have been prepared by the Government of Belarus for six additional subprojects. The project studies and engineering designs will be carried out by experienced Belarusian consulting institutes. Belarusian consulting institutes will be assisted by international specialists only if and when deemed necessary. Selection of design parameters, technologies, construction materials, and equipment will be based on existing Belarusian operational practices, considering national and international experience in WSS and specific conditions in Belarus.
81. Technical analysis. As part of pre-appraisal, several proposed subprojects were reviewed for technical soundness. Two such subprojects are briefly described in the following paragraphs (Reconstruction of WWTPs in Zaslavl and Slutsk), as representative of investments proposed for financing.
82. Reconstruction of a WWTP in Zaslavl (WWTP Kladochki). The treatment facilities at Kladochki are in an unsatisfactory condition, with infrastructure seriously depleted and the plant hardly operational. Treatment facilities at Kladochki were built in 1979, with a design capacity of 2,680 m3 per day, and consist of a receiving chamber, double-deck settling tanks (2 groups per 2), and 10 maps of filtration fields, with a total area of 12 ha. Wastewater is currently purified on three maps of filtration fields, while other fields are out of use for wastewater treatment and are only used to dehydrate and store sludge. Filtration soils of the filtration fields consist of sandy clay and sandy loam, and due to long-term operation, the filtration factor of the filtration soils has decreased significantly, leading to an inability to use the filtration fields for wastewater treatment. Given the poor state of the facilities, the WWTP must be replaced.
83. Future wastewater treatment will be provided by a new biological WWTP, with a capacity of 5,565 m3 per day. Following comparison of different options, it was decided to construct a new WWTP using the technology of simultaneous denitrification and nitrification, with mechanical sludge dehydration, which is an adequate treatment technology for the wastewater supplied and required level of treatment. New treatment facilities will include mechanical treatment of wastewater (screens), biological treatment of wastewater (a single tank with two separate wastewater treatment lines, with each line divided into an anaerobic zone, a denitrification zone, a nitrification zone, and secondary settling tanks), ancillary facilities, effluent disinfection unit, and effluent ground infiltration unit. The project will include facilities for the aerobic stabilization of sludge and consequent dehydration by means of filter presses. A technical review
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has confirmed that the proposed technical solution is optimal for the composition of wastewater and the required level of treatment.
84. Reconstruction of wastewater transport main and treatment plant in Slutsk. The WWTP for the town of Slutsk is located in the southeast, 10 km away from city limits. Treatment facilities receive wastewater from residential, construction, municipal, and industrial enterprises. The first treatment facility was commissioned in 1976, with an upgrade in 1990. The projected capacity of treatment facilities of the sewerage system is 26,500 m3 per day and includes mechanical and biological treatment, with polishing and sludge ponds. Purified wastewater disposal is performed through a gravity pipeline made out of reinforced concrete pipes with a length of 9 km to Sluch River. The condition of mechanical and biological treatment facilities is unsatisfactory. The main equipment, including wastewater pipelines to the treatment plant, are completely worn out. Concrete tanks are cracking and falling apart, and metal parts are fully corroded. There is no more capacity on existing sludge sites and water ponds. Therefore, replacement of almost complete WWTP and main wastewater transport pipeline is required to achieve required effluent standards. Following comparison of four different technical reconstruction variants, it was decided to fully reconstruct the entire facility with intensification of the processes of nutrients removal and mechanical dewatering of sludge.
85. Proposed reconstruction and expansion of wastewater treatment facilities and sewerage system in the town of Slutsk is envisaged to include the following:
• Sewerage system reconstruction works (reconstruction of Ø600 mm cast iron pipes pressure collector from the main sewerage pump system to the location of WWTP)
• Reconstruction of municipal WWTP, including (a) modernization of the administrative and household building; (b) construction of a receiving chamber; (c) construction of bar screen buildings and sand separators; (d) reconstruction (modernization) of degritters, primary settling tanks, raw sludge pump station, and aerotanks; (e) construction of an additional secondary settling tank with the reconstruction of the existing one; (f) reconstruction (modernization) of the pumping and blower station; (g) reconstruction of the disinfection unit with the construction of a sodium hypochlorite dosing station; and (h) reconstruction of the sludge treatment unit with construction of a workshop for mechanical dehydration of precipitation.
86. Economic and financial analysis. Two representative subprojects with sufficient information were selected for the preparation of financial and economic analyses (Reconstruction of the Sewerage System in the town of Zaslavl, Minsk Oblast, and Reconstruction of Wastewater Treatment Facility of Sewerage System in Slutsk). These projects make up approximately 28 percent (US$28 million) of the total investment program of US$100 million that will be funded by the World Bank, with affected populations estimated to be 15,500 and 61,000 respectively. The projects were chosen as representative subprojects for the financial and economic assessment with sufficient information provided to the World Bank by the PCT. Full financial and economic assessments have been prepared for WSS and SWM and are in annex 6.
87. Zaslavl, Minsk Oblast. The financial appraisal assessed the projected financial cash-flows (expenditures and revenues) over the life of the project to determine the financial viability of the project investment from the perspective of the service provider, which in this case is the Municipal Unitary Subsidiary Enterprise CCM of Minsk Region. The costs included in the financial appraisal are capital
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investment costs and projected annual O&M costs. Income flows include projected revenues from service provision in the form of sewerage charges. The results of the analysis indicate that the project will not bring positive financial results: at a 10 percent discount rate, the financial net present value (FNPV) is negative at −US$12.6 million; the financial internal rate of return (FIRR) stands at −4 percent, which is below the discount rate; and the financial benefit cost ratio (FBCR) is at 0.74, which is below 1. Given that profit is not usually the main objective of a large sanitation project of this nature, which is aimed at providing public good, these negative financial results are not surprising. Projects of this nature are often financed or subsidized by public authorities where there is a socioeconomic rationale and externalities, even when the project is not necessarily financially profitable. Operating revenues are larger than operational costs from year 10 onward.
88. The project’s discounted economic benefits were, were possible, monetized and compared to the discounted economic costs of the project to assess the project’s economic results. The main economic benefits flow from three sources, namely those associated with improved wastewater management, where hidden costs to the economy caused by lower environmental standards through a loss of output and inefficient production are accounted for, cost savings to households that rely on septic tanks but would be connected to a centralized sewerage system under the project and net positive annual impacts from GHG emission reduction due to the project. Drawing on the EU methodology for estimating environmental economic benefits, where benefits accrue due to benefits to public health through reduction of illnesses and avoidance of early mortality, resource benefits to parts of the environment used commercially, for example, forestry, agriculture and fisheries, and social benefits, including safeguarding and access to natural and cultural heritage, and a conservative shadow price of carbon,23 the project is estimated to have a positive economic net present value (NPV) of US$8.9 million and an economic internal rate of return (EIRR) of 10.3 percent.24
89. Slutsk, Minsk Oblast. A similar project to that of Zaslavl, the reconstruction and expansion of sewage treatment facilities and water disposal system of Soligorsk City was assessed for its financial sustainability and economic impact. The project’s FNPV is negative (−US$7.9 million), with an FIRR of −18 percent, and benefit-cost ratio of 0.78. This result is largely driven by the fact that there are limited revenue streams associated with the provision of sewerage services, and that given current tariffs currently charged do not account for full cost recovery. In assessing the economic justification of the proposed project, as in Zaslavl, in addition to economic factors, environmental and social consequences for consumers in Slutsk were taken into account. The project’s economic ENPV was estimated to be US$8.3 million, with an economic rate of return of 10.2 percent. These results suggest that the investment project is economically viable.
90. Climate Change Mitigation for WSS. While the project applies a framework approach and details of the subprojects have not yet been finalized, initial findings based on the size of the budget envelope suggest that the net emissions of the WSS aspects of the project are estimated at 513,734 tCO2-eq over the life of the project. The water supply activities under Component 1 are estimated to experience net emissions of -18,016 tCO2-eq, which represents a net decrease in emissions due to an estimated 10% increase in energy efficiency. The wastewater collection and treatment under Component 1 will see
23 Using the World Bank low shadow price of carbon in US$/tCO2e. 24 ECOTEC. 2001. The Benefits of Compliance with the Environmental Acquis for the Candidate Countries. DGENV Contract: Environmental Policy in the Applicant Countries and their Preparations for Accession.
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estimated net emissions of -495,718 tCO2-eq due to improved treatment and ending septic tank use. See annex 7 for details. GHG impacts associated with solid waste management activities under Component 3 are discussed below in the respective section.
Solid Waste Management
91. Technical analysis. The project design is aligned with the National Strategy of Municipal Solid Waste and Recyclables Management and the anticipated State Program. There will be up to three RLFs created under this project, and the first is already selected to be built in Novopolotsk. The first RLF and subsequent ones will follow nationally established guidelines and industry standards.
92. The global norms for regionalization of the waste sector will be used for this project. This entails improving waste transportation and disposal in an optimal manner for the waste sheds rather than for a single rayon. Feasibility studies for future selected waste sheds will include designs assuming a sufficient volume of waste, optimal placement of transfer stations (if appropriate to include), optimal routing to minimize transport and emissions, and safe recovery and disposal of waste with environmental controls including leachate collection and treatment, landfill gas collection and treatment, and monitoring of air, gas, water, and soil.
93. For the Polotsk/Novopolotsk RLF and associated waste shed, the most cost-effective system design is to have direct hauling to the RLF and materials recovery facility. The feasibility study for the Polotsk/Novopolotsk RLF analyzed three options: (a) upgrading the existing four city landfills; (b) having regional SWM with the RLF; and (c) having regional SWM with the RLF with added transfer stations. Option (a) was found to be too costly due to the small volume of waste within each city and the high cost of upgrading the landfills to meet the Belarusian sanitary standards. A regional system of collection and disposal with option (b) would result in savings due to more efficient use of garbage collection equipment and vehicles and lower cost per ton for disposal of waste. The RLF would also reduce the risk of environmental pollution as compared to open dumps in each of the districts. Option (c) was found to be relatively more expensive per ton due to the small volumes of waste to be handled at the transfer station. A transfer station could also create additional operational risks and complicated arrangements. Option (b), in which the operator for the collection and transportation of waste, Biomekh, collects waste from the four rayons and transports it to the RLF, was found to be the least-cost and most efficient scheme. This design will create a regional system allowing for optimal use of infrastructure, trucks, equipment, and personnel. The old landfill which is nearly full and located at the same premises as the new landfill (880 m away) will be closed and remediated.
94. For the SWM regional investments to be selected beyond the Polotsk/Novopolotsk RLF, there will be two groups of eligibility criteria to evaluate which rayons will receive project funds for TA and which will receive funds for civil works and goods. There will be two groups of eligibility criteria:
(a) Eligibility criteria to receive project funds for preparatory studies, such as site selection studies, feasibility and design studies, ESIA, and a RAP:
(i) Consistency with the Belarus National SWM Strategy;
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(ii) Several municipalities and/or rayons have demonstrated through a signed Memorandum of Understanding (MoU) or similar statement their interest to cooperate and use an RLF and are seeking finance for the preparatory studies for such RLF and supporting infrastructure from the project funds; and
(iii) Administrative arrangements for management and operation of the new RLF and supporting infrastructure are agreed in principle.
(b) Eligibility criteria to receive project funds for actual investments (civil works and goods):
(iv) The administrative arrangements for the new RLF and supporting infrastructure are in place (that is, regional company, intermunicipal utility or existing utility have been established and are operational);
(v) The site for the intended infrastructure development is selected, land is acquired, feasibility study, ESIA, and RAP (if needed) are prepared (and meet national and financiers’ requirements);
(vi) Detailed designs and bidding documents are ready for tendering;
(vii) ‘In-principle’ agreement on tariffs and contractual arrangements between the RLF and municipalities/rayons that will be served have been prepared and endorsed by the concerned local government administrations; and
(viii) Participating municipalities/rayons confirm their willingness to use the RLF and supporting infrastructure and discontinue the use of other municipal disposal sites that will be gradually closed as envisaged in the strategy.
95. Economic and financial analysis: The economic and financial analysis of representative SWM activities suggests significant economic returns to the investment and sufficient financial flows to cover the investment outlay if a reasonable increase in tariff revenue is implemented. The construction of the Polotsk/Novopolotsk RLF is taken as a representative site of the SWM activities of the project and evaluated. The remaining site to be selected could require more or less financing. The RLF is strongly justified based on the economic and financial returns. Closing the existing non-sanitary landfills and switching to a coordinated regional SWM system with a sanitary landfill are expected to deliver large economic returns because of the avoided pollution. The significant economic benefits—economic NPV of US$16.2 million and EIRR of 25 percent—are primarily driven by the value of avoiding groundwater pollution due to leachate that the lining of the new RLF and capping the existing solid waste landfill will prevent and GHG emission savings from the more efficient operations. Financially, operating costs (without depreciation) remain nearly the same as current costs due to more efficient operations. They represent approximately 0.2 percent and 0.3 percent of disposable income respectively, with and without depreciation. For comparison, the internationally accepted benchmark for affordability is 1 percent of disposable income.
96. Climate Change Mitigation for SWM. The estimated greenhouse gas emissions impact over the economic lifetime of the solid waste investments in Component 3 is approximately a net reduction of -
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846,378 million tonnes of CO2-equivalent emissions, mainly due to management of waste via a sanitary landfill rather than disposal sites that typically lack environmental controls. Nearly all of the disposal sites currently utilized have an anaerobic setup without a gas capture system and emit methane. The new regional landfills will have landfill gas collection systems to capture and treat the landfill gas. The average annual emissions are estimated to be approximately 21,254 tonnes of CO2-equivalent emissions. The economic lifespan is estimated to be 25 years, assuming construction and utilization of the Novopolotsk RLF.
B. Fiduciary
(i) Financial Management
97. FM and disbursement arrangements for implementation of this project have been confirmed as Satisfactory, and the overall FM risk is Moderate. FM and disbursement functions will be carried out by the PCT. The PCT has extensive experience in supporting World Bank-financed projects, it is adequately staffed, and the financial staff have received relevant training on the World Bank procedures. The FM arrangements have also been satisfactory in other projects implemented by the PCT, and there are no outstanding audits.
98. Accounting and reporting for this project will be carried out in the existing automated accounting and reporting systems used by the PCT for other projects. A separate set of accounts will be used to record project transactions, in both the currency of payment and Euro equivalents (currency of the loan). The project interim financial reports (IFRs) will be prepared and submitted on a quarterly basis. Project audits will be conducted by independent private auditors acceptable to the World Bank, in accordance with International Standards on Auditing under the terms of reference acceptable to the World Bank. Both the PCT and the World Bank would make the audited financial statements publicly available on their websites, as required by the World Bank Group Policy on Access to Information.
99. The flow of funds arrangements will follow the standard World Bank procedures, and a separate designated account will be opened for this operation. The project funds will not be included in the state budget before the project disbursements.
(ii) Procurement
100. Procurement will be conducted according to the New Procurement Framework—‘Procurement Regulations for Procurement in Investment Project Financing: Goods, Works, Non-Consulting and Consulting Services’ dated July 2016 (revised November 2017 and August 2018), World Bank Standard Procurement Documents, with the latest ‘Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants’ and in accordance with the provisions of the Loan Agreement and the Project Operational Manual. With regard to each contract financed by the Loans of International Bank for Reconstruction and Development, the various procurement methods, the estimated cost, and the respective implementation dates shall be agreed by the borrower and the World Bank in the Procurement Plan. The Procurement Plan shall be updated at least once a year or as the need arises, taking into account real needs and institutional capacity.
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101. The BELKOMTECHINVEST will be responsible for all project-related procurement. An initial review of the project procurement capacity of BELKOMTECHINVEST was conducted in July 2018, which showed that it has sufficient experience in World Bank procurement procedures and has shown satisfactory performance in procurement for World Bank-financed projects. BELKOMTECHINVEST is staffed with experienced procurement specialists. Diligence is also observed in record keeping and quality of evaluation. The procurement processing and contract management was rated Satisfactory. The implementing agency is familiar with the World Bank’s bidding documents and procedures, however, taking into account the significant changes and requirements introduced in 2016 to the Procurement Rules and the World Bank’s Environmental and Social Framework, procurement specialists will have to complete related training organized by the World Bank or/and other international training organizations; the first training on procurement regulations may be organized by the World Bank before project effectiveness. In addition, the qualifications obtained by specialists require ongoing maintenance through periodic participation in training courses and intensive training.
102. Procurement risk analysis. Overall risk analysis is rated Moderate based on the capacity of the implementing agency. Despite adequate capacity, the following risks are identified: (a) collusion between the supplier and the purchaser staff; (b) leakage of confidential information after bids submission; (c) delays in evaluation process; (d) delays in preparation of technical specifications, qualifications, and requirements; (e) delays in implementation of signed contracts; (f) delays in contract signing with successful bidders due to the borrower’s disagreement with proposed prices which exceed estimated costs approved by the State Agency Gosstroyexpertiza. To mitigate these risks, the following measures are incorporated into the Project Procurement Strategy for Development (PPSD):
(a) To ensure the participation of a larger number of organizations, qualification and technical requirements should be relevant, bidding documents should describe the scope of works and the methods for their performance, and false data in bids should be verified.
(b) A written consent (acknowledgment) of each nominated member of the Evaluation Commission on non-disclosure of information related to the procedure for conducting competitive bidding with regard to the relevant facilities and on the absence of a conflict of interest with the bidders should be obtained.
(c) Conducting high-quality elaboration of the technical part of bidding documents and qualification requirements, sending clarifying requests to bidders with a minimum response time, exercising control over the activities of specialists performing the evaluation of bids and increasing their competence and qualifications, forming a list of members of the evaluation commission and persons replacing them at the time of their absence, and ensuring timely preparation of orders on the appointment of members of the evaluation commission, making appropriate proposals for changes in its composition.
(d) Preparation of the technical part of bidding documents with assistance from qualified consultants on the part of the customer (if necessary) or hired experts/specialists;
(e) High-quality preparation of design solutions, ensuring the elaboration of the technical part of bidding documents in a detailed manner, sufficient for bidders to prepare their bids, which shall not be subject to any subsequent changes and additions, taking measures to identify artificially
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lowered prices offered by the bidders, and any imbalance in the financing schedule proposed by them, and improved contract management activities.
(f) Actualization of the approved estimated cost of the facility on the basis of conducted market research in terms of current prices before the announcement of competitive bidding procedure and/or during the evaluation of submitted bids, initiation of consideration of compliance with the Head of the Customer's organization, strict compliance with international rules and requirements of the World Bank, improvement of qualifications of customer organizations by conducting training on the requirements of the World Bank, in the event of significant overstatements (more than 30 percent of the estimated cost)—request clarification from the bidders concerning the technical characteristics of equipment and expected complexity of conditions for the performance of works in the formation of unit price of bills of quantities with regard to submitted bids, adoption by the World Bank of measures and sanctions for legal and other protection, including the announcement of the fact that the procurement was carried out in violation of established procedures.
103. The following project procurement arrangements will apply during project implementation:
(a) Selection methods for works. The project is expected to use Request for Bids (RFB) both for national and international markets. Other methods, where justified, include Request for Quotations (RFQ) and Direct Selection. On works packages, the RFBs (Single Envelope), RFBs (small works), and Standard Procurement Documents will be used.
(b) Selection methods for goods and non-consulting services. The following methods will be used to purchase goods/equipment: (i) RFB for both international and national markets, (ii) RFQ, and (iii) Direct Selection.
(c) Procurement of consultants. The project is expected to use Request for Proposals with the following methods: (i) Quality- and Cost-Based Selection, (ii) Selection Based on Consultants’ Qualifications, (iii) Direct Selection, and (iv) Selection of Individual Consultants.
104. Procurement Plan and STEP. An initial Procurement Plan for the life of the project is developed by the implementing agency, cleared by the World Bank, and will be processed through Systematic Tracking of Exchanges in Procurement (STEP). It defines the market approach options and the selection methods and contractual arrangements and determines the World Bank’s reviews.
C. Safeguards
105. Outside several positive social and environmental impacts (improving social conditions for the population and contributing to improving local population livelihoods, improving water quality, preventing environmental pollution, and so on), the project might generate a series of adverse impacts associated with rehabilitation and/or construction of water supply, sanitation, and SWM investments such as dust, noise, water pollution, disposal of waste material and/or older equipment, degradation of vegetation, traffic disruption (depending upon specific location), worker safety (for example, welding operations), labor influx, and so on. As such, the project triggers a number of operational policies (OPs). In most cases these impacts will be minor, short-lived, and primarily limited to project sites (except for
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movement of equipment and materials to/from the construction/rehabilitation sites). However, it is possible there might be some more significant impacts which would affect the environment and health of population, especially in the case of construction of new WWTPs and solid waste landfills on new locations. During the operational phase of landfills, some adverse impacts might be generated related to pest management activities for controlling rodents.
106. The project triggers several World Bank OPs. OP/BP 4.01 is triggered as the project may generate a series of environmental and social impacts. Regarding OP/BP 4.12 on Involuntary Resettlement, as at this stage of project design the project locations are not known, it is unclear whether subproject activities would require or cause physical or economic displacement. However, to address possible cases of impact, the client prepared a Resettlement Policy Framework (RPF) based on which the site-specific RAP/LAP, and so on will be prepared, when needed. The project also triggers OP/BP 4.09 on Pest Management, as during the landfill operation, pesticides might be used to combat pests. Among other applicable regulatory documents are the World Bank Group’s Environmental, Health, and Safety (EHS) Guidelines, including the General Guidance, Industry Sector EHS Guidelines for Waste Management Facilities, and Industry Sector EHS Guidelines for Water and Sanitation. OP/BP 7.50 on International Waterways is triggered because some of the water supply and wastewater subprojects involve international waterways. Most project- financed investments are expected to involve the rehabilitation of existing WSS systems within the original boundaries and design parameters of the schemes, but some treatment-level upgrades and capacity expansions are also expected. As a result, regardless that the project is not expected to adversely change the quality or quantity of water flows to other riparians, the World Bank has notified the borrower that a riparian notification process should be initiated with all neighboring countries, according to OP/BP 7.50 requirements.
107. Following the Government request, the World Bank agreed to perform the riparian countries notification process for the project on behalf of the client and sent the notification letters to the riparian countries on January 17, 2019. The Governments of Lithuania, Latvia, and Poland confirmed their support to the project in writing on February 28, 2019, the closing date for responses and no objections were received from Russia and Ukraine by that date. However, on March 12, 2019 the Bank received a response from the Government of Ukraine requesting that the Bank ask the Government of Belarus to provide information on the project’s environmental impact in line with the existing bilateral and international agreements on the protection of transboundary waters that affect Belarus and Ukraine, including the Convention on the Protection and Use of Transboundary Watercourses and International Lakes and Convention on Environmental Impact Assessment in a Transboundary Context (Espoo Convention). Ukraine additionally stated that Belarus, as the Party of origin of the Espoo Convention, and not the World Bank, should inform it of the project. The Bank responded to Ukraine on March 29, 2019 explaining the terms of the notification it issued on behalf of, and at the request of Belarus, in line with the Policy, explaining that the notification is meant to ensure compliance with the requirements set forth in OP/BP 7.50 and does not prejudice the separate and distinct notification obligations that the Member Country may have under international treaties. The response enclosed the relevant Environmental and Social Safeguards instruments for the project. As of May 23, 2019, no further response has been received from Ukraine.
108. Environmental and Social Management Framework. As at this stage of the project development, the full WSS investments and their location are still not confirmed, and the list of WSS investments will be updated/changed during project implementation for addressing potential adverse impacts, the client prepared an ESMF which will specify the rules and procedures for the subprojects’ ESIA and preparing site-
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specific Environmental and Social Management Plans (ESMPs). Overall the ESMF document covers the following: (a) rules and procedures for environmental and social screening; (b) guidance for conducting subprojects’ ESIA and/or preparing ESMPs, as well as preparation of the ESMP Checklist; (c) possible mitigation measures for different types of subprojects—in the case of landfill construction, for the operational phase the ESMF will also specify EHS requirements and will include an outline of the Pest Management Plan that provides the procedures for ensuring the safe handling, storage, and use of pesticides which should be prepared for all new landfills; (d) roles and responsibilities in Environmental Assessment (EA) process and in supervision and reporting; and (e) capacity-building activities to ensure an efficient ESMF implementation. The draft ESMF document was disclosed on the ministry web page on October 5, 2018, and publicly consulted in the country on October 23, 2018.
109. ESIA for P/NP RLF. The P/NP RLF has been identified by the MHU as a priority site to serve four rayons with a total population of 237,375 and waste generation of 72,000 ton per year. The client has conducted a full-scale ESIA and prepared the site-specific ESMP for the construction of the landfill, which identify and assess the potential environmental and social impacts and risks of the associated civil works, determine adequate mitigation and monitoring measures, and define institutional responsibilities and implementation arrangements for the implementation of the ESMP. According to the World Bank and national requirements, the EA documents have been disclosed for consultation to all interested parties and the local population on December 17, 2018, and public consultations held on January 3, 2019.
110. Based on the conducted, EA it was concluded that while overall the Borrower’s capacity to manage the project is consistent with Bank E&S requirements and is deemed adequate, especially at the central level of PCT, capacities need further strengthening at the lower level of participating municipalities. In this regard the project will support EA institutional building activities which would include the Bank and E&S requirements, case studies on preparing ESIAs for WSS and SW subprojects, as well as conducting E&S supervision and monitoring and reporting.
(ii) Social Safeguards
111. The only confirmed investment site is the P/NP RLF, and it has been confirmed that the land there is publicly owned. However, other sites will be known during implementation. Therefore, the project triggered OP/BP 4.12 on Involuntary Resettlement, and the RPF has been prepared. The RPF covers issues of economic and physical displacement and requires preparation of site-specific RAPs when and if needed. There are no other major social risks, and communities will mainly benefit from project activities. The project activities do not pose any risks or impacts in terms of livelihoods of waste pickers’ characteristic to projects in the SWM sector (because waste picking activity takes place at collection locations rather than at disposal sites).
(iii) Other
112. Grievance Redress Service. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures.
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Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org.
113. Grievance redress mechanisms: The project will establish a comprehensive, project-level Grievance Redress Mechanism (GRM) building on the experience of the previous WSS project. The PCT has experience in maintaining a grievance log and regularly reporting to the World Bank team on GRM, developed through implementation of the ongoing WSS project. Project-related grievances and their resolution will be publicly disseminated. Detailed GRM procedures are outlined in the RPF and will be reflected in the POM as well.
114. Citizen engagement and social inclusion: The World Bank team has conducted an analysis of citizen engagement and gender in Belarus, focusing on a sample of two utilities (RUE Oshmiany and Pinsk Vodokanal). The organizational and legal frameworks for outreach activities and quantitative indicators (for 2017 and 2018) on dealing with public appeals were analyzed, outreach and awareness-raising specialists were interviewed, and spot interviews of utilities consumers were held. The results have further informed the citizen-oriented design and beneficiary feedback indicator(s) under the project. The interaction with citizens/customers is organized in accordance with the national legislation25 and utility legal documents of the organization on customer service, handling of customer requests and complaints, and arrangements for personal appointments and hotlines for utility consumers. Citizen engagement arrangements differ slightly among utilities but could generally involve several units within the utility, such as customer services and the customer billing center, as well as the managers of the organization. All appeals are addressed within the time frame provided for by the legislation (up to 15 days). In addition, the public regularly gets information on the organization’s activities (services, tariffs, repair work, and so on) in the context of personal appointments with managers, hotlines, from utility bills, publications in the local newspaper, the organization’s website, and bulletin boards in public places.
115. According to the survey results, there is sufficient information available on the activities of Oshmiany Utilities. Basically, people get information from their utility bills which are sent by mail, hence most respondents do not communicate face to face with utilities employees. The project will hold individual utilities accountable for improving the two-way engagement with customers, including specific actions to address issues raised in mini customer engagement surveys to be conducted at the beginning, middle, and end of the project. The project will introduce mini-customer satisfaction surveys which will supplement the benchmarking and enable WSS service users to assess the services’ responsiveness to user claims, their availability, and customer interaction, identify suggested actions for improvement, and monitor users’ satisfaction through for instance scorecards (rated 1-5) where a score of 1 represents poor services and 5 represents high quality services. Utility representatives will be trained on customer orientation and carrying out of the surveys. The survey questionnaires will be attached to customer bills during subproject implementation of each participating utility to measure changes and improvements at
25 Law 306-Z ‘On Appeals of Citizens and Legal Entities’, Law ‘On Consumer Right Protection’, Presidential Decree #428 ‘On Dealing with Citizens' Appeals’.
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the three strategic points and will train and utilize staff to administer the surveys in person at these points. The results of the customer satisfaction surveys will be disaggregated by gender.
116. The project will also encourage utilities to continue to work within existing regional structures, such as the Rayon Executive Committees, on public relations outreach activities. The Rayon Administration currently provides information on different issues, including water supply and wastewater services, through the local media, particularly local newspapers and the radio. In addition, information groups have been established covering the whole rayon. These teams, which consist of staff from different departments and enterprises, provide information to local residents about the different activities of the Rayon Administration. Staff from communal utilities participate in these meetings and provide information and answer questions related to its water supply and wastewater services. Usually information groups visit large enterprises at the city and rayon levels and meet with all workers.
V. KEY RISKS
117. The overall risk of the proposed project is considered Substantial. The key identified risks relate to (a) Political and governance issues; (b) Macroeconomic issues; (c) sector strategies and policies issues; (d) institutional capacity for implementation and sustainability, (e) Stakeholder issues; and (f) environment and social issues. Additionally, the project’s PDO link to Government commitments to pursue utility performance improvements increases the risk of successful achievement of the PDO.
118. Political and governance risk is rated Substantial. Given the geopolitical circumstances in the region and their potential impact on the Belarusian macro economy, the potential impact on the project is Substantial.
119. Macroeconomic risk is rated Substantial. Overall, Belarus is vulnerable to macroeconomic risks and these risks are expected to affect program areas. Macroeconomic vulnerabilities relate largely to debt sustainability, balance of payments pressures, and reduced fiscal space in a lower growth context. Component 1 of the project aims to address this risk through capacity building and investment support (provided in foreign currency), that aims to lift service providers with lower levels of performance to higher levels of performance and increase their eligibility for further support from the World Bank. For SWM, the electronically automated user fees also provide financial stability for operations. The WSS and SWM activities contribute to the process of making the identified utilities and entities more financially robust, and in alignment with the principle of MFD as expounded in paragraph 36. It is expected that provision of identified utilities will become less dependent on respective budget outlays.
120. Sector strategies and policies risk is rated Substantial. Limited WSS tariff adjustments and high dependence on subsidies, high cross-subsidization between categories of customers, and a lack of transparency in FM remain major challenges in the sector and currently limit the operational efficiency and long-term planning of service providers. These challenges are aggravated by the absence of contractual performance requirements from local authorities and a lack of performance-oriented culture and management instruments within these organizations. While the Government has a clearly defined policy
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orientation in the water and wastewater sector, this has not been framed in a national strategy document. Component 2 of the project aims to systematically address this risk by building capacity in Government counterparts to establish a national-level WSS policy which is linked to the benchmarking and performance improvement activities under Component 1.
121. Institutional capacity for implementation and sustainability risk is rated Substantial. While proposed project implementation arrangements are consistent with the previous project and are generally expected to be adequate, the institutional capacity risk is rated substantial given concerns with implementation capacity at the utility level. For instance, insufficient interest among water utilities for the preparation of UPIPs or implementation of the measures they identify as concerns is a risk to the successful implementation of the project. While the project is designed to support utilities preparing and implementing performance improvement plans and associated measures, the limited appetite in the current project for such activities indicates that this remains a challenge. Implementation capacity risk is also increased by the need for the implementing agency to adjust to the new World Bank procurement procedures, in addition to handling the parallel EIB financed project.
122. The Stakeholder risk is rated Substantial in view of the relatively large number of utilities involved in the WSS sector, many of which have limited experience and capacity, and the need to ensure more effective coordination among themselves and with the Ministry of Housing and Utility. To methodically mitigate the above risks, the design of this project has, as far as possible, ensured that finance for WSS infrastructure is conditional on business planning and performance improvements. Poor performing utilities will receive support for the preparation of performance plans as well as the implementation of efficiency measures. The project is also designed to encourage a movement toward cost recovery and commercial finance through improved creditworthiness, with TA available to support best performing utilities to pilot such approaches. There is the risk that such efforts will not be completed in time for infrastructure financing under the project, which might reduce interest among utilities.
123. For the SWM component, even though there is a strong interest in the solid waste component, rayons and provinces in Belarus lack experience in regional landfilling; increased distances to the RLFs and associated transportation costs may discourage some rayons/provinces from participating in the project. This will be the first time the Government shifts to a regional approach to SWM with multiple rayons utilizing one disposal facility and potentially a transfer station. The proactive leadership of the Government, in particular the MHU, toward implementation of the National Strategy, including closure of municipal and mini-disposal sites and transitioning to RLFs, will be important to ensure sustained interest and participation in the project by rayons/provinces. This risk will be mitigated through strong Government commitment to the State Program, which will divide the country into waste sheds to apply a regional SWM approach.
124. Concerning the PCT’s institutional capacity, the risk persists mainly because of the difficulties in hiring/retaining qualified staff on attractive terms. The possible mitigation measure is to open possibility for funding PCT staff salaries from the project proceeds, to which possibility the project remains open if desired by the Government. One additional capacity-related risk may arise as the project will be operating within different procurement guidelines, which may slow down project implementation, but can be mitigated by intensifying staff training on procurement, preparation of the PPSD, using the STEP system, and close contract management. The PCT will be strengthened by additional technical staff for WSS and
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SWM to ensure better ability to review technical documents before tendering and follow up during construction.
125. Environment and social risk is rated Substantial. The project entails construction/rehabilitation activities. These activities are expected to have some temporary adverse impacts typical for construction/rehabilitation of small- to medium-size constructions. The potential negative impacts are perceived to be minor, short-lived, and primarily limited to a project site. However, it is possible there might be some more significant impacts which would affect the environment and health of the local population, especially in the case of construction of new solid waste landfills, where risk impacts potentially relate to siting greenfield RLFs, effluent discharge, and pest management activities for controlling rodents. There is also a risk that the dumpsite closures will be delayed and potentially occur after the project timeline, because the existing sites must be operational until the new RLF is constructed in Novopolotsk. Social risks include potential physical or economic displacement in the RLF sites which are not yet identified. There are no other major social risks, and communities will mainly benefit from project activities. The potential environmental and social impacts can be mitigated with standard procedures. For addressing potential adverse impacts, the client has prepared the ESMF, which specifies the rules and procedures for the WSS subprojects’ ESIA and for preparation of site-specific ESMPs, as well as the RPF to address potential social risks related to economic and physical displacement. With regard to the solid waste management project site, the RLF is designed to have all appropriate environmental measures associated with a sanitary landfill including leachate collection and treatment, landfill gas collection and treatment, and monitoring of air, gas, soil, and water. With the construction of the P/NP RLF and subsequent RLFs, waste will be diverted to the RLFs and the existing waste disposal sites, which pose major environmental risks while operating, can be closed.
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. . VI. RESULTS FRAMEWORK AND MONITORING
Results Framework COUNTRY: Belarus Belarus Utility Efficiency and Quality Improvement Project
Project Development Objectives(s) The Project Development Objective (PDO) is to improve the quality and efficiency of water and wastewater services, and support the introduction of regional solid waste management.
Project Development Objective Indicators
RESULT_FRAME_T BL_PDO Indicator Name DLI Baseline End Target
Improved Quality and Efficiency of Water Supply and Sanitation Services
People provided with enhanced water supply services as a result 0.00 150,000.00 of the Project (Number)
People benefitting from reliable/or enhanced water supply services as a result of the Project (out of which female) 0.00 53.00 (Percentage)
People provided with the required level of wastewater treatment (as per national standards for BOD) as a result of the 0.00 400,000.00 Project (Number)
People provided with the required level of wastewater treatment (as per national standards for BOD) as a result of 0.00 53.00 the Project (Out of which female) (Percentage)
Number of utilities that have prepared and implemented UPIPs 0.00 12.00
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RESULT_FRAME_T BL_PDO Indicator Name DLI Baseline End Target
(Number)
Support Introduction of Regional Solid Waste Management
People provided with environmentally-sound solid waste 0.00 237,000.00 disposal services as a result of the Project (Number (Thousand))
People provided with environmentally-sound solid waste 0.00 53.00 disposal services (of which female) (Number (Thousand))
PDO Table SPACE
Intermediate Results Indicators by Components
RESULT_FRAME_T BL_IO Indicator Name DLI Baseline End Target
Component One - Improving water and wastewater services at utility/service provider level Kilometers of water supply pipes constructed/rehabilitated 0.00 27.30 (Kilometers) Kilometers of wastewater collectors laid/replaced (Kilometers) 0.00 40.10 Number of utilities with UPIPs prepared under the project (Number) 0.00 20.00 Number of utilities achieving at least 10 percent average increase 0.00 10.00 in energy efficiency (Number) Number of utilities achieving at least 10 percent reduction in 0.00 10.00 NRW (Number) Utility staff benefitting from training to support performance 0.00 800.00 Improvement plans (Number) % of female utility staff benefitting from training to support performance Improvement plans (Percentage) 0.00 35.00 Share of participating utilities that see improved customer 0.00 75.00
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RESULT_FRAME_T BL_IO Indicator Name DLI Baseline End Target satisfaction regarding interaction with the utility compared to baseline (Percentage) Number of utilities advancing categories under Component One 0.00 10.00 (Number) Component Two - Strengthening Utility Performance and Linking Finance with the needs of the Sector Number of strategic sector documents/program prepared by the 0.00 1.00 Government (Number) National benchmarking system established and in use (Yes/No) No Yes Share of female staff promotions as of total annual promotions 20.00 35.00 in participating utilities (Percentage) Component Three - Enhancing the solid waste management process in the country Number of regional waste disposal sites developed and 0.00 2.00 operational (Number) Landfill gas collection systems developed and operational 0.00 2.00 (Number) Leachate and runoff water management systems developed and operational (Number) 0.00 2.00 Weighbridges for regional landfills developed and operational (Number) 0.00 2.00
IO Table SPACE
UL Table SPACE
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Monitoring & Evaluation Plan: PDO Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection People provided with enhanced water supply services are defined as People provided with enhanced water people provided with Annual Annual Annual Reports Utilities and PCT supply services as a result of the drinking water of Reports
Project satisfactory quality (as per national standards)and at least 22 hours of service as a result of the project. People benefitting from reliable/or enhanced water supply services as
a result of the Project (out of which female) The number of people with environmentally- sound solid waste disposal services. This People provided with means that the collected Annual environmentally-sound solid waste Annual Annual Reports PCT waste is treated and Reports disposal services as a result of the disposed of at a disposal Project facility with environmentally safe infrastructure and operations. People provided with The number of females Annual Annual Annual Reports PCT environmentally-sound solid waste with environmentally- Reports
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disposal services (of which female) sound solid waste disposal services. This means that the collected waste is treated and disposed of at a disposal facility with environmentally safe infrastructure and operations. People provided with the required level of wastewater treatment (as per national standards for BOD), where required People provided with the required level of wastewater Annual level of wastewater treatment (as per treatment covers access Annual Annual Reports Utilities and PCT Reports national standards for BOD) as a result to new sewerage of the Project connections connected to improved wastewater treatment, or existing connections connected to improved wastewater treatment plant. Proportions of females in People provided with the required Data will be collected The project populations provided with Project level of wastewater treatment (as by the PCT as part of implementing agency the required level of Annual progress per national standards for BOD) as project monitoring (PCT) will be wastewater treatment (as reports a result of the Project (Out of and evaluation. responsible. per national standards for which female) BOD), where required
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level of wastewater treatment covers access to new sewerage connections connected to improved wastewater treatment, or existing connections connected to improved wastewater treatment plant. The indicator will capture PCT project progress the number of utilities monitoring and MHU Progress Number of utilities that have prepared preparing and Annual. utility monitoring PCT and MHU. reports. and implemented UPIPs implementing UPIPs as a data based on project
proxy for the efficiency design. improvements. ME PDO Table SPACE
Monitoring & Evaluation Plan: Intermediate Results Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Length of water supply Progress Kilometers of water supply pipes Annual Progress Reports PCT pipelines of any profile Reports constructed/rehabilitated due to project activity. Length of sewerage Progress Kilometers of wastewater collectors Annual Progress Reports PCT pipelines of any profile Reports laid/replaced due to project activity. Number of utilities with UPIPs Semi- Semi-annual Semi-annual reports Utilities and PCT Number of Utilities prepared under the project annual reports
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This indicator directly relates to the improvements in efficiency of water and wastewater services in targeted utilities as measured through reductions in energy Number of utilities consumption/require attaining at least 10 ments for each cubic percent improvements in meter of potable efficiency of water and water produced and Number of utilities achieving at least wastewater services Annual Annual wastewater Utilities and PCT 10 percent average increase in energy measured through reports treated. It will be efficiency reductions in energy measured by utilities consumption/requiremen as part of their ts for each cubic meter of operating procedures potable water produced on a monthly and wastewater treated. basis. Average values will be reported to the World Bank annually. The project interventions (both physical assistance and TA) in targeted areas are designed to improve the
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operational efficiency of the systems and reduced energy consumed by cubic meter—supporting more efficient service delivery.
Average NRW reduction will be measured by the average reduction in NRW in utilities participating in the Number of utilities project, where NRW achieving at least 10 is the difference percent reduction in NRW between the volumes Annual Number of utilities achieving at least due to project. NRW is Annual of system input and Utilities and PCT reports 10 percent reduction in NRW the difference between billed consumption. It
the volumes of system will be measured by input and billed utilities as part of consumption. their operating procedures on an annual basis. Average values, along with individual values of each utility, will be
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reported to the World Bank annually in the Annual reports. The project interventions (both physical assistance and TA) in targeted areas are designed to improve the operational efficiency of water services supporting more efficient service delivery.
Career-enhancing training is defined as training that allows participants to Utility staff benefitting from training acquire new skills and Annual Annual Annual Reports to support performance Improvement competencies in support Reports plans of career progression and/or allows staff to take on new/different positions. Career-enhancing training % of female utility staff benefitting Annual is defined as training that Annual Annual Reports Utilities and PCT from training to support Reports allows participants to performance Improvement plans acquire new skills and
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competencies in support of career progression and/or allows staff to take on new/different positions. The target of 35 percent is a stretch target as women’s share in the utility workforce (especially in management) is estimated to be less than a quarter (and likely lower in management positions). This means that training opportunities will need to be disproportionally offered to women in the utilities (rather than disproportionally denied to women) It does not include mandatory training required across entire organizational divisions, e.g. to use a software or reporting system. Share of participating utilities that see Percentage of Annual Annual Annual Report Utilities improved customer satisfaction participating utility should Report
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regarding interaction with the utility be able to see an compared to baseline improvement at the end of the 5 year period. Number of utilities advancing categories Project Utility performance Number of utilities advancing under Component One Annual. progress monitoring by MHU MHU and PCT. categories under Component One from 1a) to 1b) or from reports. and PCT. 1b) to 1c) as will be assessed by the PCT Data will be taken from Data will Strategic sector planning the MHU be monitored by the Number of strategic sector or policy documents Annual and PCT from the MHU MHU documents/program prepared by the prepared by the MHU, reported in and reported in the Government supported by the project. the Annual Annual Reports Reports
During the first 4 Benchmarking system years of Annual National benchmarking system covering participating Annual Reports PCT and MHU project Reports established and in use utilities designed and implemen effectively used tation
Percentage of female Share of female staff promotions as of Annual staff promotions as of Annual Annual Report Utilities total annual promotions in Report total annual promotions participating utilities in participating utilities
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The number of regional Progress Number of regional waste disposal waste disposal sites that Annual Progress Reports PCT Reports sites developed and operational are constructed and
operational. The number of landfill gas collection systems that are developed and Progress Landfill gas collection systems operational. There should Annual Progress Reports PCT Reports developed and operational be one system developed
and operational at each regional waste disposal site. The number of leachate and runoff water management systems Leachate and runoff water that are developed and Progress Annual Progress Reports PCT management systems developed and operational. There should Reports operational be one system developed and operational at each regional waste disposal site. The number of weighbridges installed and operational. There Progress Weighbridges for regional landfills should be one Annual Progress Reports PCT Reports developed and operational weighbridge installed and
operational at each regional waste disposal site.
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ME IO Table SPACE
.
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ANNEX 1: Implementation Arrangements and Support Plan
COUNTRY: Belarus Utility Efficiency and Quality Improvement Project
1. Project institutional and implementation arrangements. The institutions involved in the project are (a) the MHU and its PCT – SE “Belcomtehinvest”, (b) oblast administrations; and (c) participating rayons, local municipalities, and their water utilities. The MHU reports to the Council of Ministers and is responsible for overseeing national investment plans in the communal services sector, including water, sanitation, and solid waste. Respectively, the MHU undertakes this oversight responsibility through oblast executive committees, which ensure that republican programs are implemented at the local levels in oblasts.
2. The MHU is responsible for the overall project coordination and monitoring of implementation progress. The project will be implemented through the PCT that is implementing the ongoing Water Supply and Sanitation Project AF (P146493, 2014–2019). The PCT has successfully implemented the now- closed Water Supply and Sanitation Project (P101190, 2009–2016) and Integrated Solid Waste Management Project (P114515, 2010–2017). Implementation arrangements essentially remain unchanged from the ongoing WSS project.
3. The PCT has been implementing three World Bank-financed projects since 2009 and has the experience, knowledge, and capacity necessary to implement the project. The PCT has experienced and trained technical and fiduciary staff. Before appraisal, the World Bank confirmed that (a) core staff, including the project coordinator/manager, and FM, procurement, environmental and social safeguards, and M&E specialists are in place in the PCT; and (b) the organogram for the PCT is available and acceptable. Because implementation of the new project will only start after the closing of the ongoing project, thus avoiding overlapping, the PCT staffing and capacity will be sufficient for the implementation of the new project. The PCT, as part of the Government administration, is limited in its ability to hire qualified staff on attractive terms; therefore, the focus in the last period has been on increasing its capacity. The PCT has been reinforced with two additional specialists (procurement and technical), from the recently closed solid waste project PCT. For Component 2, the MHU will lead on national-level activities while procurement and FM will be done by the PCT.
4. The PCT will also be responsible for record keeping, disbursement, FM, and financial flows of the project, including managing the Designated Account and preparing the project IFRs. The PCT will be responsible for collecting, consolidating, and coordinating data on project monitoring and preparation of periodic reports on achievements and obstacles during project implementation. The PCT will operate in accordance with the POM, which will detail the implementation arrangements, including procurement, contract management, payment authorization, GRMs, environmental and social safeguards management, and periodic reporting and relationships between the implementing and coordinating agencies.
5. The PCT is subordinate to the MHU, which is responsible for overseeing national investment plans in the communal services sector, including water, sanitation, and solid waste. The MHU undertakes this oversight responsibility through oblast executive committees, which ensure that
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republican programs are implemented at the local levels in oblasts. In Belarus’ centralized system, all Government agencies have representatives in oblast and rayon governments, which are responsible for the formation of investment plans and implementation of projects with local authorities, and the same arrangements will apply to the project. The owners and implementers of the projects at the local level are the municipalities involved. Vodokanals (water utilities) serving the urban areas are communal enterprises, defined as independent economic entities in charge of all operations, maintenance, implementation of investments, billing, collection, and customer services in their areas of service. Vodokanals are subordinate to the municipalities and are controlled by both the MHU and local authorities.
6. The water and wastewater service providers and SWM service providers will share the responsibility for civil works contracts management with the Belcomtehinvest, as both of them are signatories for the contracts. They are also responsible for supervising construction activities under the project and for reporting to the PCT any issue regarding the quality of the civil works and timely implementation of the contract.
7. Following the project framework, the MHU, with the support of the PCT, will conduct annual reassessments of WSS service providers’ performance following the two-stage selection methodology. All data will be provided by utilities at the MHU’s request. Responsibilities for data collection, validation, and final decision making will be with the MHU, while review and detailed assessment will be performed by the PCT on behalf of the MHU. Evaluation results will be available before project closure. Three mini customer satisfaction surveys will be conducted in each participating utility to assess users’ satisfaction with WSS services at the beginning, middle, and end of the project implementation by attaching brief questionnaires to their bills during subproject implementation.
8. For the first RLF in Polotsk/Novopolotsk, Biomekh will be the owner of the proposed RLF and will be responsible for the operation of the proposed facility, the existing materials recovery facility and waste collection. Biomekh is a state unitary enterprise under the Novopolotsk Executive Committee and currently operates the materials recovery facility and collects waste for the City of Novopolotsk and the City of Polotsk. After construction of the RLF, Biomekh will manage collection, treatment, and disposal of the whole system for Novopolotsk, Polotsk, Polotsk District, Rossony District, and Ushachi District. The household user fees will continue to be electronically automated.
9. The Vitebsk Oblast Executive Committee will make decisions in coordination with the four rayons with regard to the proposed investments and manage the overall system. It was agreed that the tariff would be equal across the rayons which is in line with recommended international practice for regional facilities. Assigned city, oblast, rayon, and ministry officials will participate in the procurement process, approve terms of reference (ToRs) for consultants, participate in discussions with the consultants responsible for design and supervision of the subproject, and participate in evaluations of proposals and bids. The PCT, in consultation with Biomekh and the Vitebsk Oblast Executive Committee, will oversee the consultants and contractors, evaluate performance, and review consultants’ reports, payments, and invoices to ensure that the work is up to required standards. The Vitebsk Oblast Executive Committee, through the local sanitary and epidemiological agency, will also ensure that the ESMP is followed, monitored, and implemented by consultants and contractors.
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10. Project financing arrangement and flow of funds. The funds flow will be either through direct payments and Special Commitments from the loan account (for larger payments) or through the Designated Account that will be opened in Euro denomination in Belinvestbank, a local state-owned bank, acceptable to the World Bank. A transit account in Belarusian Rubles shall be opened in Belinvestbank for making payments in the local currency. Both the Designated Account in Euro and the transit account will be operated by the PCT, and the payment orders will need to be authorized by an accountant and the director of PCT. The withdrawal applications will be prepared by the PCT, appropriately authorized by the PCT director and submitted to the World Bank for processing. The funds flow and disbursement procedures including controls and flow of funds diagram are detailed in the POM.
11. Co-financing. The Government of Belarus has not committed to provision of counterpart contribution to the project. The World Bank is therefore expected to finance 100 percent of the project.
12. Lending instrument. The project will be financed through Investment Project Financing from the World Bank, through an IBRD loan of Euro 90 million (US$ 101 million equivalent) to the Government of Belarus.
13. Financing. The MoF will cover the full cost of financing for infrastructure and TA to utilities involved in the project.
Project Implementation Support Plan
14. Semiannual supervision missions and short follow-up technical missions will focus on the following areas:
(a) Strategic support. Supervision missions will meet with relevant governmental representatives to (i) review progress on the project’s activities; (ii) discuss strategic alignment of the project’s different activities, especially at the planning level between the relevant stakeholders; and (iii) evaluate progress on cross-cutting issues, such as M&E, training, communication, knowledge exchange, innovation, dissemination of project results and experiences, and coordination between relevant stakeholders.
(b) Technical support. Supervision will concentrate on ensuring the technical quality of bidding documents, terms of reference, evaluation reports, construction plans, preparatory studies (that is, feasibility studies, ESIAs), products delivered by consultants, and so on. During construction and commissioning, technical supervision will be provided to ensure that technical contractual obligations are met. Regular site visits will be carried out during the project implementation and involve technical specialists as needed. Attention will also be paid to implementation of Citizen Engagement activities.
(c) Fiduciary support. Periodic supervision of procurement and FM support will be carried out by the World Bank semiannually or annually to (i) perform desk reviews of project IFRs and audit reports, following up on any issues raised by auditors, as appropriate; (ii) assess the performance of control systems and arrangements; (iii) update the FM rating in the FM Implementation Support and Status Report as needed; (iv) provide training and guidance on carrying out procurement processes in compliance with the Procurement and Anti-
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Corruption Guidelines and the Project Operations Manual; (v) review procurement documents and provide timely feedback to the PCT; (vi) carry out the post review of procurement actions; and (vii) help monitor the project progress against the Procurement Plan.
(d) Safeguards support. The activities that begun during preparation would continue throughout the project implementation, especially to ensure that relevant safeguards concerns are included in the works financed under the project through due diligence from applications of the site-specific ESIAs, ESMPs, and RAPs and effective mitigation measures. Supervision from the World Bank safeguard specialists will take place at least twice a year.
Table A1-1: Implementation Support Plan and Resource Estimates
Time Focus Skills Needed Resource Estimates (Staff Weeks) First 12 Project rollout, management, and Task team Leaders (TTLs) 8 Months implementation support coordination Refine subcomponent activities and ensure TTLs/Technical Specialists 3 quality of detailed designs Social and environmental safeguards, Social and Environmental 3 including risk mitigation measures Specialist Technical and procurement review of ToRs TTLs, Technical 2 and bidding document Specialists, Procurement Fiduciary arrangements and FM systems FM Specialist 1 Promoting innovation in the project TTLs/Technical Specialists 1 Operational support Operations Officer 3 12 to 72 Procurement review and feedback of Procurement Specialist 2 months bidding documents and consultant contracts Technical review of ToR, technical TTLs, Technical 2 reports, and bidding documents Specialists
Non-lending TA, capacity, and institutional TTLs, Technical 3 strengthening efforts Specialists
FM supervision FM Specialist 1 Social safeguards – supervision Social Specialist 2 Project management, M&E, and project TTLs, Technical 2 supervision coordination Specialists Operational support, M&E, lessons learned, Technical Specialists and 3 progress and final reporting. Operations Officer
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Skill Mix Requirements
Table A1-2
Skill Needs for Supervision Comment Staff weeks Task Team Leaders Region and HQ based 6 Economist HQ-based 2 FM Specialist Region-based 2 Procurement Specialist Region-based 3 Social Safeguards Specialist HQ-based 2 Environmental Safeguards Specialist Region-based 2 Financial Analyst Region-based 2 Operations Analyst HQ based 4 Disbursement Officer Region-based 2 Program support Country-based 4 Note: HQ = Headquarters
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ANNEX 2: Water Supply and Sanitation (WSS) Background
COUNTRY: Belarus Utility Efficiency and Quality Improvement Project
1. Belarus has laid a solid foundation for its WSS service provision but needs to move toward performance and efficiency improvements. With the basic building blocks firmly in place, the sector’s policy focus is now on improving full coverage of services, continuous provision of safe and affordable potable water, and improvement of systems’ performance and efficiency. While this project fulfils a traditional infrastructure financing purpose, at its core, it primarily aims to encourage a new approach to performance and efficiency improvements for utilities in the water and wastewater sectors.
2. Literature clearly indicates that it is not possible to tackle performance improvements without an understanding of current performance. Benchmarking techniques have become a strategic tool to (a) identify the strengths and weaknesses in the performance of water utilities, (b) identify performance trends, (c) promote information sharing and transparency in reporting, (d) promote and motivate competition between utilities to improve their performance, and (e) provide information regarding the performance of water utilities to water consumers. Information on a wide range of performance information is collected at the utility level, but this information is not used to systematically identify areas in need of improvement. Part of Component 2 comprises formalizing the information already collected through the second-stage screening tool and building on best practice of DWP DCM and other benchmarking systems.
3. Measuring, monitoring, and assessing information on performance using benchmarking data can then be done to identify areas of strengths and weakness and form business plans at a utility, oblast, or regional level (or National Strategies at the sectoral level). Figure A2-1 depicts a performance improvement framework on which this project builds.
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Figure A2-1: Performance improvement cycle
Developing a National WSS Strategy
Source: World Bank 2018
4. This project supports Belarusian WSS stakeholders in establishing a performance process along these lines, increasing efficiency and improving performance while simultaneously providing finance for priority investments that improve the quality of water and wastewater services, close coverage gaps, expand wastewater treatment capacity, and address remaining water supply quality issues. This project will also support preparation and implementation of UPIPs. Based on data, these utility-level plans identify areas of strengths, and weaknesses, and develop business plans to address their shortcomings.
Project and Utility Eligibility
5. A two-stage selection process is used to assess the level of utility performance, identify strengths and weaknesses, and then categorize utilities into categories 1a, 1b and 1c, after which the level and type of support can be determined. The first-stage screening involves a detailed quantitative assessment of the utilities across 13 Water Utility Performance Indicators (WUPIs) (table A2-1 below). The screening criteria cover quality of service, economic efficiency, and operational efficiency aspects of utilities. Utilities shall be assessed periodically (e.g. annually) using a standard framework such as the one suggested, so that performance over time can be measured. Measuring performance improvements over time also ensures that utilities are incentivized to move up the performance ladder during the project’s implementation. Utilities were screened through the above process and categorized under the said categories 1a), 1b) and 1c). Some of the project funds will be initially unallocated and retained for later years of implementation to create additional incentives for lower performing utilities, based on performance improvements and other factors such as readiness. Should the Government of Belarus
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demonstrate its commitment to the project’s innovative design and if its implementation proceeds well, additional resources could be added to the project in due time.
Table A2- 1: First stage screening26
Size of population served Insert your actual SCORING REGIME INDICATORS Individual scores (above and below 10,000) results Performance Score > 90% 10 above 0.0 < 50% 0 1 Water Coverage (WC), % > 75% 10 below 0.0 < 30% 0 > 70% 10 above 0.0 < 30% 0 2 Wastewater coverage (WWC), % > 50% 10 below 0.0 < 20% 0 Quality of service > 95% 10 3 Drinking Water Quality (DWC), % 0.0 < 80% 0 > 90% 10 4 Continuity of supply (CS), % 0.0 < 70% 0 > 0.9 10 5 Operating Cost Coverage (OCC) 0.0 < 0.5 0 > 25% 10 6 EBITDA/Revenue (ER), % 0.0 < 10% 0 > 95% 10 7 Revenue Collection Efficiency (RCE), % 0.0
Economic Efficiency Economic < 80% 0 < 20 10 8 Non-Revenue Water (NRW), (m3/km/day) 0.0 > 50 0 Number of breaks per 100 km mains length in the water < 30 10 9 0.0 network (NBW), (No./100 km) > 70 0 Number of blockages per 100 km sewer length in the < 20 10 10 0.0 wastewater system (NBWW), (No./100 km) > 60 0 < 3 10 above 0.0 Employees per 1000 connections (EPC), (No./1000 > 5 0 11 connections) < 5 10 below 0.0 > 7 0 Operational efficiency Operational Electricity use for production and distribution per m3 < 0.5 10 12 0.0 water produced, (kWh/m3) > 1 0 Customer complaints per 1000 connections (CC),(No. < 50 10 13 0.0 complaints/1000 connections) > 100 0 TOTAL SCORE 0.0 130 6. The project proposes a tiered approach to providing support (financial and other) to utilities to improve their performance and efficiency, while allowing good-performing WSS utilities to access larger investments to improve service quality and increase performance and creditworthiness. Utilities that receive a score of less than 90 are categorized as lower performers (1a), those with a score between 90 and 120 are categorized as better performers (1b), and those with a score above 120 are categorized as best performers (1c). Of the utility data received from the Government during project preparation, the utility categorization was made as follows:
26 Refer to the end of Annex 2 below for explanatory notes of table A2-1.
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(a) Category 1a (Score 0 – 90): 5 utilities. Utilities in category 1a will be eligible to receive assistance to (a) prepare Utility Performance Improvement Plans (UPIPs), and (b) implement measures identified in the UPIPs to improve performance before being given access to financing in Component 1b. The activities may include physical activities (such as the purchase, rehabilitation, or replacement of meters, creation of pressure control zones, NRW reduction measures, energy efficiency measures, and so on) and nonphysical activities (improving the customer database, improving the billing collection ratio, and so on).
(b) Category 1b (Score 90 – 120): 26 utilities. Utilities in 1b will be eligible to receive financial support to (a) prepare UPIPs; (b) implement performance improvement measures identified in UPIPs and (c) construct, upgrade, and modernize WSS infrastructure.
(c) Category 1c (Score 120 +): 7 utilities. Service providers with best performance will be eligible to receive (a) financial support to construct, upgrade, and modernize WSS infrastructure, including water treatment and distribution facilities and wastewater collection and treatment facilities; (b) TA to improve creditworthiness, develop viable investment plans, and prepare financing proposals for these investments (including proposals to access nongovernment financing from the domestic financial market) and pilot co-financing to improve financial sustainability.
7. The above approach is useful to assess utility performance and the associated likelihood for greater sustainability of investments as they improve performance, as a basis for prioritizing allocation of limited resources and determining the level of support to be provided to utilities. It also provides the basis for establishing the national-level benchmarking approach in Component 2. Based on the above assessment of the required level of service, sub-projects put forward by utilities were then assessed through the second stage screening to ensure their alignment with the project’s overall principles and value-for-money. The second stage proposes a minimum project size threshold of US$250,000, a minimum population size threshold of 10,000, as well as four key impact metrics. The four key metrics with which projects were assessed are as follows:
(a) Impact: Project-affected population (project affects a large enough population for its cost).
(b) People: Demonstrated need for urgent WSS intervention (project demonstrates benefits for lower-income or underserviced populations, affected by poor quality or access to water supply).
(c) Sustainability: Utility (or WSS department) has an independent budget (utility is able to manage own budget and has economic incentive for cost recovery).
(d) Environment: Project improves environment/climate change adaptation/mitigation (project’s impact on the environment is taken into consideration).
8. In addition to the above, the criteria for selection and prioritization include coverage of low- income level groups of the population to ensure that the most vulnerable groups benefit from investments. Moreover, as part of the project, it is intended to collect data and monitor users’ satisfaction, closely aligned with the World Bank’s Citizen Engagement corporate requirement and
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reflected in indicators in the Results Framework. Customer surveys will be conducted to assess users’ satisfaction with WSS services at the beginning and the end of the project implementation.
9. Results of the second stage screening (i.e. those that met the two threshold criteria and received a score of at least 3 out of these 4 criteria in paragraph 7 above) indicate a large project demand in the sector, and a spread of needs across all three categories (1a, 1b, and 1c): preliminary results from the initial list of projects and utilities screened suggest that in category 1a, there are 4 projects with a total cost of US$20 million, in category 1b there are 33 projects with a total cost of US$135 million and in category 1c there are 6 projects with a budget of US$43 million. The total potential demand is thus close to US$200 million.
Explanatory notes
10. Operating Cost Coverage Ratio (OCCR). This PDO indicator directly relates to efficiency of water and wastewater services in targeted areas. Specifically, the indicator reflects the financial performance of the utility as a ratio of total revenues and total operating expenses (including debt servicing). The OCCR will capture impacts of project interventions designed to support efficiency including reductions in operating costs and revenue enhancement. It will be measured by utilities as part of their operating procedures and average values will be reported to the World Bank annually.
11. Project beneficiaries. This indicator reflects an estimate of the population that is directly benefiting from activities/interventions supported by the project. This will be recorded as a cumulative amount, consisting of an estimate of the population which is directly benefiting from the water supply and wastewater in targeted areas. Census data will be used to determine average household size and to estimate the proportion of beneficiaries that are female.
12. Customers in project areas reporting improved water supply services, as measured through scorecards (rating 1–5). This indicator directly relates to the quality of water supply services in project areas affected by the investments. It will be measured through the average ratings derived from scorecards, before and after project interventions. The scorecard ratings will be determined through focus group sessions, designed to be representative of customer base in project-affected areas. Average ratings will be determined based on a five-point scoring system (1–5), where a score of 1 represents poor services and 5 is high-quality services. The project target is to increase the average rating by 1 basis point above the baseline (or 20 percent increase). Detailed methodology will be developed, including the identification of controls groups, in order that benefits resulting from project interventions can be correctly attributed.
13. Energy efficiency measured by the consumption of energy to produce water and treat wastewater. This PDO indicator directly relates to efficiency of water and wastewater services in targeted cities. It reflects energy consumption/requirements for each cubic meter of potable water produced and wastewater treated. It will be measured by utilities as part of their operating procedures on a monthly basis. Average values will be reported to the World Bank annually. The project interventions (both physical assistance and TA) in targeted areas are designed to improve the operational efficiency of the systems and reduced energy consumed by cubic meter—supporting more efficient service delivery.
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14. NRW reduction measured by the amount of water losses reduction in utilities participating in the project. This indicator is related to the operational efficiency of water services in targeted cities. The NRW is the difference between the volumes of system input and billed consumption. It will be measured by utilities as part of their operating procedures on an annual basis. Average values, along with individual values of each utility, will be reported to the World Bank annually. The project interventions (both physical assistance and TA) in targeted areas are designed to improve the operational efficiency of water services supporting more efficient service delivery.
15. Volume of wastewater discharged in accordance with national standards for Biological Oxygen Demand (BOD) levels. This PDO indicator relates to the quality of wastewater services in targeted areas. This indicator measures the discharged wastewater volumes that are compliant with the national requirements about residual BOD at the discharge points of the treatment plants constructed with the financial support under the project. The BOD level for the treated effluent will be measured by utilities as part of their operating procedures on a daily basis. Cumulative values will be reported to the World Bank on an annual basis. Project interventions are designed to improve wastewater collection and treatment services and as such discharged wastewater quality needs to increase in the targeted areas.
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ANNEX 3: Detailed Description of Solid Waste Management (SWM) Investments
COUNTRY: Belarus Utility Efficiency and Quality Improvement Project
1. Component 3. Enhancing the solid waste management process in the country (€22.5 million). This component’s objective is to support the Government as the country transitions to a regional approach to SWM. This component is designed to use a regional approach to design a cost-effective, environmentally sound and safe waste treatment and disposal system. Under this component, the regional approach considers technical, operational, financial, environmental, social, and administrative arrangements. The project activities can serve as a model as the Government prepares for approval and rollout of the State Program and regionalization of SWM is mandated nationally.
2. The component includes (a) the construction of the Polotsk/Novopolotsk RLF and supporting infrastructure and equipment, including through the carrying out of civil works and provision of equipment as well as detailed designs, construction management, and investment monitoring; following the construction of the new landfill, the old site located in the same area with the new site will be closed and remediated; (b) preparatory investment studies, such as site-selection studies, feasibility and design studies, ESIAs, an RAP, detailed design, and construction of other RLFs and supporting infrastructure and equipment including through the carrying out of civil works and provision of equipment as well as construction management and investment monitoring; the activity may include closure of dump sites if identified during implementation; and (c) TA for sector development policy studies related to improving the efficiency of the sector including improvements to the reduction and recovery of waste, financing studies, public communications campaign to raise environmental awareness, and/or technical preparation for future projects.
3. The Polotsk/Novopolotsk RLF is the site identified by the MHU as a priority to serve four rayons: Rossony, Ushachi, Polotsk, and Novopolotsk—all under the Vitebsk Oblast. The total population of these four rayons is 237,375, and the waste generation is 72,000 tons per year. The land for the selected site is publicly owned. Construction activities started in 2010 but stopped due to lack of funds. The Vitebsk Oblast is conducting a feasibility study for the regional waste shed and updating the designs and has prepared a full ESIA. The supporting infrastructure and equipment for the RLFs can include collection, transportation, and disposal-related infrastructure and equipment. For the Polotsk/Novopolotsk RLF, transportation equipment, an administrative building, and a weighbridge will be included in addition to the RLF construction. The RLF will be designed to last up to 31 years or the maximum lifetime based on land available and should follow global standards for a sanitary landfill. This includes having a liner; leachate collection and treatment system; landfill gas collection and treatment system; and monitoring of air, gas, water, and soil. An O&M manual will be developed to support proper operations of the sanitary RLF.
4. The remaining RLF sites and waste sheds have not yet been selected but could include vehicles, transportation equipment, a transfer station, a sorting line or facility, a weighbridge, and disposal
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equipment, in addition to construction of a sanitary RLF. The selection of rayons by the MHU to receive financing for civil works and goods or for TA will follow the criteria detailed in the following paragraphs:
A. Eligibility criteria to receive project funds for preparatory studies such as site-selection studies, feasibility and design studies, an ESIA, and a RAP:
(i) There should be consistency with the Belarus National SWM Strategy.
(ii) Several municipalities and/or rayons have demonstrated through a signed MoU or similar statement their interest to cooperate and use an RLF and are seeking finance for the preparatory studies for such RLF and supporting infrastructure from the project funds.
(iii) Administrative arrangements for management and operation of the new RLF and supporting infrastructure are agreed in principle.
B. Eligibility criteria to receive project funds for civil works and goods:
(i) The administrative arrangements for the new RLF and supporting infrastructure are in place (that is, regional company, intermunicipal utility, or existing utility has been established and is operational).
(ii) The site for the intended infrastructure development is selected; land is acquired; and feasibility study, ESIA, and RAP (if needed) are prepared (and meet national and financiers’ requirements).
(iii) Detailed designs and bidding documents are ready for tendering.
(iv) ‘In-principle’ agreement on tariffs and contractual arrangements between the RLF and municipalities/rayons that will be served have been prepared and endorsed by the concerned local government administrations.
(v) Participating municipalities/rayons confirm their willingness to use the RLF and supporting infrastructure and discontinue the use of other municipal disposal sites that will be gradually closed as envisaged in the strategy.
5. TA for sector development policy studies can support improving the efficiency of the sector and implementation of the State Program. This can include improvements to the reduction and recovery of waste, financing studies, public communications campaign to raise environmental awareness, and/or technical preparation for future projects.
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ANNEX 4: Financial and Economic Assessment
COUNTRY: Belarus Utility Efficiency and Quality Improvement Project
Water Supply and Sanitation (WSS)
Introduction
1. The Utility Efficiency and Quality Improvement Project (UEQIP) aims to support the Government of Belarus in establishing an incentive framework for encouraging the gradual modernization of WSS service providers towards commercial, operational, and financial sustainability. The project builds on a successful on-going project, which has provided financial assistance to the upgrading of a range of water supply and sanitation infrastructure. It aims to push the envelope through a structured approach to assessing performance and supporting service providers with a range of assistance to identify areas with performance gaps and then focus financial resources to address these.
2. The project provides significant resources to this end (US$100 million equivalent is available as World Bank finance, of which US$72 million is available for projects that support water supply and sanitation (WSS) service providers). It is structured using a framework approach to allow for a phased approach to project selection and implementation. As such, not all subprojects have been identified, and some projects have not yet had feasibility studies carried out/completed.
3. In order to ensure value for money and support the project’s development objectives, the framework approach means that projects will be screened for their combined impact on beneficiaries and the environment, the urgency for their need, the financial strength and sustainability of the service provider, and their project readiness. This is relevant to the financial and economic appraisal of the project as a whole since it is not possible at this point to identify (and thus assess) the financial and economic performance for the entire project as a package. Instead, the approach taken in this analysis is to identify two projects that have high scores when assessed in the proposed framework approach, and which have well developed technical feasibility studies of the design options and choice of infrastructure. These projects are considered to have high readiness (both having been prepared as part of the on-going project in the country). Going forward, a combination of applying the framework selection approach and an assessment of the technical design in a feasibility study should be conducted on all projects to determine their financial and economic viability.
4. It is worth noting that the project proposes a combination of both ‘hard’ and ‘soft’ support to service providers, both in the form of financial and technical assistance. Service providers will be supported in assessing their performance and identifying improvement areas, after which support can be given to addressing areas for improvement. Such measures could include physical activities (like the purchase and rehabilitation or replacement of meters, creation of pressure control zones, NRW reduction measures, energy efficiency measures, etc.) and non-physical activities (improving customer database, improving billing collection ratio, etc.), or project finance support. The financial and economic assessment that follows has been carried out on two project finance subprojects that are considered “ready”, and while it not possible at this time to assess the financial and economic impact of the other measures
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described, it is suggested that such a value-for-money assessment is carried out prior to their implementation to ensure that projects have a net positive impact for society, and the costs of which can be covered sustainably by the service providers.
5. The two projects that are assessed for the financial and economic outcomes are: • Reconstruction of the Sewerage System in the town of Zaslavl, Minsk Oblast; • Reconstruction of Wastewater Treatment Facility of Sewerage System in Slutsk.
Zaslavl, Minsk Oblast
6. The existing sewerage system and wastewater treatment plant is significantly degraded and requires urgent rehabilitation and modernization. The percentage of deterioration on networks is considered to be above 90%, while the treatment facilities themselves are considered more than 60% depreciated. They also utilize old treatment technologies. In accordance with the General Development Plan of Zaslavl town, further development and reconstruction of the existing centralized sewerage system of the town is envisaged, and a full feasibility study for the proposed project was carried out in 2017.
7. The proposed project includes: • Replacing approximately 12.5 km of existing sewerage networks; • Reconstruction of five existing sewage pumping stations; • Construction of two wastewater treatment facilities (for the western and eastern parts of the town), including the reclamation of existing filtration fields; and • Construction of 58.5 km of new sewerage and 34 new sewage pumping stations for connecting existing and planned water users (mainly households).
8. In terms of the wastewater treatment facilities, the project proposes the use of new artificial biological treatment facilities, where wastewater is treated before being released into filtration fields. An options analysis was carried out the technical design to determine the most appropriate option. The suggested scheme ensures extension of the sewerage system of Zaslavl town with the relevant modernization, maximal utilization of the existing networks and facilities; and takes into consideration solutions of town planning.
Financial appraisal
9. The financial appraisal is conducted from the perspective of the service provider. It will be responsible for the operation and maintenance of the infrastructure and is the direct recipient of the associated water and sewerage service tariffs and charges. The purpose of the appraisal is to understand the financial return to the project infrastructure investment and the financial viability of the infrastructure in terms of its operational sustainability.
10. The financial analysis is carried out for a 30-year planning horizon from 2017 to 2047, where 30 years is considered the economically useful service life of facilities and equipment from the project, after which there should be no residual value in the assets. Prices are given in constant 2017 prices. For the financial appraisal, a cost of capital rate of 10% was used, and a Value Added Tax (VAT) rate of 20% is included in the investment value (VAT will be paid by Bank funds).
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The costs considered in the financial appraisal include the incremental capital investment and the operation and maintenance (O&M) cost for the proposed systems. The full O&M cost for the new project were included as incremental costs due to the fact that the current system is significantly degraded and largely depreciated. As such, this project, although rehabilitating and modernizing an existing system, provides a set of services that not captured by the existing infrastructure and are thus considered in its entirety. In the absence of the project, it is also likely that the without-project scenario would be further deterioration of the system and its eventual collapse.
Table A4-1: Capex Costs and Timing
Item Total 2018 2019 2020 2021 2022 Design and survey work (DSW) USD '000s 1,280 611 191 478 - - Installation and construction USD work '000s 10,170 - 2,714 2,830 2,313 2,313 Purchasing and maintenance USD equipment '000s 2,386 - 1,479 840 34 34 Total capital cost without VAT – USD initial investment cost '000s 13,836 611 4,384 4,148 2,347 2,347 VAT, that is paid during the USD conduction of initial investment '000s 2,767 122 877 829 469 469 Total initial investment with VAT USD '000s 16,604 733 5,261 4,977 2,816 2,816 Source: Feasibility study
11. In terms of O&M costs, these comprise of material costs, total (including energy and sewerage treatment), labor costs, deductions for social needs and other costs, and account for roughly 10% of capex costs. It is assumed that O&M costs only accrue after construction. See table A4-2 below.
Table A4-2: O&M Costs for first 5 years of operation
Total 2023 2024 2025 2026 2027 Material costs, total (including USD 67,986 1,206 1,407 1,473 1,505 1,561 energy and sewerage treatment) '000s Labor costs USD 32,116 708 1,032 1,053 1,074 1,096 '000s Deductions for social needs USD 11,546 240 351 358 365 372 '000s Other costs, total USD 5,273 158 170 172 173 175 '000s Total O&M costs USD 116,921 2,312 2,961 3,056 3,117 3,204 '000s Source: Feasibility study
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12. The revenue considered includes the expected water tariffs that will be charged to three categories of users (“structural divisions”; “departmental housing”; and “legal entities and other consumers”). As with O&M costs, the full revenues were included in the assessment due to the status of existing infrastructure.
13. The results of the analysis indicate that the project will not bring positive financial results: at a 10 percent discount rate, the Financial Net Present Value (FNPV) is negative at (-US$ 12,6 million the Financial Internal Rate of Return (FIRR) stands at (-4 percent), which is below the discount rate; and the Financial Benefit Cost Ratio (FBCR) is at (0.74), which is below 1. See Appendix 1 for details.
14. Given that profit is not usually the main objective of a large sanitation project of this nature which is aimed at providing public goods, these negative financial results are not surprising. Projects of this nature are often financed or subsidized by public authorities where there is a socio-economic rationale and externalities, even when the project is not necessarily financially profitable. Operationally, the project demonstrates financial sustainability over its useful life, where operating revenues are larger than operational costs from year ten onwards.
Financing terms 15. Currently, capital investments in the construction of new facilities and reconstruction of existing water supply and sewage systems are covered by the state (the republican and local budgets). Therefore, the accumulated depreciation of the property related to investments is not included in the operating expenses, as well as interest and principal on the loan of IBRD. The tariff for sewerage services varies only because of a change in maintenance costs. While this financial structure is beneficial for the enterprise and the population, it does not meet the principle of full coverage of costs from the tariff for sewerage services.
16. A detailed tariff modelling exercise was carried out in the feasibility study for the project, aimed at investigating the impact of various tariffs on the project’s financial and economic outcomes. The Government of the Republic of Belarus plans transition to full compensation by the population for the costs of provision of housing and public services, including water and sewer-age services. This process will occur in conjunction with a reduction in cost and the elimination of cross subsidization, when industrial and budget organizations paid part of the cost of water and sewer-age services.
17. While the project’s financial performance using current tariffs is negative, under two other tariff scenarios, one where the expenses related to investments in fixed assets (payment of principal and interest on the loan) are included in the tariff for sewerage services and one where the tariff for sewerage services includes not only the costs associated with investments in fixed assets, but full operational cost recovery, demonstrate more positive results: in the first, a IRR of 4.3% and NPV of negative -US$ 2,5 million and an IRR of 11.1% and NPV of US$3.2 million respectively. In the last case, the project is financially self-sufficient and cost-effective. These results demonstrate the need for the country to move towards fuller cost recovery in tariffs if financial sustainability of utilities is sought. In terms of household affordability, the feasibility study suggests that even in the case of the full cost recovery tariff, the average spend on sewerage charges are expected to be ~2% of total family income (i.e. less than the restriction of 3%) for families with a low level of income.
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18. Using the tariff model 1 and 2 to assess the social accessibility of tariffs for water and sewerage services for the population of Zaslavl town, it can be stated that the costs of low-income households for water supply and sewerage services will be between 1.41 and 2.0% of their total family income.
19. The project is financially self-sufficient and cost-effective when option 3 of the tariff model in calculations is used. project is financially self-sufficient and cost-effective when option 3 of the tariff model in calculations is used.
Economic appraisal
20. Cost-Benefit Analysis (CBA) is a methodology for appraising the economic value of investment projects or proposals. It is a test that involves weighing up the implicit and explicit positive and negative impacts (costs and benefits) of a public project, in terms of its contribution to social welfare. The analysis finds, quantifies, and adds all the positive factors (benefits), then identifies, quantifies and subtracts all the negatives (costs). The difference between the two indicates whether the planned action has a net benefit and is therefore advisable or should be altered or discarded. The approach is explicitly designed to inform decision-makers through optimizing the social and environmental impacts.
21. In order to directly compare the various costs and benefits of a project (social, economic and environmental), the impacts are quantified as far as possible and monetised (assigned a monetary value that reflects its real value to society), through the use of economic valuation techniques. The costs and benefits – which occur throughout the project lifetime – are then discounted to a present-day value to find the net present value of the project. Given that profit is not always the main objective, particularly in the public sector, a CBA serves to indicate whether there is an economic rationale for the public provision of a good/service (the project) – i.e. because it will generate a positive net social benefit – even when a project may not necessarily be financially profitable.
22. In terms of the project’s expected economic benefits, the project will expand access to the wastewater collection system for households which currently rely on septic tanks due to overcapacity in the existing centralized system. As a result of the project, approximately 26,058 people will be connected to centralized sewerage systems by 2047, compared to 9,242 in 2016. Economic benefits accrue to households where the incremental cost savings from centralized sewerage tariffs are less than their current expenditure on septic tank systems). In this economic appraisal, this benefit stream was calculated as the difference between the costs of the existing system and the annual expected tariff in the centralized system.
23. The proposed project is also expected to ensure that the project area meets the EU standards for wastewater treatment and management. Benefits accruing to projects of this nature typically include the following. • Health - improving sanitation conditions and reducing the risk of disease; • Benefits for ecology and natural resources - protection of underground and surface sources from pollution; • Social sphere - recreation, aesthetic value, quality of life; • Wide economic benefits - development of tourism, attraction of investments, increase in employment.
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24. To quantify benefits associated with environmental improvements, data was drawn from the report on the benefits of compliance with the EU environmental legislation. While a contingent valuation study was not carried out specifically for the project, applying the methodology and average values provided in the EU report was considered sufficient. The EU report indicates that the average annual benefit of full compliance with EU environmental standards falls between EUR 81 to 412 per capita per year, with benefits relating to the improvement of air quality, water resources and waste management, and include a wide range of benefits such as direct benefits to public health through reduction of illnesses and avoidance of early mortality, resource benefits to parts of the environment used commercially, e.g. forestry, agriculture and fisheries, and social benefits, including safeguarding and access to natural and cultural heritage. A conservative approach was taken to account for Belarus’s characteristics compared to those of the EU, including its lower income levels
25. Avoided GHG emissions due to more efficient wastewater collection, lower energy use for wastewater treatment and discharge, ending septic tanks use and thus reducing methane leaks, and reducing emissions by improving treatment processes were also considered as part of this economic assessment. Using the World Bank shadow price of carbon tool, benefits streams were quantified and included in the economic assessment.
26. Expected additional economic benefits flowing from the project include the reduced the cost of pumping, where the project includes the replacement of sewage pumps with higher energy efficiency and better design and where more energy-efficient pumps will replace existing pumps. Additionally, reduced maintenance costs are expected due to the replacement of ageing infrastructure. Insufficient data available meant that these benefits were not included in the quantitative economic assessment of the Zaslavl project.
27. The main economic benefits flow from three sources, namely those associated with improved wastewater management, where hidden costs to the economy caused by lower environmental standards through a loss of output and inefficient production are accounted for, cost savings to households that rely on septic tanks but would be connected to a centralized sewerage system under the project and net positive annual impacts from greenhouse gas emission reduction due to the project. The project is estimated to have an in a positive Economic Net Present Value (NPV) of US$8.942 million and an economic internal rate of return (EIRR) of 10.38 percent.
Sensitivity Analysis
28. In order to manage the internal risks of the project and to account for the use of assumptions used in the project’s assessment, the feasibility study conducted a thorough sensitivity analysis. The following parameters were used in the sensitivity analysis carried out.
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Table A4-3: Input parameters assessed in the project’s sensitivity analysis
Assumptions (input parameters) Project Performance Indicators Investments Financial net present value of capital investments Operation and maintenance costs Maximum tariff in real prices Ecological benefits of the project Average monthly tariff for water supply Demand for sewerage services by the public Economic rate of return Coefficient: economic benefit/economic costs
29. Significant influence on the indicators of the financial evaluation of the project is the factor of increasing or decreasing the amount of capital expenditure for the execution of this investment project, as well as the tariff model used, where the project’s negative financial outcomes become positive in the case of full cost recovery tariffs being charged.
Slutsk, Minsk Oblast
30. There is an established centralized system of household and industrial sewerage in Slutsk, although the existing system faces significant pressures and is largely old and deteriorating. In 2016, the percentage of depreciated sewage networks amounted 50%, while the depreciated percentage of sewage pumping stations was 70%. Accordingly, urgent upgrading of the system is required: the state of technological structures for mechanical and biological treatment is estimated as unsatisfactory in the project’s feasibility study which was carried out in November 2017. The main technological equipment is completely corroded in places, which does not allow switching off individual facilities for maintenance without stopping the process of wastewater treatment. Additionally, no further space exists in existing sludge sites, having not been cleaned for more than 10 years (since 2009, sewage sludge is being supplied to a temporary site) and pump stations for sludge are largely non-operational due to deterioration.
31. The proposed project suggests the modernization of the sewerage system, including • Sewerage system reconstruction works • Reconstruction of municipal wastewater treatment plant, including: o Modernization of the administrative and household building; o Construction of a receiving chamber; o Construction of bar screen buildings and sand separators; o Reconstruction (modernization) of degritters, primary settling tanks, raw sludge pump station, aerotanks; o Construction of an additional secondary settling tank with the reconstruction of the existing one; o Reconstruction (modernization) of the pumping and blower station; o Reconstruction of the disinfection unit with the construction of a sodium hypo- chlorite dosing station; and o Reconstruction of the sludge treatment unit with construction of a workshop for mechanical dehydration of precipitation.
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Financial appraisal
32. As was the case in Zaslavl, the financial appraisal is conducted from the perspective of the service provider. It was carried out for a 30-year planning horizon from 2017 to 2046, where 30 years is considered the economically useful service life of facilities and equipment from the project, after which there should be no residual value in the assets. Prices are given in constant 2017 prices. For the financial appraisal, a cost of capital rate of 10% was used, and a Value Added Tax (VAT) rate of 20% is included in the investment value (VAT will be paid by Bank funds).
33. The costs considered in the financial appraisal include the incremental capital investment and the operation and maintenance (O&M) cost for the proposed systems. The total capex cost of the project is US$ 11,2 million. As with Zaslavl, the full O&M costs and tariff revenues were included in the assessment due to the status of existing infrastructure.
Table A4-4: Capex Costs and Timing
Item Total 2018 2019 2020 Design and survey work (DSW) USD '000s 593 593 Installation and construction work USD '000s 4,953 2,882 2,070 Acquisition and installation of equipment USD '000s 3,767 2,976 790 Total capital cost without VAT – initial investment cost USD '000s 9,313 593 5,859 2,860 VAT, that is paid during the conduction of initial investment USD '000s 1,863 119 1 172 572 Total initial investment with VAT USD '000s 11,176 712 7 031 3,432 Source: Feasibility study
34. In terms of O&M costs estimated include the cost of consumed electricity, the cost of buying re- agents as well as labor costs. Revenues from the provision of sewerage services are calculated based on the established actual volume of wastewater at current rates. Tariffs for enterprises and institutions were calculated considering all additional costs for water supply and sewerage. See Appendix 2 for calculations.
35. The project’s Financial Net Present Value (FNPV) is negative (-US$7.9 million), with an FIRR of -18 percent and BCR of 0.78. This result is largely driven by the fact that there are limited revenue streams associated with the provision of sewerage services, and that given current tariffs currently charged do not account for full cost recovery.
Financing terms 36. As was the case in Zaslavl, a tariff modeling exercise was carried out as part of the Slutsk feasibility study. Again, the results of the exercise demonstrated small positive financial results when a tariff for full cost recovery was used (IRR of 7.89% and NPV of US$ 365,000), whereas if a tariff was used that accounted for the cost of financing, while the IRR was positive (5.2%), the NPV is negative US$ 1.4 million, due to the fact that the IRR is lower than the discount rate applied.
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Economic appraisal
37. In assessing the economic justification of the proposed project, as in Zaslavl, in addition to economic factors, environmental and social consequences for consumers in Slutsk were taken into account. The main economic benefits flow from three sources, namely those associated with improved wastewater management, where hidden costs to the economy caused by lower environmental standards through a loss of output and inefficient production are accounted for, cost savings to households that rely on septic tanks but would be connected to a centralized sewerage system under the project and net positive annual impacts from greenhouse gas emission reduction due to the project. The project is estimated to have an in a positive Economic Net Present Value (NPV) of US$8.94.2 million and an economic internal rate of return (EIRR) of 10.38 percent. See Appendix 2 for details.
38. Given that profit is not usually the main objective of a large sanitation project of this nature which is aimed at providing public goods, these negative financial results are not surprising. Projects of this nature are often financed or subsidized by public authorities where there is a socio-economic rationale and externalities, even when the project is not necessarily financially profitable. Operationally, the project demonstrates financial sustainability over its useful life, where operating revenues are larger than operational costs from year ten onwards.
Sensitivity Analysis
39. A similar sensitivity analysis to that carried out in Zaslavl was carried out in the feasibility study for Slutsk, using the same set of parameters in the assessment. Again, capital costs and tariffs were two main drivers of the financial outcomes of the assessment.
Solid Waste Management
Introduction
40. This document analyses the construction of the Polotsk/Novopolotsk RLF (P/NP RLF) as a representative site of the SWM activities of the project. It evaluates the economic and financial returns of the project activities of closing the existing non-sanitary landfill and wild dumps and switching to a coordinated regional SWM system with a regional landfill. It finds significant economic returns to implementing the P/NP RLF. The positive economic returns primarily stem from the benefits of avoiding groundwater pollution by using lining for the new RLF. Financially, the capital outlay from the local budget for the new landfill can be recovered through an increase in tariff revenues by about 10-15 percent over 20 years.
41. This document structured as follows: first, it justifies public sector provisioning and financing for such SWM activities; second, it overviews the economic costs and benefits of the current system and of the project; third, it discusses the financial system for SWM management at the local level in Novopolotsk; fourth, it presents the model for cost-benefit analysis, and fifth, highlights the results.
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Rationale for public sector provision/financing
42. Traditionally the public sector has built, operated and managed public infrastructure with significant environmental and social benefits. These public goods comprise infrastructure components that generate substantial economic benefits and positive externalities for the public, as they will help reduce water pollution with leachate, air pollution with methane and CO2, reduce greenhouse gas emissions, improve living conditions, and protect the environment in Belarus.
43. Public sector involvement in the planning and maintenance of solid waste services and infrastructure remains critical to lessen the gaps and disparities in basic services. It will support local government authorities in performing their mandate to provide basic urban services. It will require strong government involvement at all the national and local levels, and broad consultation and engagement of local communities.
Overview of the economic costs and benefits of the current system and with the project
44. The Polotsk/Novopolotsk (P/NP) RLF will serve four adjacent territorial units (Novopolotsk, Polotsk district (including the regional center - Polotsk), Rossony district, Ushachski district) with the total population of 237,375 and waste generation of 72,000 tonnes/year. Of these, 16 percent or 11,430 tonnes/year will be recycled (up from 14 percent today) and the rest will be disposed at the regional landfill. The cities of Polotsk and Novopolotsk are currently served by one landfill. The other towns are served by open dumps– approximately 48 dump sites in total.
45. The current SWM practices carry significant negative externalities. The waste landfill sites are major sources of land, air, ground and surface water pollution. This is very harmful for people, especially who reside near landfill sites, and are a liability due to their explosive capacity. Gases released from landfill sites are the main factor in polluting the environment and could have hazardous effects on health such as through volatile organic compounds (VOCs). The composition of gas varies according to the types of waste and phase of degradation of waste. Gases generated by landfill waste are generally methane, carbon dioxide, nitrogen dioxide etc. Local people are exposed by these gases via inhalation of air born emissions or dust.27
46. A major externality is the pollution of ground water and the resulting health impacts. The existing sanitary landfill in Polotsk has lining but the leachate is currently released untreated while the remaining disposal sites do not have any protection in place. As rainwater infiltrates the landfill waste, it becomes contaminated with dissolved and suspended matter originating from the decomposing waste. The composition of the resulting leachate varies according to the nature of the landfill material, which may include biodegradable/non-biodegradable, organic/inorganic and toxic/non-toxic waste. Leachate that escapes from a landfill can contaminate groundwater, surface waters and soil, potentially polluting the environment and harming human health. Landfills can continue to produce leachate for 30-50 years after they have ceased to operate, making the sustainable management of leachate a long-term problem for landfill operators and regulators. Preventing leachate from entering ground and surface water is the most cost-efficient measure.
27 https://pdfs.semanticscholar.org/7b70/2ed22a7eeb6e465dbda1e905b6e1d9f4a680.pdf
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Institutional set-up
47. In the city of Novopolotsk PKUP Novopolotsk Special Automotive Base (Autobaza) is currently managing the landfill while UE Biomekhzavod Domestic Resource (Biomekh) provides waste transportation and operates the materials recovery facility. In January 2019, Biomekh will start collecting the waste from Polotsk as well. The Unitary Enterprise “The Housing and Communal Services of the Rossonski District” and the Ushachski District - the Unitary Enterprise “The Housing and Public Utilities of the Ushachski District” serve the two outer districts. Going forward after the regional system is in place, Biomekhzavod will continue to collect the waste, this time from all districts, operate the materials recovery facility, and operate the regional landfill.
48. Biomekh and Autobaza cover their operating expenses through various sources of revenues and operate at cost. Biomekh receives revenues from household and enterprise tariffs for its waste transportation services. Autobaza is paid tipping charges from Biomekh and enterprises.
Landfill
49. A standard Cost-Benefit analysis (CBA) model does not currently exist for SWM projects. The CBA needs to be based on a series of assumptions regarding the economic benefits as costs are easily observed. The externalities of the proposed project are particularly difficult to quantify.
50. The relevant disciplines for modeling the benefits and costs of P/NP RLF are those related to the optimization principles in logistics and environmental economics. The first deals with operational sustainability of efficient solid waste management system (i.e. the transfer of waste from households and business to disposal); the second deals with minimizing negative environmental externalities as the waste moves through the waste management system. Particularly, the avoided negative externalities relate to pollution of the ground water from leachate, GHG emissions, health impacts due to air and water pollution as well as disamenities of a landfill such as odor, noise, etc.
51. The proposed RLF operation is identified as a least-cost option. The feasibility study for the P/NP RLF analyzed several options: (i) upgrading the existing 4 city landfills; (ii) regional SWM with a P/NP RLF; (iii) option (ii) with added transfer stations. Option (i) was found to be too costly due to the small volume of waste within each city and the high cost of upgrading the landfills to meet the Belarusian sanitary standards. A regional system of collection and landfill will result in savings due to more efficient use of garbage collection equipment and lower cost per tonne for disposal of waste. The feasibility study also notes that a regional landfill will reduce the risk of environmental pollution as compared to open dumps in each of the districts. Option (iii) was found to be relatively more expensive per tonne due to the small volumes of waste to be handled at the transfer station. A transfer station can also create additional operational risks. Option (ii), in which the operator for the collection and transportation of waste Biomekh collects waste from the 4 districts and transports it to the regional landfill, is found to be the least-cost and most efficient the scheme. This will create a regional system with the most effective organization of activities, allowing for optimal use of trucks, equipment and personnel.
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Table A4-57: Estimated capital expenditures for the P/NP RL
Regional landfill: the cell for the first 15 years BYN (thousands) 8,367 leachate treatment system (for the first 15 years) BYN (thousands) 1,410 landfill gas collection and combustion system (for the first BYN (thousands) 1,261 15 years) Garbage trucks for the collection of MSW BYN (thousands) 3,235 Containers for waste collection BYN (thousands) 2,646 Closure of the existing landfill Novopolotsk BYN (thousands) 3,200 Total capital expenditure BYN (thousands) 17,669 Total capital expenditure US$ (thousands) 9,456
52. P/NP RLF Benefits. The benefits are based on conservative assumptions. The benefits consist of:
(i) Avoided leachate pollution due to the lining and leachate treatment of the new RLF. The constructed cell (Phase 1, including Cells 1&2) of lining will cover 82,000 square meters. The average leachate potential is estimated as 70 percent of the footprint of the constructed cell under the Project times the projected precipitation levels. The international reference shadow price of US$20/m3 of avoided leachate is used. (ii) Avoided leachate pollution due to the capping of the current Novopolotsk SW landfill, which covers 76,375 square meters. (iii) Avoided GHG emissions due to more efficient waste management operations. Using GHG accounting, the tool CURB, it is estimated that 32,553 tCO2/year are avoided with the more efficient regional SWM system. (iv) Avoided costs of landfilling due to increased recycling. The recycling rate is expected to increase from the current 14 to 16 percent due to the project. That is an additional 1,050 tonnes of recyclable waste per year not landfilled but recycled. When recycling is increased, the life of the new landfill is extended. The study “What a Waste” 2012 estimates that the true economic cost for middle income countries is between $25 to $65 per tonne. The analysis uses a mid-range point of $45. This is estimated to contribute about $47,250 worth of benefits per year. (v) Financial benefits of more efficient operations. The more efficient regional operation will result in savings in transport and landfill capacities and additional revenue generated from the sale of material separated from the waste. (vi) Decreased disamenities for the surrounding areas such as visual disamenities, odor and noise. (vii) Health benefits due to reduced air pollution as fires are decreased. (viii) Spillover of more efficient waste management practices throughout the sector.
53. Only benefits (i) through (iv) are quantifiable with the available data. The operation is likely to have higher economic returns because of benefits that cannot be numerically approximated such as improved health outcomes due to reduced fires at the landfill and improved welfare of households who started to receive waste collection services.
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Table A4-6: Five of the benefits of the project were quantified using the valuation methods of shadow pricing
Quantified impacts Type Valuation method i. Avoided leachate pollution with the P/NP RLF Externality Shadow price of pollutants
ii. Avoided leachate pollution by capping the Externality Shadow price of pollutants existing SW landfill iii. Avoided GHG emissions due to more efficient Externality Shadow and market price of waste management operations GHG emissions iv. GHG emission savings from increased recycling Externality Shadow and market price of GHG emissions v. Avoided costs of landfilling due to increased Externality Benefit transfer recycling
54. Using 6 percent social discount rate over 25 years, the Economic NPV and IRR of the project are evaluated as $16.2m and 25 percent respectively.
Table A4-7: Economic NPV and IRR of the project
NPV US$ $16,162,871.84 IRR 25%
55. The project is expected to generate about $1.6 million of benefits per year by preventing the pollution of soil and ground water with leachate by lining the newly constructed landfills and capping the current SW landfill. Leachate pollution is formed by water passing through the waste and sipping into the soil and ground water. The cost of that pollution can be very high. We estimate this in three steps:
1. Quantity of leachate discharge production following the following formula “0.7 x Footprint of the constructed cell under the Project (m2) x Precipitation level for the city/area (m3/hour) / 1000 (m3/m). 2. Turn the pollution potential of the leachate production into pollution equivalent (PE). 3. Transfer an economic value to the pollution equivalent from other studies.
56. The analysis uses a very conservative estimate for the value of avoided leachate of $.25 per pollution equivalent. The analysis discounted the value of avoided leachate pollution from a recent WB study in Bosnia by 75 percent. This is in range with estimates found in this study of the cost of wastewater cleanup. This results in a shadow price of US$20/m3 of avoided leachate. The valuation of this benefit is about $.83 million per year for the new P/NP RLF. Capping is also an important benefit of the project. Capping the existing SW landfill will decrease the amount of leachate polluting the soil and ground water. The value of avoided leachate from capping is calculate the same way as for lining for the territory of the existing SW landfill which is 76, 375 square meters. This value is estimated at $.78 million per year.
57. The market value of the avoided GHG is about $.3 million per year. The median market price for CO2 in the 2018 WB report “State and Trends of Carbon Pricing” is about $10/tCO2. Using market prices
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and the flow of GHG avoided calculated from CURB, the flow of economic benefits is estimated at about $325,530 million per year. 58. The P/NP RLF project would have a positive Economic Net Present Value (NPV) of US$16.2 million and an economic internal rate of return (IRR) of 25 percent. The Benefit Cost Analysis was based on a projected primary collection of 72,000 tonnes per year of solid waste. The social rate of return used is 6 percent as per latest guidance of the WB.
Sensitivity Analysis
59. The sensitivity analysis employs alternative shadow prices for the leachate and CO2 pollutants. In the economic analysis, two shadow prices are used: first, the shadow price of avoided leachate pollution of $20/m3, and second, the market price of CO2 avoided of $10/tCO2. Both of these shadow prices are very conservative. First, the value of avoided leachate pollution depends largely on the country circumstances, waste composition and the proximity of the landfill to water sources. In the literature, the value of avoided leachate pollution can range from $20 to $60 per m3 (Bosnia Waste Management ICR 2018, Study of wastewater cleanup costs). Varying the shadow price of avoided leachate by 10 percent changes the ENPV and EIRR almost correspondingly by a similar amount. Second, CO2 carries a larger shadow price than its current market price. The World Bank estimated the shadow price of carbon in its guidance note from 2017. The low value estimate is $37/tCO2 in 2017 and grows to $58 in 2037 (while the current median market price is $10/tCO2). The ENPV and EIRR using the low estimates for the social CO2 price increase significantly to $29m and 39 percent. This sensitivity analysis confirms that even with these very conservative pollutant prices, the project is economically viable. Should the social valuation of avoided pollution be increased, the value of this project will also increase.
60. Capping is also an important aspect driving benefits. Capping the old landfill will decrease the amount of leachate polluting the soil and ground water. If this option is not implemented in the project, the project’s ENPV will be more than halved and the EIRR reduced to 15 percent.
61. Lastly, the sensitivity analysis looks at the life of the constructed cells of the P/NP RLF. Should the cells be used within 15 years as the feasibility study suggests, the benefits are still sufficiently high to justify the investment. The ENPV is about $11m and the EIRR is 25 percent.
62. To conclude, the economic analysis uses very conservative estimates for the shadow prices of pollutants and confirms that the project is economically viable even with a shorter lifespan or without capping the existing landfill.
Table A4-8: Sensitivity analysis and corresponding estimates
Scenario Key variable ENPV EIRR 10% higher value for avoided $22/m3 for avoided leachate $18 m 28% leachate pollution 10% lower value for avoided $18/m3 for avoided leachate $14 m 23% leachate pollution Shadow price of CO2 $41 per tCO2 avoided $29m 39% No capping 76, 375 m2 less of leachate protection $7m 15%
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Landfill fills up in 15 years 15-year lifespan of RLF $11 m 25% No capping and 15 years of life 76, 375 m2 less of leachate protection AND $4m 13% 15 years lifespan of RLF
Financial Analysis
63. P/NP RLF capital and operating costs. The capital cost is the investment under component 3 for new landfill development at P/NP at US$8.3 million. The new regional system is estimated to have operating costs of about 70 BYN/tonne, compared to the current costs of 52.2 BYN/tonne, due to higher expenditures for disposal (filtration, energy collection) and the higher depreciation costs.
Table A4-9: Current and projected operating expenses per tonne, BYN/tonne
Current Operating Project Indicator Expenditures Operating Expenses 1 Expenditures for collecting SW total, of which: 47.0 49.3 1.1 current expenses 45.0 42.0 1.2 depreciation of fixed assets 2.0 7.3 Expenditures for disposal (including filtrate and 5.1 2 purification system, LFG energy collection and 20.7 combustion systems), of which: 2.1 current expenses 4.9 7.8 2.2 depreciation of fixed assets 0.2 12.9 Expenditures for collection and disposal of SW 52.2 3 70.0 (including depreciation) The cost of collection and disposal of SW (including 62.6 5.1 84.0 depreciation and VAT) The cost of collection and disposal of SW (excluding 50.0 6.0 49.8 depreciation and VAT) Source: Feasibility study
64. The required tariff increases to cover both operating costs and depreciation is not anticipated to affect household affordability. If the Government decides to pursue full cost-recovery, tariffs with the project would be 34.2 percent higher than tariffs without the project, or 0.33 percent of household incomes. This difference is too small to have a significant impact upon affordability.
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The World Bank Utility Efficiency and Quality Improvement Project (P164260)
Appendix 1: Financial and economic appraisal Zaslavl
Financial Appraisal
Unit of measure 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 YEAR 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Capex USD '000 733 5,261 4,977 2,816 2,816 ------
Opex USD '000 - - - - - 2,312 2,961 3,056 3,117 3,204 3,406 3,534 3,670 3,812 3,961 4,117 4,282 4,456 4,638 4,831 5,039 5,258 5,483 5,720 5,970 6,233 6,511 6,803 7,112 7,437 TOTAL COSTS USD '000 733 5,261 4,977 2,816 2,816 2,312 2,961 3,056 3,117 3,204 3,406 3,534 3,670 3,812 3,961 4,117 4,282 4,456 4,638 4,831 5,039 5,258 5,483 5,720 5,970 6,233 6,511 6,803 7,112 7,437 45,477 Tariff revenues USD '000 - - - - - 2,707 2,837 2,970 3,109 3,255 3,407 3,567 3,735 3,911 4,096 4,290 4,494 4,708 4,932 5,167 5,414 5,673 5,945 6,230 6,530 6,844 7,174 7,520 7,884 8,265 TOTAL REVENUES USD '000 - - - - - 2,707 2,837 2,970 3,109 3,255 3,407 3,567 3,735 3,911 4,096 4,290 4,494 4,708 4,932 5,167 5,414 5,673 5,945 6,230 6,530 6,844 7,174 7,520 7,884 8,265 33,673 Net Revenues USD '000 -733 -5,261 -4,977 -2,816 -2,816 395 -123 -86 -8 51 1 34 65 99 135 173 212 252 294 337 375 415 462 510 560 611 663 717 772 828 NPV USD '000 -12,622 IRR (C) -4% B/C 0.74
Grant Financing
Capex USD '000 733 5,261 4,977 2,816 2,816 ------Opex USD '000 - - - - - 2,312 2,961 3,056 3,117 3,204 3,406 3,534 3,670 3,812 3,961 4,117 4,282 4,456 4,638 4,831 5,039 5,258 5,483 5,720 5,970 6,233 6,511 6,803 7,112 7,437 TOTAL COSTS USD '000 733 5,261 4,977 2,816 2,816 2,312 2,961 3,056 3,117 3,204 3,406 3,534 3,670 3,812 3,961 4,117 4,282 4,456 4,638 4,831 5,039 5,258 5,483 5,720 5,970 6,233 6,511 6,803 7,112 7,437
Grant investment USD '000 733 5,261 4,977 2,816 2,816 - - Revenues USD '000 - - - - - 2,707 2,837 2,970 3,109 3,255 3,407 3,567 3,735 3,911 4,096 4,290 4,494 4,708 4,932 5,167 5,414 5,673 5,945 6,230 6,530 6,844 7,174 7,520 7,884 8,265
TOTAL REVENUES USD '000 733 5,261 4,977 2,816 2,816 2,707 2,837 2,970 3,109 3,255 3,407 3,567 3,735 3,911 4,096 4,290 4,494 4,708 4,932 5,167 5,414 5,673 5,945 6,230 6,530 6,844 7,174 7,520 7,884 8,265 47,059 Net Revenues USD '000 - - - - - 395 -123 -86 -8 51 1 34 65 99 135 173 212 252 294 337 375 415 462 510 560 611 663 717 772 828 NPV USD '000 1,582 IRR (C) #NUM! B/C 1.0
Economic Appraisal See GHG shadow price for final econ results Unit of measure 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 YEAR 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Capex USD '000 733 5,261 4,977 2,816 2,816 ------Opex USD '000 - - - - - 1,849 2,369 2,444 2,494 2,563 2,725 2,827 2,936 3,049 3,169 3,294 3,426 3,564 3,710 3,865 4,031 4,206 4,386 4,576 4,776 4,986 5,208 5,442 5,689 5,950 TOTAL COSTS USD '000 733 5,261 4,977 2,816 2,816 1,849 2,369 2,444 2,494 2,563 2,725 2,827 2,936 3,049 3,169 3,294 3,426 3,564 3,710 3,865 4,031 4,206 4,386 4,576 4,776 4,986 5,208 5,442 5,689 5,950 45,416 Benefits - WTP USD '000 - - - - - 5,451 5,479 5,508 5,536 5,565 5,593 5,622 5,650 5,678 5,707 5,735 5,764 5,792 5,821 5,849 5,877 5,906 5,934 5,963 5,991 6,020 6,048 6,076 6,105 #REF! Cost savings - Septic tanks - - - - - 182 182 182 182 182 182 182 182 182 182 182 182 182 182 182 182 182 182 182 182 182 182 182 182 #REF! GHG - - - - - 794,646 812,578 830,914 849,663 868,836 888,442 908,489 928,990 949,952 971,388 993,308 1,015,722 1,038,642 1,062,079 1,086,045 1,110,552 1,135,612 1,161,237 1,187,441 1,214,235 1,241,635 1,269,652 1,298,302 1,327,599 #REF! TOTAL BENEFITS USD '000 (732,808) (5,261,371) (4,977,026) (2,816,206) (2,816,206) 1,803,625 1,897,743 1,954,173 2,011,016 2,110,071 2,168,718 2,227,902 2,309,712 2,359,008 2,408,777 2,459,029 2,509,777 2,561,436 2,614,025 2,667,561 2,722,062 2,777,546 2,834,032 2,891,539 2,950,087 3,009,694 3,070,381 3,132,170 3,195,080 3,259,133 8,897,608 Net Revenues USD -733,541 -5,266,633 -4,982,003 -2,819,022 -2,819,022 1,801,775 1,895,375 1,951,728 2,008,522 2,107,508 2,165,993 2,225,075 2,306,775 2,355,958 2,405,608 2,455,736 2,506,351 2,557,872 2,610,315 2,663,697 2,718,031 2,773,340 2,829,646 2,886,963 2,945,311 3,004,707 3,065,173 3,126,727 3,189,390 3,253,183 NPV USD 8,852,192 IRR (C) 10.3%
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The World Bank Utility Efficiency and Quality Improvement Project (P164260)
Appendix 2: Financial and economic appraisal Slutsk
Financial Appraisal
Unit of measure 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 YEAR 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29
Capex USD '000 593 5,859 2,860 ------
Opex USD '000 1,747 1,761 1,833 2,075 2,087 2,100 2,113 2,126 2,139 2,153 2,167 2,181 2,195 2,210 2,224 2,239 2,254 2,270 2,286 2,302 2,318 2,334 2,351 2,379 2,396 2,414 2,432 2,450 2,469 TOTAL COSTS USD '000 2,809 9,144 5,632 2,490 2,505 2,520 2,536 2,551 2,567 2,584 2,600 2,617 2,634 2,651 2,669 2,687 2,705 2,724 2,743 2,762 2,781 2,801 4,571 2,855 2,875 2,897 3,241 2,940 2,963 32,577 Tariff revenues USD '000 2,015 2,136 2,402 2,774 2,789 2,804 2,819 2,834 2,849 2,864 2,879 2,894 2,909 2,924 2,939 2,954 2,969 2,984 2,999 3,014 3,029 3,044 3,059 3,074 3,089 3,104 3,119 3,134 3,149 TOTAL REVENUES USD '000 2,015 2,136 2,402 2,774 2,789 2,804 2,819 2,834 2,849 2,864 2,879 2,894 2,909 2,924 2,939 2,954 2,969 2,984 2,999 3,014 3,029 3,044 3,059 3,074 3,089 3,104 3,119 3,134 3,149 25,283 Net Revenues USD '000 -793 -7,008 -3,230 284 284 284 284 283 282 281 279 277 275 273 270 267 264 260 257 252 248 243 -1,512 220 214 208 -122 194 187 NPV USD '000 -7,294 IRR (C) -7% B/C 0.78 Grant Financing
Capex USD '000 593 5,859 2,860 ------Opex USD '000 1,747 1,761 1,833 2,075 2,087 2,100 2,113 2,126 2,139 2,153 2,167 2,181 2,195 2,210 2,224 2,239 2,254 2,270 2,286 2,302 2,318 2,334 2,351 2,379 2,396 2,414 2,432 2,450 2,469 TOTAL COSTS USD '000 2,341 7,620 4,694 2,075 2,087 2,100 2,113 2,126 2,139 2,153 2,167 2,181 2,195 2,210 2,224 2,239 2,254 2,270 2,286 2,302 2,318 2,334 2,351 2,379 2,396 2,414 2,432 2,450 2,469
Grant investment USD '000 593 5,859 2,860 - - - - Revenues USD '000 2,015 2,136 2,402 2,774 2,789 2,804 2,819 2,834 2,849 2,864 2,879 2,894 2,909 2,924 2,939 2,954 2,969 2,984 2,999 3,014 3,029 3,044 3,059 3,074 3,089 3,104 3,119 3,134 3,149
TOTAL REVENUES USD '000 2,609 7,995 5,262 2,774 2,789 2,804 2,819 2,834 2,849 2,864 2,879 2,894 2,909 2,924 2,939 2,954 2,969 2,984 2,999 3,014 3,029 3,044 3,059 3,074 3,089 3,104 3,119 3,134 3,149 #REF! Net Revenues USD '000 268 376 569 699 702 704 706 708 710 711 712 713 714 715 715 715 715 714 714 713 711 710 708 695 693 690 687 684 680 NPV USD '000 5,849 IRR (C) #NUM! B/C #REF!
Economic Appraisal See GHG shadow price for final econ results Unit of measure 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 YEAR 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Capex USD '000 593 5,859 2,860 ------Opex USD '000 1,747 1,761 1,833 2,075 2,087 2,100 2,113 2,126 2,139 2,153 2,167 2,181 2,195 2,210 2,224 2,239 2,254 2,270 2,286 2,302 2,318 2,334 2,351 2,379 2,396 2,414 2,432 2,450 2,469 TOTAL COSTS USD '000 2,341 7,620 4,694 2,075 2,087 2,100 2,113 2,126 2,139 2,153 2,167 2,181 2,195 2,210 2,224 2,239 2,254 2,270 2,286 2,302 2,318 2,334 2,351 2,379 2,396 2,414 2,432 2,450 2,469 33,071 Benefits - WTP USD '000 - - - 1,497 1,505 1,505 1,513 1,521 1,528 1,536 1,544 1,552 1,560 1,568 1,576 1,584 1,592 1,599 1,607 1,615 1,623 1,631 1,639 1,647 1,655 1,663 1,670 1,678 1,686 Cost savings - Septic tanks - - - 938 938 938 938 938 938 938 938 938 938 938 938 938 938 938 938 938 938 938 938 938 938 938 938 938 938 Net benefits compared to USD '000 (732,808) (5,261,371) (4,977,026) (2,816,206) (2,816,206) 1,803,625 1,897,743 1,954,173 2,011,016 2,110,071 2,168,718 2,227,902 2,309,712 2,359,008 2,408,777 2,459,029 2,509,777 2,561,436 2,614,025 2,667,561 2,722,062 2,777,546 2,834,032 2,891,539 2,950,087 3,009,694 3,070,381 3,132,170 3,195,080 baseline scenario 1 with high shadow price of carbon TOTAL BENEFITS USD '000 (732,808) (5,261,371) (4,977,026) (2,813,771) (2,813,763) 1,806,068 1,900,194 1,956,631 2,013,483 2,112,546 2,171,200 2,230,392 2,312,210 2,361,514 2,411,291 2,461,551 2,512,307 2,563,974 2,616,571 2,670,115 2,724,624 2,780,116 2,836,610 2,894,125 2,952,680 3,012,295 3,072,990 3,134,786 3,197,704 5,007,564 Net Revenues USD '000 -735,148 -5,268,991 -4,981,719 -2,815,846 -2,815,850 1,803,968 1,898,081 1,954,505 2,011,343 2,110,393 2,169,034 2,228,211 2,310,015 2,359,304 2,409,067 2,459,312 2,510,052 2,561,704 2,614,286 2,667,813 2,722,306 2,777,782 2,834,259 2,891,746 2,950,283 3,009,881 3,070,558 3,132,336 3,195,235 NPV USD '000 8,320,448 IRR (C) 10.2%
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The World Bank Utility Efficiency and Quality Improvement Project (P164260)
ANNEX 5: Greenhouse Gas Accounting Analysis
COUNTRY: Belarus Utility Efficiency and Quality Improvement Project
Water Supply and Sanitation (WSS)
1. Introduction: The Utility Efficiency and Quality Improvement Project (P164260), presented in the World Bank project appraisal document Report No: PAD3125, is a water supply and sanitation project. Its development objective (PDO) is to improve the quality and efficiency of water and wastewater services, and support the introduction of regional solid waste management. 2. Emissions Estimate and Discussion: For each WSS component of the project, the GHG emissions were estimated in tCO2eq using the World Bank’s Water GP’s GHG Accounting Tool (developed in Excel), version 2.0. The SWM component was calculated using CURB. The table below summarizes the results. Table A5-1: Summary results
Component/Activity Description Timeline Net Emissions Estimate
(tCO2-eq) Component 1 Water Supply Improvements 25 -18,016
Component 1 Wastewater Collection and 25 -495,718 Treatment
Component 3 Solid Waste Management 25 -858,023
Total -1,371,757
3. Relevant Project Components: The descriptions of the project component listed below is based on the version of PAD3125, dated November 2018.
4. The Project creates an incentive framework encouraging the gradual modernization of WSS service-providers towards commercial, operational, and financial sustainability, good practices, and, eventually, creditworthiness; and supports the Government of Belarus’ introduction and piloting of a regional SWM approach.
5. Component 1. Improving water and wastewater services (€64.8 million). Component 1 aims to improve the operational performance of WSS service-providers, as well as enhance the quality of water and wastewater service provision to the people of Belarus through packages of support tailored to the needs of utilities. The component is designed as a comprehensive range of technical assistance, capacity building, and investment support, and aims to lift service-providers with varying levels of performance to higher levels of performance and increase their eligibility for further support, leading to gradual and continuous improvements. Specifically, this component will finance:
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The World Bank Utility Efficiency and Quality Improvement Project (P164260)
a. Component 1a. Service-providers with lower performance (as per applied two stage screening criteria) will receive assistance to: (i) prepare Utility Performance Improvement Plan’s (UPIPs); and (ii) implement measures identified in UPIPs to improve performance before being given access to financing in Component 1b.28 The activities may include physical activities (such as the purchase, rehabilitation or replacement of meters, creation of pressure control zones, Non-Revenue Water (NRW) reduction measures, energy efficiency measures, etc.) and non-physical activities (improving the customer database, improving the billing collection ratio, etc.). b. Component 1b. Service-providers with solid performance (as per applied two stage screening criteria) will receive financial support to: (i) prepare UPIPs, (ii) implement performance improvement measures identified in UPIPs (physical and nonphysical activities), and (iii) construct, upgrade and modernize WSS infrastructure, including water treatment facilities and wastewater treatment facilities. All utilities in category 1b are required to develop UPIPs within the first year of accessing finance for infrastructure, however UPIP preparation is not a precondition for access to infrastructure financing. c. Component 1c. Service-providers with best performance (as per applied two stage screening criteria) will receive: (i) financial support to construct, upgrade, and modernize WSS infrastructure, including water treatment facilities and wastewater treatment facilities, (ii) technical assistance (TA) to improve creditworthiness, develop viable investment plans and prepare financing proposals for these investments (including proposals to access non-government financing from the domestic financial market) and pilot co-financing to improve financial sustainability. 29&30 Utilities in category 1c are not required to develop UPIPs.
6. Component 2. Strengthening utility performance (€1.8 million). Component 2 will finance Government activities in water service provision sector aimed at performance improvement implementation and monitoring, and facilitating access to financing, through supporting central government to assess, improve and/or develop national level policies, building on the Clean Water Programs and implementation of the Water Strategy 2030, and establishing of a stand-alone specialized republican body for water supply and sanitation. These activities include: (i) development of utility-level information collection and analysis, including developing and/or updating of information platform (benchmarking); (ii) strengthening the national water utility sector regulatory framework, (iii) developing guidelines and standards for performance criteria for service-providers, (iv) preparing feasibility studies and detailed designs for priority sub-projects, including construction management and investment monitoring, (v) strengthening the customer orientation of water utilities and citizen engagement (e.g. through supplementing the benchmarking with participatory monitoring elements such as scorecards) and public dissemination of information, (vi) introducing a remote meter reading system to collect data from individual water meters in the housing stock in Belarus, and (vii) developing capacity building and knowledge sharing activities based on existing best practices.
28 The system of performance points provides an assessment of utilities’ relative performance based on a number of Water Utility Performance Indicators (WUPI) covering operational, efficiency, and economic aspects of utility performance. See Annex 2 for the full list of indicators and scoring methods. 29 Pilot own project co-financing, initially recommended to be 5-10% of project cost. 30 Water Utility Performance Indicators covering operational, efficiency, and economic aspects of utility performance. See Annex 1 for the full list of indicators.
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The World Bank Utility Efficiency and Quality Improvement Project (P164260)
7. Component 3. Enhancing the solid waste management process in the country (€22.5 million). Component 3 will finance activities to introduce a regional approach to SWM and technical assistance to further develop the sector more broadly. One site and waste shed have been identified and the remaining sites will be determined during project implementation. This Component includes: (i) the construction of the Polotsk/Novopolotsk Regional Landfill (RLF) and supporting infrastructure and equipment, including through the execution of civil works and provision of equipment as well as detailed designs, construction management and investment monitoring, and closure and remediation of the old site in the same area; (ii) preparatory investment studies, such as site selection studies, feasibility and design studies, Environmental and Social Impact Assessment (ESIA), a Resettlement Action Plan (RAP), detailed designs, and construction of other RLFs and supporting infrastructure and equipment including through the execution of civil works and provision of equipment as well as construction management and investment monitoring; the activity may include closure of additional dump sites if such are identified during project implementation; and (iii) technical assistance for sector development policy studies related to improving the efficiency of the sector including improvements to the reduction and recovery of waste, financing studies, public communications campaigns to raise environmental awareness, and/or technical preparation for future projects.
8. Component 4. Project Management (€0.9 million). This Component will finance travel, training, audits, general consulting services support to the Project Coordinating Team (PCT).
9. Explanation of Project Scenario, Baseline Scenario, Gross Emissions, and Net Emissions: Gross emissions are the emissions project activities cause over its economic lifetime through the project scenario. These are compared to the emissions associated with a baseline scenario.31 The difference between the gross emissions and the baseline emissions represents the project’s net emissions. 10. Assumptions and Calculations • All data was provided by the Task Team for the water supply and wastewater activities. The Water GHG accounting Focal Point had to make several conservative assumptions when the balance of certain data points was not known, such as what the balance between baseline conditions for the ratio of beneficiaries currently using septic tanks vs. emptying wastewater into rivers virtually untreated. • Silpa Kaza, the TTL in GSURR and the GSURR GHG accounting Focal Point, carried out the SWM analysis separately than the WSS analysis outlined here. The SWM results are included here for consistency.
• A 25-year economic lifetime was assumed for the water supply and wastewater activities to be consistent with the GSURR analysis for the solid waste management activities.
31 There are three primary approaches to defining a baseline counterfactual: (i) the No Change Scenario, which assumes the status quo is maintained; (ii) the Use of Past Trends approach, which extrapolates data from the recent past into the near future; and (iii) the Use of Future Trends approach, which uses advanced modeling to make projections about the future. Elements from any combination of these approaches may be used when defining a counterfactual. The sole exception is the No Change Scenario, which are not allowed for use as a baseline scenario for World Bank GHG accounting analyses.
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The World Bank Utility Efficiency and Quality Improvement Project (P164260)
• For the baseline scenario for the water supply activities, it was assumed that the local beneficiaries are already connected to the existing utility and receive 31,714 m3/day. For the project scenario, it was assumed that the same amount of production would be sourced, conveyed to a treatment plant, treated, and distributed to households with 10% energy efficiency gains. • The wastewater treatment plant in which the project will invest is expected to treat 140,600 m3/day of wastewater corresponding to 58,771 kg/day of BOD5 produced by 1,469,429 beneficiaries. Raw wastewater has an average pre-treatment BOD5 concentration level of 418 mg/L.
• Raw wastewater has an average pre-treatment BOD5 concentration level of 418 mg/L, which treatment will reduce to an average of 13.65 mg/L for the effluent based on feasibility studies provided by the Task Team. Targeted nitrogen removal will take place at a 48% removal rate, reducing the amount of nitrogen in the effluent from 13,225 kg/day down to about 7,669 kg per day or less.
• Beneficiaries tend to empty their wastewater virtually untreated into local rivers or use septic tanks. The project is expected to end both of these practices. Since the balance between these two types of beneficiaries is unknown, it was assumed that 10% use septic tanks that will be replaced and the rest empty their wastewater into rivers virtually untreated. This is due to the fact that 1) septic tanks produce methane at a higher rate than emptying into flowing rivers per IPCC 2006 guidance and 2) the GHG accounting methodology’s main pathway for N2O emissions is through emptying into flowing water, so this source of emissions would not be included in the baseline to make it more conservative. • Wastewater treatment will use will generally use activated sludge for treatment, with some possible use of anaerobic digesters. Any biogas collected from the digesters will be captured and used for electricity generation. Since anaerobic treatment technologies with methane capture and electricity generation tend to produce higher net emission reductions than activated sludge and activated sludge seems to be the most common technology used in the project area, a conservative estimate of 90% activated sludge and 10% digesters with methane capture and electricity generation was used for the project scenario. • All energy needs will be fulfilled by the grid except for biogas capture and generation.
• Note that the initial version of this analysis was based on assumptions for a WSS investment of USD 140 million. The size of the WSS investment was cut down to USD 74 million, though the types of interventions and associated technologies are believed to have remained constant. The Task Team lacked fine-grained data resulting from this financing decrease, so the original inputs for the volume of water delivered for the water supply investments, the volume of wastewater treated, and the number of beneficiaries producing that volume of wastewater were multiplied by 52.86%. (74/140 = 0.5286) The methodology’s approach to determining BOD5 and nitrogen levels in wastewater before and after treatment are dependent on population and wastewater volume figures. • All calculations were performed using the Water GP’s GHG Accounting (Excel) Tool, except where noted.
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The World Bank Utility Efficiency and Quality Improvement Project (P164260)
Baseline Scenario Calculations
WATER SUPPLY IMPROVEMENTS 11. Under the baseline scenario, beneficiaries would continue to consume 31,714 m3/day. The project will invest in energy efficiency improvements for the existing water supply system. A conservative 10% improvement in energy efficiency was assumed for each part of the water supply system for the project scenario, while the baseline scenario assumed the default energy intensity levels for conveyance, standard treatment, and distribution. Data for this analysis were entered into on the “Water Utilities Baseline” tab. 31,714 m3/day was entered into the modules for source extraction, conveyance, treatment, and distribution. The borehole pumps for sourcing would be expected to move water to the surface 335 meters at an efficiency rate of 70%. The borehole depth was extrapolated based on the fact that the average energy intensity of sourcing is currently 1.3 kWh/m3 (midway between 0.8 and 1.8 kWh/m3), while a 70% pumping efficiency rate is the default assumption for source pumping when this data is unknown. The energy source was the national grid. 12. Overall, it is estimated that the baseline scenario would generate 193,884 tCO2-eq over the project’s 25-year life.
WASTEWATER COLLECTION AND TREATMENT 13. For the baseline scenario, it was assumed that 140,600 m3/day of wastewater and 58,771 kg/day of BOD5 produced by 1,469,429 people would continue to be deposited in septic tanks (10%) or emptied into nearby flowing rivers virtually untreated (90%). On the “Wastewater Utilities Baseline” tab, as this wastewater would not be collected, no amount of wastewater was entered in the wastewater collection, treatment, or discharge modules. The “Fugitive CH4 emissions from septic systems” module was used to assess the methane emissions due to leakages from septic tank use, with the methane correction factor (MCF) set at the IPCC 2006 default value of 0.5. 5,877 kg a day of BOD5 was entered into this module. Meanwhile, the other 52,894 kg a day of BOD5 would enter into rivers virtually untreated, so this value was entered into the “Fugitive CH4 Emissions from Open Pits/Latrines, Open Sewers, Etc.” module using the IPCC 2006 default value of 0.1. 14. The relevant wastewater is expected to correspond to about 13,225 kg/day of nitrogen in the wastewater effluent, which would contribute to N2O emissions, so this number was entered into the “Fugitive N2O Emissions from Effluent Discharge” module. This figure excludes any nitrogen in the septic tanks since septic tank users are not believed to empty their septic tanks into rivers. 15. The total emissions for this baseline scenario are estimated to be 1,513,651 tCO2-eq for this component’s 25-year life. Project Scenario Calculations
WATER SUPPLY IMPROVEMENTS 16. The project is expected to continue producing 31,714 m3/day while maintaining a consistent level of service with energy efficiency improvements. Data for this analysis was entered onto the “Water Utilities” tab. 31,714 m3/day was entered for source extraction, conveyance, treatment, and distribution. The energy intensity for conveyance, treatment, and distribution was reduced by 10% to demonstrate a conservative level of energy efficiency gains. The pumps for sourcing would be expected
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The World Bank Utility Efficiency and Quality Improvement Project (P164260)
to move water 335 meters at an efficiency rate of 77% (10% better than a 70% efficiency rating). The energy source was the national grid. 17. Overall, it is estimated that the project scenario would generate 175,868 tCO2-eq over the project’s 25-year life.
WASTEWATER COLLECTION AND TREATMENT 18. This part of the analysis used the “Wastewater Utilities” tab. Similar to the baseline scenario, the project scenario assumes the relevant wastewater will correspond to 140,600 m3/day of wastewater and 58,771 kg/day of BOD5 produced by 1,469,429 people. The project will use activated sludge for 90% of the treatment and anaerobic digesters with methane capture for the other 10% of treatment. 19. All data were entered on the “Wastewater Utilities” tab. 140,600 m3/day was entered for wastewater collection, treatment, and discharge. To measure the emissions from electricity use for wastewater treatment, the module for “Wastewater Treatment Method 1” module was used. A reduction in the BOD5 concentration from 418 mg/L down to 13.65 mg/L, along with targeted nitrogen removal, was noted in this module. A conservative influent load factor of 80% was assumed. The energy source was the national grid for collection, 90% grid and 10% biogas capture and electricity generation for treatment, and gravity for discharge. Since this model assumes 10% of treatment will use anaerobic digester technologies that include capturing biogas for electricity generation, 10% of the population’s total potential biogas production (2,057 m3/day out of 20,572 m3/day) was entered into the “Stationary Emissions from Combustion of Digester Gas (CH4 from Incomplete Combustion)” module. The “Process selection” line was set to “Collection, combustion and electricity generation.” 20. Since targeted nitrogen removal will take place at an estimated 48%, a default value of 42.075 grams of nitrogen/person/year for Process N2O Emissions from Wastewater Treatment was assumed. After treatment and a 48% nitrogen removal level, the amount of nitrogen remaining in the wastewater is expected to be 7,669 kg/day, which was entered into the “Fugitive N2O Emissions from Effluent Discharge” module. Post-treatment wastewater would have a BOD5 concentration level of just 13.65 mg/L, which corresponds to 1,919 kg/day of BOD5 entering local waterways post-treatment. This latter figure was entered into the “Fugitive CH4 Emissions from Open Pits/Latrines, Open Sewers, Etc.” module. A default value of 0.078 kg methane/person/year was assumed for fugitive methane emissions from sewers. The assessment of fugitive methane emissions from inlet works was based on the population level of 1,469,429 beneficiaries. 21. Overall, the project scenario for wastewater treatment is estimated to produce gross emissions of 1,513,651 tCO2-eq over this component’s 25-year life. Results and Conclusion 22. The water supply activities under Component 1 are estimated to experience net emissions of - 18,016 tCO2-eq, which represents a net decrease in emissions due to an estimated 10% increase in energy efficiency. The wastewater collection and treatment under Component 1 will see estimated net emissions of -495,718 tCO2-eq due to improved treatment and ending septic tank use. The net emissions from the water supply energy efficiency activities break down as follows: 13,727 tCO2-eq from groundwater sourcing, -336 tCO2-eq from water conveyance, -2,295 tCO2-eq from electricity use for conventional water treatment, and -1,657 tCO2-eq from potable water distribution.
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23. The net emissions for each step of the wastewater treatment activities break down as follows: 38,025 tCO2-eq from wastewater collection, 274,603 tCO2-eq from electricity use for overall wastewater treatment, 0 tCO2-eq from gravity use for wastewater discharge, 114 tCO2-eq stationary methane emissions from the incomplete combustion of digester gas, 80,231 tCO2-eq from fugitive methane emissions from sewers, 40,115 tCO2-eq from fugitive methane emissions from inlet works, 409,599 tCO2-eq from process N2O emissions from wastewater treatment, -105,633 tCO2-eq from fugitive N2O emissions from wastewater discharge, -450,790 tCO2-eq from ending septic tanks use and thus experiencing reduced methane leaks, and -781,981 tCO2-eq from reducing the BOD5 concentration of entering local rivers due to improved treatment and thus ending fugitive methane emissions.
Solid Waste Management
24. Analysis Boundary: • The analysis covers the four rayons included in the initially selected SWM investments. • The solid waste management activities analyzed are the construction of a landfill with landfill gas capture and treatment with a small increase in recycling activities.
25. Methodology: • The tool used was CURB: Climate Action for Urban Sustainability which follows the International Panel for Climate Change methodologies.
26. Baseline scenario for 2018: • The total population is 237,375, generating 72,000 tonnes. • 14 percent of the waste is recycled, and 86 percent is sent to landfills without landfill gas capture. • The waste composition assumed is as follows:
Waste type Percentage Waste type Percentage Paper/Cardboard 0.3% Plastics 2.5% Textiles 1.6% Metal 0.4% Organic Waste 56.9% Glass 3.2% Wood 0.2% Other 34.7% Rubber and Leather 0.2%
27. Project scenario: • From 2021 onwards, 16 percent of the waste is recycled, and the remaining waste is sent to the newly constructed landfill. • The landfill gas capture rate of the newly constructed landfill is 100 percent. • Nearly all of the disposal sites currently utilized have an anaerobic setup without a gas capture system and emit methane. The new regional landfills will have landfill gas collection systems to capture and treat the landfill gas.
28. Data sources:
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The World Bank Utility Efficiency and Quality Improvement Project (P164260)
• Population growth rates were obtained from the from World Population Prospects: The 2015 Revision published by the UN Department of Economic and Social Affairs (UNDESA). Because of the anticipated decrease in population, the assumption of no change in population was used to be conservative when calculating future solid waste generation levels. • The PCT provided waste composition and disposal data.
29. Key assumptions: • The landfill is assumed to be operational from 2021 with an economic lifetime of 25 years. • Belarusian electricity emissions factors from International Energy Agency (2015) were used.
30. Results:
Summary Economic Lifetime (years) 25 Gross Emissions over Economic Lifetime (t co2e) 552,604 Net Emissions over Economic Lifetime (t co2e) -846,378* Average Annual Emissions (t co2e) 21,254 *Decrease in emissions
31. The net emissions of the project are estimated at -1,371,757tCO2-eq over the life of the project, while the gross emissions are estimated to be 1,749,944 tCO2-eq. On average, the project will generate estimated net emissions of -54,870 tCO2-eq annually.
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The World Bank Utility Efficiency and Quality Improvement Project (P164260)
ANNEX 6: Map of project sites COUNTRY: Belarus Utility Efficiency and Quality Improvement Project
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