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Bydgoszcz Water Supply and Sewerage Project

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Bydgoszcz Water Supply and Sewerage Project ISPA INFORMATION SHEET No. 2000/PL/16/P/PE/001 Measure title: Bydgoszcz water supply and sewerage project Authorities responsible for implementation 3.1. Name: Ministry for Environment 3.2. Address: ul. Wawelska 52/54 00-922 Warsaw, Poland 3.1.1 Name: National Fund for Environmental Protection and Water Management 3.2.2 Address: Konstruktorska 3A 00-673 Warsaw, Poland Description Bydgoszcz is the eight largest city in Poland with a population of 390,000. The city’s waste water is a major source of pollution of the Brda and Vistula rivers and of the Baltic Sea 150km away. The Polish environment strategy for ISPA identifies Bydgoszcz as one of the priority centres for pollution abatement in the Vistula basin. Accordingly, the proposed project should be seen in the context of the priority for ISPA to ensure that waste water treatment in compliance with the Urban Waste Water Directive is provided as soon as possible for the main cities in the Vistula basin, Krakow, Warsaw, Torun and Bydgoszcz. The city has already made significant investments in two major waste water treatment plants which are currently close to completion. At present only 25% of all waste water is treated but this will rise to 95% after the completion of the treatment plants and the implementation of the waste water part of the project which consists of the provision of a main collector and associated pumping stations to intercept the outfall to the Brda river and to transport effluent to the new treatment plants, replacement of the main pumping station K1, renovation of the existing sewer network and extension of the network into six area of the city currently without sewers. At present, drinking water in the city does not fully comply with EU standards. The parts of the project related to improving drinking water quality include up-grading the two existing drinking water treatment plants, improving the testing laboratory to enable measurement of all parameters specified in EC directives, pipe replacement in ageing parts of the network to reduce leakage, safeguarding the water supply to the Fordon district through installation of a second water main and improving water pressure in the area south-east of the Brda. Economic and social cost-benefit analysis An economic internal rate of return was not calculated for the project due to the difficulties in quantifying many of the economic benefits. These benefits include public health benefits through enabling drinking water to reach EU standards, environmental benefits of improved water quality in the Vistula and in the Baltic Sea, reduced energy consumption in water treatment, tourism and recreational benefits associated with improved river quality and removal of sewage outfalls in the centre of the city The alternative economic analysis takes the form of a cost effectiveness analysis which compares alternative technical solutions and their investment, operating and maintenance costs over the economic life cycle of the project. All alternatives would achieve compliance with the relevant EU environmental Directives. Calculation of the net present values for capital and operational expenditure of the various alternatives indicates that the technical options which were chosen for the project are the most cost effective options. Main elements of financial analysis The financial analysis and rationale for the project is based on the principles of (a) the polluter pays (b) user charge acceptability and affordability and (c) the need to ensure financial sustainability of the water utility in the future. The level of ISPA grant has been calculated on the basis of tariff levels rising during the implementation of the project to enable full recovery of operating costs, maintenance expenditure and additional capital expenditure needed to ensure that MWiK can implement the project while continuing to operate as a going concern. The ISPA grant is set at a level which will ensure that tariffs, while enabling recovery of costs, will remain within a maximum affordability limit of 2.9 % of household income (well within the generally acceptable affordability range of 3-5% of household income). The increase in tariff from its present level of 1.7% of income will ensure that the ‘polluter pays’ principle is respected while optimising the leverage effect of the ISPA grant. The analysis indicates that 32% loan financing out of the total cost of the project is the maximum sustainable within the boundaries of affordability for households and the water company which, given own-financing by the company of 25%, would imply an optimum level of 43% of the total cost for ISPA financing and would ensure that revenues cover costs over the lifetime of the project. When ineligible expenditure (taxes and public levies, interest paid during construction) and expenditure before the start date of the project is excluded, this gives an ISPA contribution of 49% of the eligible project cost. Environmental Impact Analysis The type of infrastructure investment included in the waste water treatment part of project falls within projects covered by Annex II of the EIA Directives. These are project types for which the national authorities have discretion to decide if a full EIA is required. In this case, they have decided that a full EIA is not required and they have explained their reasoning to the Commission. In the case of the drinking water component of the project the national authorities have decided to carry out a full EIA pursuant to the requirements of Polish law. The condition stated in Article 8 (3) of the financing memorandum applies to this part of the project. The national authorities have certified that the project is not likely to affect an environmentally sensitive area. Cost and assistance (in millions of Euro) Total cost Private sector Ineligible Total eligible ISPA grant Grant expenditure contribution cost rate % 75.7 - 9.5 66.2 32.5 49 .
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