Socio-Economic Situation in the Region

Summary of Feasibility Study

for the technical project for the building 2nd complex of underground water intake in Pskov city of the Pskov region

Socio-economic situation in the region

Pskov is an ancient city, founded in 903. It is located in the north-west of Russia, in the northwestern federal district, the Pskov region borders with the Estonia and Latvia, as well as with the Republic of Belarus. The Pskov region includes 24 districts, 14 cities and 14 urban-type settlements. The area of the city of Pskov is 9 5, 5 km2. The population density is 2 123 people / sq. km. The population of Pskov in 2017 was 205 thousand inhabitants, and the Pskov region 642 164 inhabitants. The share of the urban population in the region was 67,8%, 472,000 inhabitants in 2016. The population is declining quite significantly, faster than the national average, in 1999 there were 804 632 residents living in the region.

The average wage in the Pskov region was 343 EUR / month (21 669 rubles), in the I quarter of 2017, which is lower than the national average of 555 EUR / month (35 000 rubles). The average wage in the Pskov region in 2017 increased compared with the I quarter of 2016 by 4,9%. The number of able-bodied population in the Pskov region in January 2016 amounted to 360 000 people, the number of employed population is 326 000 people. The official number of unemployed in the region is 34 000 people, or 9,4% (8,7%) in the country as a whole).

According to the Department of the Pension Fund of the Russian Federation for the Pskov region as of April 1, 2017, the average size of the assigned monthly pensions was 12 243 rubles and increased by 4 % compared to the corresponding date in 2016 by 4 %, the real size of the pension increased by 0,1 %.

The degree of water supply in the region is high, about 96% of the population is connected to the water supply network. The total water consumption in Pskov is

l about 60 ООО m3 / day, although about 20% of this amount is spent on technical needs, leaks and illegal tapping.

The paid water consumption is about 41 000 m3 / day. The city of Pskov is the largest population center located in the water area of the Lake Peipsi. Almost the entire population of the city and surrounding areas uses the possibilities of the lake for amateur fishing, active water recreation, eco-tourism. In addition, rest on the lake is popular with tourists and guests from other regions of Russia.

Prerequisites for the implementation of the project (including information on project partners, target groups and final beneficiaries, location, current situation, planned activities, the need to implement the project (social and environmental), problems to be solved, analysis of options (analysis of different scenarios, alternatives, planned results, results, including long-term, risk analysis)

The current situation

Currently, the water supply of Pskov is carried out from a surface source - the river Velikaya. In connection with the fact that river flows through wetlands, the water in it is characterized by increased color and oxidation, in addition, during the summer "flowering” microbiological indices deteriorate sharply. Therefore, the quality of water in the source of urban water supply does not meet the requirements of Russian sanitamo-hygienic standards. In addition, annually there is a tendency to deterioration of water quality in the river, which aggravates the unfavorable situation associated with drinking water supply. In order to ensure reliable and high-quality water supply to the city's population, it is necessary to build an alternative source of water supply - groundwater abstraction. In the period 2003-2005 on the site in the Solonovo-Velikoye Selo area, geological exploration work was carried out and underground water reserves of 42 000 m3 / day were approved for water supply of the city. The water in the underground source is characterized by a consistently high quality and fully meets the hygienic requirements for drinking water, with the

2 exception of elevated iron (0,5 mg / 1 at a standard up to 0,3 mg / 1). In 2015 the construction of the 1st complex of underground water intake with the capacity of 12000 m3 / day was completed, however, to ensure quality water supply of the entire city, it is necessary to increase the water withdrawal capacity to at least 42 000 m3 / day. Another problem affecting the quality of water supply and the ecological situation in the Lake Peipsi water area is insufficient awareness of the city's population about the measures that contribute to improving the ecological situation and improving the quality of life of the population. This leads to irrational water use, over-consumption of water as a valuable natural resource, increased amounts of sewage directly affecting the environment. The problem of informing the population is also acute in the border region of the Latgale region of the Republic of Latvia. A survey carried out by the Health Inspectorate of the Republic of Latvia shows that residents are not sufficiently informed about the quality of drinking water, as well as the work of drinking water supply institutions and the possibilities of actions aimed at improving the quality of drinking water. Now both in the Latgale region and in the Pskov regions it is necessary to raise the level of knowledge of the inhabitants, to inform them about how they can be involved and promote the protection of the environment, that is why there is a need for a broad information campaign on the use of water resources and protection of the environment.

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Planned activities, the need to implement the project (social and environmental), the problems to be solved.

Within the framework of the project "Pure water for program regions" it is assumed:

- Construction of the 2nd complex of underground water intake with a capacity of 30 000 m3 / day and an increase in the total water withdrawal capacity to 42 000 m3 / day, including the following works:

Drilling 2 wells to a depth of 150 m;

Purchase and installation of 7 pumps;

Installation of 7 pavilions with electrical and automatic equipment;

Piping 0280 mm length 3,2 km inside the well site;

Laying an electrical cable - up to 7 wells;

4 Construction of roads inside the field of wells, installation of fences on the well field;

Laying of technological pipelines for 29 self-cleaning filters in treatment plants;

Purchase and installation of 2 clean water pumps;

Electrical work inside the wastewater treatment plant.

Additional activities:

- informational activities in Pskov and Latgale region about the problems of water supply and wastewater management; as well as informing about project implementation in local and regional mass media and using the back side of monthly utility bills in Pskov.

- 2 training programs to increase the capacity of local municipalities and water- related institutions (1 program in the Latgale region and 1 program in the Pskov region);

- experience exchange in Latgale region (6 people - employees of water management municipal enterprises bordering on municipalities (Pechory, Palkino, Pytalovo, Krasnogorodsk, Sebezh, Pskov) responsible for drinking water quality and wastewater treatment);

- exchange of experience in Pskov (5 people - employees of water management municipal enterprises bordering municipalities from the municipalities of Latgale region);

- the festival of popularization of water resources in the Latgale region and the organization of the Water Day in Pskov.

In the implementation of the large-scale project "Pure water for program regions", the following organizations are involved:

- ME of Pskov city "Gorvodokanal" (Russia), Applicant of the project, responsible for the implementation of the project as a whole, coordinating the actions of partners and implementing all infrastructure activities envisaged by the project;

5 - Latgale planning region (Latvia), project partner, carrying out project activities on the Latvian side (training events, exchange of experience in operation of water intake facilities, creation of an interactive exposition on water resources, etc.);

- The Committee for Economic Development and Investment Policy of the Pskov region (Russia), an associate partner, is responsible for consultations on management issues, information support and will act as the training body for the part of the project on the Russian side.

Target groups of the project:

• 40 (20 participants on the Latvian side, 20 participants in Russia) - participants in training on water supply and wastewater treatment;

0 6 participants of a trip to exchange experience in Latgale (employees of water treatment organizations of municipal enterprises, bordering with municipalities from the Pskov region);

® 5 participants in the experience-sharing trip to Pskov (employees of municipal wastewater treatment plants border municipalities from the Latgale region);

® The population of the cities of the information campaign (Pskov, 205,000 people, Latgale region - 275,983 people).

Ultimate beneficiaries of the project:

• Residents, holidaymakers, visitors and tourists of Latgale and Pskov region;

• National, regional and local authorities of the municipalities of Latgale and Pskov region; Representatives of the sector of home management, water supply and wastewater management;

• Environmental specialists, institutions and organizations involved in the protection of the environment and the maintenance of natural resources and tourism.

6 The need to implement the project (social and environmental)

Throughout the entire period of Pskov's existence, the city's water supply was provided from a surface source - the river Velikaya. Due to the fact that the catchment basin is located in wetlands, the water in the river is characterized by high color, oxidation, and microbiological contamination. Every year there is a tendency to deterioration of the quality of river water in the above and other indicators. In some periods associated with ice and sludge formation, there is a sharp deterioration in water quality, which leads to overloading of water treatment facilities, over consumption of reagents and inadequate drinking water for sanitary and hygienic requirements. In this case, significant amounts of washing water are formed, which contains high concentrations of coagulant (aluminum hydroxide). In addition, the surface water source is not protected from threats of occurrence of catastrophes of anthropogenic and terrorist nature.

The above factors lead to the fact that consumers receive low quality drinking water, with increased color and odor. Carcinogenic and mutagenic chlorine-containing organic compounds formed in drinking water during disinfection lead to increased risks of disease of the city's population with oncological, infectious and other diseases.

In order to find an alternative source of urban water supply, exploration works were carried out and sufficient underground reserves were found in the immediate vicinity of the city. The water in the underground water source is characterized by consistently high quality, and meets the organoleptic, chemical microbiological and radiometric requirements. The construction of a new underground water intake will provide the city's population with high quality water, which will create conditions for the socio-economic development of the regional center. In addition, in the process of water treatment, a minimum amount of reagents will be used, which will allow to minimize the volumes of wash water and reduce the load on the Lake Peipsi.

7 Analysis of options (analysis of different scenarios, alternatives, planned results, results, including long-term, risk analysis)

There are several options for the development of the situation:

Option 1

In the event that the water intake is not constructed, the city’s water supply will be provided mostly from a surface source; taking into account the declining quality of water in the river Velikaya, the moral and technical deterioration of the water treatment station, which has been in operation for more than 30 years, the quality of drinking water supply will deteriorate, and there may be further interruptions in the supply of drinking water due to the failure of the water treatment plant equipment. Flushing water discharges containing aluminum compounds that are not removed at the sewage treatment facilities and enter the Lake Peipsi, which adversely affect the aquatic ecosystem of the transboundary basin, will increase. Built underground water intake with a capacity of 12000 m3 / day will not have a significant impact on improving the quality of urban water supply. Thus, if this scenario develops, the social and economic situation in the regional center will worsen, the quality of life of the population will decrease, the region as a whole will lose investment and tourist attraction, migration changes are possible.

Option 2

In the event that the water intake is not constructed, the city’s water supply will be provided mostly from a surface source. The option is supposed to perform reconstruction on the existing surface water intake. This will require significant financial costs associated with the introduction of ozonation (or ultrafiltration), major repairs of filters, clean water tanks, pumping stations and the replace of water lines from water intake to urban networks. In addition, reconstruction of the

8 electricity supply system of the water treatment plant is required. Taking into account the constantly decreasing water quality in the surface source, the amount of used reagents for water treatment will be constantly increased, in addition, the volume of washing water discharged to the sewerage will grow, which will increase the load on Lake Peipsi. As a result, the efficiency of investments in the reconstruction of the existing water intake will be low and will not have a positive impact on the ecology of the lake Peipsi.

Option 3

The construction of the II launch complex will be completed in 2020. The productivity of underground water intake will increase to 42 000 m3 / day. After commissioning of the facility, the 2nd line of underground water intake is under construction and its capacity is increased to 78 thousand m3 / day, which allows to fully meet the existing and future needs of the city in drinking water at least until 2035. The existing surface water intake is preserved, discharges of wash water practically cease. The availability of free volumes of drinking water creates an incentive for housing and industrial construction, the quality of life of the population improves, and the ecological situation in the Lake Peipsi improves. This option will be implemented during the project and it is the best for given situation as well as for long-term perspective.

Risk analysis during project implementation

Riskl (P): Non-compliance with work schedule.

Corrective measure 1 (CM): Daily monitoring of activities by the project manager and monitoring their compliance with the project implementation schedule. Particular attention will be paid to timely submission of reports, organization of meetings of the Steering Committee (hereinafter - SC), organization of the

9 procurement procedure. In the event of non-compliance by contractors with the schedule of work, taking measures up to the termination of the contract and the change of contractors.

The probability of a risk is high, however, as a rule, non-compliance with work schedules by contractors is not systematic and is eliminated by an increase in the pace of work performance in subsequent reporting periods.

P2: The risks of the procurement procedure (low interest on the part of contractors, poor level of qualification of contractors) and the risks of cost overruns (changes in inflation, errors in budget planning by partners).

СМ2: carefully developed tender documents, selection criteria, evaluation procedure. Organization of an open competitive procurement process with the placement of information on the tender and all tender documents on the official Russian procurement website www.zakupki.gov.ru. Providing full information to potential participants. As a last resort - holding repeated auctions.

The likelihood of risk is low, since a large number of experienced applicants are involved in construction competitions. In the event of a change in the level of inflation and a significant rise in price of imported equipment, it is possible to consider the option of replacing the project equipment with cheaper analogs.

P3: Absence of quorum in the SC at project meetings.

СМЗ: In case any member of the SC can not attend the meeting, his / her representative will have to attend the meeting or, alternatively, organize a video or Skype conference. The likelihood and impact on the project risk are low, as members of the RK are informed about the meeting in advance and adjust their schedule.

P4: Bad feedback from the experts involved in the project and representatives of municipalities dealing with water supply and wastewater management.

10 СМ4: The project implementation will include a variety of sources of information and communication - e-mail, a website, a social network, etc. In addition, these representatives themselves are interested in obtaining information on modern ways of managing water resources.

P5: The project start may drag on and affect the project implementation.

CM5: The project implementation schedule is well-structured and allows you to flexibly react to the risks of delaying the start of the project. The schedule of work is prepared taking into account seasonal works. The probability of a risk is high, but it can be parried by adjusting the project implementation plan.

Deputy Chief Engineer /П /

ME of Pskov city "Gorvodokanal"