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EBRD finances regional water and environment programme in Romania
The inhabitants of the Jiu valley, one of the most beautiful parts of Romania, will have a constant supply of drinking water due to a US$ 25 million (ECU 20 million) loan that the European Bank for Reconstruction and Development (EBRD) is providing for the Jiu Valley regional water company, Regie Autonoma a Apei Valea Jiului (RAAVJ).
"Environmental improvements will be critical in enabling the Jiu valley to develop its potential for alpine tourism, which is potentially one of the most important activities to diversify the economic base of the region," said Johan Bastin, Director of the EBRD's Municipal and Environmental Infrastructure team. "The EBRD's loan is part of a broader strategy in the sector to promote transition and the reform of municipal utility financing and operations. In particular this programme, which is to be channelled via the government, will improve the credit-worthiness of local service providers and develop cost recovery to ensure that services are self-financing."
The overall benefit of the project will be to improve significantly the basic living conditions for the inhabitants of the Jiu valley, 300 km north-west of Bucharest. Water supply is limited to eight to ten hours a day, and less than 50 per cent of the total collected sewage is treated. Proceeds of the loan will be used to finance priority areas, such as pipeline upgrading to allow water to be supplied 24 hours a day, the installation of water meters to encourage consumer awareness of water demand management, the modernisation of water treatment plants and the installation of energy-efficient equipment in the pumping stations.
The investment programme is twinned with an operational and financial performance programme which will give RAAVJ the means to build up cash reserves to finance new investment and to strengthen its credit position.
The total project cost is US$ 52.6 million, of which the EBRD is covering 48 per cent. Additional funding of ECU 8 million is expected from EU-Phare. RAAVJ will provide US$ 5.7 million from its own cash resources, and the balance will be funded by central and local government.
In April 1995, the EBRD signed a US$ 28 million loan agreement (the Municipal Utilities Development Programme) with five Romanian local authorities to renovate and upgrade their municipal water supply and waste-water infrastructure. This project provides a model of municipal and environmental infrastructure financing in the region. The five water utilities concerned have significantly improved their financial and operational performance, as well as the quality of the services they provide.
The EBRD is also working with the government and the banking community to develop a second Municipal Utilities Development Programme covering ten more cities, which involves the development of a dedicated municipal credit facility for the first time in Romania.
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