EBRD helps improve water supply in northwestern Romania

• €18 million to help regionalization of water utility in Oradea

July 6, 2007 -- Some 26,000 people living in northwestern Romania, near the Hungarian border, will benefit from cleaner water and reduced pollution as a result of a €18 million EBRD loan that will also extend the reach of the local water network.

The significant environmental benefits of the loan also include the reduction of cross-border groundwater pollution in the Crisul Repede River on the border between Hungary and Romania.

A €12 million portion of the loan will be used to co-finance the extension of the water and wastewater network in Oradea by constructing water and sewage pipes in parts of the city and 8 adjacent communities which are not currently connected to the network.

These investments will be the first step in the company's transformation into a sustainable regional operator -- one of the key criteria for eligibility for EU cohesion funds. An additional €200,000 of technical cooperation funds for consultancy services will assist the company in its regionalization, achieving substantial efficiency gains and greater access to commercial capital.

The remaining €6 million portion of the loan will be used to restructure the original City-backed loan into a direct finance to the local utility without recourse to a sovereign guarantee. Of the total €18 million loan, €8 million will be syndicated to Raiffeisen Zentralbank Österreich Aktiengesellschaft.

The EBRD has been cooperating with the Oradea water utility company since 1997, when the Bank extended a $9.6 million sovereign loan to the company to finance critical water and wastewater investments, improving the quality of water for 220,000 inhabitants. The Bank extended an additional €6 million in 2004 to Oradea to finance the rehabilitation of the wastewater treatment plant along an EU grant.

Dana Craciunescu, EBRD Senior Banker, said this project reflects the EBRD's strong emphasis on supporting Romania in its drive to develop regional infrastructure and support the regionalization of the water operators. As the process of convergence continues after the country's accession to the EU, the Bank supports regionalization as a means of improving water services in smaller towns and achieving greater economies of scale. Regionalization also underpins the sustainability of investments and operations and the development of a long-term water sector strategy while also promoting regional balanced growth, Craciunescu said.

The EBRD is a major investor in regional infrastructure including the water and wastewater sector projects in Romania, which have been identified as one of the highest priorities during Romania's discussions on environment for its EU accession. This project is the third EBRD project with a regional water utility in Romania, following the signing of the projects in Cluj Salaj in 2005 and Timisoara in 2007.

These projects had a significant impact on the reform of this sector in terms of building institutional and regulatory framework and tariff reform. The benefits of reforming municipal finance in Romania are beginning to show. Craciunescu added that those service utilities and local governments that have implemented tariff reform and commercialization are now in a position to obtain capital directly.

Petru Filip, Mayor of Oradea, said that this is another project made possible because of water sector reforms, enabling local water companies to improve creditworthiness and take loans without sovereign or local financial guarantees and to operate on a commercial basis.

Ioan Ciursas, General Manager of the Oradea water company, said this loan is a result of our long-standing cooperation with the EBRD and will not only improve the quality of water for its users, but also contribute generally to a reduction in pollution.

The European Bank for Reconstruction and Development (EBRD) is one of the largest investors in Romania, having invested more than € 3.5 billion in 231 projects which have mobilized a total funding of €6.4 billion.

---

Also see:
-- "EBRD long-term water loan to cut pollution of Volga River"
-- "EBRD finances wastewater treatment in Armenia"

###