EBRD US$10.09 million loan helps improve water services in Bulgaria

The city of Rousse will use an EUR 8 million European Bank for Reconstruction and Development loan to bring improved water supply to around 260,000 residents in eight municipalities across northern Bulgaria. The loan is being provided directly to the Rousse Regional Water Company and will help upgrade water infrastructure, including the main transmission line. This should reduce water losses, increase water security and improve the quality of local services...

Bank works with EU, city of Rousse; around 260,000 residents to benefit.

ROUSSE, Bulgaria, June 21, 2006 -- The city of Rousse will use an EUR 8 million [US$10.09 million] European Bank for Reconstruction and Development (EBRD) loan to bring improved water supply to around 260,000 residents in eight municipalities across northern Bulgaria.

The Bank's loan is being provided directly to the Rousse Regional Water Company and will help upgrade the City's water infrastructure, including the main transmission line. This should reduce water losses, increase water security and improve the quality of local services.

The loan is part of a EUR 46.8 million [US$59.03 million] programme of water and wastewater infrastructure investments in the city. The European Union is expected to provide EUR 35.1 million [$44.25 million] in ISPA grants, which were set up to finance infrastructure projects in countries planning to join the EU. The EU funds will finance the construction of a waste-water treatment plant, with the remaining finance coming from the national budget. The project is intended to help the company achieve European environmental standards and consequently should have a significant impact on the quality of the environment both for Rousse and for its neighbours along the Danube River.

Henry Russell, EBRD Deputy Director for Municipal Environmental Infrastructure, said this project is possible because of recent government reforms in the water sector enabling local water companies to take loans without sovereign guarantees and to operate on a commercial basis. Also the recent establishment of an independent water regulator should improve the creditworthiness of water companies, making it easier to attract funding to improve standards that will ultimately benefit local residents, said Mr Russell.

The project was developed in close cooperation with the Ministry of Regional Development which is the majority owner of the Regional Water Companies in Bulgaria. Assen Gagauzov, Minister of Regional Development, said the project represents a good example of how future investments in local infrastructure can be financed by combining both loans and grants. He said future projects after Bulgaria's accession to the EU are under development along similar lines using Structural and Cohesion Funds.

The EBRD is setting conditions on the loan that should enable the water company to become more dynamic and commercially oriented, while other conditions include further improving legislation and regulatory reform that [may/should] help attract further investment in the sector.

Located on the Danube River in northern Bulgaria, close to the Romania border, the Rousse Water Company provides water and sewage services to eight neighbouring municipalities. The project marks the second ISPA (Instrument for Structural Policies for Pre-Accession) co-financing with the EBRD of a local water utility following the signing of the Bourgas Water and Wastewater project last year.

The European Bank for Reconstruction and Development (www.ebrd.com) is the largest investor in Bulgaria, having invested more than EUR 1.3 billion [US$1.64 billion] in 61 projects. In the municipal sector alone, the Bank has invested more than EUR 1.6 billion [US$2.02 billion] in 20 countries.

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