EBRD helps improve water supply in central Bulgaria

Sept. 4, 2007
Twelve municipalities and around 400,000 people in central Bulgaria served by the Stara Zagora regional water company will benefit from improved water supply as a result of a €9 million loan to be provided by the EBRD. Stara Zagora, one of the regional centres in Bulgaria, is currently subject to water rationing throughout the year. The Bank's loan will enable the company to implement a €11.1 million program of water supply investment to improve supply reliability and introduce...

• €9 million to help rehabilitation of water infrastructure in Stara Zagora

July 11, 2007 -- Twelve municipalities and around 400,000 people in central Bulgaria served by the Stara Zagora regional water company will benefit from improved water supply as a result of a €9 million loan to be provided by the EBRD. Stara Zagora, one of the regional centres in Bulgaria, is currently subject to water rationing throughout the year.

The Bank's loan will enable the company to implement a €11.1 million program of water supply investment to improve supply reliability and introduce energy efficiency measures. The company will use the funds to replace 36km of water supply pipes and to upgrade pumping stations, which should result in reduction of water losses by 18 percent and decrease electricity consumption by 27 percent by the end of 2009.

The EBRD loan, focusing on water supply issues, constitutes the next step of a long-term capital investment programs of Stara Zagora, following an initial investment grant from the EU-ISPA* fund and the central government to deal with wastewater treatment issues. The EBRD loan will further contribute to the institutional strengthening of the company in respect of restructuring, commercialization and improving efficiency of operations, thus making it easier for the company to absorb EU structural funds.

Thomas Maier, EBRD Director for Municipal Infrastructure, said this is another project made possible because of the recent government reforms in the water sector, enabling local water companies to improve creditworthiness and take loans without sovereign or local financial guarantees and to operate on a commercial basis. The recent establishment of an independent water regulator should further improve the operational parameters of water companies, making it easier to attract funding to improve standards that will ultimately benefit local residents, said Maier.

The project was developed in close cooperation with the Ministry of Regional Development which is the owner of the regional water company in Bulgaria.

Assen Gagauzov, Bulgarian Minister of Regional Development, said this project is a great example of the fruitful cooperation between the Ministry of Regional Development and Public Works, the Stara Zagora Regional Water Company and our partners from the European Bank for Reconstruction and Development. We expect the investment component to start by this autumn and help address the problem of water rationing which has persisted in Stara Zagora for years. This goal will be achieved through targeted investments which will reduce water losses, bringing savings without requiring substantial tariff increase to cover the investment cost, Minister Gagauzov said.

The Bank's loan is complemented by €250,000 of technical cooperation funds for the improvement of the commercial standing of the company through the provision of a comprehensive range of support services which will support the management of the company in improving its performance and strengthen its capacity to develop and implement investment projects.

The European Bank for Reconstruction and Development (EBRD) is a major investor in the water and waste-water sector in Bulgaria, which is facing significant investment needs due to investment neglect for the past 17 years. This project is the third EBRD project with a regional water utility in Bulgaria, following the signing of the projects in Burgas in 2005 and Rousse in 2006. These two projects had a significant impact on the reform of this sector in terms of building institutional and regulatory framework and tariff reform.

The Bank is the largest investor in Bulgaria, having invested more than € 1.4 billion in 105 projects. In the municipal sector alone, the EBRD has invested more than € 2 billion in 21 countries.

*Instrument for Structural Policies for Pre-Accession

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