OREANDA-NEWS. January 23, 2007. Entering into its first partnership with the private sector to restructure Russian municipal services, the European Bank for Reconstruction and Development has agreed to provide a long-term loan of up to 1,5 billion roubles to Novogor Prikamie to improve water and district heating services in the cities where the company operates, reported the press-centre of EBRD.

The Bank’s eight-year loan to the privately-owned company is divided in two tranches of 750 million roubles (equivalent to ?21 million) each. The first tranche will be used to improve water services in the city of Perm and cut pollution of the river Kama, a key tributary of the Volga, while the second tranche could be released, subject to new approval, if suitable additional projects arise, including in neighbouring towns and cities.

The Company has since 2003 been operated the municipal water and wastewater system in Perm, a city of one million at the foot of the Urals mountains, which at present discharges around 100,000 cubic metres of untreated effluent a day into the 1,800-km Kama river, the longest left tributary of the Volga, due to the lack of capacity of the main sewerage collectors and treatment facilities.

The EBRD loan will, among other purposes, be used to upgrade three water treatment plants providing drinking water for 75 percent of the city’s population, as well as to modernise a biological wastewater treatment system and build a new collector to reduce the amount of untreated water being discharged into the river Kama.

The lack of available resources for major investments combined with rapidly ageing infrastructure has led to a rapid growth in the number of breakages in the water system and part of EBRD’s funds will go towards rehabilitating the water distribution network to cut such losses and reduce secondary pollution of drinking water.

Total investments needed for water projects in Perm between now and 2025 are estimated at over 15 billion roubles. The programme is to be financed from both budget and extra-budgetary resources, including investments by private operators, tariff premiums and connection charges. EBRD loan funding will allow work on these projects to start in 2008.

The EBRD partnership with Novogor Prikamie, controlled by Integrated Energy Systems (IES), which also controls OJSC Russian Communal Systems (RKS), Russia’s largest private utility company operating in the municipal services sector, means that the best practises and methodologies agreed for Perm can serve as a model for municipal projects in many more regions. IES is in turn part of Russia’s Renova group, a diversified investment holding.

This loan is a logical step in the Bank’s strategy to support the restructuring of the municipal services sector in Russia and encourage private sector involvement, said the EBRD’s Business Group Director for Infrastructure, Thomas Maier.