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The European Bank for Reconstruction and Development (EBRD) and the international community are banding together to help a city in the north of Russia improve wastewater treatment and put its municipal services on a financially sound basis.

The EBRD is lending the rouble equivalent of €
10mn to the water and wastewater utility company of the city of Syktyvkar in Russia’s Arctic Komi region. The loan is part of an infrastructure programme under which the bank is pioneering the financing of Russian municipalities without requiring sovereign guarantees.

The EBRD loan is backed by a financial guarantee from the Republic of Komi, one of Russia’s 89 regions. Syktyvkar, capital of the sparsely populated region, is a city of 245,000 in southwest Komi and is located 1,400km northeast of Moscow.

The total cost of the work to be carried out is estimated at €
21mn, of which €
3.7mn will be financed with a grant from the Northern Dimension Environmental Partnership (NDEP) Support Fund. The governments of Canada, Finland and Sweden, as well as the European Union, are providing an additional €
850,000 in grant support.

The NDEP was set up in 2001 to mobilise investments from the international community to tackle the main environmental problems of northwest Russia. It has identified 13 potential Russian environmental projects, requiring an aggregate investment of about €
1.3bn. The fund is administered by the EBRD.

Thomas Maier, director of the EBRD’s Municipal and Environmental Infrastructure Team, says the project demonstrates how the EBRD can help municipalities implement tariff reform, improve billing and apply better management procedures.

The EBRD’s Municipal and Environmental Infrastructure operations in Russia focus on local infrastructure investments. It works with local authorities and their utility companies to enhance their creditworthiness by improving budgeting, debt management and investment planning. A project similar to the Syktyvkar transaction, involving the Arctic coal mining town of Vorkuta in the far north of Komi, is under consideration.