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EBRD water services loan sets benchmark for Russian municipal contracts

May 23, 2008
Rosvodokanal agrees to revise existing deals to introduce best practises

The European Bank for Reconstruction and Development has agreed to lend 1.5 billion roubles (equivalent to ?42 million) to Russia’s Rosvodokanal, a market leader in the provision of water and sewerage services, premised on its commitment to bring its existing and future contracts with municipalities closer to international practice.

The terms of the EBRD’s 13-year loan aim to increase investment in the sector by setting a benchmark for the Russian municipal services market. Such a step could, among other benefits, encourage greater foreign involvement in the sector.

The EBRD is in parallel working closely with Russia’s Anti-Monopoly Authority, the government body responsible for fair competition policy and the regulation of natural monopolies, with the objective of ensuring that long-term leases of municipal assets are in the future awarded on a competitive basis.

This transaction has given the EBRD a unique opportunity to improve the quality of the existing lease arrangements to bring these closer to international standards and the EBRD intends to replicate this approach in other projects involving private operators in the Russian municipal services sector, Thomas Maier, EBRD Business Group Director for Infrastructure, said.

The Bank welcome's Rosvodokanal's decision to re-balance its municipal contracts and thus send an important message to the whole market, Mr. Maier added.

Under the agreement, Rosvodokanal will revise contracts with six Russian cities and one region. The new contracts, whose provisions will be replicated in Rosvodokanal’s future municipal agreements, will introduce service targets and penalties for non-performance, as well as requirements for public disclosure. These contracts will be monitored by independent bodies.

The proceeds of the loan will be used to co-finance the rehabilitation and upgrade of relevant infrastructure in Barnaul, Kaluga, Krasnodar, Omsk, Orenburg, Tver, Tyumen and other cities, as well as to enable Rosvodokanal to acquire water companies.

Rosvodokanal is one of Russia’s largest water operators, servicing about 5 million people in eight cities. The company is part of the privately-held Alfa Group.
Company — Rosvodokanal
  • Full name
    Rosvodokanal LLC
  • Industry
    Public utilities