Romania - Rehabilitation of the Water Supply/Sewerage Public Service in Medgidia

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Flush with money

For every liter of water delivered to the people of Medgidia, a town in southern Romania, one liter is wasted because of outdated municipal pipes. Many citizens living on the outskirts of town do not have running water at all. To make matters worse, the local utility company doesn't have the money to fix the pipes or expand the network.

These problems would have continued to afflict Medgidia for years - had the government not started to think outside the box. Now it has $44 million in the bank and a guarantee that all the water pipes will be fixed by 2007. What accounts for the change in fortunes?

Good advice, for one. UNDP was working with the local government in Medgidia as part of Local Agenda 21, a programme that supports sustainable local development in line with the Millennium Development Goals (MDGs). When the town raised the issue of its poor water system, UNDP suggested bringing in a private water company.

The town agreed and issued a tender to attract an investor. Bonet, a Romanian-American company, won the bidding process. It agreed to pay $44 million for the right to operate the town's water system for 25 years. It will renovate and expand the system and in exchange will collect usage-based fees.

According to Florin Banateanu of UNDP Romania, Bonet will be able to achieve substantial savings by fixing or replacing the town's leaky pipes. "But the most important issue is that this company will provide better water quality for the people", he said.

Background and Significance

Background

Village on Danube Bank, Romnania

The existing situation of water and waste water services in Medgidia is characterized as follows:

• Not all the population of the city has access to water supply/sewerage services;
• the existing water and wastewater networks are very old; so are the entire water and wastewater system.
• because of the old equipment the efficiency is extremely low; huge water loss is registered each year (over 50%);
• the actual local operator of water supply-sewerage system, Edilmed, also operates the sanitation and energy services and its financial sustainability is extremely limited. Therefore, they had no capacity to make any investments in the water field in Medgidia.

Given the above-mentioned situation, the Local Council decided to find a new partner with the adequate experience in the area as well as with the appropriate financial capacities.

The main issue to be solved is the water and wastewater quality in Medgidia as well as the provision of efficient services for acceptable prices for the population. The local administration faced a financial incapacity for the appropriate investments, while the age and efficiency of the existing system were worsening every day. There was also an increasing need to extend the water and wastewater services supply in other parts of the town, which are not yet connected to the different networks. The Local Council faced the need and, at the same time, the opportunity of a public-private partnership which would lead to an improvement of the existing water situation in Medgidia.

Goal and Objectives

The main goal of the project is to insure the access of all citizens of Medgidia and of two adjacent villages Valea Dacilor and Remus Opreanu, to water and wastewater services and for decent costs. This should be accomplished in an efficient manner, i.e. with a minimum and good quality water resources. It should be mentioned that the existing losses are of about 50% of the water quantity extracted. The funds to be invested are private and the investor intends to accomplish all investments within 2 years. This means that at the end of this period of time all citizens will have full access to water and wastewater services at lower costs due to an increased efficiency of the system.

The Experience: Challenges and Solutions

WHAT

1. The institutional solution found was a form of a PPP between the Local Council and a private investor for a specific period of time. The project is developed under the Romanian law and the private partner will insure the observance of all applicable laws in force. The social issue was a key factor and therefore the main decision focused on securing complete access for all citizens to water and wastewater services while insuring the efficiency of the existing system. The economic as well as the technical needs imposed the PPP with a powerful investor with adequate experience in this field.
2. Based on an opportunity study ordered by the Local Council, it was proved that the existing water company in Medgidia – Edilmed – did not have the financial capability to provide the adequate investments needed to improve the system. Therefore, the Local Council organized an open tender in order to select the investor. Consequently, a partner was thus found; the change will consist in a modernized water supply and wastewater services system.
3. The opportunity study ordered by the Local Council explored the following potential solutions: keeping the situation unchanged; finding non- reimbursable European funds to complete the necessary investments and find a private investor. The first possibility did not prove to be a real solution. The second one would have implied long and complex procedures (i.e. years are normally needed to access these funds). Therefore, the Local Council decided that the third solution was the most appropriate for Medgidia. It should be mentioned that this last solution will put in place a totally revolutionary technology in this field in Romania and, more important, will solve the problems within a quite short period of time.

WHO

The Local Council, together with the investor, will insure the operation of the system. The investor comes with new technologies and financial support, while the Local Council will secure the overall observance and accomplishment of the terms of the contract. The main stakeholders of this project are:

• the entire population in Medgidia
• all industrial companies and economic agents operating in the area;
• all public institutions;
• the entire population of Romania through a better use of its natural resources as well as thorough the implementation and experience of a revolutionary technology in the country.

Such a complex project, unique in Romania so far, needed a special monitoring and control in order to secure the transparency and the accountability of its implementation. As the project identification was done under UNDP project Local Agenda 21, and knowing the previous fruitful collaboration with the municipality of Medgidia, it was agreed that UNDP will be responsible for the sound administrative, financial and technical management of the project. A Memorandum of Understanding to this effect was signed in June 2006. The direct beneficiaries are the citizens of Medgidia together with the economic agents and public institutions operating in the town.

WHERE

The location of the project is Medgidia town, located in Romania, Constanta county.

WHEN

The project will be implemented starting with October 2006. The project is currently in the inception phase. It is estimated, based on other local experiences, that this project was developed in a short period of time and it is forecasted that all investments will be in place within 2 years. The time is one of the most important elements and this is why both partners – the investor as well as the Local Council – are interested in advancing the project as quickly as possible.

HOW

1. The last important step related to the project implementation was the signing of the contract in July 2006. Before that, the tender was held in May 2006 based on which the investor was chosen. The tender was organized based on an Opportunity Study ordered by the Local Council, who analyzed different approaches to the problem.

2. The main problem identified was the poor quality of the water and wastewater services in Medgidia and the limited access to these services. So far no measure was implemented because at the moment the system is in the transferring process from the former operator to the new investor.

3. There have been no approaches implemented yet but it is forecasted that both traditional and innovative measures will be used, according to each necessity.

4. The relations between the two main partners are so far optimal; the Local Council has granted full support to its partner.

5. The interest of the US ExIm Bank in exporting US technology and the support of the Commercial Department of the US Embassy in Romania had a positive impact on the project speeding up some phases of the project preparation.

6. The investments are implemented with private funds.

Results and Impact

The project represents a real public-private partnership (PPP) on infrastructure rehabilitation under UNDP’s Local Agenda 21 project in Romania and has the following main components: construction and operation of drinking water treatment station; construction and operation of a new wastewater treatment plant; extension of the water supply/sewage service; rehabilitation of the existing piping network.

Main Results

Until now nothing has actually changed for the beneficiaries but the forecasted changes

The project is in the inception phase; therefore no results have been obtained yet. However, the initial schedule proposed by the Local Council has been going on according to the plan. Example of lesson learned: close cooperation and joined efforts of private partner, public authorities, financial and commercial sector

Lessons for Replication

Testimonies and Stakeholder Perceptions

Timeframe & Status

The project is currently in the inception phase. The project contract was signed by the private investor and Medgidia Local Council in June 2006 and curently, the private investor is taking over the system from the former local operator Edilmed (final take over foreseen for 1 October 2006) The concession contract was signed for a period of 25 years.

References

See also

1. Water and Waste Management for small rural communities
2. Transfer of Environmentally Sound Technologies (TEST) to Reduce Transboundary Pollution in the Danube River Basin
3. Tisza community-led demonstration regional project for sustainable development and integrated land and water management
4. Tisza community-led demonstration project for sustainable development and integrated land and water management
5. Sustainable Development for the Community from the Dorman Creek Valley, Romania
6. Strengthening the Implementation Capacities for Nutrient Reduction and Transboundary Cooperation in the Danube River Basin
7. Romania, Sanitation Country Profile
8. Romania SD Country Profile
9. Romania Human Development Report 2005
10. Romania Freshwater Country Profile
11. Romania - USAID – Strengthening Water Users Associations
12. Rapid Environmental Assessment of the Tisza River Basin
13. International Black Sea Day
14. Integrating multiple benefits of wetlands and floodplains in to a trans-boundary management plan for the Tisza River Basin
15. Integrated River Basin Management in the Prut River Basin
16. Integrated Management and Conservation of the Mara Basin Reversing the Water Degradation in the Romanian Transboundary Region of the Upper Tisza, Romania
17. Improving resilience of the Tisza River basin to fluctuating climatic regimes through development and adoption of a Strategic Action Programme
18. Garla Mare – Salcia – a double role wetland: biodiversity conservation and nitrate pollution filtration, Romania
19. Control of eutrophication, hazardous substances and related measures for rehabilitating the Black Sea ecosystem
20. Capacity and Community Building for Industrial Water Stewardship in the Danube/Black Sea region
21. Assessment of the Management of Shared Lake Basins in Southeastern Europe
22. A public-private partnership to fix a water supply system in Medjidia
23. A Practical Model for a Sustainable Development of the Rural Communities along the Green Corridor of the Danube River

External Resources

Attachments