European Bank gives loan to Poland for water treatment

The European Bank for Reconstruction and Development (EBRD) has provided a £14 million (EUR 22 million) loan for Poland’s third largest city and former capital, Krakow, to improve its wastewater treatment systems.

The 12-year loan, to be made to Miejskie Przedsiebiorstwo Wodociagow i Kanalizacji w Krakowie SA (MPWiK), the municipal wastewater treatment company, will help clean up the nearby Vistula river.

The treatment works will be extended and modernised, and a biological treatment facility constructed in the Plasz—w area of the city. Krakow has also already had approval for a complementary £25 million (EUR 40 million)grant from the EU Instrument for Structural Policies for Pre-Accession (ISPA) programme.

“The EBRD’s loan will not only help to reduce pollution of the Vistula river, it will also enable Krakow to comply with EU environmental standards and improve its sewerage and wastewater services to consumers and industry,” said EBRD director for municipal and environmental infrastructure Thomas Maier.

The loan is being provided without a financial guarantee from Krakow, because the EBRD has enough confidence in the financial footing of the wastewater treatment authority to assume the full financial risk. This will enable Krakow to focus its resources in sectors that do not provide revenue such as housing, education and roads.

Krakow has a population of 740,000, and is a regional economic centre for the south of Poland and an important focus for foreign investment. MPWiK employs 1,150 staff and serves over 700,000 customers in the city and surrounding areas.

The project is one of several in Poland and other European accession countries to be co-financed by the EBRD and ISPA, and is the second in Krakow itself. As of 30 June last year, the EBRD’s figures show that by itself it had signed 102 investment projects in Poland involving direct Bank investment of £1022 million. This finance helped to mobilise £410 million in additional investment.

The EBRD has responded to Poland’s advancing economic state with a wide range of initiatives. Private sector finance has been supplemented rather than replaced, a situation which has been achieved by moving across market segments and developing new approaches. The Bank has been adjusting to the transforming Polish market by switching from debt to equity, from Warsaw to the provinces, from foreign-backed joint ventures to Polish companies without foreign shareholders, and from classical bank lending to capital market transactions.

The EBRD is actively working in infrastructure, industrial restructuring, and support for small and medium-sized enterprises (SMEs). Private sector operations have accounted for 89% of EBRD’s financing, well above the Bank’s own target. Equity accounts for 44% of the financing, with 56% in the form of debt.

The bank’s operational strategy for Poland remains focused on the key challenges for the transition to a market economy, emphasising the requirement for a rapid response to new problems as Poland’s transition process moves forward.

The EBRD is financing infrastructure, municipal and environmental investments and contributing to the increasing use of local currency financing in infrastructure and utilities projects. The bank continues to promote implementation of energy-saving investments in both private and public sectors by investing in and providing loans to energy service companies. The Bank has also pledged to support the upgrading of district heating networks by promoting privatisation and restructuring. The EBRD also aims to provide finance to industrial companies for investment programmes that reduce excessive energy consumption.

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