Largest wastewater treatment project in the Baltic Sea area moves forward

In St. Petersburg today, 20 March 2003, the Nordic Investment Bank (NIB) signed a loan agreement of EUR 45 million with the Russian project company Nordvod.

The long-term credit will finance the completion of the St. Petersburg Southwest Wastewater Treatment Plant Project, which will have a major positive ecological impact on the Baltic Sea. As a consequence of the successful completion of the financial negotiations among the parties, the building works may start. The plant will be completed within three years.

NIB has led the financial structuring of the project since the year 2000, and has acted as lead bank for the bank consortium’s financing operation. The project structure is unique as the project is established as a private public partnership (PPP) enterprise, and based on cooperation between joint European forces, Nordic contractors, international financial institutions, donors, and local authorities.

In practice, the PPP model means that the Nordvod project company takes charge of project implementation, in association with the local authorities. Nordvod is owned by a Nordic construction consortium (consisting of the YIT, Skanska and NCC construction companies), Nordic Environment Finance Corporation (NEFCO) and the water company Vodokanal of St. Petersburg.

To ensure operational efficiency, the plant, when completed, will be operated by a separate operating company with the same ownership structure as Nordvod.

The project is an element in the Northern Dimension Environmental Partnership investment programme. The costs of the project will be covered by a combination of equity, credits, grants and local funding. A number of financing institutions participates in the financing structure. Apart from the NIB credit, the project will also be financed by loans from the European Investment Bank, the European Bank for Reconstruction and Development, Finnfund and Swedfund; share capital and subordinated credits through NEFCO; Nordic bilateral assistance, mainly from Finland and Sweden (SIDA); as well as EU assistance channelled through TACIS and a grant from the NDEP fund. Both the City of St. Petersburg and Vodokanal have also made major financial contributions to the finalisation of the project.

The investment will greatly reduce the effluent load of untreated and contaminated wastewater discharged into the Gulf of Finland and the Baltic Sea. At present, unprocessed sewage from a population of nearly one million people is being discharged into the Gulf of Finland, with dire effects on the water quality of the entire Baltic Sea. Most importantly, emissions of oxygen-consuming substances (BOD5), nitrogen and phosphorus will be substantially reduced when the treatment plant becomes operational. The project is therefore an urgent necessity. Once commissioned, the new plant will meet the HELCOM and EU efficiency requirements. In addition to the actual treatment plant, the project also includes a sludge combustion facility.

Construction work on the Southwest Wastewater Treatment Plant in St. Petersburg started in the 1980s, but was suspended in the 1990s. At that time approximately one-fifth of the plant’s concrete structures were completed.

The project, for which the Russian Federation and the City of St. Petersburg have expressed strong political support, is a good illustration of how coordination of Nordic and international financial resources together with local partners can facilitate the achievement of concrete and significant results for environmental improvement in the Baltic Sea.