Ukraine – Water & Waste 2019

Japanese development agency finances restoration of sewage treatment plant

People driving from the Kiev airport Boryspil towards the city center usually notice an unpleasant smell on their way. It is caused by the huge sewage treatment plant Bortnytska stantsiya aeratsii, which treats the wastewater of 5 million persons in the greater Kiev area. Especially residents who live near the sewage treatment plant around the subway stations Charkiwska and Posnjaky suffer from the odor nuisance.

However, the situation is expected to improve in the near future. According to an agreement reached in 2015, Japan International Cooperation Agency (JICA) is providing around US$ 970 million for the overhaul of the plant. The financing comprises a term of 40 years with an interest rate of 0.1 percent and a ten-year interest-free phase.

Kyivvodokanal seeks general contractor

After several years of preparation, the operator of the large sewage treatment plant, the municipal company Kyivvodokanal (https://vodokanal.kiev.ua), published a tender for the selection of a general contractor on 15 March 2019. Only Japanese companies or joint ventures between Japanese and Ukrainian companies are allowed to participate. The tender text is available at https://vodokanal.kiev.ua/zaproshennya-do-uchast%D1%96-v-torgax.

Construction is scheduled to start in February 2020 and should be completed by August 2025. Even after the end of the JICA-financed project, further stages of modernization are planned for the wastewater treatment plant. A solution needs to be found for the treatment of the sewage sludge. The construction of a mono-combustion plant would be an option. Kyivvodokanal is also involved in phosphorus recovery.

Ukraine: Selected projects in water management

Source: GMI research

Across the country, investments in the water sector are necessary

The Ukrainian water sector has a considerable modernization backlog. The investment requirement for the most urgent tasks alone is estimated at US$ 20 billion, the total requirement at US$ 40 billion. A large part of the pipeline networks, pumps and water treatment and purification plants are worn out or do not meet the necessary standards. The waterworks can hardly cope with investments due to the fact that tariffs do not cover costs. The funds are often sufficient only for the most necessary repair work. Accidents repeatedly occur in the pipelines.

Water supply companies complain about sharply rising electricity costs, the brain drain and delays in the adjustment of tariffs for water and wastewater by the national regulatory authority NKREKP (http://www.nerc.gov.ua). They call for the adoption of a new program. The previous program “Drinking Water 2011 to 2020” (Ukrainian: “Pytna woda Ukrajiny”) is underfunded. Of the originally estimated 3 billion Ukrainian Hryvnia (UAH; about US$ 112.8 million), only 208 million UAH have been made available so far. In the governmental budget for 2019, no funds are earmarked for the program.

With regard to investments, water supply companies are usually dependent on international donors. In addition to JICA, the World Bank is also active. As part of the Second Urban Infrastructure Project, which has been running since 2014, it is providing a total of US$ 350 million by 2020. The funds will be used for infrastructure improvements in various cities. In addition, the European Investment Bank will provide EUR 400 million for the municipal infrastructure.

The waterworks are looking for potential investors for further projects. The Ukrainian Association of Water Companies Ukrwodokanalekolohija (https://ukrvodokanal.in.ua/) presented a number of projects during a water management exhibition in November 2018. The country relies heavily on know-how and technology from abroad for the planning and implementation of water management projects.

Ukraine: Overview of projects in the water sector for potential investors

Source: Ukrwodokanalekolohija Association