Modernizing Municipal Infrastructure in Ukraine

Challenge

Municipal infrastructure and services in Ukraine, particularly in the water and wastewater sectors, have been suffering from decades of underinvestment. Low tariff and government subsidy levels leave no incentive to increase the efficiency of provided services, including energy efficiency. Deprived of a reliable cash flow, service providers cannot maintain aging infrastructure, and steadily worsening service makes cost recovery through tariff increases and efficiency improvements an uphill battle. The need for rehabilitation is exacerbated by the overall energy inefficiency of water production and wastewater treatment. 

Solution

The project is assisting the participating utilities in moving toward higher service quality and reliability and in reducing the cost of service through a series of institutional improvements and selective investments in the rehabilitation of deteriorated water supply and sanitation infrastructure.

The project addresses (i) institutional strengthening to enable utilities to adopt commercially oriented business-type practices through the preparation of business plans; (ii) rehabilitation investments in water and wastewater utilities in Odessa, Ivano-Frankivsk, and Chernihiv; and (iii) financing for the most urgent energy-efficiency investments in water and sanitation in 14 cities.

Results

The project has achieved the following results between August 2007 and March 2014:

• The average energy savings reached in UIP utilities is around 27 percent, resulting in UAH 47.8 million annual savings
• The reconstruction of 418 pumping stations (water and sewer).
• The replacement and new construction of 53 kilometers of water and sewer networks.
• Procurement of 44 units of specialized automotive vehicles (excavators, mobile workshops, cleaners, etc.)
• The development of business plans by three participating utilities to improve their strategic planning and decision-making practices, and ultimately to have a positive impact on their long-term capacity and financial condition.
• Improved water and sanitation services to 4 million people in Ukraine.

Bank Group Contribution

The International Bank for Reconstruction and Development (IBRD) contributed a US$140 million loan. A key development partner is the Swedish International Development Cooperation Agency (SIDA), which has provided SKr 35,844,217 (an equivalent of about US$5.5 million) in support of institutional strengthening and energy efficiency under the UIP.

Partners

Key partners include: (i) the Ministry for Regional Development, Construction, Housing and Communal Services, which is the lead partner responsible for overall project implementation; (ii) the municipal authorities of Odessa, Ivano-Frankivsk, and Chernihiv, which have regional Project Management Units responsible for the implementation of investment subprojects in their respective cities; and (iii) municipal water and sanitation utilities in all 14 participating cities.

Moving Forward

Based on satisfactory progress on the project development objectives and on the solid capacity for project implementation developed within the line ministry, the World Bank is currently preparing a follow-up project. The Second Urban Infrastructure Project is currently being developed in the amount of up to US$350 million to continue financing water and sanitation investment needs in a number of Ukrainian cities and to assist in strengthening the capacity of municipal service providers.

Beneficiaries

Ukraine's Urban Infrastructure Project covers the upgrade of water utilities in 14 cities across the country. It reaches 4 million Ukrainians, who now have better access to clean, safe, reliable water.