Revolving Credit Facility for the Modernization of Asuncion's Wastewater System
The project encompasses construction works for sanitary sewerage systems and wastewater treatment plants in the metropolitan area of Asuncion, Paraguay. The works to be carried out consist of tasks involved in the construction of primary, secondary, and tertiary sewage collectors, household connections, inspection registers, pumping stations, drive lines, treatment plants, and final disposal by means of underwater outlets (the “Project”). The project construction period is four years and once finished, the project is expected to benefit more than 1.6 million inhabitants.
IDB Group financing consists of a revolving line of capital intended to finance the construction of the Project (the “Loan”). The loan will be disbursed monthly in U.S. dollars up to an amount equal to project advances already approved by the supervisor appointed by the Ministry of Public Works and Communications (MOPC).
Once the contractor completes the works associated with one of the milestones, as these are defined in the contract, with prior review and validation from the work supervisor and the MOPC, the latter will grant a CRPago (certificate recognizing the obligation to pay) for the corresponding U.S. dollar amount. Once that certificate is issued it may not be revoked by a contract termination event and will be sold to a group of long-term investors through a contractual and trusts structure established prior to the close of financing. The cash resulting from this sale will be used to prepay an amount corresponding to principal and interest on the loan, which may again be disbursed based on progress made in the works.
In accordance with the IIC Environmental and Social Sustainability Policy, the project has been classified as a category “B” project because it could generate moderately important environmental and social impacts and risks that can be managed using standard management practices, including appropriate design criteria, as well as previously known plans and procedures.
Impacts that will be generated in the project’s construction phase include those typically associated with the construction of civil works, including changes in the quality of the air, soil, and surface water; production of dust, noise, and vibrations; compacting of soil; generation of water erosion processes; combustion gas emission; and potential contamination of soil and water due to the overturning of solid and liquid wastes. The most relevant social impacts will be related to potential physical or economic displacement of people; increased risk of accidents; effects on vehicular traffic; alteration of commercial activities; and changes in the quality of life of those living and moving in the areas surrounding the works (due to dust, noise, and vibrations generated).
In the operating phase, the impacts to be produced will be primarily positive and related to i) qualitative improvements in the health and quality of life of those benefiting from the drinking water and sewer systems; and ii) improved quality of the waters of the Paraguay River thanks to reduced volumes of untreated effluents dumped there.
A Preliminary Environmental Impact Assessment (EIA), focusing on the environmental and social management of the quarries and zones of the project loan has been presented to the competent authorities. The final EIA for the project is now being prepared. In addition, a study on the Strategic Environmental and Social Evaluation for Greater Asuncion (EASEGA) has been prepared. This latter study analyzes the typology of the environmental and social impacts that subprojects making up the PMSAS could cause, and for each impact proposes generic measures along with General Environmental and Social Technical Specifications.
The IIC will carry out the environmental and social due diligence (ESDD) process, which will focus on evaluation of probable environmental risks, confirmation of the project’s classification, analysis of the management plans for mitigating these risks, and the definition of an environmental and social action plan for the project (ESAP). During the ESDD, the IIC will visit the works sites and evaluate the environmental, social, and health and safety system to be adopted, including related plans and procedures. It will also inspect the encampment sites and proposed industrial areas, will verify the scope of the public consultation process, and will evaluate the basic information and social and labor issues related to the project.
An Environmental and Social Review Summary (ESRS) will be prepared and published on the IIC website once the ESDD process is completed.