WATER UTILITY INFRASTRUCTURE IN THE REPUBLIC OF CROATIA HRVATSKE VODE WATER PROTECTION DEPARTMENT MARA PAVELIĆ, DSc Biotech. BRUXELLES, 21 January 2015

21st CENTURY CHALLENGE Water is a strategic 21st century resource, and although it covers 70% of the Earth’s surface, freshwater represents only 3% . ¼ of the world population does not have at their disposal sufficient quantities of drinking water, which makes the provision of sufficient drinking water quantities the main ecological, economic and safety issue. On the global level, 70% of the total water consumption is used in agriculture, 19% for industrial purposes and 11% for personal needs of the population. Based on total renewable water resources per person, Croatia ranks 3rd in Europe (after Norway and Russia), and 5th with regard to quantities of high quality drinking water, which makes us committed to rational and responsible management.

21st CENTURY CHALLENGE Level of water supply to population in the Republic of Croatia is 76%, but the connection level to public sewerage systems is less than 50%. Existing public sewerage systems do not always meet the need, which is particularly visible in tourist season. Numerous challenges direct us to transboundary cooperation and joint approach to problem solving. Water protection is not only the issue of protecting national heritage and ecological priority, but also a political priority to preserve sovereignty over water resources.

HISTORY OF WATER MANAGEMENT Founder: Josip Juraj Strossmayer Founding date: 7 Sept. 1876 – next year will be the 140th anniversary of water management Hrvatske vode were restructured in 1996, after which they have retained as its core water management activity exclusively public service activities, which include: Water regulation and protection from adverse effects of water Water use Water protection Irrigation Drafting planning documents for water management HISTORY OF WATER MANAGEMENT

ACTIVITIES OF HRVATSKE VODE I. Rregulation and protection water management facilities dikes, bank revetments, relief canals, lateral canals, dams with reservoirs, sluices, retentions , owned by the Republic of Croatia, managed by Hrvatske vode II. Amelioration water management facilities basic amelioration drainage facilities (owned by the Republic of Croatia, managed by Hrvatske vode 2.detailed amelioration drainage facilities, irrigation facilities owned and managed by regional self-government units III. Water utility facilities public water supply facilities and public sewerage facilities , owned and managed by public water service provider

PROGRAMME OF MEASURES The Republic od Croatia is a country with abundant water resources; therefore, the indisputable national strategic goal is to protect them and ensure sufficient supplies of clean water for future generations. In achieving this goal, great efforts are made, as well as financial resources invested, to achieve the required standards planned in the Water Management Strategy, which was adopted by the Croatian Parliament in July 2008 as the long-term planning document which defines the vision, mission, goals and tasks of the national policy in the field of water management. The Republic of Croatia, as the latest EU member, had a different position from its predecessors.

PROGRAMME OF MEASURES All experiences and problems which the European Commission encountered with joining of new countries from East Balkans and Baltic countries resulted in more stringent criteria which were applied to the Treaty concerning the Accession of the Republic of Croatia to the European Union. The Republic of Croatia joined the EU in the period when the Black Sea area was declared a sensitive area, which resulted in the requirement that more stringent wastewater treatment conditions are implemented in the entire area of the Danube River. Due to integrated implementation of the adaptation, securing funds and technical equipment of water service providers, it was concluded necessary to consolidate small water service providers, i.e. to implement a reform of the water utility sector.

IMPLEMENTATION OF THE NATIONAL PLAN – DEADLINE FOR COMPLIANCE Sensitivity Agglomeration size (PE) TOTAL 2,000-10,000 10,000-15,000 15,000-50,000 50,000-150,000 >150,000 Black Sea Basin – sensitive area wastewater collection secondary treatment 12 years-31 Dec. 2023 (126 agglomerations) wastewater collection more advanced treatment 9 years-31 Dec. 2020 (10 agglomerations) wastewater collection more advanced treatment 7 years-31 Dec. 2018 (29 agglomerations) wastewater collection more advanced treatment 7 years -31 Dec. 2018 (2 agglomerations) 167 Adriatic basin - sensitive area (discharges on land and part of the sensitive sea) wastewater collection secondary / appropriate* treatment (26 agglomerations) wastewater collection more advanced treatment 9 years-31 Dec. 2020 (5 agglomerations) (8 agglomerations) (0 agglomerations) 39 Adriatic basin – area of the "normal" sea wastewater collection appropriate treatment (53 agglomerations) wastewater collection secondary treatment (16 agglomerations) wastewater collection secondary treatment 7 years-31 Dec. 2018 9 years-31 Dec. 2020 ** (11 agglomerations**) 7 years-31 Dec. 2018 (4 agglomerations) 88 205 31 54 4 294 *- coastal areas ** - coastal agglomerations with a significant share of tourism in total load (> 30%)

AREA SENSITIVITY IN THE REPUBLIC OF CROATIA Agglomerations 10.000-15.000 PE 15.00-150 PE > 150,000 PE Area sensitivity SENSITIVE Eutrophic area Area intended for abstraction of water for human consumption Protected nature area Sensitive area basin NORMAL Normal area Additional bathing water protection area

ANALYSIS OF STATE IN THE WATER UTILITY SECTOR WATER SUPPLY ZONES 376 water abstraction sites 443 local water supply systems 68 water supply zones Water supply zones are determined mainly based on technical analysis of the existing state and water supply development plans Average water supply zone has 65,000 inhabitants and annual water production of approx. 3.8 m3 Large differences between minimal and maximal quantities

ANALYSIS OF STATE IN THE WATER UTILITY SECTOR SEWERAGE Wastewater collection of approx. 329 million m3 Coverage level of public sewerage is 47% Capacity of newly constructed wastewater treatment plants is 4.04 million PE Coverage level of wastewater treatment is 30% of the population 763 sewerage systems were established, of which 294 larger than 2,000 PE

ANALYSIS OF STATE IN THE WATER UTILITY SECTOR PRESENT WWTP CONSTRUCTION LEVEL (WWTP ZAGREB) 140 installed WWTPs, of which 43 have capacity for less than 2000 PE 97 plants are larger than 2000 PE It is necessary to construct 290 plants, i.e. 197 new WWTPs 36 WWTPs have preliminary treatment, which is 1,341,710 ED, i.e. 32.24% Of 140 WWTPs, 117 is operating On 49 WTTPs (secondary and tertiary level), efficiency is evaluated Most plants do not meet treatment efficiency

IMPLEMENTATION OF THE PROGRAMME OF MEASURES Water Management Strategy River Basin Management Plans Multi-annual construction programme for water utility facilities Multi-annual construction programme for regulation and protection water facilities and amelioration drainage facilities Multi-annual programme for monitoring harmonization Annual programmes for maintenance works in protection areas from adverse effects of water RBMP– Programme of measures Flood Risk Management Plan – Programme of measures Public information and participation in the preparation and update of plans and programmes is carried out through public consultation in compliance with requirements of the: Water Framework Directive Flood Directive SEI Directive Strategic environmental impact assessment Strategic environmental impact assessment Conditions, measures and recommendations in relation to nature protection

MULTI-ANNUAL CONSTRUCTION PROGRAMME FOR WATER UTILITY FACILITIES Based on the Implementation Plan for Water Utility Directives – document was prepared by Hrvatske vode and adopted by the Government of the Republic Croatia in Nov. 2010. Represents mandatory part of the programme of measures as part of the RBMP. Its starting point are adopted and agreed activities and deadlines related to the implementation of the EU water utility directives as an integral part of the Accession Agreement.

MULTI-ANNUAL CONSTRUCTION PROGRAMME FOR WATER UTILITY FACILITIES The programme takes into account agreed activities and deadlines and elaborates in detail technical/ implementation/ organization issues. The programme: Defines the framework investment programme in public water supply and public sewerage, Operationalizes the project implementation system to contribute to more efficient utilization of financial, personnel and information / documentation resources available to the Republic of Croatia.

MULTI-ANNUAL CONSTRUCTION PROGRAMME FOR WATER UTILITY FACILITIES Cost analysis: A significant impact on the implementation of the EU water utility directives is also the WFD, which requires water price policy based on the principle of cost recovery for water services. A prerequisite for responsible and efficient water use is water saving and collection of funds for infrastructure maintenance and renewal. Considering the estimated high investment costs and need to introduce water price based on the cost recovery principle (incl. costs of investment, operation and maintenance, depreciation, etc.), the affordability analysis represents the most demanding, and also the most influential part of organizing the implementation of the EU water utility directives.

MULTI-ANNUAL CONSTRUCTION PROGRAMME FOR WATER UTILITY FACILITIES Understanding the water utility sector in the framework of the Implementation Plan for Water Utility Directives (2010) has significantly contributed to better water management planning and understanding of the implementation on the national level. The established and connected database was used for determination of service area boundaries, and presents the basis for further elaboration of activities through the Programme. Identification of priority investment areas, already during the negotiations with the EU, enabled implementation of a series of projects, among which the ones using loan funds from international development banks and EU pre-accession funds seem more significant.

MULTI-ANNUAL CONSTRUCTION PROGRAMME FOR WATER UTILITY FACILITIES The Programme is financially demanding, thus a special attention is paid to models of financing. All sources of financing are directed to the Programme: appropriate EU funds, loans from IFIs, available domestic funds (State Budget, budgets of local self-government units, etc.). A challenge to project shaping/forming is the optimization of burdening the population with new costs, with a desirable highest possible involvement of the EU grants. Attempts are made to prevent the problem /experience of other countries with regard to a reduced absorption capacity in view of the EU funds due to the lack of well prepared projects.

MULTI-ANNUAL CONSTRUCTION PROGRAMME FOR WATER UTILITY FACILITIES Indicators of the Programme results: Increased water supply level of the population. Reduced water losses from public water supply systems. Increased connection level to public water sewerage systems. Increased number of sewerage systems compliant with the standards. Share of the future water price without costs of local cofinancing in NRD (uniform price in a service area)

INVESTMENT CYCLE - WATER UTILITY SECTOR Drinking water directive 68 water supply zones identified (presently 135 companies, 376 abstraction sites, 74% of the population connected to public water supply systems) 443 local water supply systems 14% of the population supplies water from own wells Transitional period -31.12.2018. (3+3+3). 1.355 billion EUR Urban wastewater directive 763 agglomerations identified; 294 larger than 2000 PE (presently 151 companies, 47% of the population connected to public sewerage systems, 30% of the wastewater is treated) Transitional period -31.12.2023. 3.192 billion EUR

INVESTMENT CYCLE - WATER UTILITY SECTOR 2018: it is necessary to build sewerage systems for a total of 47 agglomerations. 2020: it is necessary to build sewerage systems for a total of 26 agglomerations. The total planned WWTP capacity for 294 agglomerations larger than 2000 PE is 7,780,440 PE. WWTPs built through projects will have a total capacity of 6,170,010 PE (79.30%). The total number of inhabitants in agglomerations larger than 2000 PE is 3,260,053. The projects cover the area with 2,417,193 inhabitants (74 %).

OVERVIEW OF PROJECTS IN PREPARATION No. Project name Construction value (EU) No. of projects per implementation year Total Sewerage projects Water supply projects Total Implementation Plan List 39 List 16 List 7 List 9 Other Total Difference – Implementation Plan Project lists were named after the number of projects No. of agglomerations and water supply zones is larger that the number of projects (for the purpose of grouping per water service provider – wider spatial perception) 50% of estimated implementation value for the Urban wastewater treatment directive is initiated

OVERVIEW OF PROJECTS IN PREPARATION Through funds of Hrvatske vode, HRK 260 million was secured up to date for preparation of water utility infrastructure projects at the estimated value of 2.6 billion Euro, through the use of the Structural and Cohesion Funds which Croatia can now use following EU joining. Through defined allocations in the Multi-annual financial framework, we expect annual allocations for water management in the amount of 150-200 million Euro of the EU funds, i.e. the EU Regional Development Fund anticipated a tentative allocation of 1.3 billion Euro in the financial programme period 2014-2020. A large number of projects has a high maturity level. In preparation up to date: 2300 km of detailed designs of water supply and sewerage networks 20 WWTP preliminary designs

EIB and CEB PROJECT WATER UTILITY INFRASTRUCTURE FINANCING Loan amount: 150 million EURO EUR 75 million (EIB) EUR 75 million (CEB) Project financing The project is financed in the ratio 90 %- 10% of the investment value excl. VAT (90% from the bank loan funds, 10% is own participation of final beneficiary, VAT is paid by final beneficiary) Total estimated project cost excl. VAT: 166.7 million EUR EUR 75 million (EIB loan funds) EUR 75 million (CEB loan funds) EUR 16.7 million (own funds of public water service providers)

EIB and CEB PROJECT WATER UTILITY INFRASTRUCTURE FINANCING Project purpose: The project includes investments in water supply systems, wastewater collection and treatment and storm water collection in municipalities located in all Croatian counties, with the exception of the City of Zagreb. Project implementation: Project implementation is planned in the period 2013-2016 for a total of 650 subprojects on the entire Croatian territory. Loan funds: Amount to a total of 150 million EUR0 (75 million EUR CEB, 75 million EUR EIB) Loan funds absorption is planned in 4 tranches. To date, 60 million EUR of bank loan funds have been absorbed (CEB - 30 million EURO, EIB – 30 million EURO) in 2 tranches. In 2015 and 2016, the absorption of the remaining 90 million Euro of the loan funds is planned.

CONCLUSION The implementation of the water utility directives was institutional obligation, but also incentive, not only for institutional and adaptation, but also for technical and technological, organizational, personnel and financial restructuring of Croatian water utility sector. Consolidation of water service providers (utility companies) is a strategic determinant of the Republic of Croatia, and the expected outcomes are increased service level (coverage and quality of public water supply and public sewerage services), rationalization of operation and maintenance costs of public systems (sustainability and development) and related rationalization of water price which the citizens pay.

CONCLUSION Acceptability and implementability of such long-term programme documents, whose content and scope is demanding, depend on coordinated work of initiations in the water sector (national, regional and local level) and timely/ active participation od stakeholders and the general public. Apart form the fact that the national water management policy is implemented through this type of documents, they also follow thematic goals and investment priorities related to environmental protection and/or water management on the EU level, and in this manner secure financial support for their implementation.

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