Document of
The World Bank
Report No: 32411-HU
DRAFT
PROJECT DOCUMENT
ON A
PROPOSED GRANT FROM THE
GLOBAL ENVIRONMENT FACILITY TRUST FUND
IN AN AMOUNT EQUAL TO US$ 12.5 MILLION
TO THE
REPUBLIC OF HUNGARY
FOR A
NUTRIENT REDUCTION PROJECT
February 15, 2006
Infrastructure Department
Central Europe and Baltics Country Unit
Europe and Central Asia Region
CURRENCY EQUIVALENTS
(Exchange Rate Effective February 15, 2006)
Currency Unit =
HUF = US$ 0.00473
US$ = HUF 211.22
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
BMSC
CAS
DDNP
EIA
EMP
EU
FM
FMR
FMS
GEF
GoH
HMWP
ICPDR
JAP
M&E
MOB
MOEW
MOF
N
NBWWTP
P
PIU
PMRs
PMU
PSC
SA
UNDP
WD
WFD
WWTP
Budapest Municipal Sewerage Company
Country Assistance Strategy
Duna-Drava National Park
Environmental Impact Assessment
Environmental Management Plan
European Union
Financial Management
Financial Management Report
Financial Management System
Global Environmental Facility
Government of Hungary
Hungary - Municipal Wastewater Project (Loan 4512-HU)
International Commission for the Protection of the Danube River
Joint Action Plan
Monitoring and Evaluation
Municipality of Budapest
Ministry of Environment and Water
Ministry of Finance
Nitrogen
North Budapest Wastewater Treatment Plant
Phosphorous
Project Implementation Unit
Project Management Reports
Project Management Unit
Project Steering Committee
Special Account
United Nations Development Programme
South-Transdanubian Environment Protection and Water Management Directorate
(EU) Water Framework Directive
Wastewater Treatment Plant
Vice President:
Country Director:
Sector Manager:
Task Team Leader:
Shigeo Katsu, ECAVP
Daniela Gressani, ECCU7
Sumter Lee Travers, ECSIE
Xavier Chauvot de Beauchêne, ECSIE
HUNGARY
NUTRIENT REDUCTION PROJECT
CONTENTS
Page
A.
STRATEGIC CONTEXT AND RATIONALE ............................................................. 1
1.
Country and sector issues.................................................................................................... 1
2.
Rationale for Bank involvement ......................................................................................... 2
3.
Higher level objectives to which the project contributes .................................................... 3
B.
PROJECT DESCRIPTION ............................................................................................. 3
1.
Lending instrument ............................................................................................................. 3
2.
Project development objective and global environmental objective and key indicators .... 3
3.
Project components ............................................................................................................. 4
4.
Lessons learned and reflected in the Project design ........................................................... 6
5.
Alternatives considered and reasons for rejection .............................................................. 7
C.
IMPLEMENTATION ...................................................................................................... 7
1.
Institutional and implementation arrangements .................................................................. 7
2.
Monitoring and evaluation of outcomes/results ................................................................ 10
3.
Sustainability and Replicability ........................................................................................ 10
4.
Critical risks and possible controversial aspects ............................................................... 11
5.
Grant conditions and covenants ........................................................................................ 13
D.
APPRAISAL SUMMARY ............................................................................................. 15
1.
Economic and financial analyses ...................................................................................... 15
2.
Technical ........................................................................................................................... 16
3.
Fiduciary ........................................................................................................................... 16
4.
Social................................................................................................................................. 17
5.
Environment ...................................................................................................................... 17
6.
Safeguard policies ............................................................................................................. 19
7.
Policy Exceptions and Readiness...................................................................................... 19
ANNEXES
Annex 1: Country and Sector or Program Background ......................................................... 20
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 23
Annex 3: Results Framework and Monitoring ........................................................................ 24
Annex 4: Detailed Project Description...................................................................................... 28
Annex 5: Project Costs ............................................................................................................... 35
Annex 6: Implementation Arrangements ................................................................................. 52
Annex 7: Financial Management and Disbursement Arrangements ..................................... 55
Annex 8: Procurement Arrangements ...................................................................................... 61
Annex 9: Economic and Financial Analysis ............................................................................. 66
Annex 10: Safeguard Policy Issues ............................................................................................ 71
Annex 11: Project Preparation and Supervision ..................................................................... 73
Annex 12: Documents in the Project File ................................................................................. 74
Annex 13: Statement of Loans and Credits .............................................................................. 75
Annex 14: Country at a Glance ................................................................................................. 76
Annex 15: Incremental Cost Analysis ....................................................................................... 78
Annex 16: STAP Roster Review ................................................................................................ 85
Annex 17: Maps .......................................................................................................................... 92
Annex 18: Biological Processes of Nutrient Trapping in Floodplains and Wetlands ........... 95
A. STRATEGIC CONTEXT AND RATIONALE
1. Country and sector issues
One of the main reasons for environmental degradation of the water bodies of the central
European region and the Black Sea is the high content of nutrients. The Danube River, one of the
continent’s largest and most important rivers, is by far the single most important contributor to
the nutrient pollution of the Black Sea. The loads of nitrogen (N) and phosphorus (P) transported
via the Danube River are estimated as of about 690,000 and 70,000 tons per year 1, respectively.
As a comparison, these amounts represent about ten times the loads of N and P discharged to the
North Sea from the river Rhine. The eutrophication on the northwestern shelf of the Black Sea, at
the mouth of the Danube, has had a disastrous impact on water quality, natural habitat, and fish
populations on which both biodiversity and human populations depend. Future development of
the river basin will further increase the pressure on the ecosystems.
Since the mid 1980s, the countries in the Region have stepped up cooperation for the protection
of the Danube River and the Black Sea. The Bucharest (1985) and Sofia (1994) Conventions,
signed by eleven Danube basin countries and the European Union (EU), led to the creation of the
International Commission for the Protection of the Danube River (ICPDR) in October 1998.
Under the ICPDR’s lead, strategic action plans and monitoring programs have been launched,
setting baselines and identifying hot spots and investment priorities. In November 2000, the
ICPDR adopted its first Joint Action Plan (JAP) for the years 2001-2005, which called for the
reduction of municipal discharges from major urban centers. Although, according to studies,
pollution from non-point sources represents about 80% of N and 65% of P, it is much more
difficult to address them than point-source discharges. One effective method to achieve this
consists in developing wetlands as nutrient traps. This method was identified as a strategic
priority to improve the Danube River water quality, and thereby decrease the discharges of
nutrients in the Black Sea. Budapest is the most important source point of nutrient discharges
identified by the JAP in Hungary. As such, it has been included within the top five regional
priorities of the JAP.
Hungary joined the EU on May 1st, 2004 and is in the process of adapting its regulatory
framework to comply with EU requirements, particularly the EU Directives on water. With this
goal in mind, the Municipality of Budapest (MOB) has prepared a long-term comprehensive plan
for wastewater collection and treatment in Budapest. This plan represents a substantial step
toward Hungary’s compliance with EU Directives. It entails the development, by the end of
2010, of four major projects: the completion of the wastewater collection system in all areas of
Budapest; the rehabilitation and the development of nutrient removal facilities at existing
wastewater treatment plants (WWTPs); the construction of the Central WWTP; and the increase
of landfill capacity for mid-term sludge disposal. The proposed Project complements the actions
already undertaken by the MOB, in particular through the ongoing World Bank financed
Hungary Municipal Wastewater Project (HMWP), to further reduce nutrient discharges and
achieve additional global benefits (for additional information, see Annex 1).
Within the overall investment program of the JAP, construction of wastewater treatment
infrastructure is the largest investment, representing about 90 % of the investment program
Source: Nutrient Removal Extension of North Budapest Wastewater Treatment Plant – Environmental Impact
Assessment (Imsys Ltd.) February 2005, based on MONERIS results.
1
1
(investments in wastewater treatment infrastructure in Hungary alone represent 25 % of the JAP
investment program). Although the Danube River is not declared a sensitive water body, the
Hungarian authorities have decided to add tertiary treatment in the North Budapest WWTP
(NBWWTP) to fulfill Hungary’s commitments towards the reduction of nutrient discharges into
the Danube and the Black Sea.
In order to reduce costs and to make more affordable the achievement of the stated objectives,
the JAP also puts emphasis on alternative solutions to reduce nutrients. Restoration of wetlands,
in particular floodplains connected to rivers, is one of the main alternative actions proposed.
Given the ample capacity they have to act as nutrient filters, wetlands can make a significant
contribution to reducing N and P loads. However, to date the impact of such floodplains and
wetlands connected to rivers on nutrient reduction have not been systematically documented
(water depth, timing of flooding, vegetation etc.) and hence the outcomes remain difficult to
predict in quantitative terms. The proposed Project aims at developing knowledge and scientific
data to better understand such solutions and facilitate their replication.
2. Rationale for Bank involvement
The Bank has played a catalytic role in the ongoing HMWP by financing a substantial portion of
the investment requirements and helping to mobilize funds from other sources to support the
Project. The Bank-financed HMWP, co-financed by an EU Phare Grant, is part of a Euro 100
million investments aimed at reducing the pollution load in the Danube River Basin,
strengthening compliance with Hungarian and EU environmental standards, and improving
wastewater operations in the water and wastewater utilities. Project benefits extend beyond
Hungary to Black Sea countries. The HMWP includes the rehabilitation of the North Budapest
and South Pest WWTPs to the secondary level of treatment, the improvement of nutrient
reduction at the South Pest WWTP, and the construction of a WWTP for secondary treatment in
Dunaujvaros. Loan savings and uncommitted funds under the HMWP will be utilized to
complement the GEF Grant for the proposed Project.
The Bank and the GEF helped to establish regional coordination and institutional cooperation
through the ICPDR, and were instrumental in the development of the UNDP/GEF Strategic
Partnership for the protection of the Danube River and the Black Sea. To support actions under
the Partnership, the GEF created an investment fund which will finance the proposed Project. As
the executing agency for GEF-financed projects, the Bank has gained experience from projects to
reduce nutrients in other countries and regions and is incorporating the lessons learned into the
proposed Project. Examples include a wetland restoration project in Bulgaria and a project in the
Russian Federation to reduce nutrient discharges into the Don river and the Azov/Black Seas
from the Rostov-on-Don WWTP.
The proposed Project is consistent with the themes of the last Country Assistance Strategy (CAS)
for Hungary discussed by the Bank’s Board of Directors in 2002, namely: support for Hungary’s
EU accession objectives, environmental improvements inter alia to comply with EU Directives,
sub-national development, poverty reduction and increased social inclusion. The proposed
Project is also consistent with the “Framework for World Bank Support to the European Union
New Member Countries of Central and Eastern Europe” (SecM2004-0283, dated May 28, 2004).
The program set out in the CAS includes the ongoing HMWP and the proposed Project, in
parallel with analytic and advisory services.
2
3. Higher level objectives to which the project contributes
The Project’s higher-level objectives are to assist national and local authorities in Hungary in the
implementation of top priority investments in the wastewater sector and to support the
Government’s commitments under the Danube Conventions and other international agreements
for the protection of the Danube River and the Black Sea.
B. PROJECT DESCRIPTION
1. Lending instrument
The Project’s cost of US$32 million would be partially financed by a full-sized GEF Grant in the
amount of US$12.5 million. The Grant will be complemented by a reallocation in the amount of
EUR5.9 million (US$7.7 million equivalent) from the Bank’s Loan 4512-HU to the MOB for the
HMWP, and additional counterpart funding of about US$10.4 million from MOB, and US$1.4
million from the Ministry of Environment and Water (MOEW).
2. Project development and global environmental objective and key indicators
The key development and global environmental objective of the Project is: (i) to reduce
Budapest’s discharge of nutrients (nitrogen and phosphorus) into the Danube River, and
consequently into the Black Sea; (ii) to enhance the nutrient trapping capacity of Gemenc and
Beda-Karapancsa wetlands situated in the lower Hungarian part of the Danube River; and (iii) to
serve as a model for similar nutrient reduction initiatives in Hungary and other Danube basin
countries. These objectives will be achieved through: (i) the development of tertiary treatment
(nutrient removal) at the NBWWTP; (ii) the rehabilitation of wetlands in the Gemenc and BedaKarapancsa areas of the Duna-Drava National Park (DDNP); and (iii) the establishment of a
comprehensive Monitoring and Evaluation (M&E) system for water quality and environmental
health allowing to measure the reduction of nutrients and contributing to the development of an
impact evaluation methodology. The Project will also finance dissemination activities to foster
replication in Hungary or in other parts of the Danube River basin.
The set of monitoring (physical/technical) and performance (operational and environmental)
indicators that will be monitored and reported through Project Management Reports (PMRs)
have been agreed during Project preparation. These include:





Annual reduction of nutrient discharges from the NBWWTP (N and P kg/year);
Average operation cost of the nutrient reduction process in the NBWWTP (US$/kg of
nutrient reduced);
Number of hectares of wetlands rehabilitated in the DDNP;
Annual amount of nutrients retained by the DDNP wetlands (N and P kg/year);
Average operation cost of the wetland management procedures in the DDNP, in terms of
its nutrient reduction capacity (US$/kg of nutrient reduced).
Target and baseline figures for these indicators were agreed upon at Negotiations. They might be
revised in the early stages of the Project, based on the results of the baseline study.
3
3. Project components
The Project uses a multi-focal approach to assist the Government of Hungary (GoH) in
developing advanced wastewater treatment of domestic discharges and to restore high priority
wetlands to work as nutrient traps, while increasing their internationally recognized ecological
values. It will enable comparison of two different forms of intervention to reduce discharges of
nutrients from point and non-point sources, and evaluation of their impacts in terms of global
benefits in relation to their respective investment and operation costs. It is thus expected to have
an important demonstration role in Hungary and within the region to help develop technically
and financially sound solutions, allowing for best use of scarce resources. Furthermore, the
Project is expected to strengthen the institutions involved, build capacity of local staff in efficient
development and operation of wetlands for nutrient trapping, and raise awareness of the
ecological benefits of wetland rehabilitation and their impacts on biodiversity. (See Sections C.2.
and Annex 4 for details). The Project has three components:
Component 1 – Development of nutrient removal at the NBWWTP (Budapest). (GEF
amount including contingencies: US$ 6.96 million, Total cost: US$ 25.04 million)
This component, hereafter referred to as MOB- or Budapest- component, will finance works and
equipment to upgrade the NBWWTP to the tertiary level of treatment for N and P removal. The
technology for such treatment is highly specific and likely to be protected by patents. From a
procurement standpoint, specifying the technical solution/process would give an unfair
advantage to a given supplier. Therefore, the procurement will be based on a set of precisely
defined performance requirements (to be detailed in the technical specifications of the bidding
documents), with evaluation based on technical and financial efficiency in attaining the specified
outcomes in regards to N and P reduction.
Component 2 - Wetland Restoration in the Duna-Drava National Park (DDNP component).
(GEF amount including contingencies: US$5.20 million, Total cost: US$ 6.50 million)
This component, hereafter referred to as DDNP- or Park- component, will finance the
rehabilitation of about 10,000 hectares of wetlands to develop their nutrient trapping capacity
within two identified areas, Gemenc and Beda-Karapancsa, located within the DDNP, directly
along the course of the Danube River. The rehabilitation process will be implemented in stages,
starting with the establishment of one pilot in each of the two areas for a period of one year. It
will also provide funds to design and install an M&E system for the evaluation of Project
impacts in terms of reduction of N and P. A comprehensive baseline study will be carried out at
the beginning of the Project to assess the areas’ environmental quality at the first stage of the
Project, to help determine the precise location of the two pilots, and to provide recommendations
on the design and development of the M&E system. Building on the results and lessons learned
from the pilots, the rehabilitation will then be scaled up. Early in the process, an Experts Panel
will be convened by the MOEW to assist the South-Transdanubian Environment Protection and
Water Management Directorate (WD) and the DDNP Directorate (DDNPD) in the selection and
monitoring of the planned interventions. In parallel, the component will adapt a methodology of
impact evaluation, using local research organizations and universities. It will also include the
development, in a participatory way, of a DDNP Special Area Management Plan, including
measures to best accommodate authorized uses and protection measures in the Park area. Finally,
this component will include limited funding for incremental Project management costs for the
WD, PIU. Works to be carried out in the wetlands include localized clearing, dredging and
construction or installation of small scale water regulating structures. As the lead-time
4
requirements for the approval of the required environmental licenses could extend to about
eighteen months, execution of works under this component is scheduled to start during the
second year of Project implementation. The M&E system will be developed in the meantime,
allowing it to be fully operational prior to the execution of works. (See details in Annex 4)
Component 3 - Dissemination and Replication. (GEF amount including contingencies: US$
0.35 million, Total cost: US$ 0.43 million)
This component will finance consultant services to carry out a comprehensive end-of-project
impact evaluation and results analysis study of the two interventions (tertiary treatment and
wetlands restoration), including a cost-benefit analysis. The results of these studies will serve as
a basis for the dissemination, replication and knowledge sharing activities. The component will
finance workshops, public communication campaigns and promotion of cost effective solutions
for nutrient reduction in other areas of Hungary and in other riparian countries. The project will
also link to the GEF Danube and Black Sea Regional projects, Danube Convention-supported
dissemination activities and the GEF-funded IW Learn initiative. In this regard, this component
will include setting up a Project website consistent with the GEF IW:LEARN guidance,
participation of project staff in IW:LEARN activities, participation in at least two GEF
International Waters portfolio conferences, and participation in ICPDR and Black Sea
coordination meetings. The Project will also provide limited funds to finance a Project launch
workshop; auditing services; and training to strengthen WD for project implementation and to
build capacity of DDNPD staff for the efficient development and operation of wetlands for
nutrient trapping.
Table 1. Project Costs (million US$)
Component
Indicative
Cost
% of
Total
Local
Financing
Associated
IBRD loan
GEF
Financing
% GEF
Financing
1: Development of tertiary
treatment at the NBWWTP
(Budapest)
2: Wetland Restoration in
the Duna-Drava National
Park
3: Dissemination and
Replication
23.40
73%
9.70
7.20
6.50
52%
6.08
19%
1.22
0.00
4.86
39%
0.41
1%
0.08
0.00
0.33
3%
Contingencies (Unallocated)
Total Project Cost
2.09
31.97
7%
100%
0.77
11.77
0.50
7.70
0.82
12.50
6%
100%
Benefits and Target Population.
At the global level, the Project is expected to generate benefits through the reduction of N and P
discharges into the Danube River and consequently into the Black Sea2. The primary
beneficiaries of the Project are downstream riparian countries and littoral states of the Black Sea.
2
Estimation of the nutrient reduction potential of the rehabilitation of Gemenc and Beda-Karapancsa wetlands was
carried out on the basis of the data collected, international experience in other regions and extensive literature
research, with data adapted to the size and general characteristics of the selected restoration sites (e.g., permanent
water bodies, water depth, timing of flooding, vegetation). Expected incremental annual nutrient reduction is
5
The contribution of the Project (reductions of about 4,000 tons per year for N and 260 tons per
year for P) might appear small in comparison to the total N and P flow at the mouth of the
Danube (about 690,000 tons of N and 70,000 tons of P). However, it represents a 9% and 4%
reduction respectively of N and P total nutrient discharges from Hungary (see Annex 15). In
particular, the MOB component is expected to reduce 14% of N and 6% of P Hungarian
discharges from point sources and the DDNP component 6% of N and 2% of P from diffuse
sources. Further, the Project is not only justified by its direct benefits; it represents also a
necessary first step to help generate the commitment for the complementary investments for
nutrient reduction needed to achieve the ultimate objective of controlling eutrophication in the
Black Sea.
More importantly, the Project is expected to have a demonstration effect in Hungary and in the
region. It will result in a replicable model for the treatment of non-point sources of nutrient
pollution, using wetland and floodplains, and the development of a methodology of impact
evaluation, which will potentially benefit the entire Danube-Black Sea basin population. The
implementation approach proposed, the environmental monitoring information to be introduced,
and the results analysis to be performed will also be reviewed and analyzed from a cost-benefit
prospective, comparing the wetland rehabilitation approach to the implementation of tertiary
treatment. On that basis, a set of recommendations will be prepared to serve as a "transfer of
experience" to other cities in Hungary and riparian countries, through the ICPDR.
The ecosystems of the DDNP are also expected to benefit directly from the Project. These
include the Gemenc and Beda-Karapancsa areas, which are two areas of international importance
(Ramsar sites) and nesting places for a number of migratory bird and other species of global
importance. (See Annex 10 and 18 for details)
At the national level, Hungary will benefit from progress towards compliance with EU
Directives, in particular in regard to wetland management aspects of the Water Framework
Directive (WFD), and increased capacity of the existing central, regional and local institutions
concerned to protect and manage wetlands, floodplains and aquatic ecosystems.
4. Lessons learned and reflected in the Project design
The main lessons learned from similar Bank operations in the country, in the region, and in other
countries suggest that:

A clear understanding of the roles of and responsibility sharing between the MOEW, the
MOB, and the WD, on behalf of the DDNPD, should be confirmed by Negotiations. This
issue has been addressed through extensive consultations that led to the preparation of a
Grant implementation agreement between the partner institutions, which determines the
roles and responsibilities of each of them during implementation. A draft of this
agreement, along with an Operational Manual, have been submitted to the Bank for
review prior to Appraisal. Comments have been provided by the Project team. The
submission of a Grant implementation agreement and of an Operational Manual,
estimated to range between 1,390 and 1,734 tons of N and between 76 and 92 tons of P, i.e., between 130 and 165
kilogram per hectare per year of N and between 7.3 and 8.8 kilogram per hectare per year.
6
including financial accounting section, satisfactory to the Bank, is a condition of
Negotiations (fulfilled).

Poor quality at entry may result in unrealistic expectations, delays and unsatisfactory
achievement of the Project objectives. To address this risk, funds were made available by
the GEF for the purpose of Project preparation. These funds financed detailed
consultants’ services for the preparation of economic and financial analysis,
environmental impact assessments, pre-feasibility studies and preliminary design (DDNP
component).

The early involvement in Project design of key stakeholders as well as the local
communities is critical to ensure ownership, build trust and ensure lasting commitment
and collaboration. While socio-economic and local community development issues need
to be carefully considered in the Project design, the rationale, benefits and objectives of
the Project should be disseminated to all stakeholders early in the preparation process, if
not through active participation, through effective public awareness programs.
Preparation activities focused on ensuring quality and helped design a Project supported
by the main stakeholders and by the population. The Project foresees further public
involvement and provides for the development of public awareness, in particular through
the dissemination and replication activities.
5. Alternatives considered and reasons for rejection
The MOB as the sole implementation agency. The selection of MOB as the sole
implementation agency was considered due to: (i) the possible substantial reduction of nutrients;
(ii) the fact that Budapest is considered in the JAP as one of the main hot spots; and (iii) MOB’s
good performance in implementing the ongoing HMWP and its commitment to make available
counterpart funding for the proposed Project. This alternative was rejected because the
fulfillment of GoH’s commitments towards the ICPDR and the development of the EU WFD
development agenda fall under the direct responsibility of the MOEW, as does the DDNPD.
Given their national mandate, the MOEW is the appropriate agency for the preparation of the
dissemination and replication component.
Addressing only point-source pollution. A possible alternative was to focus exclusively on
point-source pollution such as municipal wastewater treatment and industrial discharges. This
alternative was rejected because of the interest shown by the GoH’s interest in documenting the
impacts on nutrient reduction of floodplains and wetlands ecosystems such as the DDNP’s, and
in getting the opportunity, while addressing two of the most important hot spots as identified in
the JAP, to compare the efficiency of nutrient reduction and cost effectiveness of the two
treatment approaches. While nutrient removal technologies are well understood and very
efficient, they represent an important incremental cost in terms of investments, operation and
maintenance. However, it is a generally accepted assumption that wetland rehabilitation allowing
wetland use as nutrient traps requires significantly lower investments and Operation and
Maintenance (O&M) costs, while providing a very effective system to reduce nutrients pollution
from non-point sources and from large quantities of water.
C. IMPLEMENTATION
1. Institutional and implementation arrangements
7
Implementation Period: Five years, from FY 2006 to FY 2011.
Project Management Structure: The MOEW will have overall responsibility for managing the
Project implementation, including Project oversight and reporting to the Bank, as well as for
inter-agency coordination between the two executing agencies. For overall Project management,
disbursement, supervision and reporting to the Bank and Hungarian authorities, the MOEW has
appointed a Project coordinator and established a small Project Management Unit (PMU) to
ensure quality and timely coordination. The MOEW has entered into a Grant implementation
agreement with the MOB, the WD and the DDNPD that defines the main roles and
responsibilities of each partner institution for the implementation of the Project. Under this
agreement, the day-to-day implementation and administration of components 1 and 2 is
decentralized to separate executing agencies. Component 1 will be implemented by the MOB
and Component 2 by the WD, on behalf of the DDNPD, the final beneficiary of the investments,
through respective PIUs, fully integrated in these two institutions. Implementation of Component
3 will remain under the direct responsibility of the MOEW. To provide for inter-agency
coordination, a Project Steering Committee (PSC), composed of representatives of the main
institutions involved in its implementation, has been established.
MOEW, PMU: During Project preparation, the MOEW has designated a qualified staff from its
Budget and Finances Department as Project coordinator, who will continue the existing
responsibilities during Project implementation. The MOEW has established a PMU to assist the
coordinator, staffed with six professionals: a coordinator’s assistant, a financial analyst, a
procurement specialist and three environmental specialists. The PMU will oversee, coordinate,
administer and monitor Project implementation, and will act as Bank’s counterpart for any matter
related to Project implementation. In addition, the PMU will coordinate the Project management,
monitoring and reporting, and will be directly responsible for implementing the dissemination
and replication component.
Project Steering Committee: The PSC will continue operating throughout Project
implementation. It comprises representatives from the MOEW, the MOB, the WD and the
DDNPD, including PMU director and heads of the PIU, MOB and PIU, WD. This committee is
to bring the collective expertise of the sectors concerned, at the national, regional and municipal
level, and of the stakeholders, to help ensure that Project implementation achieves its objectives.
The PSC and will also work as channel for the dissemination of experiences and lessons
generated by the Project. The PSC is chaired by a senior level official of the MOEW to ensure
appropriate support. For these reasons, the establishment and appropriate staffing of the PSC is a
condition to Negotiations (already fulfilled).
Project Implementation Unit-PIU, MOB: Implementation of the Budapest component will be
managed by the PIU, MOB. This unit was established more than ten years ago to implement
Projects financed by IFIs. The unit is composed of a group of staff who have substantial
experience in the implementation of Bank-financed projects, through the ongoing HMWP (Loan
4512-HU), which is at an advanced stage of implementation. The unit will be responsible for the
technical and financial management of the Project component, and for handling procurement and
reporting requirements. The PIU, MOB will be advised in technical matters by the Public
Utilities Department of the MOB, which has experienced personnel. There is a long and well
established cooperation between the MOB and the Budapest Municipal Sewerage Company
(BMSC), which has been involved in all stages of Project preparation. During the
8
implementation phase, the supervision of the works to be performed at the NBWWTP has been
awarded to the BMSC, under a contract financed by MOB from its own funds. The MOB will
create a joint review team consisting of representatives of the MOB (Project Unit and Public
Utilities Department), the BMSC, and the Private Operator to monitor the implementation of the
works. The responsibility for investments remains under the responsibility of the MOB until the
facilities are completed and commissioned. Responsibility for their operations and maintenance
will then be handed over to the BMSC .
Project Implementation Unit-PIU, WD: Implementation of activities under the DDNP
component, including the development of the M&E system, will be supervised by the PIU, WD,
acting as an agent on behalf of the DDNPD, whose staff has no experience in dealing with Bankor IFI-financed projects. This unit was established for the component’s preparation, and it is
composed of a coordinator – a consultant was hired for that purpose - and seasoned professional
staff of the WD. The selection of the WD as an executing agency on behalf of the DDNP is
based on its experience in water project management, including projects financed by IFIs (other
than the World Bank), its knowledge of water management and of the area and its river basin
approach. On technical aspects the WD and the DDNPD will continue to work in close
cooperation during Project implementation. The DDNPD provides comprehensive knowledge of
the Park areas, ecosystem and biodiversity to the WD, which has expertise of water management
infrastructure and engineering. In order to minimize risks related to the lack of experience in
dealing with Bank-financed projects, a Project launch workshop, including training in Bank’s
operational rules and Safeguard Policies, will be organized. Additionally, a detailed Project
Operational Manual, including the Project’s operational procedures, as well as agreed
implementation and procurement plans, has been drafted and commented by the Bank. The PIU,
MOB will provide assistance to the PIU, WD, as appropriate.
Operational Flow: Each PIU will be required to fulfill Project requirements in regards to the
investment planning, procurement, supervision of works and purchases, financial management,
and for auditing and reporting to the PMU for its respective Project component. The above tasks
will be performed directly by the PMU for component 3. Approval for applications for
disbursement, withdrawal of Grant funds, and consolidated reporting to the Bank will be carried
out by the PMU in the MOEW and sent to the MOF or entity delegated by MOF for signature
prior to submission to the Bank. Main roles and responsibilities in regard to financial
management, flow of funds, disbursement, reporting, and execution and monitoring of the
Project’s Environmental Management Plans are to be described in the Grant implementation
agreement. Additionally, detailed responsibilities for operational processes, rules and standard
forms and documents are to be spelled out in sufficient details in the Operational Manual. Drafts
of these two documents have been submitted to the Bank for review prior to Appraisal.
Comments have been provided. Revised versions of these documents, satisfactory to the Bank,
were submitted before Negotiations.
Legal Arrangements: A Grant Agreement will be signed between the Bank, acting as an
implementing agency for the GEF, and the Republic of Hungary. This Agreement will include
the provisions for the implementation of Components 2 and 3, as both the WD and the DDNPD
are under the direct responsibility of the MOEW. A Project Agreement is to be signed between
the Bank and the MOB for the purposes of Component 1. An amendment to the Loan Agreement
is being prepared by the Bank, at the request of the MOB, to authorize the use of loan savings
9
and uncommitted funds under the Loan 4512-HU to partially finance Component 1 of the
proposed Project 3
2. Monitoring and evaluation of outcomes/results
Monitoring and evaluation of the Project outcomes will be carried out separately for each
component. Concerning the MOB component, the proposed Project performance indicators will
be monitored by the BMSC and reviewed by the MOB prior to being reported to the PMU. As
part of regular operation of the NBWWTP, the BMSC performs continuous measurements of a
set of technical and financial indicators. Technical Project performance indicators are already
being closely monitored by the BMSC, in accordance with Hungarian and EU requirements.
For the DDNP component, a comprehensive M &E system will be put in place at the DDNP,
under the responsibility of the WD, in coordination with the MOEW, PMU. This system will
monitor the Project impacts in the DDNP, in terms of reduction of N and P, water quality and
environmental health, taking into account the efforts of the GoH to harmonize existing
monitoring systems and to integrate the provisions of the EU WFD in regard to wetlands. The
list of indicators to be included in the M&E system, including possible indicators species, will be
determined in the first stages of the Project, based on the results of the baseline study. Also, as
indicated above, the M&E is to be established prior to the execution of the works.
A simple management information system for Project M&E will be designed by the MOEW,
PMU to ensure the coordination and aggregation of the data, including reporting formats and the
agreed monitoring indicators. Quarterly and consolidated annual reports including the use of
Project funds and Project impacts will be prepared by the PMU. Significant supervision by
qualified Bank staff is planned during the start-up phase. A Mid-Term Review will be carried out
to assess overall Project progress, introduce required changes, identify lessons learned, and
disseminate good practices. This process will be closely coordinated with the review of similar
projects in the Danube and Black Sea Programs, to allow for maximum benefits and knowledge
sharing.
3. Sustainability and Replicability
Sustainability. The MOB has demonstrated its commitment to the Project objectives through the
implementation of the baseline investments and the approval of additional direct financial
support beyond the GEF contribution. As part of the HMWP, the Bank has financed the
construction of the South Pest WWTP and the rehabilitation of the biological secondary
treatment of the NBWWTP. These investments, along with the installation of tertiary treatment
in the NBWWTP under the proposed Project, and the foreseen construction of the Central
Budapest WWTP are included in the long-term comprehensive plan for wastewater collection
3
In addition, the amendment expressly includes such development in the Project description of the HMWP and to
introduce the use of the revised procurement guidelines, dated May 2004. In parallel, a Memo is also being
processed, in compliance with OP/BP 13.25 on the use of Project Cost Savings, to seek the endorsement of the
Country Director, (in compliance with the ECAVP Memo dated July 8, 2005) to reallocate the loan savings and
uncommitted funds for that purpose. The amendment will be signed concomitantly with the signing of the legal
documents.
10
and treatment in Budapest. Tariff increases will be made as required to cover capital and
operational expenses requirements.
In the case of the DDNP component, the long-term sustainability of Project benefits is linked to
the adequate management and maintenance of the restored wetlands in the Gemenc and BedaKarapancsa areas, both reported as hot spots in the JAP of the ICPDR. Such management and
maintenance will require sufficient institutional and financial resources, which the GoH has
committed to provide. A provision is also made under the Project to support incremental Project
management costs of the WD, PIU on a declining basis while developing financial mechanisms
to finance the wetlands basic maintenance costs. The Project makes provisions for strengthening
capacity of local and regional implementing institutions and central administrations to ensure
that they acquire the needed managerial and technical skills and capabilities. Project
sustainability will be enhanced by actively involving local institutions during Project
implementation and by the preparation of a Special Area Management Plan, involving
stakeholders in the process.
Replicability. As indicated above, the dissemination and replication component of the Project
will provide the means for developing an M&E system to properly assess Project results.
Comprehensive impact evaluation studies will be carried out. The results of these studies will
serve as a basis for the dissemination and replication activities. In particular, the component will
finance workshops, public communication campaigns and promotion of cost effective solutions
for nutrient reduction in other areas of Hungary and in other riparian countries.
4. Critical risks and possible controversial aspects
Lack of continuing commitment from the Government. Negligible, because of the need for
compliance with EU requirements and the strong support from MOB for the Project. The risk of
lack of continued support for the DDNP component was initially rated as significant on the basis
of previous disagreement between the DDNPD and the MOEW, which significantly delayed
confirmation of counterpart funds and the signing of the PDF-B grant. However, because of
MOEW’s overall responsibility in the preparation and implementation of the Project, and based
on the institutional arrangements made to support the Project, this risk has decreased to
negligible. Nevertheless, the Bank team will work closely with the MOB and MOEW to
maintain current support.
Consumers unwilling/unable to pay required tariffs levels. Negligible, because the increase
required in MOB’s wastewater tariffs as a result of the Project investments is not substantial, and
studies show that the new tariffs should be affordable to most of the population (less than 4% of
the average household monthly income). As regards low income households and households
facing temporary difficulties, MOB has certain schemes already in place to provide financial
relief.
Institutional capacity to handle preparation and implementation. Negligible for the MOB. The
municipality has shown satisfactory capacity during preparation and implementation of the
HMWP, financed by Loan 4512-HU, which has a more complex structure and larger
requirements than the proposed Project.
11
Modest for the DDNPD. Despite being technically strong agencies, the implementing teams of
the WD and the DDNPD do not have experience in dealing with Bank-financed projects. To
decrease this risk, the Project provides for a launch workshop including training in the Bank’s
operational rules, coaching from MOB to WD and DDNPD, and assistance from specialized
consultants for Project preparation, including procurement.
Capital investments at the NBWWTP are higher than estimated. Modest. Since the selection of
the technology as well as the final design are to be carried out as part of the procurement process,
there is a risk that the bids result in higher than expected prices. However, cost estimates have
been carefully and regularly reviewed during Project preparation and have been found in line
with market prices. Additionally, the procurement process with a prequalification of firms and a
two-stage-bidding (ICB using the Bank standard bidding documents for Supply and Install) is
expected to create the highest possible competition for such contract, as the design will be left to
the bidders to decide during the first phase. Thus, prices are expected to be in the low range.
Slow decision-making during implementation. Significant. The complex and rather bureaucratic
process of decision-making in Hungary has generated delays during Project preparation. To
decrease this risk, a Grant implementation agreement between the MOEW, the MOB, the WD
and the DDNPD has been prepared to define the roles and responsibilities of each partner during
implementation. This agreement is being complemented by an Operational Manual to describe in
sufficient detail the procedures and timeframe for the organization of procurement, financial
management, disbursement, auditing and reporting. Drafts of these documents have been
submitted to the Bank and comments have been provided. The submission of these documents,
satisfactory to the Bank, is a condition for Negotiations. Additionally, the formal establishment
and staffing of the PSC, under the leadership of the MOEW, will facilitate the exchange of
information, experience and lessons learned among the partner institutions. These arrangements
have been agreed at Appraisal. The establishment and appropriate staffing of the PSC is a
condition of Negotiations. Confirmation of these arrangements will allow reducing this risk to
Modest.
Safeguards policies. Modest. Both the MOB and the WD have completed Environmental Impact
Assessment (EIA) reports that fulfill Bank requirements for their respective components prior to
appraisal (these have been published in Info-Shop). The MOB has already obtained
Government’s approval of its EIA and the corresponding Environmental License, which is
required by Hungarian legislation before the works can start. The WD, on behalf of the DDNPD,
is working on the preparation of the additional assessment for the DDNP component, which is
required to obtain the Environmental License by Hungarian regulations. Such assessment will be
completed on the basis of the detailed design of the rehabilitation works planned for the
wetlands. This assessment has been budgeted and will be implemented as soon as the Grant is
approved. As the process for the approval of such assessments by the Government has proven to
be rather lengthy in Hungary, execution of works under this component is scheduled to start
during the second year of Project implementation. A Panel of internationally recognized experts
on wetland rehabilitation and river dynamics will also be convened to examine the proposed
works. The GoH and the Bank will retain the authority to reject the financing of any work which
the Panel concludes that could have negative impacts. Additionally, these rehabilitation works
will be implemented in stages, starting with the development of pilots, to allow for a better
quantitative evaluation of the impacts. Notification to other riparian countries has been made
12
within the scope of the Danube Commission and measures have been developed as part of the
EMP to protect Natural Habitats. (See Section D.6 and Annex 10 for details).
5. Grant conditions and covenants
Negotiations of the Legal documents (GEF Trust Fund Grant Agreement and MOB Project
Agreement) of the proposed Project will be held once the Bank has received evidence of:
(a) Submission of a Grant implementation agreement between the MOEW, the MOB, the WD
and the DDNPD, satisfactory to the Bank;
(b) Submission of an Operational Manual, including the financial accounting section, satisfactory
to the Bank;
(c) Confirmation of the establishment and appropriate staffing of the Project Steering
Committee;
(d) Confirmation of the FMRs and disbursement reports formats, satisfactory to the Bank; and
(e) Receipt of evidence that staff to perform Financial Management tasks for entire Project has
been assigned in the MOEW.
Effectiveness conditions:
The GEF Legal documents will become effective once the Bank has received evidence that the
Grant Implementation Agreement has been duly executed and Legal Opinions, respectively from
the Government of Hungary attesting the validity and the binding nature of the GEF Trust Fund
Grant Agreement and of the Grant Implementation Agreement; and from the MOB attesting the
validity and the binding nature of the MOB Project Agreement.
Other covenants: The following covenants were agreed during the Technical Discussions and
confirmed at Negotiations:
For the GEF Trust Fund Grant Agreement:
(a)
The Recipient shall maintain throughout Project implementation the Project
Management Unit with adequate financial and human resources to ensure quality and timely
coordination..
(b)
In order to ensure appropriate inter-agency coordination, provide overall
guidance, facilitate integration and address potential conflicts, the Recipient shall maintain
throughout Project implementation a Steering Committee chaired by a senior level official of the
MOEW and comprising representatives from the MOF, MOEW, the MOB, the DDNPD and the
WD.
(c)
The Recipient, through the MOEW, shall cause the WD: (i) to carry out, supervise
and monitor component 2 of the Project, including the development of a water quality
monitoring system to measure the impact of said component on the reduction of nutrients in the
DDNP; and (ii) upon Project completion, to transfer to the DDNP the ownership and the
responsibility for the operation and maintenance of the facilities constructed, areas rehabilitated
and water quality monitoring system developed under component 2 in accordance with a time
action plan agreed by the Recipient and the Bank.
13
(d)
In order to assess and assist the WD authorities in the selection and monitoring of
the planned interventions under component 2, the Recipient, through the MOEW, shall ensure
that a panel of internationally recognized experts in the area of wetlands restoration and
management shall provide appropriate advice and recommendations, all in accordance with the
Operational Manual.
(e)
The Recipient, through the MOEW, shall take all action required to ensure that
the Operational Manual is applied and followed at all times in the implementation, monitoring
and evaluation of components 2 and 3 of the Project.
(f)
The Recipient shall take all measures necessary on its behalf to carry out, or to
enable the WD, as the case may be, to carry out, the measures identified under the
Environmental Management Plans at all times in a timely manner, ensuring that adequate
information on the implementation of said measures is suitably included in the Project progress
reports to be prepared by the WD.
(g)
The Recipient, through the MOEW shall, commencing on November 30, 2006
and thereafter, not later than November 30 and May 31 in each calendar year and until Project
completion, prepare and furnish to the Bank a semi-annual progress report describing the
progress achieved in the implementation of components 2 and 3 of the Project during the
preceding calendar semester and the updated MOEW Monitoring and Evaluation Indicators for
the upcoming calendar semester.
(h)
The Recipient, through the MOEW, shall maintain policies and procedures
adequate to enable it to monitor and evaluate on an ongoing basis the carrying out of components
2 and 3 of the Project and the achievement of the objectives thereof and review with the Bank,
by February 28, 2009 a mid-term report on the progress achieved in the carrying out of such
components and, thereafter, take all measures required to ensure their efficient completion and
the achievement of the objectives thereof, based on the conclusions and recommendations of the
said report and the Bank’s views on the matter.
For the MOB Project Agreement:
(a)
The MOB shall maintain the PIU-MOB throughout Project implementation with
financial and human resources adequate to enable it to appropriately carry out its responsibilities
under component 1of the Project.
(b)
The BMSC shall report to a joint review team formed by representatives of the
MOB and of the BMSC.
(c)
The MOB shall take all measures necessary to carry out the measures identified
under the Environmental Management Plan for component 1 of the Project at all times in a
timely manner, ensuring that adequate information on the implementation of said measures is
suitably included in the Project progress.
14
D. APPRAISAL SUMMARY
1. Economic and financial analyses
As a stand-alone GEF Project, the principal economic evaluation criterion is the Project’s
potential contribution to global benefits (see the economic and incremental cost analysis details
in Annexes 9 and 15). For the MOB component, the baseline scenario for the Project includes the
rehabilitation of the NBWWTP and the control of untreated discharges from the sewerage
network, carried out during 2001-2005 under the HMWP, but it does not include any specific
nutrient reduction actions, as such development is not required under the EU Directive for Urban
Wastewater Discharges. The GEF Project fills this gap by financing the upgrading of the
NBWWTP to the tertiary level of treatment, to reduce nutrient discharges. For the DDNP
component, the baseline scenario is business as usual, as no particular development of nutrient
trapping capacity is required in the DDNP to comply with the EU WFD.
Incremental costs: Baseline investment costs are estimated at about US$80 million of which
about US$ 27 million is for the NBWWTP. The GEF Project will finance additional investments
of about US$32 million, of which GEF will provide US$12.5 million, the ongoing Loan 4512HU EUR5.9 million (US$7.7 million equivalent), the MOB US$10.4 million, and the MOEW
US$1.4 million4.
Global benefits: The main expected benefits are the reduction in nutrient (N and P) discharges
into the Danube and consequently into the Black Sea. Over the 25-year period 2006-2030, the
total reduction in nutrient discharges is estimated at 54,200 tons for the MOB component and
38,350 tons for the DDNP component. In terms of cost effectiveness, the unit cost of abatement
(estimated as the present value of the relevant annual capital and O&M costs) is estimated at
US$1,060/ton for the MOB component and US$240/ton for the DDNP component. As indicated
above, as the impact of wetlands on nutrient reduction has not been systematically documented,
the unit cost of abatement for the DDNP component has been roughly estimated based on the
information provided during Project preparation. Details are provided in the Incremental Cost
Analysis in Annex 15.
Financial analysis: The MOB and the BMSC, respectively the borrower and final beneficiary
under the ongoing Bank Loan (4512-HU), are in compliance with their financial covenants.
Financial statements are provided in Annex 5. A financial rate of return has not been calculated
for the Project given the nature of the investments which result in environmental benefits. A
financial return on investment is not the main consideration in undertaking the investment.
However, as provided under the contractual agreement between the MOB and the BMSC, the
tariff formula provides for BMSC to recover any incremental operating expenses due to the
investment. The increment in tariff is based on such cost-recovery. However, as seen above and
in Annex 15, the Project will yield significant economic benefits. For the MOB component, the
upgrading to tertiary treatment is estimated to involve an incremental cash expense (HUF 6.5/m3
for O&M and HUF 1.5/m3 for debt service) of about HUF 8/m3 of wastewater invoiced. The
required tariff increase is about 4.5% over the current level of the average wastewater tariff. The
resulting new wastewater tariff is estimated to remain affordable to most of the population
concerned. As regards low income households and households facing temporary difficulties,
4
The GEF leverage ratio is 1:7.96 (12.5 million provided by GEF and 99.5 million provided as baseline investments
and counterpart)
15
MOB has certain schemes already in place to provide financial relief. For the DDNP
component, the Project is estimated to result in an increase in O&M expenses by about HUF 135
million per year, which represents about 26% of the 2005 DDNPD annual budget (HUF 529
million, US$2.7 million equivalent). This amount will be provided through budgetary transfers to
DDNPD by the MOEW.
2. Technical
MOB component. Although the proposed nutrient removal technology has been widely adopted
in many parts of the world, this will be only the second such use in Hungary. It has already been
implemented at the South Pest WWTP as part of the ongoing HMWP and both WWTPs fall
under the responsibility of the BMSC, which is managed by a private operator having sufficient
knowledge and experience of O&M of such facilities. The Bank’s supervision at the design
stage, through the procurement process, and during implementation is critical for the success of
the Project. Verification protocols for the operation of the new facilities have been discussed and
agreed with MOB and BMSC representatives during the pre-appraisal mission.
DDNP component. During Project preparation, a technical assessment at the pre-feasibility level
of restoration of the two identified sites was carried out. The assessment found that the
development of a number of small interventions could significantly improve the average water
flow and the period of water retention in the area’s wetlands, ponds and oxbows. Emphasis was
placed on ensuring that the restoration of wetlands maximizes the water flow through the system
in order to optimize nutrient trapping and improve ecological conditions and biodiversity. As
indicated above, in order to provide additional security and confidence to the authorities, the
MOEW will convene a panel of experts, with internationally recognized experience in this type
of intervention, to assist the DDNPD in the implementation of proposed works and follow up on
the impact they have on the Park’s morphology and ecology. Additionally, the works will be
implemented in stages, starting with pilot areas. Foreseen interventions include localized
dredging, cleaning of the riverbed and culverts and construction of small scale facilities to
increase water retention (bottom weirs, sluices, pipe-culverts, etc.). Feasibility studies and
detailed design will be done in the course of Project implementation, following detailed field
surveys and investigations, for which provisions have been made under the Project.
3. Fiduciary
Procurement. Procurement under the Project will be limited to a small number of goods, works
and consultant services contracts. The major contract, representing 78% of the Project funds,
would be a Supply and Install contract for the construction/installation of tertiary treatment
facilities in the existing NBWWTP, to be procured under International Competitive Bidding
(ICB) on a turn key basis. The procurement of this contract will be carried out by the PIU, MOB,
which has gained experience in Bank-financed projects in the successfully implemented HMWP,
financed by Loan 4512-HU. The PIU, WD has no previous experience in implementing Bankfinanced procurement. The requirements from this Project component are, however, limited to
only a few contracts of a very simple nature. An Action Plan has been prepared to minimize the
risks which have been identified, specially related to the lack of experience of DDNPD and WD
in implementing Bank-financed procurement. The Procurement Plan will be updated at least
annually, or as required to reflect the changing Project implementation needs and improvements
in institutional capacity. (Detailed information is included in Annex 8).
16
Financial Management. A Financial Management (FM) assessment was carried out for the
Project. The financial management arrangements of the project are acceptable to the World
Bank. (See Annex 7 for details).
Strengths & Weaknesses. The strengths that provide a basis of reliance on the Project FM
System (FMS) include the use to a great extent of the existing financial accounting and
budgetary procedures in the implementing entities, and the extensive experience of MOB in
implementing similar Projects co-financed by IFIs (including the World Bank, EBRD, and EIB).
The specific risk identified during the assessment relates to the fact that the Project will be
implemented by three entities; the MOEW, the MOB and the WD, the latter being located
outside Budapest. However, this risk will be mitigated by the coordinating role of MOEW and
the fact that the WD falls under the responsibility of the MOEW. The MOEW and the WD
assigned staff to carry out the incremental Project FM tasks. (For details, please see Annex 7).
Disbursement: The Department of Budget of MOEW will open one Special Account (SA) with
the Hungarian State Treasury in the currency of the GEF Grant. To facilitate payments through
each of the implementing entities and to receive the share of their respective contributions to the
financing of the project, settlement accounts will be opened for each of the three implementing
entities/beneficiaries. The MOB, MOEW and the WD will have to provide the full amount of
their respective contributions required to finance Project expenditures before the due date for the
payment of suppliers’ invoice. Accordingly, Grant funds will flow from the World Bank to the
SA and then through settlement accounts to the suppliers. The MOEW will be responsible for
having the SA replenished from time to time, on the basis of withdrawal applications. (For
details, please see Annex 7). The associated proceeds under the Loan 4512-HU will remain in
the special account already established for that Loan for the purpose of parallel financing of the
component under the HMWP.
4. Social
Considering the nature and the location of the investments and the current socio-economic
situation, the World Bank concluded that no social impact assessment was needed. Local
communities, environmental associations and NGOs have been involved in the preparation of the
Project through public meetings and consultations carried out as part of the EIA preparation
process. Conclusions and recommendations were recorded in the EIAs. Special attention will be
given during Project implementation to maintaining a high level of communication and
transparency with local stakeholders.
5. Environment
Impact Assessment. The major environmental objective of the Project is to reduce nutrient
discharges into the Danube River and Black Sea and thus to achieve positive environmental
benefits. Separate EIAs were prepared for Component 1 and 2. Both EIAs, including the EMPs
have been reviewed and found to be satisfactory to the Bank. They were published in the Bank’s
Infoshop on June 7, 2005. No significant negative impact on the environment is expected as a
result of Project implementation. Given the nature of the investments, the Project has been
classified as environmental category “B”.
17
For the Budapest component, the MOB completed the EIA for its component in compliance with
the provisions of OP 4.01. As required, the EIA has been disclosed to the public and a summary
of the document has been published on the website of the MOB, in Hungarian and in English.
The EIA clearly indicates that no significant negative impact on the environment is expected as a
result of the Project’s implementation. Potential impacts on the environment of the investments
at the NBWWTP are exclusively limited to those that could occur during the construction phase
(noise, dust, etc.). Such potential impacts are well known and will be adequately controlled.
Appropriate measures have been included in the EMP.
For the DDNP component, the WD, on behalf of the DDNPD, completed the EIA in compliance
with OP 4.01 and presented it in a public forum in March 2005. The final version of the EIA
incorporating all comments received, including from the Bank Project Team, was made available
for public consultation at the public service offices of the WD in June 2005. Letters were sent to
the main stakeholders, including environmental associations and NGOs, to invite them to consult
and comment on the document. The EIA contains a description of existing environmental
conditions in the two areas (Gemenc and Beda-Karapancsa), including climate, hydrology, soil
and water quality, groundwater and biodiversity, and it assesses the impacts on these conditions
from implementation of the Project, during the construction and operation phases. The EIA has
assessed potential environmental negative impacts associated with dredging, changes in the local
hydrology, disposal of dredge materials, and increased flow of pollutants into the wetlands. The
EIA concludes that no significant negative impact is expected if the measures included in the
EMP are implemented. Moreover, the rehabilitation of the wetlands is expected to improve the
ecological conditions of the ecosystem and increase biodiversity, as the quality of valuable
habitats will be improved. Positive ecological impacts are in particular expected with the quality
improvement of habitats for a number of migratory bird species of global importance, such as the
Ferruginous Duck (Aythya Nyroca), the White-tailed Eagle (Haliaeetus albicilla) and Black
Storks. Furthermore, the rehabilitation of the wetlands will help solve the desiccation problem
caused by the deepening of the Danube River bed, which has resulted in serious loss of wet
alluvial habitats over the years. As indicated above, the MOEW will convene an Experts Panel to
assist the WD and DDNPD authorities in the assessment and monitoring of the proposed
interventions. Additionally, the rehabilitation work in the Park will be implemented in stages,
starting with the development of pilots, in parallel with the development of the M&E system, to
allow for a better quantitative evaluation of the impacts. For more information on the biological
processes of nutrient trapping to take place in the DDNP and on their potential impacts on flora
and fauna, see Annex 18. The list of indicators to be measured as part of the M&E system will be
determined in the first stages of the Project, based on the results of the baseline study. Also, this
study will provide recommendations on the inclusion of indicators species in the M&E system to
measure its impacts on the ecology and biodiversity of the DDNP.
As indicated above, Hungarian regulations require that Environmental Licenses need to be
obtained on the basis of the EIA before works can start. This Environmental License has already
been obtained by MOB for the works planned under component 1. Therefore, works under this
component can start as soon as the Project is effective. WD is in the process of requesting the
Environmental License for the works planned under component 2. As part of this process, the
EIA will be updated to incorporate eventual additional environmental impact information on the
18
basis of the detailed design of the rehabilitation activities for the wetlands5. As this process is
rather lengthy in Hungary, execution of works under this component is scheduled to start during
the second year of Project implementation.
Environmental Management Plan (EMP). EMPs have been prepared for components 1 and 2.
Mitigation measures prepared under each EMP determine and address all relevant parameters,
impacts and mitigation measures, both during the construction and the operation periods, and
designate the responsible agency for their enforcement. In particular, for the DDNP component,
possible options for the handling and disposal of the dredged material have been considered, and
will be thoroughly examined as part of the detailed design. These measures include testing
materials to be dredged for potential contamination, physical isolation of the area during
dredging, reuse of dredged material where practicable, if found to be of acceptable quality, and
disposal of dredged material to an appropriate site according to its quality. Also, measures have
been developed as part of the EMP to protect natural habitats, including concentration of the
dredging and construction work during ecologically less sensitive periods of the year.
Contractors will be responsible to implement these precautions and measures, and their
implementation will be supervised by the WD, the DDNPD and the MOEW. These EMPs will
be incorporated in the Project Operational Manual and its implementation will be monitored as
part of Bank supervision missions.
6. Safeguard policies
Yes
No
Safeguard Policies Triggered by the Project
Environmental Assessment (OP/BP/GP 4.01)
[X]
[]
Natural Habitats (OP/BP 4.04)
[X]
[]
Pest Management (OP 4.09)
[]
[X]
Cultural Property (OPN 11.03, being revised as OP 4.11)
[]
[X]
Involuntary Resettlement (OP/BP 4.12)
[]
[X]
Indigenous Peoples (OD 4.20, being revised as OP 4.10)
[]
[X]
Forests (OP/BP 4.36)
[]
[X]
Safety of Dams (OP/BP 4.37)
[]
[X]
Projects in Disputed Areas (OP/BP/GP 7.60)
[]
[X]
Projects on International Waterways (OP/BP/GP 7.50)
[X]
[]
Additional information and provisions made under the Project to ensure compliance with
applicable safeguards policies are described in Annex 10.
7. Policy Exceptions and Readiness
This project complies with all applicable Bank policies.
5
The detailed design work has been budgeted but cannot start before the GoH has assurance of financial support
under the Project.
19
Annex 1: Country and Sector or Program Background
HUNGARY: NUTRIENT REDUCTION PROJECT
Hungary’s investment needs in wastewater treatment to comply with EU directives are estimated
as EUR4.0 billion over the next fifteen years. Budapest is by far the most important point of
wastewater discharges in Hungary, and consequently of nutrient discharges. In particular, the
city generates respectively 45% N and 33% P of nutrient discharges from point sources in the
country. In 1999, the Hungarian Government prepared a long-term sewerage and wastewater
treatment plan, which covers the priorities for investment in wastewater treatment until 2015.
This plan includes the following investments for reducing nutrient discharges in the Danube: (a)
the development of tertiary treatment for nutrient removal at the South Pest WWTP; (b) the
development of tertiary treatment for nutrient removal at the NBWWTP; (c) the completion of
the sewer network in all areas of Budapest; (d) the construction of the Central WWTP, to
complete the treatment of Budapest wastewater; and (e) the increase of landfill capacity for midterm sludge disposal by 165,000m3. Investments for the provision of tertiary treatment facilities
for these three plants represent about 30 % of the investment allocated to wastewater treatment in
the plan, while the development of wastewater treatment infrastructure in Hungary represents
25% of the overall JAP plan. Although the Danube River is not declared as a sensitive water
body according to the EU Directive, Hungarian authorities decided to reach tertiary treatment to
fulfill Hungary’s commitments made towards the reduction of nutrient discharges to the Danube
and the Black Sea. The JAP includes the investment requirements for the reduction of nutrient
discharges in Budapest among the five top priorities in the Plan.
In Hungary, provision of water and wastewater services falls under the responsibility of the
municipalities. In the past, the Government gave priority to the extension of drinking water
services. Nowadays, the coverage and quality for such services are good in Hungary, and water
tariffs generally reflect the cost of service. Therefore, the Government recently shifted sector
priorities to increase wastewater collection and treatment (to biological secondary level of
treatment). In this regard, the MOB prepared the ongoing HMWP, financed by a Bank Loan and
an EU Phare grant. This project includes substantial investments in collection system
development and improvement of both the NBWWTP and the South Pest WWTP. The project
included also the construction of a WWTP in Dunaujvaros, an important secondary Hungarian
city, which is already completed. The South Pest WWTP discharges constituted the largest
source of pollution of the sensitive Rackeve-Soroksar-Danube Branch, which is an important
recreational area for Budapest and is classified as a “sensitive water body” as defined in the EU
Directive. It was therefore a priority to develop nutrient reduction facilities at the South Pest
WWTP. The development of tertiary treatment at the NBWWTP was a lower priority, as it
discharges directly in the Danube River, which is not considered a “sensitive water body”.
The Government strategy regarding nutrient reduction is based on the following objectives: (a)
the establishment of a framework for sustainable use of natural resources; (b) implementation of
cost-effective actions to meet the EU requirements in regards to the WFD and the Directive on
Urban Wastewater Discharges; and (c) contribution to fulfilling Government’s commitments
under international agreements, and in particular the Danube Convention established on June 29,
1994, of which Hungary is a founding member.
20
The Project is fully consistent with the GEF Partnership on Nutrient Reduction for the Danube
and Black Sea Basins, as it addresses the highest priority transboundary issues identified in the
Strategic Actions Plans for the Danube River and the Black Sea. The Project complies with
eligibility criteria set for the Partnership, through a multi-focal approach, including investments
in two focal points: advanced wastewater treatment for substantial discharges from metropolitan
areas, and restoration of wetlands to recover their function as nutrient traps. The Project will
follow-up on the substantial baseline investments financed in the MOB, through the ongoing
HMWP.
The GoH and the MOB have demonstrated their commitment to reducing nutrient discharges
from the NBWWTP and in the Gemenc and Beda-Karapancsa areas of the DDNP. To this end,
the Government obtained financial support from the GEF Strategic Partnership for Nutrient
Reduction in the Danube River Basin and the Black Sea. In addition to the GEF Grant, the MOB
will provide counterpart financing from its own funds and from associated funds under the Loan
4512-HU.
As mentioned above, Budapest is the principal source of nutrient discharges in the Danube.
Nutrients (N and P) are responsible for the stimulation of aquatic growth and for contributing to
eutrophication of the Black Sea. Estimates show that the city of Budapest at the NBWWTP Plant
discharges about 2,000 t/yr of Total Kjeldahl Nitrogen and 450 t/yr of total Phosphorus into the
Danube. To reduce these discharges, the MOB has examined a number of technologies and has
submitted an application for a Preliminary Water License for three pre-selected technologies.
License was granted for the three examined technologies, which have been included in the
following technical options: (a) using conventional biological nutrient removal, with installation
of anoxic zones to improve settling of the sludge; (b) including Membrane Bio-Reactor (MBR)
technology in the existing aerated system; (c) constructing new MBR lines; and (d) completing
the present activated sludge system by a fix-bed process. As all these technologies are likely to
be protected by patents, the bid will be organized in two stages, the first to establish common
requirements for the offers, and the second, to compete in prices. The preparation of the
prequalification document is well advanced.
A second Project area, the DDNP’s Gemenc and Béda-Karapancsa region, is identified by the
Environmental Action Plan for Hungary as an environmentally sensitive area, which could be
used to develop cost-effective nutrient reduction measures through the restoration of its
wetlands, thereby improving the quality of the Danube River. The DDNP, a protected zone of
50,000 ha, is one of the areas with greater potential for this purpose (these wetlands covered
80,000 ha in the past). The Project will support the rehabilitation of about an additional 10,000
ha of wetlands and test their nutrient reduction capacity. The wetland restoration will take place
in the Gemenc and Beda-Karapancsa areas of the DDNP. The size of the area is 27,800 hectares,
of which about 19,500 hectares acts as a floodplain and is thus involved, at least during flood
events, in trapping part of the nutrients carried by the Danube. In the past, wetlands were
covering an area of about 80,000 hectares, providing higher capacity for regulating nutrient
quantities in the Danube River.
As a result of numerous actions to regulate the river flow of the Danube, its riverbed has
deepened. Consequently, the inundation period in the adjoining floodplain (inundation area),
which is today a protected nature reserve, and the frequency of floods have decreased. Flood
waves with the same water level inundate smaller floodplain areas than a few decades ago. The
21
degree of riverbed incision is around 1.5 meters during the course of 100 years. As a
consequence, the area is becoming drier, wetland habitats keep shrinking, and the nutrient
retention capacity of the ecosystem is considerably diminishing.
The hydrological restoration of the Gemenc area of the National Park was started in 1998, in
order to reconstruct former wetlands. These activities are believed to have caused the reduction
of nutrient levels in the Danube. Stage I of the revitalization of the “Vén-Duna” side branch and
the adjoining “Nyéki-tó” was completed in 2001. Corresponding costs, reaching HUF 70 million,
were financed from the Environmental Fund administered by the Hungarian Government. As
part of the restoration a dam was pulled down. As a result, the “Vén-Duna” branch, which was
formerly dead, now functions again as a side-branch, improving water circulation and nutrient
retention capacity of the “Nyéki-tó”. For Stage II, which further develops the previous activities,
another HUF 35.5 million has been granted from the Environmental Fund. The Project has been
launched, and initial steps for Project implementation have been made. The next steps would
include interventions in the neighboring flood areas: the so-called “Lassi” and “Decsi” water
systems, which represent an area of about 1,300 hectares. For these activities, the MOEW has
committed HUF 46 million from the Environmental Fund. By improving the water circulation
and regimes in the area, a considerable proportion of the lost nutrient retention capacity will be
regained. Opening up of the “Kádár-sziget” side branch is also planned through a governmentfunded Project, but the amount of necessary investments is still to be determined.
Activities under the Project will contribute to increase the scope of these interventions in the
Gemenc and Beda-Karapancsa areas, with a special focus on development of nutrient trapping
capacity and improvement of the overall ecological conditions and biodiversity in the Park.
22
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
HUNGARY: NUTRIENT REDUCTION PROJECT
Sector Issue
Project
Latest Supervision
(PSR) Ratings
(Bank-financed projects only)
Bank-financed
Municipal Wastewater
Hungary – Municipal
Wastewater Project (HMWP)
Implementation
Progress (IP)
Development
Objective (DO)
S
HS
Other development agencies
IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)
23
Annex 3: Results Framework and Monitoring
HUNGARY: NUTRIENT REDUCTION PROJECT
Results Framework
PDO
Key Project development and global
environmental objective is:
(i) to reduce Budapest’s discharge of
nutrients (nitrogen and phosphorus)
into the Danube River, and
consequently into the Black Sea;
(ii) to enhance the nutrient trapping
capacity of Gemenc and BedaKarapancsa wetlands situated in the
lower Hungarian part of the Danube
River; and
(iii) to serve as a model for similar
nutrient reduction initiatives in
Hungary and other Danube basin
countries.
Intermediate Outcomes
Reduction of point-source nutrient
discharges from Budapest and
Hungary
Reduction of quantity of nutrients
flowing out of Hungary into the
Danube River
Project Outcome Indicators
Overall reduction of the nutrient
flow into the Danube River and the
Black Sea of about 4000 tons per
annum at the end of the Project.
Use of Project Outcome
Information
Refine JAP and implement the
integrated Danube River
environmental management strategy
in the region and the country to
develop synergies and efficient use
of financial resources.
Intermediate Outcome
Indicators
Use of Intermediate Outcome
Monitoring
Annual reduction of nutrient
discharges from the NBWWTP of
about 70% of Nitrogen and about
60% of Phosphorus by the end of the
Project.
Revise the JAP updating priorities of
the ICPDR for point sources of
nutrient discharges
Average operational cost of the
nutrient reduction process in the
NBWWTP
About 10,000 hectares of wetlands
rehabilitated in the DDNP at the end
of the Project.
Development of good practices for
wetland rehabilitation
Annual water flow and quantity of
nutrients (N and P) retained by the
DDNP wetlands increased by about
40% each at the end of the Project.
Average operational cost of the
nutrient reduction process in the
DDNP wetlands
Replication strategy is in place
M&E system fully operational
Cost-benefit analysis of nutrient
reduction of wetland restoration
compared to WWTP tertiary
treatment carried out
Project experience and impact
evaluation studies disseminated in
the workshops held
24
Development of similar initiatives in
other cities and countries of the
Danube River basin.
Arrangements for results monitoring
Institutional issues: As indicated above, monitoring and evaluation of the Project outcomes will
be carried out separately for each component. Concerning the MOB component, the proposed
Project performance indicators will be monitored by the BMSC and reviewed by the MOB prior
to being reported to the PMU. As part of regular operation of the NBWWTP, the BMSC
performs continuous measurements of a set of technical and financial indicators. Technical
Project performance indicators are already being closely monitored by the BMSC, in accordance
with Hungarian and EU requirements.
For the Park components, a comprehensive M&E system will be put in place at the DDNP, under
the responsibility of the WD, acting as an implementing agency for the DDNPD, and in
coordination with the PMU of the MOEW. This M&E system will monitor the Project impacts in
the DDNP, in terms of reduction of N and P, water quality and environmental health, taking into
account the efforts of the GoH to harmonize existing monitoring systems and to integrate the
provisions of the EU WFD in regard to wetlands. The list of indicators to be included in the
M&E system, including possible indicators species, will be determined in the first stages of the
Project, based on the results of the baseline study. Also, as indicated above, the M&E is to be
established prior to the execution of the works.
A simple management information system for Project M&E will be designed by the MOEW,
PMU to ensure the coordination and aggregation of the data, including reporting formats and the
agreed monitoring indicators. Quarterly and consolidated annual reports including the use of
Project funds and Project impacts will be prepared by the PMU. Significant supervision by
qualified Bank staff is planned during the start-up phase. A Mid-Term Review will be carried out
to assess overall Project progress, introduce required changes, identify lessons learned, and
disseminate good practices. This process will be closely coordinated with the review of similar
projects in the Danube and Black Sea Programs, to allow for maximum benefits and knowledge
sharing.
Data collection: This will be carried out by the BMSC and the DDNPD for components 1 and 2
respectively, under the supervision of the respective PIUs and agencies in charge of the quality
control in Hungary. It will take into account the Hungarian and EU regulations in place and to be
implemented, as well as the efforts to harmonize existing monitoring systems in Hungary.
Capacity: For the MOB component, the municipality has shown satisfactory capacity during
preparation and implementation of the ongoing HMWP, financed by Loan 4512-HU, which has a
more complex structure and larger requirements than the proposed Project.
Despite being technically strong agencies, the implementing teams of the WD and the DDNPD
do not have experience in dealing with Bank-financed projects. To decrease this risk, the Project
provides for a launch workshop, coaching from MOB to WD and DDNPD, and assistance from
specialized consultants for Project preparation, including procurement.
Overall, no problems are expected in terms of capacity to monitor Project’s results. Additionally,
funds will be made available under the Project to finance training and workshops to ensure that
any potential problem will be adequately addressed.
25
Arrangements for results monitoring
Project
Outcome
Indicators
Overall reduction
of the nutrient
flow into the
Danube River
and the Black
Sea.
Intermediate
Outcome
Indicators
Quantity of
nutrients
discharged from
the NBWWTP
(in kg/day)
Average
operational cost
of the nutrient
removal facilities
at the NBWWTP
Number of
hectares of
wetlands
rehabilitated in
the DDNP
Annual water
flow and
quantity of
nutrients retained
by the DDNP
wetlands
Baseline
YR1
YR2
Target Values
YR3
YR4
YR5
0 tons / annum (t/a)
0 t/a
840 to 915 t/a
3,650 to
3,800 t/a
3,930 to
4,290 t/a
3,930 to
4,290 t/a
Baseline discharges:
BOD: 20,586
BOD: 20,586
BOD: 20,586
BOD: 3,200
BOD: 3,200
BOD: 3,200
Nitrogen (N): 9,230
N: 9,230
N: 9,230
N: 2,945
N: 2,945
N: 2,945
Phosphorus (P): 775
P: 775
P: 775
P: 310
P: 310
P: 310
0 US$/m3
0 HUF/m3
0 US$/m3
0 HUF/m3
0 US$/m3
0 HUF/m3
0.03 to 0.05
US$/m3
5.2 to 10.3
HUF/m3
0.03 to 0.05
US$/m3
5.1 to 10.1
HUF/m3
0.03 to 0.05
US$/m3
5.0 to 9.8
HUF/m3
0
0
3,000
7,000
10,525
10,525
Water flow in
restored wetlands:
37,000 m3/ha/annum
37,000
m3/ha/a
42,500 to
43,500
m3/ha/a
46,400 to
50,700
m3/ha/a
50,400 to
57,900
m3/ha/a
50,400 to
57,900
m3/ha/a
N: 3,768t/a
N: 4,560 to
4,635 t/a
N: 4,900 to
5,030 t/a
N: 5,150 to
5,500 t/a
N: 5,150 to
5,500 t/a
P : 189t/a
P: 234 to 236
P: 250 to
P: 264 to 281
P: 264 to
N: 3,768t/a
26
Data Collection and Reporting
Frequency
Data
Responsibility
and Reports
Collection
for Data
Instruments
Collection
PMU, MOB MOB, PIU,
Quarterly
PIU, WD
WD PIU
Project
PIU
implementation
progress
reporting from
the PMU
Quarterly
Project
implementation
progress
reporting from
the PMU
Quarterly
Project
implementation
progress
reporting from
the PMU
MOB,
BMSC
water
quality
monitoring
system;
quality
control
analysis
BMSC,
WD,
DDNPD,
MOEW
WD, DDNPD
WA
P : 189t/a
t/a
257 t/a
t/a
281 t/a
Average
operational cost
of the nutrient
reduction process
in the DDNP
wetlands
M&E system
fully operational
Cost-benefit
analysis of
nutrient
reduction of
wetland
restoration
compared to
WWTP tertiary
treatment
Project
experience and
impact
evaluation
studies
disseminated
Financial
reports
No
No
Yes
Yes
Yes
Yes
No
No
No
No
No
Yes
No
No
No
No
No
Yes
This table will be agreed upon at negotiations.
27
Monitoring and
Evaluation
Report
Impact
Evaluation
Studies
Monitoring and
Evaluation
report, Impact
evaluation
studies,
financial
reports
MOEW,
MOB PIU,
WD PIU
MOB, WD,
DDNPD,
MOEW
Annex 4: Detailed Project Description
HUNGARY: NUTRIENT REDUCTION PROJECT
Annex 4. Table 1. Estimated Project Costs by Components (million US$)
Project Components
Local
Foreign
Total
%
1: Development of tertiary treatment at the
NBWWTP (Budapest)
9.70
13.70
23.40
73.2%
2: Wetland Restoration in the DDNP
a) Wetland restoration
b) Technical Assistance and Monitoring system
Total Component 2
0.97
0.24
1.22
3.89
0.97
4.86
4.86
1.21
6.08
15.2%
3.8%
19.0%
3: Dissemination and Replication
0.08
0.33
0.41
1.3%
Physical
Price
0.55
0.22
0.77
0.94
0.38
1.32
1.49
0.60
2.09
4.7%
1.9%
6.5%
Grand Total
11.77
20.20
31.97
100.0%
Contingencies
Total Contingencies
Component 1- Development of tertiary treatment at the NBWWTP (Budapest).
This component will finance works and equipment to upgrade the NBWWTP to the tertiary level
of treatment for the reduction of nitrogen and phosphorous from nutrient discharges into the
Danube River. The NBWWTP, which was built in 1973, has been rehabilitated under the
ongoing Bank financed HMWP. It is being operated by a mixed-capital operator company, under
a 25-year concession contract, awarded in 1997 to a consortium of the Compagnie Generale des
Eaux (now Veolia Water) and Berlinwasser. The Municipality of Budapest, assisted by
consultants, prepared a feasibility study assessing three alternatives for this Project component.
This feasibility study has been reviewed and approved by the WD who issued the required
Preliminary License.
Because most systems for tertiary treatment are likely to be protected by patents, and the
solutions in each system are difficult to compare in a one-stage conventional bid, the MOB is
working on the preparation of a two-stage process, to permit equalization of proposals. The
solution to be developed is not specified at this stage and will be provided by the suppliers in the
bids. The technical responsiveness of the solutions to be provided will be checked against its
compliance with a set of precisely defined performance requirements (to be detailed in the
technical specifications of the bidding documents), based on their technical and financial
efficiency and their ability to comply with the EU Urban Wastewater Directive in terms of
quality of effluents and the Hungarian regulation. After the selection process is completed, the
MOB will seek the final licenses from the WD. The prequalification documents are well
advanced and prequalification is expected to be completed prior to effectiveness. After the
implementation of the nutrient removal phase the discharges of the NBWWTP in terms of Total
N and Total P in the effluent are expected to be reduced by 68% and 60%, respectively.
28
Component 2- Wetland Restoration in the Duna-Drava National Park.
This component will finance the rehabilitation of about 10,000 hectares of wetlands to develop
their nutrient trapping capacity within two identified areas, Gemenc and Beda-Karapancsa,
located within the DDNP, directly along the course of the Danube River. The DDNP is located
downstream from Budapest, which still discharges a significant proportion of its wastewater into
the Danube River without any treatment. Additionally, the surrounding areas upstream from the
Park are cultivated areas, and represent a source of non-point pollution of nutrients. This
component will test the efficiency of wetlands in trapping nutrients directly from the river. It will
establish an M&E system to measure the reduction of nutrients. This M&E system will be
developed in compliance with Hungarian regulations in regard to wetland monitoring. It will also
incorporate the quality assessment requirements under the WFD, thus supporting Hungary’s
compliance with such requirements. In particular, parameters to be included in the M&E system
will be determined on the basis of the baseline survey to be carried out at the first stage of the
Project. The rehabilitation process will be implemented in stages, starting with the establishment
of one pilot in each of the two areas for a period of one year.
A comprehensive baseline study will be carried out at the beginning of the Project to assess the
areas’ environmental quality at the first stage of the Project, to help determine the precise
location of the two pilots, and to provide recommendations on the design and development of the
M&E system. Building on the results and lessons learned from the pilots, the rehabilitation will
then be scaled up. Early in the process, an Experts Panel will be convened by the MOEW to
assist the WD and the DDNPD authorities in the selection and monitoring of the planned
interventions. In parallel, the component will adapt a methodology of impact evaluation, using
local research organizations and universities. It will also include the development, in a
participatory way, of a DDNP Special Area Management Plan, including measures to best
accommodate authorized uses and protection measures in the Park area. Finally, this component
will include small provisions for financing incremental Project management costs for the WD,
PIU. This provision will cover the cost of the head of the WD, PIU, a consultant hired by the
WD for the component’s preparation, and who will continue the existing responsibilities during
Project implementation.
The DDNP area includes floodplains and side branches covering about 20,000 hectares. The
Project includes their hydrological restoration as wetlands or floodplain (inundation) area.
Necessary investments will include some engineering works and earthworks for smaller dikes,
weirs and sluices, wetland monitoring and sampling equipment, and some localized dredging and
clearing. Additionally, laboratory instruments and operation control systems (computer hardware
and software) will be needed to establish the monitoring system. As a result, the drying of the
wetland habitat is expected to stop and its degradation to reverse. Through the general
improvement of the natural ecosystems with adequate vegetation, the nutrient reduction capacity
of the wetland will increase. It is estimated that the Gemenc and Beda-Karapancsa regions will
have the ability to annually retain between 1390 and 1,730 tons of N and between 76 and 92 tons
of P. For a detailed description of the qualitative biological processes of nutrient trapping to take
place in the DDNP and on their potential impacts on flora and fauna, see Annex 18.
A pre-feasibility study has been carried out in the following hydrological units of the Park, to
elaborate feasible and cost effective interventions to increase nutrient trapping capacity, while
29
taking into account environmental and biodiversity protection. The study recommended
implementing the interventions described below as part of the DDNP component of the Project.
Final design for these interventions will be prepared during Project implementation. Detailed
maps of these areas, identifying the different zones, are available in Annex 17.
“Veránka” water system, “Rezéti-Duna”. Area: 1,100 hectares.
Description: The Veránka island was created at the end of the 19th century, by artificially cutting
across an over-developed bend, what is today the “Rezéti-Duna” side branch. The water surface
area of the 15 kilometres long side branch is 206 hectares. Its upper and lower mouths
connecting it to the main bed are 3 kilometres apart. As a result of regulation, the branch is
increasingly silted up, especially at its upper section and its confluence, with the water flow
being totally blocked at low water levels, and being less capable of supplying water to the
wetland habitats of the island.
Recommended intervention: Construction of a silt gathering device at the upper mouth. Building
a levee or a weir to hold back the water and dredging of the bed at the lower mouth.
“Buvat” water system. Area: 614 hectares.
Description: There are several silted-up dead branches crossing the area. Their desired level of
water intake should be ensured from the neighbouring dead branches (“Rezéti-Duna” and
“Grébeci-Duna”).
Recommended intervention:
 Improve the linkage between the Keszeges-tó, the Lídia-tavak and Lídia-lapok to the
Rezéti-Duna, in order to allow more frequent floods.
 Improve the water transport at Zátony-tava and repair the collapsed culvert at Vajas-fok
to stop the leakage by the old abandoned rail road.
“Béda-Karapancsa” water system. Area: 2,500 hectares.
Description: The major elements of this area adjacent to the Croatian border are the “BédaiDuna” and the “Belső Béda”, comprising a 20 kilometre long system of side-branches. The areas
belonging to the two side-branches are separated by a flood-prevention dike. The “Belső-Béda”
is situated on the flood-protected side. A small sluice separates Külső-Béda (outer Béda) dead
branch from the Danube; with the help of which, the water can be sustained at a constant level
averaging 3.2 meters.
Recommended intervention:
 Build a sluice (4.0m x 4.5m) to separate the Külső-Béda (outer Béda) from the Danube
and dredge the pre-channel inner river stretch to transform this dead branch into a
floodplain lake with a surface of 75 hectares and a depth up to 5.0 meters;
 In the Belső Béda (inner Béda) dead branch, remove the dividing barrier and increase the
allowed water level;
30

By making a large passage at the upper stretch of the channel linking Mocskos-Duna
dead branch, increase the water level with a small escape sluice and dredge the river
stretch.
Water system at the Sió-mente canal. Area: 755 hectares.
Description: The area along the Sió-mente canal connecting Lake Balaton with the Danube is
interwoven by various types of wetland habitats originating from the Danube’s earlier riverbed
movements and from the cross-cutting of bends. In order to be able to maintain the high variety
of wetland plant species capable of retaining nutrients, it is necessary to implement bed
corrections, and construct regulatory works and water-retaining barriers.
Recommended Interventions:
 Improve the water intake conditions (frequency, accretion volume, level of retention)
achieved through cleaning the connections to the river-bed and the internal connections,
(profile extension, thalweg correction), through the implementation of controllable waterretention facilities (maneuverable locks, pipe culverts) in the mouth profiles;
 Sió mente II.: Cleaning of the channel No. 1259; Construction of regulating sluice and of
a pipe culvert at water body No. 1259 and at the mouth of Szilágy fok;
 Sió mente III.: Bed cleaning at water body and channels No. 1254. Construction of a
water flow regulating weir. Construction of a pipe culvert at section 0+105 of the water
body No. 1254;
 Sió mente VI.: Bed cleaning at water bodies and channels No. 1263 and No. 1265;
Construction of water flow regulating weirs and construction of a pipe culvert at section
000-010 of the water body No. 1265;
 Sió mente VII.: Bed cleaning at water body and channels No. 1268; Construction of a
water flow regulating weirs and of a pipe culvert at the mouth of Holt-Sió and Sió;
 Sió mente VIII.: Bed cleaning at the mouth; Construction of water flow regulating weirs
and of a pipe culvert at the mouth of Holt-Sió II and Sió.
“Gemenc” water system. Area: 926 hectares.
Description: The most valuable central element of this water system is the 30 hectares surfacearea Forgó Lake. The lake is connected with the “Grébeci-Duna” side branch through a 2
kilometres long canal.
Recommended Interventions:
 Improve the water intake conditions (frequency, accretion volume, level of retention)
through cleaning the connections to the river-bed and the internal connections, (profile
extension, thalweg correction);
 In the Forgó Lake (No. 1002), implementation of a double water induction direction and
restoration of the inter-basin diversion under the line road from the direction of north;
 Cleaning of channel No. 1008. Construction of a water flow regulating device at the north
side of Forgó-tó, construction of a pipe-culvert with double gate.
31
“Bátai-Duna” water system. Area: 1,430 hectares.
Description: The system is named after the 6 kilometres long dead branch of 96 hectares surface
area. The island between the branch and the Danube River bed is an area of high ecological
diversity, partially covered by forest, which is frequently flooded.
Recommended Interventions:
 Bátai-Holt-Duna: construct a water flow control facility (decelerator) in parallel with the
village and a weir or sluice at the lower railway bridge pillars section.
 The optional severance of the Jaj-tanyai-tó from Báta water system. Contemplate the
repair of an existing channel leading to the Sárosok (and the Danube).
“Fekete-erdei” water system, “Grébeci-Duna”. Area: 500 hectares.
Description: The area is an island bordered by the main bed and the side branch “Grébeci-Duna”.
It was created in the 19th century, by cutting across a bend. The side-branch has 66 hectares
surface area. Its length is 4 kilometres, and it is connected to the main bed only by its confluent
end. It has become strongly silted up, with a developed eutrophication process.
Recommended interventions:
 To block the upper inlet of Grébec in order to slow down the rate of sedimentation and
dredge stretches filled with sediment.
 In order to facilitate the improvement of water intake into lakes and swamps, namely
Sulymos-tó, Akós-hókony, Döglött Grébec, Keselyűs-(Ásás)-Duna and Tehenes-lap, it is
essential to secure more frequent flooding of those sites through the water inflow and
outflow of the channels.
“Kerülő-Duna” water system. Area: 640 hectares.
Description: The determining element of water regime in the area is the artificially created bed
with the name „Kerülő-Duna”. It is 8 kilometres long. During flood events, it can represent a
wetland of 9 hectares.
Recommended Interventions:
 slight dredging of the river-bed in order to increase the volume of the water body;
 improvement of the water supply of the wet habitat defended by the summer dike;
 restoration of 2 dike drains at the same location;
 repair of two pipe weirs at 000-450;
 Construction of a damming weir.
“Báli” water system. Area: 500 hectares.
Description: The central part of the area is occupied by a strongly eutrophic, filled-up inner lake.
The surface area of the lake is approximately 15 hectares. Its water supply is regulated by the
canal connecting it to the “Vén-Duna” (Old-Danube), the neighbouring hydrological unit, which
has already been revitalised.
32
Recommended Interventions:
 Rebuild the culvert in the dirt road above ground level at Báli-fok (lake);
 Dredge the entire stretch of Báli-fok and the bottom of Báli-tó to ensure a more frequent
and prevalent flooding of the lake;
 Construct a water regulating weir or sluice at the inlet to Báli-tó.
Remark: Csörösz is currently getting its water from Nyéki-tó, but it is possible to develop
feeding from Simon-Duna, which will result in a more frequent, lower water supply. One of the
branches of Zsold-kaszáló is fed from the Nyéki-tó. More frequent flooding can be ensured by
moderate dredging.
“Móricz-Duna” water system. Area: 360 hectares.
Description: The Móricz-Duna branch and the associated water system cover an area of 48
hectares, which is periodically flooded and have been considerably silted up, especially at the
confluent section.
Recommended Interventions:
 Construction of a weir at 0+000
“Nagy-Pandur” water system. Area: 1,200 hectares.
Description: The Nagy-Pandur Island is a temporarily flooded area with forest cover, belonging
to the town of Baja and the village Szeremle. The area is bordered by the main Danube and the
10 kilometres long „Szeremlei-Duna” side branch of 84 hectares open surface area. On the island
there are 25 hectares of permanently flooded area and inner lakes, with water supplied at times of
flood coming partly from the Danube and partly from the „Szeremlei-Duna” branch. The latter is
strongly silted up, and the relative elevation of its bottom level is relatively increasing as the
main Danube bed deepens.
Recommended intervention:
 Rebuilding of the confluence at the lower part of Szeremlei-Sugovica and dredging,
preferably, along the highly sedimented stretches. Alternatively, the entire dead branch
may be subject to dredging.
 Improvement of the water supply into the water bodies at Pandúr-sziget through
enhancement of the channels’ water influx.
Component 3: Dissemination and Replication
This component will finance consultant services to carry out a comprehensive end-of-project
impact evaluation and results analysis study of the two interventions (tertiary treatment and
wetlands restoration), including a cost-benefit analysis. The results of these studies will serve as
a basis for the dissemination, replication and knowledge sharing activities. The component will
finance workshops, public communication campaigns and promotion of cost effective solutions
for nutrient reduction in other areas of Hungary and in other riparian countries. The project will
also link to the GEF Danube and Black Sea Regional projects, Danube Convention-supported
dissemination activities and the GEF-funded IW Learn initiative. In this regard, this component
33
will include setting up a Project website consistent with the GEF IW:LEARN guidance,
participation of project staff in IW:LEARN activities, participation in at least two GEF
International Waters portfolio conferences, and participation in ICPDR and Black Sea
coordination meetings. The Project will also provide limited funds to finance a Project launch
workshop; auditing services; and training to strengthen WD for project implementation and to
build capacity of DDNPD staff for the efficient development and operation of wetlands for
nutrient trapping.
34
Annex 5: Project Costs
HUNGARY: NUTRIENT REDUCTION PROJECT
CONTENTS
Table 1: Project Cost and Financing
Table 2: Financial Results and Projections - Municipality of Budapest
Table 3: Financial Results and Projections - BMSC
Table 4: NBWWTP - Project Stand-Alone Income Statement Projections
Table 5: NBWWTP Financial Operations - Impact of GEF Project
Table 6: Main Assumptions in Financial Projections
Institutional Analysis - Municipality of Budapest
Institutional Analysis - BMSC
Institutional Analysis - DDNPD and WA
35
Annex 5, Table 1: Project Cost and Financing
Project Cost By
Component and/or
Activity
Total
US
$million
Local
US $million
Government Municipality
(MOEW)
of Budapest
Foreign
US $million
GEF
Associated
IBRD loan
1: Development of
tertiary treatment
23.40
0
9.70
6.50
7.20
at the NBWWTP
(Budapest)
2: Wetland
Restoration in the
6.08
1.22
0
4.86
0
Duna-Drava
National Park
3: Dissemination
0.41
0.07
0.01
0.33
0
and Replication
Total Baseline
29.88
1.29
9.71
11.69
7.20
Cost
Physical
1.49
0.06
0.49
0.58
0.36
Contingencies
Price
0.60
0.03
0.19
0.23
0.14
Contingencies
Total Project
31.97
1.38
10.39
12.50
7.70
Costs1
Interest during
construction
Front-end Fee
Total Financing
31.97
1.38
10.39
12.50
7.70
Required
1
Identifiable taxes and duties are US$m6.4, and the total Project cost, net of taxes, is US$m25.6.
Therefore, the share of Project cost net of taxes is 80%.
36
Annex 5, Table 2: Financial Results and Projections - Municipality of Budapest
(HUF billion)
CURRENT REVENUES
A. Operating revenues
Centrally regulated funds
State grant for operations
Personal income tax
Transfers from Social Security Fund
Total centrally regulated funds
Current own revenues
Operating revenues of institutions
Business tax
Tourism tax
Stamp duties
Revenues from financial investments
Miscellaneous other revenues
Total own current revenues
Total operating revenues
B. Specific purpose current revenues
Interest income
Other revenues
Total specific purpose revenues
Total current revenues
CURRENT EXPENDITURES
Operating expenses of institutions financed by the Social Security
Operating expenses of state financed institutions
Specific purpose current expenses
Total current expenses
CURRENT OPERATING SURPLUS
Less: surpluses of specific purpose revenues
2001
2002
Actual
2003
2004
Estimate
2005
2006
2007 2008
Projections
2009
2010
20.1
13.6
43.8
77.5
26.8
15.0
53.3
95.1
32.0
19.0
66.3
117.3
29.8
23.1
64.9
117.8
32.1
24.7
67.7
124.5
33.7
26.3
70.0
130
35.4
27.8
71.9
135.1
36.9
29.3
73.8
140
38.6
30.9
75.9
145.4
40.5
32.6
78.1
151.2
18.0
46.6
0.3
6.4
2.6
4.8
78.7
156.2
23.6
53.3
0.3
6.7
3.1
4.5
91.5
186.6
24.8
58
0.3
8.6
3.3
5.1
100.1
217.4
23.6
64.9
0.3
10.7
3.7
3.2
106.4
224.2
24.6
71.1
0.3
12.3
3.3
3.1
114.7
239.2
25.4
77.3
0.3
14.1
3.4
3.2
123.7
253.7
26.1
83.2
0.4
15.9
3.6
3.3
132.5
267.6
26.8
89.2
0.4
17.4
3.7
3.4
140.9
280.9
27.6
95.3
0.4
18.8
3.9
3.5
149.5
294.9
28.4
104.5
0.4
20.2
4.1
3.6
161.2
312.4
7.4
9.1
16.5
172.7
4.2
10.0
14.2
200.8
3.6
10.0
13.6
231
2.5
1.6
4.1
228.3
1.0
2.4
3.4
242.6
1.0
2.4
3.4
257.1
1.0
2.5
3.5
271.1
1.0
2.5
3.5
284.4
1.0
2.6
3.6
298.5
1.0
2.6
3.6
316
47.7
96.9
2.6
147.2
58.3
110.3
10.8
179.4
71.2
126.5
8.7
206.4
69.7
137.9
1.8
209.4
72.7
135.5
1.5
209.7
75.2
138.0
1.6
214.8
77.2
140.8
1.6
219.6
79.2
145.5
1.7
226.4
81.5
154.4
1.8
237.7
83.9
166.0
1.8
251.7
25.5
13.9
21.4
3.4
24.6
4.9
18.9
2.3
32.9
1.9
42.3
1.9
51.5
1.9
58.0
1.8
60.8
1.8
64.3
1.8
37
ADJUSTED CURRENT OPERATING SURPLUS
11.6
18.0
19.7
16.6
31.0
40.4
49.6
56.2
59.0
62.5
DEBT SERVICE
Interest payments
Principal repayments
Total debt service
1.5
1
2.5
1.9
0.9
2.8
2.3
18.1
20.4
2.3
2.3
3.0
8.4
11.4
3.8
15.4
19.2
4.3
16.3
20.6
4.6
19
23.6
5.0
21.4
26.4
5.4
17.7
23.1
NET CURRENT OPERATING SURPLUS
9.1
15.2
-0.7
14.3
19.6
21.2
29.0
32.6
32.6
39.4
ACCUMULATION AND CAPITAL-TYPE EXPENDITURES
48.0
69.3
70.1
140.2
139.7
183.9
205.7
188.0
119.9
117.4
ACCUMULATION AND CAPITAL-TYPE REVENUES
Targeted specific purpose disbursements
Transferred funds
Sales of property and physical assets
Total accumulation and capital-type revenues
5.7
9.7
2.0
17.4
0.7
6.5
7.0
14.2
0.2
10.7
6.0
16.9
0.8
27.9
10.0
38.7
5.0
66.2
2.5
73.7
5.0
108.7
2.5
116.2
10.8
123.1
2.5
136.4
13.3
100.6
1.8
115.7
12.6
33.1
1.8
47.5
8.0
35.0
1.8
44.8
LOANS
15.5
37.0
19.3
42.5
44.4
44.3
38.6
37.8
38.0
31.3
RESERVES FOR MUNICIPAL INVESTMENTS
62.7
47.4
18.9
38
Annex 5, Table 3: BMSC - Summarized Historical Financial Statements
(HUF billion)
INCOME STATEMENTS
Operating revenues
Direct cost of sales
Indirect cost of sales
selling and marketing
administration
other overhead
Other revenues
Other expenditures
Total operating expenses
Operating profit
Financial revenues
Financial expenses
Financial profit/loss
Profit loss from ordinary activities
Extraordinary revenues
Extraordinary expenditures
Extraordinary profit/loss
Profit before tax
Corporate tax
Profit after tax
BALANCE SHEETS
Intangible assets
Tangible assets
Long-term financial assets
Total long-term assets
Inventories
Receivables
Securities
Liquid assets
Total current assets
Prepayments
Total assets
Issued capital
Capital reserve
Retained earnings
Profit/loss of the year
Total shareholders' equity
Provisions
Long-term liabilities
Current liabilities
Total liabilities
Accrued expenses and deferred income
Total equity and liabilities
FINANCIAL RATIOS
Operating margin/operating revenues (%)
Profit before tax/operating revenues (%)
Current ratio
Debt equity ratio
39
1999
2000
2001
2002
2003
2004
14.4
7.3
17.0
8.0
18.5
8.7
20.2
9.8
20.2
11.2
25.7
11.8
0.1
0.7
0.7
4.4
5.0
13.8
5.0
1.0
0.1
0.9
0.7
7.5
8.3
18.7
7.3
1.1
1.0
6.0
0.1
1.6
-1.5
4.5
1.0
3.5
0.1
0.7
0.6
5.5
7.7
17.1
5.4
0.9
0.1
0.8
6.2
0.1
1.2
-1.1
5.1
1.3
3.8
0.1
0.9
0.8
6.1
7.4
19.0
7.3
0.8
0.1
0.7
8.0
0.2
2.2
-2.0
6.0
1.5
4.5
0.1
1.1
0.8
9.7
9.7
22.9
7.0
0.7
0.2
0.5
7.5
0.3
3.3
-3.0
4.5
1.2
3.3
0.1
1.1
0.8
8.8
13.6
18.5
7.2
0.9
0.2
0.7
7.9
0.3
3.1
-2.8
5.0
1.4
3.6
0.1
82.8
0.1
83.0
0.2
3.4
5.8
0.8
10.2
0.4
93.6
70.0
13.6
2.6
1.3
87.5
0.9
0.7
1.4
2.1
3.0
93.6
0.1
84.1
0.1
84.3
0.1
3.1
6.8
0.5
10.5
0.3
95.1
70.0
13.6
3.9
1.2
88.7
1.7
0.2
1.2
1.4
3.3
95.1
0.1
85.9
0.1
86.1
0.2
3.2
7.0
0.5
10.9
1.2
98.2
70.0
13.6
5.1
1.5
90.2
1.7
0.4
1.5
1.9
4.4
98.2
0.1
88.6
0.1
88.8
0.2
3.5
6.5
0.7
10.9
1.6
101.3
70.0
13.6
6.6
1.7
91.9
2.4
0.1
90.5
0.1
90.7
0.2
3.1
4.9
1.6
9.8
2.0
102.5
70.0
13.6
8.3
0.5
92.4
1.2
1.1
1.1
6.0
101.3
1.5
1.5
7.5
102.5
0.1
92.2
0.1
92.4
0.2
3.8
6.3
1.5
11.8
2.8
107.0
70.0
13.6
8.8
0.6
93.0
2.7
0.2
1.8
2.1
9.3
106.9
35
31
7.3
0.01
32
30
8.8
0.00
39
31
7.3
0.00
36
30
9.9
0.00
35
22
6.5
0.00
28
19
6.5
0.00
1.1
8.4
0.1
2.7
-2.6
5.8
1.5
4.3
Annex 5, Table 4: NBWWTP - Project Stand-Alone Income Statement Projections
(000 US$)
A. PROJECT STAND-ALONE
REVENUES
Sewerage revenues
Other revenues
Total revenues
EXPENSES
Salaries
Electricity
Chemicals
Sludge disposal (incl. transportation)
Maintenance
Other operating expense
Environmental levy
Water pollution charge
Rental fee
Provisions for bad debt
Total O & M expense
Depreciation
Operating margin
Interest expense
Net income before tax
Corporate tax
Net income after tax
2007
2008
2009
2010
2011
2012
5277
0
5277
5306
0
5306
5298
0
5298
5363
0
5363
5441
0
5441
5522
0
5522
238
1021
1214
221
160
50
-376
0
2492
106
5126
0
151
0
151
24
127
252
1052
1251
227
165
52
-418
0
2465
106
5152
0
154
0
154
25
129
268
1083
1288
234
170
54
-498
0
2437
106
5142
0
156
0
156
25
131
283
1111
1321
240
174
55
-498
0
2410
107
5203
0
160
0
160
26
134
299
1142
1359
247
178
56
-498
0
2382
109
5274
0
167
0
167
27
140
315
1174
1398
254
183
58
-498
0
2355
110
5349
0
173
0
173
28
145
Note: Lease alternative - rental fee to be paid by the operator is included
40
Annex 5, Table 5 - NBWWTP Financial Operations - Impact of GEF Project
(US$ 000)
2007
2008
2009
2010
2011
2012
2013
2014
Annually
2015-2020
Revenues
48675
50142
51653
52951
54476
56045
57760
59322
60722
O & M cash expenses
33999
34844
36697
37504
38438
39401
40393
42173
43034
2059
1669
3352
3575
3740
3902
4065
4029
4169
12617
13629
11604
11872
12298
12742
13302
13120
13519
Revenues
5277
5306
5298
5363
5441
5522
5606
5624
5650
O & M cash expenses
5020
5045
5036
5095
5165
5238
5315
5329
5350
Revenues
53952
55448
56951
58314
59917
61567
63366
64946
66372
O & M cash expenses
39019
39889
41733
42599
43603
44639
45708
47502
48384
2083
1694
3377
3601
3767
3930
4094
4140
4200
12850
13865
11841
12114
12547
12998
13564
13304
13788
NBWWTP operations
(without project)
Corporate tax
Net cash income
Project operations
NBWWTP operator
(with project)
Corporate tax
Net cash income
41
Annex 5, Table 6: Main Assumptions in Financial Projections
2004
Unit
(Base)
2005
2006
2007
Biologically treated wastewater (NBWWTP)
Invoiced wastewater volume
000 m3/year
000 m3/year
55734
152500
Base wastewater tariff (without env. levy)
Annual wastewater planned tariff increase due to
investments other than under the Project
Total wastewater tariff (excl. environmental levy)
without Project
Environmental levy outside the Project area
Environmental levy inside the Project area
Total tariff (including environmental levy) without project
Total wastewater tariff after the Project (excl. VAT)
Net incremental tariff after the Project (excl. VAT)
HUF/m3
121.2
HUF/m3
HUF/m3
HUF/m3
HUF/m3
HUF/m3
HUF/m3
HUF/m3
Average per employee salary (in real terms)
Annual real wage increase
Social security contributions (as % of salaries)
HUF/month
%
%
Price increase in electricity
Electricity price (in real terms)
2008
2009
2010
2011
2012
55682
153298
63802
152977
63811
152650
63819
152319
63827
151982
63835
151641
64072
151750
64309
151860
21.0
30.8
51.4
54.3
66.9
78.4
110.6
120.5
121.9
142.2
152.0
36.3
3.1
191.4
196.2
4.8
172.6
53.2
4.5
230.3
235.4
5.1
175.5
59.0
4.8
239.3
245.6
6.3
188.1
67.5
5.2
260.8
267.0
6.2
199.6
71.3
6.0
276.9
282.9
6.0
231.7
13.5
5.8
251.0
256.9
5.9
241.7
13.4
5.7
260.8
266.7
5.9
243.1
11.3
5.5
259.9
265.7
5.8
210529
1.5
34.0
2.0
34.0
2.2
34.0
2.7
34.0
3.0
34.0
3.0
34.0
3.0
34.0
3.0
34.0
3.0
34.0
%
HUF/kWh
9.0
15.3
15.3
15.3
15.3
15.3
15.3
15.3
15.3
15.3
Cost of sludge disposal with transportation (real terms)
HUF/m3
2527
2527
2527
2527
2527
2527
2527
2527
2527
Maintenance costs (% of investments)
construction
machinery & equipment
%
0.5
1.2
0.5
1.2
0.5
1.2
0.5
1.2
0.5
1.2
0.5
1.2
0.5
1.2
0.5
1.2
0.5
1.2
Environmental levy
%
30
50
75
90
100
100
100
100
100
Local annual inflation rate
Exchange rate
VAT on investments
VAT on water and wastewater services
Corporate tax rate
%
HUF/USD
%
%
%
6.9
205
25
15
30
4.4
3.9
3.4
3.0
3.0
2.5
2.5
2.5
25
15
30
25
15
30
25
15
30
25
15
30
25
15
30
25
15
30
25
15
30
25
15
30
42
Institutional Analysis - Municipality of Budapest
Legal Framework: Hungary's system of government comprises the State, 19 county
governments plus Budapest, and 3,148 independent local units organized as villages or towns.
Budapest is further structured into 23 independent districts, each district having its own mayor,
city council and staff. Of the independent local units, 42 (including the Budapest districts) have a
population of 50,000 or more.
Key pieces of legislation govern Hungarian local government spending and revenue powers: the
1990 Law on Local Governments (Act No. LXV); the Law on Local Taxes (Act C of 1990), last
modified at the end of 1995; and the 1996 Act on Municipal Debt Adjustment (Law XXV of
1996), providing procedures for formal debt work out and bankruptcy reorganization for
municipalities.
Organization and Administration: The 1990 Law on Local Government contains a chapter on
Budapest's governmental structure, recognizing its "special role and position" vis-à-vis central
government and other local governments. According to the law, Budapest has a municipal
government where each of the city's 23 districts has one seat on a General Assembly (city
council), and the remaining 65 council seats are elected at large. The Budapest municipal
government is headed by a Lord Mayor, elected directly every four years, with the next election
in 2006. Deputy Mayors are appointed by the Lord Mayor subject to General Assembly
approval.
The Local Government law directs the Municipality to perform functions affecting the whole of
the city, including maintaining major roads and providing public transportation, police
protection, water and wastewater treatment, wastewater collection, wastewater disposal and
drainage. District government is responsible for primary and secondary education and social
programs including day/elder care, and birth and death registry.
Revenues: Budapest has two general revenue sources: funds from the central State budget and
"own source" local revenues. Revenues received from the State fall into three major categories:
intergovernmental transfers, shared taxes and fees, and social security support.
Intergovernmental Transfers. The four categories of budget transfer from State to local
government are: normative grants, targeted matching grants, addressed grants and other
relatively minor transfers.
Normative (unconditional) Grant. The normative grant is an unconditional transfer composed of
two elements: (i) a HUF 2 million lump sum, provided to all local governments and (ii) an
amount based on "norms" and need indices. The norms are a function of standard per capita
services, a small matching grant (each HUF of tourism tax is supplemented by two from the
State) and 18 expenditure related weights designed to estimate the demand and cost for
municipal services. From the grant, cost recovery for services is just below 60% for most
operations of the Municipality.
43
Targeted (matching) Grants. Matching grants are provided for specific capital construction
projects determined by annual state priorities. The central funds are matched by a local
contribution, with the state generally providing 40% of project costs. Most wastewater projects
(except for Budapest and the largest cities) are funded by matching grants.
Addressed Grants. Certain infrastructure projects for Hungary's larger cities, including the
ongoing Municipal Wastewater Project for Budapest, are funded by addressed grants (special
appropriations). Each year legislation is passed earmarking the funds to specific projects.
Shared Taxes and Fees. Local governments receive a share of personal income taxes collected
by the state. The local share ranges from 25 to 36%, according to a formula incorporating per
capita income and population. Budapest's share of personal income taxes is divided between the
Municipality and the districts in a 60:40 ratio.
Other Centrally Earmarked Transfers. There are two other state transfers to the Budapest
budget: (i) a social security contribution of pass-through funds to cover the cost of health
institutions and (ii) special "ad hoc" grants.
Revenues under Municipality control can be divided into two major categories: (i) those from
current operations and (ii) from portfolio income and the sale of municipal assets.
Current Revenues. Municipal revenue from current operations consists primarily of local taxes,
together with relatively minor fees, fines and other income. The Law on Local Taxes grants local
government authority to levy five types of "own-source" taxes, up to maximum rates defined by
the law. In Budapest, the Municipality levies two of these taxes, and the balance are reserved for
the district governments. The taxes are:
Local Industrial Tax (general business turnover tax). This is a tax levied by the Municipality on
all businesses operating within its limits. The tax is 2% of gross sales revenue net of VAT, cost
of goods sold and the value of subcontractor services. Revenue from the general business tax is
shared with district government. Budapest's rate is the maximum allowed under the law.
Tourism Tax. The maximum rate is 4%, or 300 HUF per person per night. In its current version,
the tax applies to every night's stay at commercial lodgings; previously, the first night was
exempted, resulting in large losses due to short average stays by business people. The tax is
collected and administered by the Municipality and shared with the local districts. The
Municipality retains 60%, which is allocated equally to a tourism infrastructure fund and a
general fund.
Property Taxes. Two types of property taxes may be levied by district governments: on
unimproved private and public land, and on improvements (private buildings, both commercial
and residential). The maximum rate on unimproved property is 200 HUF per square meter, or
3% of "corrected value" (defined as 50% of observed market value). The percentage calculation
is rarely used because of low turnover and unreliable price data. The maximum rate on
commercial and residential buildings is 900 HUF per square meter, or 3% of corrected value.
44
Communal Taxes. Communal taxes are charged at a flat rate per employee or per unit of housing.
The maximum rate is 12,000 HUF per housing unit or 2,000 HUF per employee. This tax is
available only to district governments.
Portfolio Income and Sale of Assets. Municipality of Budapest generates revenue from sales of
equity stakes in enterprises, securities transactions, sales of land and other assets, privatization of
housing, interest income, rental income, and profits from entrepreneurial activities. The
Municipality has significant holdings of shares in recently privatized utilities (Budapest Gas
Works, Budapest Electrical Works, the national grid), as well as compensation coupons and
securities, and plans to sell several unimproved lots and other real estate.
Borrowing capacity: A limit on municipal borrowing is included in the legislation governing
Hungary’s budget. Municipal debt service is limited to 70% of “corrected” own revenues,
defined as local taxes, administrative fees, interest income, environmental fees and other specific
revenue of local governments less debt service. This definition excludes “current” revenue of
municipal institutions having discretion over their own income, and “capital” revenue other than
dividends and interest. Budapest’s debt backed by sovereign guarantee is not included in the
debt service limitation, but even without this exclusion, Budapest is well within the prescribed
limits. Projections prepared by Budapest with the help of international consultants indicate that
Budapest will continue to remain within the limits specified at present.
45
Institutional Analysis - Budapest Metropolitan Sewerage Company (BMSC)
The Operating and Technical Support Agency - Budapest Metropolitan Sewerage
Company (BMSC)
Sewer construction was begun in the inner city of Budapest at the end of 18th century.
Wastewater collection nationwide, including Budapest, was a central government responsibility
until 1946, when an independent company under the control of the local council was established.
Since 1950, the company has been known as Budapest Fovarosi Csatorndzdsi Mzuvekor,
translation of Budapest Metropolitan Sewerage Company (BMSC). In 1993 it was transformed
into a public limited liability company. Water supply is the responsibility of a separate company,
the Budapest Metropolitan Water Supply Company.
Ownership and Governance: BMSC is an Operating Company (OC). Its assets comprise
buildings, real-estate and operating equipment only. Prior to 1997, BMSC was 100% owned by
the Municipality. In 1996, it was registered and the newly registered company concluded a
public utility service agreement with the Municipality. The agreement specifies service
requirements and a formula for the annual adjustment of tariffs. In 1997, the Municipality sold a
25% share of the BMSC through an international competition to a private investor, a joint
venture of Generale des Eaux and Berlinwasser. The shares owned by the investor are preferred
shares which entitle the investor to a dividend equal to 18% of the par value of their shares. The
dividend is calculated from the after tax profit. Any profits remaining after payment of the
private investor's preferred shares dividend then go to the Municipality. The shareholder's
agreement gives the investor the right to manage the BMSC for a period of 25 years. The
investor's management rights include a majority position on the Board of Directors and the right
to appoint the General Manager. Tariff-setting is discussed below in the last paragraph in this
section.
Organization and Management: The Company is organized into two management centers-technical and financial--with clear lines of hierarchical authority. Each center is headed by a
deputy general manager. There are roughly six management levels, each employee reports to no
more than one manager, and responsibility is delegated (within expenditure thresholds) so that
senior management involvement is not required in lower level decisions.
The technical center is divided into three sections: network, operations and investments. The
network section is responsible for the sewer system, pump stations and associated equipment,
including repair, maintenance and reconstruction of sewers, surface drainage, river bank outlets
and hydraulic structures. The network section also operates sludge disposal facilities on Csepel
Island and in Csomad, and maintains the technical designs inventory. The operations group is
responsible for wastewater treatment, including laboratory analysis of samples, control of
industrial discharges and scheduled maintenance programs for wastewater treatment plants. The
investments department plans the company's capital improvements and manages their
implementation.
46
Institutional Assessment: With the introduction of the private-sector led management starting
1997, BMSC has become a strong institution that has been successful in delivering dependable
sewerage and drainage services to the Municipality.
Management. The current management of the company has consistently sought to bring BMSC
management systems and practices closer to Western European accepted norms and standards
through upgrading the company's operational, financial and commercial management functions;
improvements in equipment, facilities and personnel skills; enhancement of operational
efficiency through improved maintenance and replacement programs; financial planning and
control through improved information systems to provide a better basis for internal decisionmaking; and improved commercial practices, including customer relations.
Operations. BMSC's operational staff is competent. Company management follows a policy of
setting specific and achievable targets and standards. Areas addressed include customer service
obligations, system reliability, including improved inspection and monitoring programs; timely
preventive and routine maintenance; and reductions in obstructions and breaks in pipe networks.
Employment and Staffing. The company employs about 1,180 persons, down from 1,717 in 1997
when the new management took over. This represents an employee per thousands connections
ratio of 1.8 which the management intends over time to bring closer to ratios in similar sized
utilities in Western European countries. BMSC encourages the education and training of its
employees through company sponsored university education. Skilled worker and driver training
are provided, as are short courses for software/hardware applications.
Commercial Activities. For most customers, wastewater charges are a function of water
purchased. A computerized bill is prepared by the water company on behalf of BMSC. The bills
either are sent by the water company with automatic debiting of the customer's bank account, or
are transmitted to a private collection company (Dijbeszedo Rt), which prints the bills, and
collects and remits the fees. Dijbeszedo Rt also has contracts for the billing and collection of
other city services (water, gas, solid waste, district heating and insurance premiums). With
automatic billing, information on a customer's account is available at any time. The collection
agency reports remittances and non-collected debts monthly. In both cases, sales revenue is
recorded monthly and bank transactions entered daily. Wastewater customers with their own
water supply are billed by BMSC on the basis of self-declarations. BMSC has a two year
collection contract with the Dijbeszedo Rt. The contract stipulates a minimum 95.2% collection
effectiveness ratio. Dijbeszedo Rt transfers the total fee collected less any retention allowed
under the contract to the BMSC. BMSC keeps the operations part and transfers the investment
and rent parts to the Municipality.
Financial Management. The company has an experienced financial management team aware of
the value of timely and accurate information for decision-making. Concurrently with
improvements in the management information system, steps have been taken to improve the
content and quality of internal reporting and analysis.
Accounting and Internal Control. Company accounts are kept in formats required under current
regulations. Prior to 1997, in common with most Hungarian utilities, the focus in accounting
47
was more on the production of financial statements and reports for regulatory, tax and control
purposes rather than as an aid to management decision-making. This has progressively changed
under the new management. The focus is continually improving linkages between the different
financial, accounting and commercial subsystems to enable management to take an integrated
and fully informed view.
Wastewater Tariffs. The company utilizes one tariff structure for all customers (domestic,
industrial, commercial) and does not take into account differential costs of service. The tariffs are
adjusted each year with the new tariff going into effect on January 1st. There are three parts to the
tariff: (i) the depreciation of the sewerage system; (ii) an investment fee for the construction of
new facilities and the repayment of debt service on loans taken out by the Municipality for new
investments, e.g., the ongoing Bank Loan 4512-HU; and (iii) the operating fee. Starting 2003, an
environmental levy has been added as a surcharge to the tariff. The investment fee is decided by
the Municipality and is used only for replacement of or improvements to the system. The
operating fee is proposed by the BMSC based on the formula in the utility services agreement
and is subject to negotiation of the assumptions. The formula contains no allowance for a
management fee or a fixed profit. The profit, if any, results from the savings realized by the
investor over the year in operation of the system. BMSC has consistently realized a net profit
after tax for each year since 1999.
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Institutional Analysis – Duna Drava National Park Directorate, and
South-Transdanubian Environment Protection and Water Management Directorate
The Hungarian park system covers an estimated 485,000 hectares, of which about 58,400
hectares are wetlands. The Ministry of Environment and Water (MOEW) is the designated
central government agency in charge of the national parks. Administration of the parks is carried
out through 10 Directorates within the MOEW. Financing for the operations and maintenance of
the parks is provided through the central budgetary allocations for the Directorates. In some
cases, the Directorates are able to supplement these budgetary allocations with revenues derived
through other activities related to forestry, plant growing and horticulture, animal and fish
farming, game management, and tourism.
Duna Drava National Park Directorate (DDNPD)
The DDNP covers an area of about 50,000 hectares of which about 19,500 hectares are
temporary (floodplain) or permanent wetlands. This includes the Gemenc and Beda-Karapancsa
wetlands situated in the lower Hungarian part of the Danube river. Administration of the DDNP
is carried out by the DDNPD, established in December 1995. Current responsibilities of the
DDNPD include, but are not limited to, the following:
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Maintenance of the Park, including wetlands;
Operation and maintenance of facilities for nature protection and tourism;
Monitoring, information gathering and control, activities related to Park protection and
maintenance;
Protection of flora and fauna;
Forestry activities;
Cooperation and coordination with municipalities and other local/regional bodies in tasks
related to environmental protection, regional development planning; and
Contribute to research involving nature protection, education, and information
dissemination.
The annual budget of the DDNPD is funded mainly through allocations from the central
government’s budget. Its other sources of revenue are not very significant. For 2005, the
DDNPD budget is HUF 529 million (USD 2.7 million).
The DDNPD has a total of 78 staff, 60 of whom have various degrees in biology, ecology,
forestry, etc. The staff has, on average, about 6 to 8 years of experience. To date, the DDNPD
has not been involved in large internationally financed projects, but it has some experience in
smaller projects of up to HUF 80 million (USD 400,000). In particular, the DDNPD does not
have, in-house, the type of water management expertise that will be required for the proposed
GEF project. Consequently, the Government has decided to assign implementation management
responsibility for the implementation of the Park component (Component 2) of the Project to the
South-Transdanubian Environment Protection and Water Management Directorate as described
below.
49
South-Transdanubian Environment Protection and Water Management Directorate (WD)
The WD was established by Government decree in 1953. It is defined as a regional state
organization and is an independent legal entity. In 2004, guided in part by the need to bring
existing institutions more in line with the requirements of EU membership, the Government
initiated a restructuring of the WD. Under this, new functions have been added, e.g.
environment protection activities, while some other functions, e.g. licensing activities, have been
transferred to a newly created Water Licensing Authority. At present, the WD’s main
responsibilities are to:
 Maintain, protect and regulate natural state waters in its jurisdiction;
 Fulfill tasks related to flood protection, environment protection, and water quality
management;
 Fulfill tasks connected to hydrogeology;
 Collect primary data for carrying out its tasks and responsibilities for the State
Environment Protection Information System;
 Operate laboratories for the fulfillment of the maintenance requirements of state water
utilities, state waters and water utilities; and
 Cooperate with the water supervisory body in regards to supervision of water
management.
The MOEW approves the annual work plan and budget of the WD. The WD’s activities are
funded through three types of schemes: (i) core activities from the state budget; (ii)
supplementary activities from operational and institutional incomes; and (iii) entrepreneurial
activities (limited to 30% of total revenues) which are to be self-financing. For 2005, the central
budgetary allocation, through the MOEW budget, is HUF 807 million (about USD 4 million)
which includes about HUF 700 million for administration, HUF 63 million for maintenance and
HUF 44 million for investments. The WD supplements this through some revenues generated
from its entrepreneurial activities.
The WD is headed by a Director appointed by the MOEW. The restructuring has resulted in a
separation of the licensing activities and related staff to the Water Licensing Authority, created
for that purpose, and in a new organizational structure for the WD’s remaining and added
functions. The WD has four expert consulting/advisory departments (water reserve and
monitoring; environment and water utilities; water damage prevention; and watercourse
management) and six administrative and support departments or units (finance; project
management; information technology; internal audit; information and service; and Director’s
support). As a result of the restructuring, while new specialists were added, e.g. in environment
protection, there was a significant reduction in the total number of employees, part of which
transferred to the Water Licensing Authority. The WD currently employs a total of 185 staff, 65
of whom hold university degrees. More than half the staff has at least 10 years or more of
experience with the WD. Over the years, the WD has acquired substantial experience in project
implementation for water management projects funded either through central budgetary
resources or international financing (e.g. EU Phare) where the WD functioned as implementing
agency and/or constructor. As implementing agency, the WD’s experience includes projects
dealing with flood plain and reservoirs management (over 100 ha), river regulation works, flood
protection planning and management, water base protection schemes, surface and underground
50
water quality analysis, improvement and monitoring. The projects have ranged in size from
HUF 150 million (USD 770,000) to HUF 1,000 million (USD 5 million). In addition to the
proposed Project, the WD is also involved in the preparation of other activities, including
Interreg programmes of various sizes. In particular, the WD is acting as lead expert advisors for
the development of compliance wit the requirements under the EU Water Framework Directive.
As regards implementation of the DDNP component of the GEF project, under the Grant
implementation agreement between the MOEW, MOB, DDNPD and WD, the responsibility for
implementation of the DDNP component has been assigned to the WD, acting as an
implementing agency on behalf of the DDNPD. For this purpose, a Project Implementation Unit
(PIU) has been set up within the WD. The PIU was involved in the preparation of the
component. It consists of a coordinator (an experienced and qualified consultant was appointed
for this purpose) and five staff drawn from the existing staff of the WD that cover the
engineering; procurement; financial management; monitoring and water management; and
environmental protection aspects of implementation. The PIU will also be responsible for
implementation of the Monitoring & Evaluation (M&E) system to be installed under the project.
A detailed Operational manual has been prepared to assist the PIU in project implementation.
Training, including familiarization with Bank procurement rules, and financial management and
reporting requirements, will also be provided through a Project Launch Workshop that is planned
to take place in the first months of 2006.
To enable proper coverage of the incremental operational and monitoring expenses of project
implementation, funds have been provided under the Project to supplement those available for
this purpose under the WD budget.
51
Annex 6: Implementation Arrangements
HUNGARY: NUTRIENT REDUCTION PROJECT
Implementation Period: The Project would be implemented over a period of five calendar years,
from 2006-2011, covering the Fiscal Years 2006 to 2012.
Project Management Structure: The MOEW will have overall responsibility for managing the
Project implementation, including Project oversight and reporting to the Bank, as well as for
inter-agency coordination between the two executing agencies. For overall Project management,
disbursement, supervision and reporting to the Bank and Hungarian authorities, the MOEW has
appointed a Project coordinator and established a small PMU to ensure quality and timely
coordination. The MOEW has entered into a Grant implementation agreement with the MOB,
the WD and the DDNPD that defines the main roles and responsibilities of each partner
institution for the implementation of the Project. Under this agreement, the day-to-day
implementation and administration of components 1 and 2 is decentralized to separate executing
agencies. Component 1 will be implemented by the MOB and Component 2 by the WD, on
behalf of the DDNPD, the final beneficiary of the investments. Implementation of Component 3
will remain under the direct responsibility of the MOEW. To provide for inter-agency
coordination, the Project’s institutional arrangements include the establishment of a Project
Steering Committee (PSC), composed of representatives of the main institutions involved in its
implementation.
MOEW, PMU: During Project preparation, the MOEW has designated a qualified staff from its
Budget and Finances Department as Project coordinator, who will continue the existing
responsibilities during Project implementation. The MOEW has established a PMU to assist the
coordinator, staffed with six professionals: a coordinator’s assistant, a financial analyst, a
procurement specialist and three environmental specialists. The PMU will oversee, coordinate,
administer and monitor Project implementation, and will act as Bank’s counterpart for any matter
related to Project implementation. In addition, the PMU will coordinate the Project management,
monitoring and reporting, and will be directly responsible for implementing the dissemination
and replication component.
Project Steering Committee: The PSC will continue operating throughout Project
implementation. It comprises representatives from the MOEW, the MOB, the WD and the
DDNPD, including PMU director and heads of the PIU, MOB and PIU, WD. This committee
plays an important role in the Project. It is to bring the collective expertise of the sectors
concerned, at the national, regional and municipal level, and of the stakeholders, to help ensure
that Project implementation achieves its objectives. The PSC and will also work as channel for
the dissemination of experiences and lessons generated by the Project. The PSC is to be formally
appointed as early in the process as possible. It is to be chaired by a senior level official of the
MOEW to ensure appropriate support. For these reasons, the establishment and appropriate
staffing of the PSC is a condition to Negotiations.
Project Implementation Unit-PIU, MOB: Implementation activities for the Budapest component
will be managed by the PIU, MOB. This unit was established more than ten years ago to
implement Projects financed by IFIs. The unit is composed of a group of staff who have
52
substantial experience in the implementation of Bank-financed projects, through the ongoing
HMWP (Loan 4512-HU), which is at an advanced stage of implementation. The unit will be
responsible for the technical and financial management of the Project component, and for
handling procurement and reporting requirements. The PIU, MOB will be advised in technical
matters by the Public Utilities Department of the MOB, which has experienced personnel. There
is a long and well established cooperation between the MOB and the Budapest Municipal
Sewerage Company (BMSC), which has been involved in all stages of Project preparation.
During the implementation phase, the supervision of the works to be performed at the NBWWTP
has been awarded to the BMSC, under a contract financed by MOB from its own funds. The
MOB will create a joint review team consisting of representatives of the MOB (Project Unit and
Public Utilities Department), the BMSC, and the Private Operator to monitor the implementation
of the works. The responsibility for investments remains under the responsibility of the MOB
until the facilities are completed and commissioned. Responsibility for their operations and
maintenance will then be handed over to the BMSC.
Project Implementation Unit-PIU, WD: Implementation of activities under the DDNP
component, including the development of the M&E system, will be supervised by the PIU, WD,
acting as an agent on behalf of the DDNPD, whose staff has no experience in dealing with Bankor IFI-financed projects. This unit was established for the component’s preparation, and it is
composed of a coordinator – a consultant was hired for that purpose - and seasoned professional
staff of the WD. The selection of the WD as an executing agency on behalf of the DDNPD is
based on its experience in water project management, including projects financed by IFIs (other
than the World Bank), its knowledge of water management and of the area and its river basin
approach. On technical aspects the WD and the DDNPD will continue to work in close
cooperation during Project implementation. The DDNPD provides comprehensive knowledge of
the Park areas, ecosystem and biodiversity to the WD, which has expertise of water management
infrastructure and engineering. In order to minimize risks related to the lack of experience in
dealing with Bank-financed projects, a Project launch workshop, including training in Bank’s
operational rules and Safeguard Policies, will be organized. Additionally, a detailed Project
Operational Manual, including the Project’s operational procedures, as well as agreed
implementation and procurement plans, has been drafted and commented by the Bank. The PIU,
MOB will provide assistance to the PIU, WD, as appropriate. Preparation of basic engineering
designs and works supervision will be carried out by consultants. As the lead-time requirements
for the approval of the required environmental licenses for the DDNP component could extend to
about eighteen months, execution of works under this component is scheduled to start late during
Project implementation.
Operational Flow: Each PIU will be required to fulfill Project requirements in regards to the
investment planning, procurement, supervision of works and purchases, financial management,
and for auditing and reporting to the PMU for its respective Project component. Approval for
applications for disbursement, withdrawal of Grant funds, and consolidated reporting to the Bank
will be carried out by the PMU in the MOEW and sent to the MOF or entity delegated by MOF
for signature prior to submission to the Bank. Main roles and responsibilities in regard to
financial management, flow of funds, disbursement, reporting, and execution and monitoring of
the Project’s Environmental Management Plans are to be described in the Grant implementation
agreement. Additionally, detailed responsibilities for operational processes, rules and standard
53
forms and documents are to be spelled out in sufficient details in the Operational Manual. Drafts
of these two documents have been submitted to the Bank for review prior to Appraisal.
Comments have been provided. Revised versions of these documents, satisfactory to the Bank,
are to be submitted by Negotiations.
Legal Arrangements: A Grant Agreement will be signed between the Bank, acting as an
implementing agency for the GEF, and the Republic of Hungary. This Agreement will include
the provisions for the implementation of Components 2 and 3, as both the WD and the DDNPD
are under the direct responsibility of the MOEW. A Project Agreement is to be signed between
the Bank and the MOB for the purposes of Component 1. An amendment to the Loan Agreement
is being prepared by the Bank, at the request of the MOB, to authorize the use of loan savings
and uncommitted funds under the Loan 4512-HU to partially finance Component 1 of the
proposed Project 6
6
In addition, the amendment expressly includes such development in the Project description of the HMWP and to
introduce the use of the revised procurement guidelines, dated May 2004. In parallel, a Memo is also being
processed, in compliance with OP/BP 13.25 on the use of Project Cost Savings, to seek the endorsement of the
Country Director, (in compliance with the ECAVP Memo dated July 8, 2005) to reallocate the loan savings and
uncommitted funds for that purpose. The amendment will be signed concomitantly with the signing of the legal
documents.
54
Annex 7: Financial Management and Disbursement Arrangements
HUNGARY: NUTRIENT REDUCTION (GEF) PROJECT
1. Summary of the Financial Management Assessment
The Financial Management (FM) assessment was performed in April 25-27, 2005, prior to
Project Appraisal. The FM arrangements of the Project are acceptable to the World Bank’s
fiduciary FM requirements.
Country Issues. Due to the fact that Hungary, an EU member since May 2004, has ceased to
borrow from the World Bank, there was no Country Accountability Assessment performed by
the World Bank. Hungary is at the final stage of the graduation process. Accordingly, the World
Bank Group assistance program is limited to analytical and advisory services. Since the last
CAS, approved in 2002, Hungary has continued to complete the transformation agenda and
establish a sustainable, robust macroeconomic environment. Hungary's overall financing needs
have declined as deficits have been kept at moderate levels. In addition, it enjoys access to
private capital at terms that are extremely competitive for sovereign borrowings, and to
significant financing from European institutions. During the pre-graduation period, Hungary
seeks limited technical support from the Bank to complement the support available from the EU
and other sources.
Strengths & Weaknesses. The strengths that provide a basis of reliance on the Project FMS
include the use to a great extent of the existing financial accounting budgetary procedures in the
implementing entities, and the extensive experience of MOB in implementing similar Projects
co-financed by IFIs (including the World Bank, EBRD, and EIB). The specific risk identified
during the assessment relates to the fact that the Project will be implemented by three entities
MOEW, MOB and WD, the latter being located outside Budapest. However, this risk will be
mitigated by the coordinating role of MOEW and the fact that the WD falls under the
responsibility of the MOEW. The MOEW and the WD assigned staff to carry out the incremental
Project FM tasks.
Implementing Entities
The MOEW has overall responsibility for program implementation. MOEW and Ministry of
Finance (MOF) will work closely together to ensure that the Program is adequately funded
throughout its life with transparency and clear accountability, and that the necessary
arrangements are put in place to ensure satisfactory coordination, implementation, monitoring
and auditing for the Project. The Project will be managed and coordinated by designated staff
working in existing organizational units of MOEW. MOEW itself will be responsible for direct
implementation of the Dissemination and Replication component.
The MOB is the implementing entity for the Budapest component. Within the organization of
the Municipality, the PIU, MOB is responsible for the day-to-day coordination and
administration of all investment projects implemented by the Municipality with international
assistance (grants and Loan proceeds from IBRD, EBRD, EIB, EU). The PIU MOB is working
in collaboration with the Public Utilities Department, which takes care of the financial and
55
technical implementation of the Project, in addition to other investment projects in the utility
sector. However, PIU, MOB will be responsible for all financial Bank-management aspects of
the Budapest component. Thus, all financial management, disbursement and procurement
management under the grant activities will be implemented by the PIU, MOB, in accordance
with the Bank guidelines.
Regulations concerning the operation, organizational structure, duties and powers of the MOB
are described in Act No. LXV of 1990 on Local Governments (hereinafter referred to as the Act
on Local Governments) and in General Assembly Decree No. 7/1992 (III. 26.) concerning the
Rules of Procedure of the MOB, enacted on the basis of the authorization granted under the
aforementioned law (hereinafter referred to as the Rules of Procedure).
Budapest has a two-tier local government system: it consists of the Municipal Government and
the District Governments. The special weight and national role of the capital city and its two-tier
government system requires regulations differing from the overall one. The Municipality and the
District Governments are not subordinated to one another. Concerning their basic rights as
defined in the Constitution and in law they are equal, but they differ in their specific duties and
powers. Due to the vast population and area of the capital, it is reasonable that most basic and
administrative services are provided for the citizens on district level.
However, the Act on Local Governments provides, as a fundamental principle, that the MOB
shall perform duties and exercise rights of a local government which concern the whole of the
capital or more than one district, or if they relate to the special role of the capital in the country.
In order to avoid possible disputes relating to jurisdiction and problems of operation that may
arise thereof, the Act on Local Governments stipulates that any act specifying duties and powers
for local governments shall also define, in respect of the capital, whether it is the obligation of
the City or of the District government, to fulfill certain duties. In accordance with the Act on
Local Governments, it is possible for the City and the Districts to agree on taking over duties
from one another and assuming the other’s powers.
To be able to fulfill the above duties, the MOB has been provided with own assets; it is
subsidized from the central budget and it is entitled to collect revenues of its own, of which the
most important is the right to impose local taxes.
The Act on Local Governments offers the opportunity to establish associations to facilitate more
efficient management of municipal tasks. The City, the Districts, as well as the local
governments outside the capital may participate in such associations. Agglomeration associations
may be set up with the local governments outside Budapest, in particular to harmonize public
transportation, water management, the containment of catastrophes, public and communal
investment projects, as well as the organization of services in the vicinity of Budapest providing
education, health and social care.
The PIU, WD will implement DDNP component on behalf of the DDNPD. The proposed
interventions consist mostly in dredging and construction of flow regulating devices in the
Gemenc and Beda-Karapancsa areas of the DDNP. The PIU WD is operating as a regional
governmental organization, separate legal entity, under the supervision of the MOEW. WD is
responsible for flood protection, environment and water quality-protection activities. The policy,
56
organizational structure and financing of the activities are regulated in the organizational and
operational regulations.
Flow of Funds: The Department of Budget of MOEW will open one Special Account (SA) with
the Hungarian State Treasury in the currency of the GEF Grant. To facilitate payments through
each of the implementing entities and to receive the share of their respective contributions to the
financing of the project, settlement accounts will be opened for each of the three implementing
entities/beneficiaries. The MOB, MOEW and the WD will have to provide the full amount of
their respective contributions required to finance Project expenditures before the due date for the
payment of suppliers’ invoice. Accordingly, Grant funds will flow from the World Bank to the
SA and then through settlement accounts to the suppliers. The MOEW will be responsible for
having the SA replenished from time to time, on the basis of withdrawal applications. The
associated proceeds under the Loan 4512-HU will remain in the special account already
established for that Loan for the purpose of parallel financing of the component under the
HMWP. (Detailed chart presenting the flow of funds and documents is presented in an Appendix
to this Annex).
Staffing. The Project will rely on the existing staff in MOEW, MOB (including PIU), and WD.
MOEW’s staff will be responsible for collection and consolidation of reports from other
implementing entities. The financial staff of the implementing entities has proven experience in
the accounting and reporting of budgetary expenditures. Additionally, MOB staff including the
PIU, have proven experience in implementation of projects co-financed by IFIs. The WD
assigned staff to be responsible for contract monitoring and Project reporting for the purpose of
the DDNP component.
Accounting Policies and Procedures. The accounting books and records of the implementing
entities are maintained on modified cash basis (i.e. liabilities are recorded at the date of invoice
acceptance). Each implementing entity will record transactions in their accounting books and
records in accordance with normal accounting procedures according to Hungarian regulations
applicable for budgetary units.
The MOEW documented the Project’s FM arrangements in the Operational Manual for the
Project. This document describes Project-specific procedures, roles and responsibilities of the
various FM staff in all implementing entities, eligibility of expenditures, flow of funds,
applicable budgetary procedures for withdrawal applications, sample formats of the financing
agreements between MOEW, MOB, WD and DDNPD, FMRs reporting requirements with the
deadline for their preparation, and the Project’ auditing arrangements.
Internal Audit departments of the MOEW, MOB and WD will be responsible to perform the
internal audit function according to the annual plan as approved by the management of the
entities. Additional assurance could be gained if internal auditors include the Project in their
audit plans. However audit plans are established individually in each implementing entity and
therefore the World Bank is not able to rely solely on such audits for its fiduciary purposes.
External Audit. MOEW will organize the annual audits of the financial statements for the entire
Project. The audit of the Project financial statements will be performed annually by an auditor in
accordance with terms of reference acceptable to the Bank. The audit shall be carried out in
57
accordance with International Standards on Auditing and the Project financial statements
together with the auditor’s report will be submitted to the Bank within six months of the end of
the each fiscal year. The terms of reference acceptable to the Bank were attached to the minutes
of negotiation. The short list of auditors will be submitted to the Bank prior to the end of each
fiscal year, and only those accepted by the Bank shall be included in the short list. The cost of
the audit will be financed from the GEF Grant.
The following table identifies the audit reports that will be required to be submitted by the PMU
together with the due date of submission.
Audit Report
Due Date
Project Financial Statements prepared for Within six months of the end of each fiscal
entire project
year and also at the closing of the project
Reporting and Monitoring. MOEW will be responsible for submission of consolidated FMRs on
quarterly basis within 45 days of month-end incorporating the information submitted by
implementing entities as well as annual Project Financial Statements subject to external audit.
PIU, MOB will assist MOEW in compiling the inputs from implementing entities into a
consolidated report. However, MOEW will be ultimately responsible for verification of the
consistency of the information in the FMRs, reconciliation of the SA statements, reconciliation
of the disbursements/expenditures as recorded by the Bank, and the final acceptance of FMRs.
The first FMRs will be submitted to the Bank not later than 45 days after the end of the first
calendar quarter after the Effectiveness date. The FMRs will be used for Project monitoring and
supervision. Agreed formats of the FMRs were attached to the agreed minutes of technical
discussions, and were confirmed at Negotiation.
Information Systems. Each of the implementing entities (MOEW, MOB, WD) uses various
computerized financial accounting systems. All the Project transactions will be entered on
separate analytical codes within these systems maintained by each implementing entity, to track
the use of the Project funds. Additionally all the transactions of the SA and the three settlement
accounts will be done within the State Treasury System. The entire Project will have a separate
appropriation under the budget chapter. However the systems are not able to generate FMRs or
disbursement reports automatically. The FMRs will be complied manually using the Excel
spreadsheets. Due to the relatively low volume of transactions, such an approach is acceptable.
Disbursement Arrangements
Disbursement of Funds from the World Bank. There would be one SA for the Project opened
by MOEW and three settlement accounts opened for each of the three Beneficiaries. All accounts
will be opened in the Hungarian State Treasury. Grant funds will flow from the World Bank to
the SA and then through settlement accounts to the suppliers in line with existing State Treasury
procedures.
The Project will use traditional disbursement methods. Statement of Expenditures will be used
for expenditures incurred on all contracts which do not require The Word Bank’s prior review.
For all other contracts, disbursement will be made on the basis of Summary Sheet with full
documentation. The first applications will be for advance at the Effectiveness date. Taking into
58
account the fact that the Project will finance the investment contracts of high value, and no direct
payments will be used, it is justified to allow the limit of the SA up to 10% of the total Grant
amount. Thereafter, MOB and WD will rely on the MOEW for the transfer of funds from the SA
to the settlement account (both kept in the Hungarian State Treasury), on the basis of suppliers’
invoices with confirmed delivery. In parallel MOB and WD will transfer their own contributions
to the settlement account and notify the MOEW that the own contributions were transferred in
full amount. After the grant funds are made available on the settlement account, beneficiaries
will submit the payment order (with required supporting documents) to the State Treasury in
order to make the payments to the suppliers. Grant funds will not be kept in the settlement
account on an ongoing basis but it will be funded in sufficient time to allow for prompt payment
to suppliers. All original source documentation supporting Statements of Expenditures and
Summary Sheets shall be kept by implementing entities, and made available for review by
auditors and the Bank staff until one year from the receipt of the final Project audit report.
Annex 7, Table 1: Allocation of GEF Trust Fund Grant Proceeds and Financing
Percentage
Disbursement Categories
Goods, Works and Consultants’
Services under Component 1:
Development of tertiary treatment at
the NBWWTP (Budapest)
Goods, Works and Consultants’
Services under Component 2:
Wetland Restoration in the DunaDrava National Park
Goods and Consultants’ Services
and Training under Component 3:
Dissemination and Replication
Unallocated
Total Project Cost
Indicative Cost
in million USD
23.40
GEF Financing
in million USD
6.50
Financing percentage
from GEF Grant
up to 80%
6.08
4.86
80%
0.41
0.33
80%
2.09
31.97
0.81
12.50
39%
Supervision Plan. During Project implementation, the Bank will review the Project’s FM
arrangements in two main ways: (i) review the Project’s quarterly FM reports and the annual
audit report; (ii) during the Bank’s missions, review the Project’s financial management and
disbursement arrangements to ensure compliance with the Bank's requirements. As required, a
Bank-accredited Financial Management Specialist will assist in the supervision process.
59
Appendix to the Annex 7 –Nutrient Reduction Project
Sequence and Flow of Documents and Funds
c. Disbursement of funds (advance,
deposits)
b. Withdrawal applications
for advance, deposits, recovery
Ministry of
Finance
Special Acc. in the State
Treasury in USD
World Bank
a. Withdrawal Application for grant
disbursement – for initial advance,
further replenishment of Special
Account, recovery process.
iv. Quarterly consolidated
project reports- FMRs
4. Payment order to transfer
the funds from SA to
settlement accounts.
MOEW
5. Transfer of funds to
settlement accounts
1. Application for
funds for project
expenditures with
supporting
documentation
iii. Monthly report on
utilization of funds
SOE or SS. And
quarterly FMRs
2. Payments order to transfer
own contribution to settlement
account
MOB, MOEW,
WD
ii. Submission of the
invoices for the work
done/services
rendered
3. Transfer of own
contribution
MOB, MOEW,
WD bank
accounts
6. Payments order for works
done/services rendered
Three Settlement
Accounts for
MOB, MOEW,
WD in the State
Treasury
7. Payment to
contractors.
i. Signing of the
contracts
Contractors
Contractors’ bank
Accounts
Flow of funds
Flow of documents
60
Annex 8: Procurement Arrangements
HUNGARY: NUTRIENT REDUCTION (GEF) PROJECT
A. General
Procurement for the proposed Project would be carried out in accordance with the World Bank’s
“Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004; and
“Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May
2004, and the provisions stipulated in the GEF Trust Fund Grant and Project Agreement. For
bidding and contracting of consulting firms, the Project executing agencies would use standard
Bank documents; for National Competitive Bidding (Works), for Shopping, ECA regional
sample documents; and for individual consultants, national standard documents satisfactory to
the Bank.
The general description of items under different expenditure categories is provided below. For
each bidding package to be financed by the Loan, the procurement method, the need for
prequalification, estimated cost, prior-review requirement and time-frame have been agreed
between the Recipient and the Bank Project team, and are detailed in the Procurement Plan. The
Procurement Plan will be updated at least annually or as required to reflect the changing Project
implementation needs and improvements in procurement capacity.
Procurement of Goods and Works: Goods and Works represent most of the total Project cost.
They are packaged as follows: (a) the construction/installation of tertiary treatment facilities in
the existing NBWWTP. The turn-key contract for this plant will be procured under International
Competitive Bidding method (ICB), using the Bank standard bidding document for Supply and
Install (Two Stages). There will be pre-qualification of firms. The estimated cost is US$ 23.4
million; (b) the rehabilitation of wetlands to develop trapping capacity for nutrients in the
DDNP, through earth moving and installation of water flow controllers. These works include
several civil works contracts, to be awarded under National Competitive Bidding (NCB)
procedure taking into account the NCB procedural waiver (conditions of broad compatibility
with Bank’s guidelines) included in the Legal Agreement, using the Bank ECA Regional sample
bidding documents for NCB of works. The aggregate cost of these contracts is estimated at
US$3.125 million. (However, subject to the estimated cost being updated higher than the NCB
threshold, one additional similar works contract may have to be awarded under ICB procedure
for US$1.25 million). Six very small minor works contracts (estimated aggregate: US$
490,000).would be awarded on the basis of three or more written quotations (Shopping for
works). The BMSC has been awarded a contract for the supervision of the
construction/installation of tertiary treatment facilities in the existing NBWWTP. Therefore, to
avoid conflict of interest, neither the Private Operator managing the BMSC nor its affiliates will
be allowed to participate in the bidding for the construction of tertiary treatment facilities.
Additionally, following the Bank advice, the MOB will create a committee consisting of
representatives of the MOB (Project Unit and Public Utilities Department), the BMSC, and the
Private Operator to monitor the implementation of the works.
Selection of Consultants: Consulting services represent about 5 % of the total Project cost and
include several assignments to be contracted with individual consultants for support of Project
implementation management training and workshops. Two contracts estimated to cost US$
270,000 would be awarded using Quality and Cost Based (QCBS) Selection method for design,
61
preparation of specifications and bidding documents, and supervision. The same method will be
used to award the development of DDNP Special Area Management Plan (US$ 250,000). One
contract might be awarded using Least Cost (LCS) Selection method. Other Consultant contracts
with firms would be awarded using the selection method based on the Qualifications of
Consultants (CQS) for the preparation and implementation of replication and dissemination
(three contracts), and for three other contracts listed below under Section E.2 of this Annex.
B) Assessment of the Agency’s Capacity to Implement Procurement.
Project implementation management would be under the responsibility of the MOEW. A Project
Steering Committee with representatives of the MOEW, the MOB, the WD and the DDNPD has
been set up for advisory and coordination purposes. The MOEW has appointed a Project
coordinator, to lead a Project Management Unit involving six other people from different
departments of the MOEW. Implementation activities for the Budapest component will be
supervised and controlled by the MOB through a Project Implementation Unit - PIU, MOB. The
implementation activities for the DDNP Project component will be under supervision and control
of the WD through a Project Implementation Unit - PIU, WD. The implementation of the
dissemination and replication component will be with the PMU, MOEW.
An assessment of the capacity of both PIUs, as well as of the PMU, to implement the Project’s
procurement was carried out on February 4, 2005. The risk assessment of the system’s capacities
to implement procurement has been rated as average. The PIU, MOB has gained experience in
dealing with Bank-financed projects through the implementation of the ongoing HMWP
financed by Loan 4512-HU, which has been successful. The PIU, WD has no previous
experience in implementing Bank-financed procurement. The procurement requirements from
this Project component, however, are limited to a few contracts of a simple nature. The
implementation of the following Action Plan will help minimize the risks which have been
identified, especially those related to the lack of experience by DDNPD/WD in implementing
Bank-financed procurement.
Description
Procurement
Plan/Packaging
Draft Operational Manual
Project Launch Seminar
Procurement Ex-Post
Reviews
Objective
Identify events/work flow
Time-frame
Appraisal
Define operational rules
Train/disseminate rules
Supervision
Administrative Support to
the PMU at MOEW
Assure satisfactory
supervision/control.
Negotiations
Prior to disbursement
Two in the Project
Implementation period, to
be scheduled.
Appraisal
The Bank will prior review the ICB for the Budapest component and the two NCBs for the
DDNP component. Regarding services, the Bank will prior-review all consultant contracts with
firms and the first two individual contracts with individual consultants. Intensity of the Bank
procurement supervision would be average.
C) Procurement Plan.
62
Both executing agencies have prepared Preliminary Project implementation schedules and
procurement plans covering the foreseen implementation period (2005-10). These procurement
plans have been updated and annexed to the Operational Manual.
D) Frequency of Procurement Supervision.
The participation of a procurement specialist at least once a year in Bank supervision missions is
recommended.
E) Details of Procurement Arrangements Involving International Competition.
1. Goods, Works and Non Consulting Services.
(a) List of contract packages to be procured following ICB and direct contracting:
 Contract: Construction/installation of tertiary treatment facilities in the existing North
Budapest Wastewater Treatment Plant.
Estimated Cost: US$ 23.4 million.
Procurement Method: ICB; two stages.
Prequalification: yes
Domestic Preference: No
Review by Bank: Prior
Expected Bid Opening Date: May 2006
Comments: technical and bid preparation is advanced.
(b) Direct Contracting: not planned.
Table A: Project Costs by Procurement Arrangements
Million US$ (1)
Procurement Method
Expenditure Category
ICB
NCB
Other (2)
N.B.F.
1.34
3.34
0.52
1. Works
(1.07)
(2.68)
(0.42)
25.04
0.07
2. Goods
(6.96)
(0.05)
1.67
3. Services
(1.33)
4. Miscellaneous/Other
26.38
3.34
2.25
Total
(8.03)
(2.68)
(1.80)
-
Total
Cost
5.20
(4.16)
25.10
(7.01)
1.67
(1.33)
31.97
(12.50)
1) Total expected value of contracts, including contingencies. Figures in parentheses are the amounts to be
financed by the GEF.
2) Includes civil works and goods to be procured through medium works, shopping, consulting services,
services of contracted staff of the Project management office, training, technical assistance services and costs
related to (i) managing the Project.
63
2. Consulting Services
(a) List of consulting assignments with short-list of international firms:
-
-
-
Two contracts estimated to cost respectively US$ 150,000 and US$ 120,000 will be
awarded using Quality and Cost Based (QCBS) Selection method for design, and
preparation of specifications and bidding documents on one hand, and subsequent
construction supervision of the works in the DDNP on the other hand. (First expected
submission of proposals: March 2006)
Three contracts for (i) Design and Development of a Monitoring System (US$ 80,000)
(ii) Baseline study and licensing support (US$ 120,000), and (iii) Development of impact
evaluation technology (US$ 80,000) will be awarded using Selection method based on
Consultants’ Qualifications (CQS). (First expected submission of proposals: January
2006)
Six Consultant contracts with firms will be awarded using the selection method based on
Consultants’ Qualifications (CQS) for (i) the preparation and implementation of
replication and dissemination, (ii) training and Project launch workshop, and (iii) impact
evaluation and cost-benefit analysis (estimate: US$ 325,000 for the six). (First expected
submission of proposals: January 2006)
Table A1: Consultant Selection Arrangements (optional)
Million US$
Expenditure
Category
A. Firms
B. Individuals
Total
QCBS
QBS
SFB
0.70
(0.56)
0.70
(0.56)
-
-
Selection Method
LCS
CQ
-
64
0.81
(0.65)
0.81
(0.65)
Other
N.B.F.
0.16
(0.13)
0.16
(0.13)
-
Total
Cost
1.50
(1.20)
0.16
(0.13)
1.67
(1.33)
Appendix 1 to the Procurement Plan: Prior Review Thresholds
Thresholds for prior review are specified hereafter as Appendix 1 to the initial Procurement Plan
for the starting year of implementation, and may be revised after one year. The updates issued by
the Bank are to be construed as Appendix 1 to the current Procurement Plan replacing previous
Appendix 1.
Thresholds for prior review are set as follows for the first year:
A). Goods and Works. The following contracts are subject to the Bank’s prior review as set
forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines:
1.
all ICB contracts;
2.
all contracts estimated to cost the equivalent of US$ 200,000 or more; and
3.
the first two contracts procured under NCB (regardless of contract value), and first two
under Shopping as well as under Minor Works (S or MW).
B). Consulting Services. With respect to consulting services, prior Bank review will be required
for all terms of reference for consultants. Contracts for services estimated to cost the equivalent
of US$ 100,000 or more for firms and US$ 50,000 or more for individuals, and the first two
contracts under CQS, FBS and LCS are subject to Bank’s prior review as set forth in paragraphs
2 and 3 of Appendix 1 to the Guidelines (CQS Method may be used for contracts estimated to
cost less than US$ 200,000 equivalent).
C). All other contracts are subject to post review, in a ratio of one contract in five.
Table B: Thresholds for Procurement Methods and Prior Review 1
Expenditure Category
1. Works
2. Goods
3. Services (local and
foreign firms)
Contract Value
Threshold (Method)
(US$)
Procurement
Method
Contracts Subject to
Prior Review
(US$)
Over 2,000,000
less than 2,000,000
less than 100,000
Over 300,000
Up to 300,000
Less than 100,000
Over 200,000
ICB
NCB
S (MW)
ICB
NCB
S
QCBS
All
2 first contracts
2 first contracts
All
2 first contracts
2 first contracts
All
Less than 200,000
Less than 200,000
Less than 100,000
CQ
LCS
IC
above 100,000
above100,000
above 50,000
65
Annex 9: Economic and Financial Analysis
HUNGARY: NUTRIENT REDUCTION (GEF) PROJECT
1. Economic
The key development objectives of the Project are: (i) to reduce Budapest’s discharge of
nutrients (nitrogen and phosphorous) into the Danube River, and consequently into the Black
Sea; (ii) to enhance the nutrient trapping capacity of Gemenc and Beda-Karapancsa wetlands
situated in the lower Hungarian part of the Danube River; and (iii) to serve as a model for similar
nutrient reduction initiatives in Hungary and other Danube basin countries. These objectives will
be achieved through: (i) the development of tertiary treatment (nutrient removal) at the
NBWWTP; (ii) the rehabilitation of wetlands in the Gemenc and Beda-Karapancsa areas of the
DDNP; and (iii) the establishment of a comprehensive M&E system for water quality and
environmental health to measure the reduction of nutrients. The Project will also finance
dissemination activities to foster replication in Hungary or in other parts of the Danube River
basin.
The economic analysis in this annex should be read in conjunction with the detailed Incremental
Cost Analysis of the Project which is presented in Annex 15.
Broad sectoral goals and baseline: See Annex 15.
Incremental cost and financing:
See Annex 15.
Global benefits: See Annex 15.
Cost-Effectiveness: See Annex 15.
Economic benefits: Incremental benefits are valued at US$ 5 per kg of nutrient reduction.7
Incremental capital and O&M costs are net of taxes. The projection period is 25 years (20062030). On this basis, the economic rate of return (ERR) is estimated at 22% for the Budapest
component and 72% for the DDNP component. The high rate of return for the DDNP
component, however, has to be viewed with caution given the relative lack of quantitative
evaluations of impacts for wetlands. Details are in the attached Table 1.
7
Current estimates of the value of nutrient reduction range from US$2/kg to about US$9/kg for N and up to
US$22/kg for P. Therefore, the estimate of US$5/kg appears rather conservative. This figure of 5 US$ per kg has
been adopted on the basis of available references, such as: 47 SEK/kg ($5.58/kg) and 112 SEK/kg ($13.30/kg) for
the marginal cost of the reduction of nitrogen and phosphorous to coastal waters, as proposed by K. Elofsson (Cost
efficient reductions of stochastic nutrient loads to the Baltic Sea, Paper presented at the 7th Ulvoe conference 19-21
June 2000), $2/kg proposed by G. Constantinides (Cost-Benefit Analysis Case Studies in Eastern Africa for the
GPA Strategic Action Plan on Sewage. UNEP, 2000); 62 SEK/kg ($7.36/kg) proposed for the marginal benefit of Nreduction proposed by I.M. Gren and H. Folmer (Cooperation vs. Non-Cooperation in Cleaning of an International
Water Body with Stochastic Environmental Damage: The Case of the Baltic Sea. Swedish University of Agricultural
Sciences, Uppsala, September, 2001), and 11.50 EUR/kg as the critical emission "tax" level for the removal of P
from detergents, as proposed by I. Ijjasz (Reducing Phosphorus in the Danube Basin Workshop, Hungary, 1995). In
more recent studies, the US EPA established a benchmark for the cost-effectiveness of nutrient removal of $4 per
pound of nitrogen ($8.8/kg) and $10 per pound ($22/kg) of phosphorus (Federal Register / Vol. 68, No. 29 /
Wednesday, February 12, 2003 / Rules and Regulations).
66
Annex 9, Table 1 - Economic benefits estimation
(US$ 000)
Budapest
component
Incremental capital
cost
Incremental O&M
expenses
Incremental
economic benefits
Net economic
benefit
Economic rate of
return (ERR)
DDNP component
Incremental capital
cost
Incremental O&M
expenses
Incremental
economic benefits
2006
2007
2008
2009
-1872
-7488
-6926
-2434
-5020
-5045
-12508
11971
-729
-700
-1872
2010
2011
2012
2013
2014
Annually
20152030
-5036
-5095
-5165
-5238
-5315
-5329
-5350
12320
12320
12320
12320
12320
12320
12320
4850
7225
7155
7082
7005
6991
6970
-1798
-1652
-581
-700
-700
-700
-700
-700
-700
-700
-700
9130
9130
9130
9130
9130
9130
7849
8430
8430
8430
8430
8430
22%
-100
Net economic
benefit
-100
Economic rate of
return (ERR)
72%
-1429
-2498
-2352
Note: Base economic value of nutrient reduction assumed to be USD 5/kg of reduction.
NBWWTP component: Total project cost (including taxes and duties) = USD 23.4 million; taxes and duties = 20%;
cost excluding taxes and duties = USD 18.72 million
DDNP component: Total project cost (including taxes and duties) = USD 6.08 million; taxes and duties = 20%; cost
excluding taxes and duties = USD 4.86 million
Sensitivity Analysis: Estimates of the economic value of nutrient reduction range between US$
2/kg to US$ 9/kg for nitrogen (N) and up to US$ 22//kg for phosphorus (P) in different studies.
Sensitivity analysis indicates that, at the lower end value of US$ 2/kg, the ERR for the
NBWWTP becomes negative while that for the DDNP component drops to 33%. At the upper
end values of US$ 9/kg for N and US$ 22/kg for P, the ERRs for the two components are
estimated at 51 % and 111% respectively. For the NBWWTP component, the break-even point
(NPV=0) is reached at an economic value of nutrient reduction of about US$3.5/kg. For the
DDNP component, given the relative uncertainty about the amount of reductions to be achieved,
sensitivity analysis indicates that the ERR would remain above 40 % even if the amount of
reduction (in tons) is lower than expected by up to 50%. Furthermore, the ERR would remain
about 20% even if both the amount of reduction (in tons) is lower than expected by up to 50%,
and the economic value per unit of reduction drops to US$ 2.5/kg. See Table 2 for details.
67
Annex 9, Table 2: Sensitivity Analysis for Economic Benefits Estimation
(USD 000)
2006
2007
2008
2009
2010
2011
2012
2013
2014
Annually
2015-2030
-1872
-7488
-5020
-6926
-5045
-12508
-11971
-2434
-5036
4928
-2542
-5095
4928
-167
-5165
4928
-237
-5238
4928
-310
-5315
4928
-387
-5329
4928
-401
-5350
4928
-422
-729
-700
-1798
-700
-1652
-700
-1429
-2498
-2352
-581
-700
3652
2371
-700
3652
2952
-700
3652
2952
-700
3652
2952
-700
3652
2952
-700
3652
2952
-7488
-5020
-6926
-5045
-12508
-11971
-2434
-5036
23778
16308
-5095
23778
18683
-5165
23778
18613
-5238
23778
18540
-5315
23778
18463
-5329
23778
18449
-5350
23778
18428
-729
-700
-1798
-700
-1652
-700
-1429
-2498
-2352
-581
-700
17621
16340
-700
17621
16921
-700
17621
16921
-700
17621
16921
-700
17621
16921
-700
17621
16921
LOW CASE (at USD 2/kg of nutrient reduction)
NBWWTP (Budapest component)
Incremental capital cost
Incremental O&M expenses
Incremental economic benefits
Net economic benefit
Economic rate of return (ERR)
DDNP (Park component)
Incremental capital cost
Incremental O&M expenses
Incremental economic benefits
Net economic benefit
Economic rate of return (ERR)
-1872
negative
-100
-100
33%
HIGH CASE (at USD 9.46/kg of reduction)
(weighted average of N at USD 8.8 kg and P at
USD 22/kg)
NBWWTP (Budapest component)
Incremental capital cost
Incremental O&M expenses
Incremental economic benefits
Net economic benefit
Economic rate of return (ERR)
DDNP (Park component)
Incremental capital cost
Incremental O&M expenses
Incremental economic benefits
Net economic benefit
Economic rate of return (ERR)
-1872
-1872
51%
-100
-100
111%
68
50% LOWER NUTRIENT REDUCTION FROM
DDNP
(annually 913 tons instead of 1,826 tons, at USD
5/kg)
DDNP (Park component)
Incremental capital cost
Incremental O&M expenses
Incremental economic benefits
Net economic benefit
Economic rate of return (ERR)
-100
-100
-729
-700
-1798
-700
-1652
-700
-581
-700
4565
3284
-700
4565
3865
-700
4565
3865
-700
4565
3865
-700
4565
3865
-700
4565
3865
-1429
-2498
-2352
-729
-700
-1798
-700
-1652
-700
-2352
-581
-700
2283
1002
-700
2283
1583
-700
2283
1583
-700
2283
1583
-700
2283
1583
-700
2283
1583
-1429
-2498
-7488
-5020
-6926
-5045
-2434
-5036
8708.86
1238.86
-5095
8708.86
3613.86
-5165
8708.86
3543.86
-5238
8708.86
3470.86
-5315
8708.86
3393.86
-5329
8708.86
3379.86
-5350
8708.86
3358.86
-12508
-11971
41%
50% LOWER NUTRIENT REDUCTION & 50%
LOWER
PER TON VALUE OF BENEFIT FOR DDNP
COMPONENT
(annually 913 tons of reduction at USD 2.5/kg)
DDNP (Park component)
Incremental capital cost
Incremental O&M expenses
Incremental economic benefits
Net economic benefit
Economic rate of return (ERR)
-100
-100
19%
BREAK-EVEN VALUE FOR NBWWTP
Component
(USD 3.53/kg of reduction, at which NPV = 0)
NBWWTP (Budapest component)
Incremental capital cost
Incremental O&M expenses
Incremental economic benefits
Net economic benefit
-1872
-1872
Net Present Value =
$0.00
Note: Base case annual nutrient reduction: NBWWTP = 2,464 tons (2,300 tons of N and 164 tons of P); DDNP = 1,826 tons (1,734 tons of N and 92 tons of P)
69
Financial (see Annex 5)
Financial rate of return (FRR): An FRR has not been calculated for the Project given the
nature of the investments which result in environmental benefits and externalities. A financial
return on investment is not the main consideration in undertaking the investment. However, as
provided under the contractual agreement between the MOB and the BMSC, the tariff formula
provides for BMSC to recover any incremental operating expenses due to the investment. The
increment in tariff is based on such cost-recovery.
Financial assessment of the participating entities: The MOB is a borrower under the ongoing
Bank Loan 4512-HU for the HMWP and had earlier been a borrower under Loan 3093 for the
Urban Transport Project. Budapest has generally followed a prudent fiscal and financial policy,
and has been successful in raising funds in European bond markets. It has also followed an
active policy of divestiture of assets through privatization with the revenues from these sales
being directed largely to developmental, including infrastructure, investments. Budapest, with
the help of international consultants, has prepared forward-looking financial plans, updated each
year, including detailed financial projections (a summary is provided in Annex 5). The
projections indicate that Budapest would continue to be able to meet its debt service obligations
in a satisfactory manner. The BMSC is the beneficiary under Loan 4512-HU. Until November
1997, BMSC was a joint stock company owned by Budapest. In November 1997, Budapest
entered into an agreement with a consortium of two foreign utility operators General des Eaux
(of France) and Berlinwasser (of Germany) under which Budapest transferred 25% of the share
ownership and the management of the company to the consortium. The Bank has been in touch
with the company through Project supervision under Loan 4512-HU. Operations of the company
have been satisfactory and the company has realized a profit each year since 1999 (a summary of
the financial statements is provided in Annex 5). The DDNPD falls within the jurisdiction of the
MOEW. Revenues of the DDNPD are derived primarily through budgetary transfers from the
MOEW.
Incremental O & M expenses and tariffs: For the NBWWTP, the annual incremental O & M
expenses on account of the addition of tertiary treatment have been estimated at about US$ 5
million equivalent (HUF 975 million). For BMSC as a whole, with a total invoiced volume of
about 154 million m3 per year, this implies a per m3 incremental O & M expense of about HUF
6.5/m3. Annual debt service on the loan amount of US$ 7.2 million (HUF 1440 million) is
estimated to amount to about HUF 1.5/m3. The total incremental expense for the NBWWTP is
therefore estimated at about HUF 8/m3 which represents an increase of about 4.5% over the
existing level of average wastewater tariff (about HUF 173/m3) and of about 2.3% over the
existing level of the average water and wastewater tariff. The resulting new tariff is projected to
remain affordable for the population (less than 4% of the average households’ monthly income).
For the DDNPD, the incremental expenses associated with the Project are estimated at HUF135
million per year which represents 26% of the 2005 DDNPD annual budget (HUF 529 million,
US$2.7 million equivalent). This amount will be provided through budgetary transfers to
DDNPD by the MOEW.
70
Annex 10: Safeguard Policy Issues
HUNGARY: NUTRIENT REDUCTION (GEF) PROJECT
Safeguard Policies Triggered by the Project
Environmental Assessment (OP/BP/GP 4.01)
Natural Habitats (OP/BP 4.04)
Pest Management (OP 4.09)
Cultural Property (OPN 11.03, being revised as OP 4.11)
Involuntary Resettlement (OP/BP 4.12)
Indigenous Peoples (OD 4.20, being revised as OP 4.10)
Forests (OP/BP 4.36)
Safety of Dams (OP/BP 4.37)
Projects in Disputed Areas (OP/BP/GP 7.60)
Projects on International Waterways (OP/BP/GP 7.50)
Yes
[X]
[X]
[]
[]
[]
[]
[]
[]
[]
[X]
No
[]
[X]
[X]
[X]
[X]
[X]
[X]
[X]
[X]
[]
Environmental Assessment (OP/BP 4.01).
No significant indirect or long term negative impact on the environment is expected as part of the
Project, which, given the nature of the investments, has been classified as environmental
category "B".
The MOB completed the environmental assessment report for its component for which it
received Government's approval. The WD, on behalf of the DDNPD, completed an EIA for the
DDNP component. As the process for its approval is rather lengthy in Hungary, the Project
provides for a late start of implementation for the DDNP component, to take place after the
Government’s approval for this EIA is obtained, in compliance with Hungarian regulation.
The EIAs and other studies carried out during preparation clearly indicate that no significant
negative impact on the environment is expected as a result of the Project’s implementation. For
the Budapest component, potential impacts are exclusively limited to those that could occur
during the construction phase (noise, etc.) which will be adequately controlled (the EMP
includes measures to this end). For the DDNP component, the EIA has identified potential
environmental negative impacts associated with dredging, changes in the local hydrology,
disposal of dredge materials, and increased flow of pollutants into the wetlands. The EIA
concludes that no significant negative impacts are expected if the precautions foreseen under the
EMP are followed. Moreover, the rehabilitation of the wetlands is expected to improve the
ecological conditions of the ecosystem and increase biodiversity, as new valuable habitats will be
created. Positive ecological impacts are in particular expected with the creation of additional
habitats and nesting places for a number of migratory bird species of global importance, such as
the Ferruginous Duck (Aythya Nyroca), the White-tailed Eagle (Haliaeetus albicilla) and Black
Storks. As indicated above, the Ministry of Environment will convene an Experts Panel to assist
the WD and DDNPD authorities in the assessment and monitoring of the proposed interventions.
Qualitative aspects of the biological processes to occur in the DDNP in regards to nutrient
trapping and their possible consequences on the ecology and biodiversity are detailed in Annex
18.
Environmental Management Plans have been prepared for each of the aforementioned
components, and mitigation measures have been proposed. The Mitigation Plan prepared under
71
each EMP identifies and addresses all relevant parameters, impacts and mitigation measures,
both during the construction and operation periods, and identifies the agency with designated
responsibility for its implementation and for its enforcement. In particular, for the DDNP
component, possible options for the handling and disposal of the dredged material have been
considered and will be thoroughly examined as part of the detailed design. These measures
include testing materials to be dredged for potential contamination, physically isolate areas
during dredging, reuse dredged material where practicable if found to be of acceptable quality,
dispose of dredged material to an appropriate site according to its quality, and concentrate the
dredging and construction work during ecologically less sensitive periods of the year.
Contractors will be responsible for implementing these precautions and measures, and their
implementation will be supervised by the WD, the DDNPD and the MOEW. The distribution of
responsibilities for the implementation and monitoring of these EMPs will be incorporated in the
Grant implementation agreement between the MOEW, the MOB, the WD and the DDNPD.
Additionally, these EMPs will be incorporated in the Project Operational Manual and its
implementation will be monitored as part of Bank supervision missions.
Natural Habitats (OP/BP 4.04)
On the basis of the conclusions of the EIAs, the Project is not expected to have any significant
conversion (loss) or degradation of natural habitats, particularly in the DDNP. The DDNP is
currently flooded periodically (several times a year) by the Danube River. The Project will
increase water retention and expand the areas of permanent wetlands. Specific provisions have
been included in the EMP to ensure that these works are carried out taking into consideration the
functioning of these habitats so as to avoid disturbing migratory species or reduce biodiversity.
Populations of selected endangered species will be monitored during and beyond the Project life
as part of the Park monitoring system to be established. Consistent with the Safeguards meeting
and comments received, the Project Team took all necessary measures to comply with the
OP/BP, in particular in the EMPs.
Cultural Property (OPN 11.03) and Involuntary Resettlement (OP/BP 4.12)
The investments financed by the Project will not affect any known archeological or historical
site, nor will it affect indigenous people or require resettlement or purchase of land.
Safety of Dams (OP/BP 4.37)
No dams higher than 15 meters are located within the Project area and no upstream dam
infrastructure failure could impact the planned investments.
Projects on International Waterways (OP/BP/GP 7.50).
The Project is expected to have a positive impact on the water quality of the Danube, which is an
international waterway. In addition, riparian countries which are signatory members of the
Danube convention have been informed of and have discussed the Project within the scope of the
Danube Commission, which has included it in the priority list of the Joint Action Program.
Therefore notification to the riparian countries as part of OP7.50 has been waived for this Project
via Memo from the ECA RVP dated March 18, 2005.
No other Safeguard Policy is triggered.
72
Annex 11: Project Preparation and Supervision
HUNGARY: NUTRIENT REDUCTION (GEF) PROJECT
Planned
10/08/2004
PCN review
Initial PID to PIC
Initial ISDS to PIC
Appraisal
Negotiations
Board/RVP approval
Planned date of effectiveness
Planned date of mid-term review
Planned end of implementation
Planned closing date
06/07/2005
11/21/2005
1/21/2006
2/15/2006
12/15/2007
12/31/2009
12/31/2011
Actual
12/08/2004
11/24/2004
11/24/2004
10/12/2005
Key institutions responsible for preparation of the Project:
As indicated above, the MOEW has been given overall responsibility for the preparation and the
implementation of the Project. It will be directly responsible for the coordination and the
implementation of the dissemination and replication component. The MOB and the WD, on
behalf of the DDNPD, are responsible for the preparation of components 1 and 2, respectively.
Bank staff and consultants who worked on the Project included:
Name
Xavier Chauvot de Beauchêne
Manuel Mariño
Emilio Rodriguez
David Sislen
Iwona Warzecha
Andreas Rohde
Salim Benouniche
Suman Mehra
Christine Castillo
Claudia Pardiñas Ocaña
Rohit Mehta
Maria Teresa Lim
Title
Water & Sanitation Specialist, TTL
Lead Water & Sanitation Specialist, co-TTL
Consultant
Senior Infrastructure Economist
Senior Financial Management Specialist
Senior Sanitary Engineer
Senior Procurement Specialist
Country Program Coordinator
Operations Analyst
Senior Counsel
Senior Finance Officer
Program Assistant
Bank funds expended to date on Project preparation:
1. Bank resources:
2. Trust funds:
3. Total:
Estimated Approval and Supervision costs:
1. Remaining costs to approval:
2. Estimated annual supervision cost:
73
Unit
ECSIE
ECSIE
LCOPR
LCSFU
ECSPS
ECSIE
ECSPS
ECCU7
ECCU7
LEGEC
LOAG1
ECSIE
Annex 12: Documents in the Project File
HUNGARY: NUTRIENT REDUCTION (GEF) PROJECT
Extension of the North Budapest Wastewater Treatment Plant: II Stage, Nutrient Removal.
Estimation of Investment and Operation Costs for Technological Alternatives (Hydrochem Kft.
Vituki Innosystem Kft.) Mai 2003
Nutrient Removal Extension of North Budapest Wastewater Treatment Plant – Financial and
Economical Analysis (Oko Inc.) February 2005
Nutrient Removal Extension of North Budapest Wastewater Treatment Plant – Environmental
Impact Assessment (Imsys Ltd.) February 2005
Reduction of Nutrient Discharges Project – DDNP Component – Environmental Assessment and
Public Consultation (VITUKI Kht/ VTK Innosystem Ltd.) March 2005
Reduction of Nutrient Discharges Project – (DDNP) Pre-Feasibility Study, Financial and
Economic Analysis (DHV Hungary Ltd.) March 2005
74
Annex 13: Statement of Loans and Credits
HUNGARY: NUTRIENT REDUCTION (GEF) PROJECT
Difference between
expected and actual
disbursements
Original Amount in US$ Millions
Project ID
FY
P008497
2000
Purpose
IBRD
MUN. WASTEWATER
Total:
IDA
SF
GEF
Orig.
Frm. Rev’d
Cancel.
Undisb.
31.60
0.00
0.00
0.00
0.00
10.68
10.02
6.71
31.60
0.00
0.00
0.00
0.00
10.68
10.02
6.71
HUNGARY
STATEMENT OF IFC’s
Held and Disbursed Portfolio
In Millions of US Dollars
Committed
Disbursed
IFC
FY Approval
IFC
Company
Loan
Equity
Quasi
Partic.
Loan
Equity
Quasi
Partic.
ESCO Hungary
0.00
0.40
0.00
0.00
0.00
0.40
0.00
0.00
1990
FHF
0.00
2.16
0.00
0.00
0.00
2.16
0.00
0.00
2001
HEECP2
12.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2.56
0.00
0.00
0.00
2.56
0.00
0.00
Total portfilio:
12.00
Approvals Pending Commitment
FY Approval
Company
Total pending commitment:
75
Loan
Equity
Quasi
Partic.
0.00
0.00
0.00
0.00
Annex 14: Country at a Glance
HUNGARY: NUTRIENT REDUCTION (GEF) PROJECT
E uro pe &
C e nt ra l
H unga ry
A s ia
P O V E R T Y a nd S O C IA L
2003
P o pulatio n, mid-year (millio ns)
GNI per capita (A tlas metho d, US$ )
GNI (A tlas metho d, US$ billio ns)
Uppe rm iddle inc o m e
10.1
6,330
64.1
473
2,570
1,217
335
5,340
1,788
-0.1
0.1
0.0
0.2
1.2
1.8
17
65
72
8
..
99
1
102
102
101
..
63
69
31
..
91
3
103
104
102
..
76
73
19
..
89
9
104
104
104
D e v e lo pm e nt dia m o nd*
Life expectancy
A v e ra ge a nnua l gro wt h, 19 9 7 - 0 3
P o pulatio n (%)
Labo r fo rce (%)
M o s t re c e nt e s t im a t e ( la t e s t ye a r a v a ila ble , 19 9 7 - 0 3 )
P o verty (% o f po pulatio n belo w natio nal po verty line)
Urban po pulatio n (% o f to tal po pulatio n)
Life expectancy at birth (years)
Infant mo rtality (per 1,000 live births)
Child malnutritio n (% o f children under 5)
A ccess to an impro ved water so urce (% o f po pulatio n)
Illiteracy (% o f po pulatio n age 15+)
Gro ss primary enro llment (% o f scho o l-age po pulatio n)
M ale
Female
GNI
per
capita
Gro ss
primary
enro llment
A ccess to impro ved water so urce
Hungary
Upper-middle-inco me gro up
KE Y E C O N O M IC R A T IO S a nd LO N G - T E R M T R E N D S
19 8 3
19 9 3
2002
2003
GDP (US$ billio ns)
21.0
38.6
64.9
82.8
Gro ss do mestic investment/GDP
Expo rts o f go o ds and services/GDP
Gro ss do mestic savings/GDP
Gro ss natio nal savings/GDP
26.5
40.2
28.4
25.0
20.0
26.4
11.8
10.6
24.4
65.4
22.1
20.4
..
..
..
..
Current acco unt balance/GDP
Interest payments/GDP
To tal debt/GDP
To tal debt service/expo rts
P resent value o f debt/GDP
P resent value o f debt/expo rts
-6.3
3.7
51.1
22.6
..
..
-9.0
3.5
63.2
40.9
..
..
-4.1
1.7
53.9
33.8
50.5
74.9
..
1.5
55.3
..
..
..
E c o no m ic ra t io s *
19 8 3 - 9 3 19 9 3 - 0 3
(average annual gro wth)
GDP
GDP per capita
Expo rts o f go o ds and services
-1.2
-0.9
-0.6
3.7
3.9
15.1
2002
2003
2003-07
3.5
3.8
3.8
2.9
3.3
..
..
..
..
19 9 3
2002
2003
Trade
Do mestic
savings
Investment
Indebtedness
Hungary
Upper-middle-inco me gro up
S T R UC T UR E o f t he E C O N O M Y
19 8 3
(% o f GDP )
A griculture
Industry
M anufacturing
Services
19.1
47.2
..
33.7
6.8
32.9
22.8
60.3
4.3
31.2
22.7
64.5
..
..
..
..
P rivate co nsumptio n
General go vernment co nsumptio n
Impo rts o f go o ds and services
61.5
10.1
38.3
74.4
13.8
34.6
67.0
10.9
67.6
..
..
..
19 8 3 - 9 3 19 9 3 - 0 3
2002
2003
G ro wt h o f inv e s t m e nt a nd G D P ( %)
20
10
0
98
00
01
GDI
02
03
GDP
G ro wt h o f e xpo rt s a nd im po rt s ( %)
(average annual gro wth)
A griculture
Industry
M anufacturing
Services
-2.6
-3.7
..
0.0
1.7
5.8
8.1
3.2
2.4
2.4
2.4
2.4
..
..
..
..
30
P rivate co nsumptio n
General go vernment co nsumptio n
Gro ss do mestic investment
Impo rts o f go o ds and services
-0.6
2.3
-3.1
1.3
2.5
0.6
7.7
13.3
9.3
10.8
-2.0
6.1
..
..
..
..
0
76
99
-10
20
10
98
99
Exports
00
01
02
Imports
03
Hungary
P R IC E S a nd G O V E R N M E N T F IN A N C E
19 8 3
D o m e s t ic pric e s
(% change)
Co nsumer prices
Implicit GDP deflato r
G o v e rnm e nt f ina nc e
(% o f GDP , includes current grants)
Current revenue
Current budget balance
Overall surplus/deficit
19 9 3
2002
2003
Inf la t io n ( %)
20
..
5.0
22.5
21.3
5.7
8.9
..
7.8
15
10
5
0
..
..
..
49.6
-1.8
-6.0
..
..
-8.8
..
..
..
19 8 3
19 9 3
2002
2003
..
..
..
..
..
..
..
..
8,910
..
..
..
12,530
..
..
..
34,337
..
..
..
37,612
..
..
..
..
..
..
..
..
..
..
..
26
24
106
63
65
97
175
..
..
175
..
..
19 8 3
19 9 3
2002
2003
10,246
10,870
-624
10,246
13,249
-3,003
42,600
44,105
-1,506
..
..
..
-760
56
-1,186
732
-1,586
..
..
..
Current acco unt balance
-1,328
-3,457
-2,644
..
Financing items (net)
Changes in net reserves
1,539
-211
6,063
-2,606
851
1,793
..
..
..
42.7
..
91.9
1,793
257.9
..
224.3
19 9 3
2002
2003
24,404
2,095
0
34,958
517
0
45,785
253
0
2,350
1
0
4,382
292
0
14,790
96
0
15,179
319
0
Co mpo sitio n o f net reso urce flo ws
Official grants
Official credito rs
P rivate credito rs
Fo reign direct investment
P o rtfo lio equity
0
173
-141
0
0
85
95
2,411
2,350
46
123
-8
-496
854
-137
..
-470
2,376
..
..
Wo rld B ank pro gram
Co mmitments
Disbursements
P rincipal repayments
278
57
0
342
229
144
0
1
64
0
0
281
98
99
00
01
02
GDP deflator
03
CPI
TRADE
(US$ millio ns)
To tal expo rts (fo b)
Other manufactures
Fo o d
M anufactures
To tal impo rts (cif)
Fo o d
Fuel and energy
Capital go o ds
Expo rt price index (1995=100)
Impo rt price index (1995=100)
Terms o f trade (1995=100)
E xpo rt a nd im po rt le v e ls ( US $ m ill.)
40,000
30,000
20,000
10,000
0
97
98
99
00
Exports
01
02
03
Imports
B A LA N C E o f P A Y M E N T S
(US$ millio ns)
Expo rts o f go o ds and services
Impo rts o f go o ds and services
Reso urce balance
Net inco me
Net current transfers
M emo :
Reserves including go ld (US$ millio ns)
Co nversio n rate (DEC, lo cal/US$ )
E X T E R N A L D E B T a nd R E S O UR C E F LO WS
19 8 3
(US$ millio ns)
To tal debt o utstanding and disbursed
10,735
IB RD
57
IDA
0
To tal debt service
IB RD
IDA
C urre nt a c c o unt ba la nc e t o G D P ( %)
0
97
98
99
00
01
02
03
-2
-4
-6
C o m po s it io n o f 2 0 0 3 de bt ( US $ m ill.)
77
A: 253
D: 1,202
G: 9,016
E: 295
F: 35,019
A - IBRD
B - IDA
C - IM F
D - Other multilateral
E - Bilateral
F - Private
G - Short-term
Annex 15: Incremental Cost Analysis
HUNGARY: NUTRIENT REDUCTION (GEF) PROJECT
Broad Sectoral Development Goals and the Baseline
Background: Hungary joined the EU in May 2004 and is in the process of adapting its
regulatory framework to meet the requirements under EU Directives, including those in regards
to water quality and environment. Along with other countries that joined the EU in 2004,
Hungary has been given a period of ten years to achieve full compliance with the EU Directives.
The Government’s priorities in regards to the sector are therefore governed by the need to meet
the EU requirements within the specified time frame. Hungary is also a signatory to the ICPDR
created in October 1998. As such, it is committed to international cooperation for the protection
of the Danube River and the Black Sea.
Status of the sector: Water supply in Hungary generally functions well. Water service levels
are high, ownership and management in the sector have been decentralized to the local
governments, and most tariffs reflect the cost of service. The Government’s principal objectives
in the sector are to: (i) close the gap between water supply coverage, and wastewater collection
and treatment; (ii) keep water and wastewater services affordable; and (iii) increasingly reach
full compliance with the relevant EU Directives. For Hungary, investment in additional
wastewater facilities, particularly treatment facilities, is by far the largest aspect of compliance
with the EU Directives. The Government, in dialogue with the EU and other institutions
including the World Bank, has guided resources towards investments that are local and /or
national priorities (including improvement of water quality in the Danube basin) and which also
help Hungary move towards compliance with EU requirements.
Budapest is by far the most important source point of nutrient discharges in Hungary. As such, it
has been included within the top priorities in the first JAP of the ICPDR. Development of the
wastewater treatment infrastructure in Hungary represents about 25% of the overall investment
program under the JAP. Alternative solutions to achieve nutrient reduction, including wetlands,
and in particular, floodplain solutions, are also considered. The DDNP, a protected area of
27,800 ha includes about 19,500 ha of wetlands. In the past, these wetlands covered about
80,000 ha but the area has been drastically whittled down by conversion of land to agricultural
use. The DDNP, particularly its Gemenc and Beda-Karapancsa sections, lies close to the
southern body of the country where the Danube exits Hungary. Because of its characteristics and
location, it is the area with the largest nutrient reduction potential in Hungary, and capable of
eliminating large amounts of nutrients from agricultural and other diffuse uses.
Baseline: In recent years, the Government has initiated a number of wastewater treatment
related investments. In the case of Budapest, this includes expansion and upgrading of two
WWTPs for North Budapest and South Pest respectively (these investments were financed in
part by the Bank through Loan 4512-HU). The South Pest WWTP was expanded from a
capacity of 72,000 m3/day to 120,000 m3/day, and upgraded to provide nitrogen and phosphorus
removal, and biogas recovery. The NBWWTP was expanded to a capacity of 200,000 m3/day
and includes secondary treatment; however, nutrient removal facilities were left for
78
implementation in the future (when it was planned to add more high-rate primary sedimentation
tanks, fixed-bed filters, and chemical dosing for phosphorus removal). The estimated total cost
of the investment was about US$ 80 million of which US$ 31 million was for the South Pest
WWTP, US$ 27 million for the NBWWTP, and US$ 22 million for complementary investments.
This is taken as the Baseline for the proposed Project.
Annex 15, Table 1: Expected achievements under the Baseline (pollution and nutrient reduction):
Indicator
South Pest WWTP
NBWWTP
Wastewater discharged
90,000 m3/day
152,000 m3/day
BOD discharged
1,350 kg/day
20,600 kg/day
Nitrogen discharged
900 kg/day
9,230 kg/day
Phosphorus discharged
90 kg/day
775 kg/day
Incremental Cost: Although the Government is keenly aware of its commitment to cooperate in
improving the environmental situation and transboundary impacts of pollution in the Danube
River, and consequently, the Black Sea, it is prevented from pursuing these goals as rapidly as it
would like by the lack of sufficient funds. Under the current EU directives, tertiary treatment is
not a requirement for discharges into the Danube River. Therefore, as regards the important
nutrient reduction investments (extension to tertiary treatment for the NBWWTP and wetlands
restoration in the DDNP), unless complementary financing is available from external sources, the
Government’s financial constraints would prevent it from undertaking the investments until such
time as it has funds available for the purpose. This would indefinitely delay the nutrient
reduction activities and result in continued pollution of the Danube and the Black Sea. The
entire cost of the Project (estimated at US$ 32 million) is therefore taken as additional to the
Baseline. For details, please see Table 6 and 8 below.
Global Environmental Objective and the GEF Alternative
The global objective is to reduce the discharge of nutrients into the Danube River and thereby to
reduce nutrient loads into the Black Sea.
Under the Baseline discussed above, the Government is unlikely to be able to allocate sufficient
financial resources to address the growing pollution effects from nutrient discharges into the
Danube River which will also result in negative transboundary and global environmental
consequences including:





endangered marine ecosystems and habitats
endangered coastal ecosystems
risks and adverse impacts of biodiversity
development of algae populations
declining marshlands of global importance
GEF alternative: To minimize the nutrient discharges and consequent eutrophication of the
wetlands and marine areas, the GEF alternative proposed includes investments that will
significantly reduce nutrient loads of the wastewater discharged into the Danube River and into
the Black Sea. Availability of a significant GEF Grant contribution will enable the Government
79
to complete the financing required to launch the early implementation of the environmental
protection interventions. The local contribution to the Project is expected to be about US$11.8
million of which about US$10.4 million would be from the Municipality of Budapest and
US$1.4 million from the Government. An amount of US$7.7 million equivalent (Euro5.9
million) will be made available from the reallocation of loan savings and uncommitted funds
under the Bank’s Loan 4512-HU (for the HMWP). The balance of US$12.5 million is to be
provided through the GEF Grant. The investments proposed under the GEF alternative are the
following:



Upgrading of the NBWWTP to the tertiary level of treatment for nutrient reduction (N
and P);
Rehabilitation of wetlands and the development of nutrient trapping capacity in the
Gemenc and Beda-Karapancsa regions of the DDNP; and
Establishment of monitoring systems to measure nutrient reduction, improvement of
water quality, and impacts on ecology and biodiversity.
GEF financing is expected to be used in conjunction with associated complementary financing
for each of the components (see Table 5).
The Project investments are expected to result in the following reductions in nutrient emissions:
Annex 15, Table 2: Nutrient emissions (in tons/annum) of the NBWWTP compared to large
scale fluxes. The figures into brackets represent the reduction percentage generated by
Component 1.
NBWWTP
Components
N (t/yr)
P (t/yr)
Current
3,370
280
Budapest
After Project
1,075 (68%)
110 (60%)
Current
7,150
985
After Project
4850 (32%)
820 (17%)
Hungary point sources
emissions
Current
15,900
3,000
After Project
13,600 (14%)
2800 (6%)
(Date Source: Behrendt et al., 2003 and Municipality of Budapest)
Annex 15, Table 3: Estimated nutrient reduction in the DDNP component (in tons/annum).
The figures into brackets represent the reduction percentage generated by Component 2.
Components
Estimated reductions in DDNP
Current
After Project
Total non point sources emissions in Hungary
Current
After Project
N (t/yr)
P (t/yr)
3,770
190
29,300
4,000
5,500 (46%)
280 (49%)
27,300 (6%)
3,900 (2%)
(Date Source: Behrendt et al., 2003 ; DHV Hungary Ltd., 2005)
As a result of the Project, total point and non-point source nutrient discharges from Hungary are
expected to be reduced by about 9% for N and 4% for P, as indicated in Table 4 below.
80
Annex15, Table 4: Project impact on Hungary nutrient discharges (in tons/annum) compared to
large scale fluxes.
Hungary current discharges
per source
NonPoint Total
point N (t/yr)
P (t/yr)
15,900
3,000
29,300
4,000
45,200
7,000
Project reduction
% Reduction per sources
NBWWTP
DDNP
Total
Point -
Nonpoint -
Total
2,300
170
1,740
100
4040
270
14%
6%
6%
2%
9%
4%
Additionality: The measures under the proposed interventions are additional to the Baseline.
These actions will complement existing and planned activities. Specifically, the additional
activities are designed to improve international waters quality and reduction of pollution from
municipal sources, wildlife management of the wetlands, restore precious habitats, and secure
long-term biodiversity protection of both marine and marshland areas. Incorporation of the
proposed alternative will ensure the conservation of globally unique biodiversity by integrating
biodiversity protection with the improvement of quality of life.
Expected outputs and global benefits: These are the following:




significant reduction in nutrient discharges in the Danube River basin and the Black Sea;
improving the quality of the Danube River providing benefits to downstream areas;
restoration of high priority wetlands with benefits for biodiversity of the ecosystems; and
demonstration effects for other potential investors in Hungary as well as other countries
in the region.
Cost and Financing Plan
The total cost of the GEF alternative is estimated at US$ 32 million and is expected to be
financed as follows:
Annex 15, Table 5: Cost and financing of the GEF alternative (US$ million)
Component
Total cost
GEF
Government Municipality Reallocated
and
(budget)
of Budapest Bank loan
financing
Development of
tertiary treatment at the
25.04
6.96
0
10.38
7.70
NBWWTP (Budapest)
Wetland Restoration in
the Duna-Drava
6.50
5.20
1.30
0
0
National Park
Dissemination and
0.43
0.35
0.07
0.01
0
Replication
Total
31.97
12.50
Above amounts include contingencies.
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1.37
10.39
7.70
Benefits-Global Environmental Effects
Annex 15, Table 6: Matrix of global environmental benefits and incremental costs (GEF
component)
Baseline
Alternative
Incremental global
environmental benefit
Implementation of
wastewater treatment
activities up to levels
required to comply with
EU directives
(secondary treatment)
and investment in
wetlands restoration
only as and when
funding becomes
available
Extension of
NBWWTP to tertiary
treatment and wetlands
restoration in the
Gemenc and BedaKarapancsa areas of the
DDNP together with
associated Project
monitoring activities
Reduce nutrient loads
into the Danube and the
Black Sea; protect and
restore endangered
marine ecosystems and
habitats; increase of
biodiversity
Cost
US$ 80 million of
which US$ 27 million
for the NBWWTP
US$ 25.0 million for
the NBWWTP and
US$ 6.5 million for
the DDNP
US$ 108 million for
the NBWWTP and
US$ 79 million for the
DDNP
Development of
tertiary treatment at
the NBWWTP
(Budapest)
No further extension of
treatment from the
current level (secondary
treatment)
Extension to tertiary
treatment
Reduce nutrient
discharges into the
Danube and thereby
reduce nutrient loads
for the Black Sea
Wetland Restoration No action leading to
in the Danubefurther degradation of
Drava National Park the wetlands
Wetlands restoration
and development of
nutrient trapping
capacity
Reduce nutrient
discharges into the
Danube and thereby
reduce nutrient loads
for the Black Sea;
improve protection of
ecology and
biodiversity
Dissemination and
replication
component
Establish proper
monitoring system, and
arrangements for
dissemination and
facilitating replication
Contribute to efficient
and effective use of
allocated resources
under the Project;
demonstration effect
for future projects
No action
82
Cost Effectiveness
Annex 15, Table 7: Nutrient (N and P) reduction and cost-effectiveness
Projected
quantity
reduced
(tons/year)
Development of tertiary
treatment at the NBWWTP
(Budapest)
Wetland Restoration in the
DDNP
Total
Financial cost/unit
reduction
Total annualized cost of
nutrient reduction
(US$/kg)
(US$/ton)
(000 US$)
(million HUF)
2,464
1.06
1,059
2,296
448
1,826
0.24
241
370
72
4,290
0.62
621
2,666
520
Note: Over the period 2006-2030, the total nutrient reduction (N and P) is estimated at
92,554 tons at a total cost (in PV terms) of US$ 66.7 million.
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Annex 15, Table 8: Incremental cost-benefit for the period 2006-2030
Incremental effects
(2006-2030)
Total
Budapest
component
DDNP component
Nitrogen reduction (tons)
87,014
50,600
36,414
Phosphorus reduction
(tons)
Total (tons)
5,540
3,608
1,932
92,554
54,208
38,346
187
108
79
66.7
56.0
10.7
0.62
1.06
0.24
0.27
0.23
0.04
3.15
2.50
0.65
Incremental economic
benefits (PV at US$ 5/kg
of nutrient reduction
over 25 years) (US$
million)
Incremental abatement
costs (PV of annual
capital and operating
costs over 25 years) (US$
million)
Cost per unit of nutrient
reduction (US$/kg)
Total annualized cost
(capital + operating cost)
per inhabitant (US$ per
capita)
GEF investment cost per
inhabitant (US$ per capita)
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Annex 16: STAP Roster Review
HUNGARY: NUTRIENT REDUCTION (GEF) PROJECT
Context information: In accordance with GEF guidelines, a Scientific and Technical Advisory
Panel (STAP) review of the Project has been performed by Dr. Cristobal Felix Diaz Morejon,
member of the STAP roster of the GEF. The below STAP report has been received June 7, 2005.
It confirmed the scientific soundness and technical quality of the Project and provided
comments, which have been incorporated in the present PAD and associated Project documents,
in compliance with Bank procedures. The comments and answers to the question raised by the
STAP reviewer are also available at the end of the present Annex.
Original title: HUNGARY NUTRIENT REDUCTION (GEF) Project - Review 1
Expert Reviewer STAP/GEF: Dr. Cristóbal Félix Díaz Morejón
Date: June 1, 2005
-----------------------------------------------------------------------1. Introduction
The Project is of utmost importance for the European environment, taking into account its
benefits for sanitation improvement in Budapest, reducing the nutrients (mainly N and P) to the
Danube River and Black Sea. The sanitation sector has been less benefited than that of drinking
water in most countries in the world, and Hungary is not an exception. Hence the importance to
develop this kind of projects, with replicability possibilities in other riparian countries, if results
are as foreseen.
Key Issues
2. Scientific and technical soundness of the project
The project has an acceptable scientific and technical backing, although tending more to
technical soundness. It is perhaps advisable to propitiate the inclusion in it of the scientific
community and universities, thus giving a strong scientific support to the necessary research in
the design, implementation and follow-up stages, specially monitoring and evaluation activities.
However the following comments are valid:

The improvement of treatment in wastewater treatment plants on the North (including the
addition of tertiary treatment), the South, and in the future the construction of other one
in the central part of Budapest, will undoubtedly improve the city sanitation and the
reduction of nutrients rich in N and P effluence in the Danube River and, subsequently, in
the Black Sea. Three technologies are mentioned for the license process for the tertiary
treatment in the Northern Plant (NBWWTP), but without an in-depth analysis of the
technical considerations of convenience according to the wastewater quantity and
characteristics. Thus it is very difficult to make a potential analysis of technological
alternatives. With their own use characteristics, the 3 technologies mentioned have
demonstrated good results in different parts of the world, but at different scales (quantity
85
and quality of wastewater to be treated). The activate sludge system by a fix-bed process,
although it is the many countries.

It is not very clear whether the municipal wastewaters to be treated in the treatment plants
are only domestic or also include industrial wastewaters, an aspect that has to be
explicitly reflected and explained in the text. In the latter case, the existence or not of
heavy metals content should be takes into account, because they are very difficult to
eliminate by conventional treatment methods. In the case of domestic wastewaters, the
special treatment of foams from detergents and soaps for various home uses should also
be accounted for, since they contain chemicals that are very difficult to eliminate in the
treatment.

The results and recommendations established in the Environmental Impact Assessment
(EIA) are very important. The EIA was adopted by the government for Budapest
Component conducted by MOB y WD. It is unfortunate that the main findings and
recommendations were not included in the Draft. I suggest their inclusion.
For the National Park Component the representative WD on behalf of DDNPD is
working in the preparation of the required evaluation. This will require a stringent work
because of the implications wetland restorations (11) may have over the environment in
terms of affectation and biodiversity variation, the potential creation in the future of
anaerobic conditions as a result of systematic accumulations of considerable volumes of
nutrients rich in N and P, that with time may lead to swampy conditions through
eutrophication processes and GHG emissions. Apart from the potential impact on the
Danube itself and riparian countries, if changes and negative impacts due to variations in
the conditions initially expected by the Project, there should be special attention on the
Beda-Karapancsa area given its proximity to Croatia. Attention should be also given to
cases of “Fekete-erdei”, “Grébeci-Duna” wetland with advanced eutrophications
processes, and “Bali” whose central part is occupied by a strongly eutrophic, filled-up
inner lake.

The Project Operational Manual should be acquired without delay for its various
components and a strict follow-up of it future implementation.

Monitoring and Evaluation should have first priority, because there are negative cases of
projects, since they are later steps in the Project, there was less or no money for them and
they were partially or totally ignored, with natural disasters that could have been avoided
with systematic monitoring and evaluation. In the case of the wetland restoration
monitoring system in Duna-Drava National Park (Annex 4. Table 1. Estimated Project
Costs by Components, page 13), taking into account the necessary volume of research
and the follow-up required for a comprehensive evaluation, including biodiversity, water
quality, bottom sediment studies and other. I suggest a percentage increase for monitoring
and evaluation (0.7 %), since 250 M euros is actually very little.
3. Identification of the global environmental benefits and/or drawbacks of the project.
The global environmental benefits for Europe, Hungary – specially Budapest - and the
riparian countries in this part of Danube are clearly reflected, as well as for the Black Sea,
because of the reduction of nutrients rich in N and P entering into the river, with the
86
treatment plant improvement located in the North and South of Budapest and the water
systems.
4. Project’s context within GEF goals, operational strategies, program priorities, GEF
Council guidance and the provisions of the relevant conventions.
The Project context perfectly classifies within the GEF objectives and its operational strategies,
program priorities, and guidelines of the GEF Council. It clearly articulates with the European
Union Water Directives, and specially those having to do with the Danube River and the Black
Sea, as well as with the European Union Directive for the discharge of urban wastewaters, and
the provisions of the Bucharest Convention (1985) and the Sofia Convention (1998), the
strategic plans of the International Commission for the Protection of the Danube River, and the
UNDP/GEF Partnership on Nutrient Reduction for the Danube and Black Sea basins.
In the Annex 10: Safeguard Policy Issues (page 20) it may perhaps be necessary to deepen on
Natural Habitats (OP/BP 4.04), since the creation of water systems will change the natural
habitats. This is also valid for Involuntary Resettlement (OP/BP 4.12), since there is no
explanation or what will be done with landowners working in agriculture, because it is not
explained.
Foreseen supervisions by qualified personnel of the World Bank (as GEF implementing agency)
and GEF teams is essential, not only during the start-up phase but during the implementation,
especially the field visits where each components of Project will be analyzed.
5. Regional context
In general, the analysis of regional context is adequate, approaching essential elements and
actors. However it will be good to add that, at national and local levels, additional benefits will
be obtained with an improved water quality in the Danube River and the Black Sea together with
a better quality of life in the population.
6. Replicability of the project
The Project will be perfectly replicable in other areas of Hungary, riparian countries, and other
parts of the world, if the initial foreseen results are obtained.
7. Sustainability of the project
The Project intends to achieve sustainability with an element of great importance in every
country – the reduction of pollution. In this case, the reduction of nutrients rich in N and P
arriving to the Danube River and later to the Black Sea, with the improvement of existing
wastewater treatment plants, and an ambitious rehabilitation plan of a former wetland through 11
water systems restoring the National Park former conditions.
However, results useful, the following comments on the Project as a whole are relevant:

It is important to really take into account, not only the technical, operative and
maintaining costs, but too the social costs when service tariffs are established, in
correspondence with the characteristics of the population of North and South wastewater
treatment plants.
87
It is necessary to comply with what is established in the Consumers unwilling/unable to
pay required tariffs levels in Point 5 Critical risks and possible controversial aspects
of C. Implementation (page 16), that mechanisms “are already in place […] for any cross
– subsidies that would be required to provide services to the poor”, if we hope the Project
reaches the intended economic, social and environmental repercussions.

The relationship between sustainability and water management is often viewed in terms
of the exploitation of natural systems for water treatment. Ponds, reed beds, and wetlands
have consequently been granted extensive coverage as potentially sustainable solutions to
water management problems. However, it is important to recognize that engineered water
treatment technologies are not, in themselves, a threat to sustainable water management.
Where there is room for improvement is in the wise design and implementation of
technology.
For this reason we must research to study, and deepen into the variant of establishing 11
water systems the lower part of the Danube River in Hungary, since their long-term
effects maybe negative. It would be trying to reconstruct something destroyed by men
themselves and it while never be as originally conceived by Nature. That is why I believe
a pilot water system should be built in each zone: ¨ Béda – Karapancsa ¨ y ¨ Gemenc ¨,
where the impact on the environment and the consequences of accumulating of nutrients
rich in N and P may be studied in depth. That is why in Point 2 I suggested the
intervention of the scientific community and the universities, creating multidisciplinary
research groups.

It will be useful in the future, together with the construction the Central new wastewater
treatment plant, and even in the already constructed ones, to work in the capacity of the
types of technologies to recycle grey and black waters at the neighborhood, street or even
household level thus offering new opportunities for the design of comprehensive water
supply and sewerage network that will allow smaller physic and treatment dimensions in
wastewater treatment plants (in a household level, for example, sand filters and physical
filter/membrane systems for recycling bath/shower water and even the wastewater from
kitchens). This consideration has large economic, social and environmental advantages.

Project sustainability should be viewed comprehensively with an integral management
for the entire region. Thus it would be important to include:
- variant analysis for possible reuse of treated wastewaters( for example in
agriculture for irrigation, in municipalities for irrigation of gardens, parks, and
other uses) with important savings of water in the sources;
- the use of possible sludge arising in wastewater treatment plants (for example, in
agriculture as fertilizer, if it does not contain heavy metals or other hazardous
substances; or in the production of energy);
- the gradual reduction in the application of inorganic fertilizers rich in N and P,
that constitutes non-point sources of pollution to the Danube River; with the
consequent savings, utilizing organic fertilizers as compost, biofertilizers and
others.
These possible applications may be considered in the financial analysis, because they will
result in incomes from the Project

Other aspects about sustainability were raised in Point 2.
88
Secondary issues
8. Linkages to other focal areas
This Project has links with the focal areas of Biodiversity, Land Degradation, and even with
Climate Changes, if we take into account the emissions in wastewater treatment plants and if the
possible adverse effects described above in water systems occur (Point 2).
9. Linkages with other programs and action plans at regional or sub-regional levels
They are well described in the Draft Project.
10. Other beneficial or possible environmental damaging effects
All important issues were described in Points 2 and 7.
In the Annex 3: Results Framework and Monitoring (pages 9 –12), in the part on Monitoring
(Table: Arrangements for results monitoring, page 11), I suggest to include in the Intermediate
Outcome Indicators: Quantity of treated wastewaters reused; Variation in the number of
existing species in water systems; Average of N and P contained in each water system /ha.
11. Capacity building aspects
These aspects are described in generic form without a very clear and defined plan, of what is
intended. I insist in the need of working together with the scientific community and universities.
12. Innovativeness of the project
Some aspects may be reflected in Point 5 Lesson learned and reflected in the Project design
(pages 10 y 11) and in Point 6 Alternatives considered and reasons for rejection (pages 11 y 12)
in B Project description.
However the main innovation is the application in a complex Hungarian region, within the limits
of the capital and a National Park, an improvement of wastewater treatment systems, and the
application of wetlands. These are well known technologies used in other parts of the world.
Dr. Cristóbal Félix Díaz Morejón
STAP/GEF Expert
89
Response by the Project Team to comments and answers
to the question raised by the STAP reviewer
This is to acknowledge that I received your excellent and very well written STAP review
report on the design of the aforementioned Project. We have incorporated your comments in
the document and discussed them with our Hungarian counterpart during our mission there. I
just have the following comments on some of the points you raised.
Point 2:
I fully agree with you on the fact that university and the research community should be
involved in a study to help in the wetland rehabilitation in the Gemenc and BedaKarapancsa areas of the Park. Provisions have been made under the Project to finance the
development of an impact evaluation methodology, in addition to the contracts for final
designs, baseline study. This study should serve as a basis for the design and
development of the Monitoring and Evaluation system. This study is foreseen to be
implemented by searchers or university involved in such activities or similar activities in
Hungary.
The technology to be developed is not decided yet, and since the treatment technologies
referred to in the feasibility studies are only indicative at this stage, they have not been
described in details in the document. Since these technologies are likely to be protected
by patents, and in order to guarantee competition, the turn key contract will be procured
based on technical specifications that will allow the widest range of technical solutions to
be applied, while taking into account the operation and maintenance (O&M) costs. Of
course, thorough technical review will be performed in the process, in particular at the
end of the prequalification stage, to make sure that the technical specifications allow
reaching the appropriate level of treatment, that these technologies demonstrated good
results while minimizing the O&M costs.
The impact evaluation you are referring to and the potential implications in terms of
creation of anaerobic conditions which might lead to eutrophication and GHG emissions
will be studied as part of the aforementioned study. Mitigations measure for potential
negative impacts will be added to the Environmental Management Plan of the Park
component.
As indicated above, Monitoring and Evaluation will be given the right level of attention.
A baseline study will be prepared, an impact evaluation methodology will be developed
and a M&E system will be implemented, taking into account your comments. Altogether,
about 250,000 Euro equivalent (USD320,000) will be allocated to these aspects, which
represents more than 6% of the component amount. This percentage looks rather on the
high side, compared to other projects in the Bank. Additionally, preparation of the
development of the M&E system will take place at the early stages of the Project and not
at the end, giving the priority to the M&E of the activities to be implemented in the Park.
90
Point 4:
Regarding your mention on the Annex 10, we will deepen on the Natural Habitat in the
Environmental Management Plan, based on the results on the baseline, final design and
the impact evaluation methodology results. As indicated in the Environmental Impact
Assessments, the Project is expected to improve the habitats of a number of species,
including some protected species and migratory birds. Additionally, the dredged material,
which good quality has just been confirmed, will be used as game island to prevent
animals from drowning during the flood events. Concerning the Involuntary Resettlement
Safeguard Policy, the national park is property of the state and no agriculture is taking
place within the park boundaries. This is the reason why there is no mention of any
agricultural activity within the Park.
In addition to regular supervision missions, and in order to provide additional security
and confidence to the authorities, the MOEW will convene a short team of experts, with
internationally recognized experience in the type of interventions to be developed, to
review the proposed works and follow up the impact they have on the park’s morphology
and ecology.
Point 7:
I fully agree with your comment on the possible development of technologies to recycle
grey and black waters at the street or household level, however, this is outside the scope
of this Project.
Point 10:
In regard to the indicators, we agreed during the last mission with the indicators proposed
by the authorities to focus on a limited number of monitoring indicators that can be easily
measured.
Point 11
Detail plan of activities and associated terms of reference for the capacity Building
aspects will be prepared before Project Effectiveness, based on the identified needs at that
time.
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Annex 17: Maps
HUNGARY: NUTRIENT REDUCTION (GEF) PROJECT
Map 1: Gemenc area of the Duna Drava National Park8
Map 2: Beda Karapancsa area of the Duna Drava National Park
8
These two maps are the property of the WA. Written authorization to use and publish these maps has been
received and filed. They have been cleared by the Cartography Department of the World Bank.
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Map 1: Gemenc area of the Duna Drava National Park
93
Map 2: Beda Karapancsa area of the Duna Drava National Park
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Annex 18: Biological Processes of Nutrient Trapping in Floodplains and Wetlands
HUNGARY: NUTRIENT REDUCTION (GEF) PROJECT
Introduction:
Wetlands perform many important biochemical functions in watersheds in relation to nutrients
(Nitrogen and Phosphorus). Among these are sediment trapping; nutrient removal, storage and
release; and transformation of inorganic nutrients to organic forms. Floodplains and temporary
wetlands, like Gemenc and Beda-Karapancsa areas of the Duna-Drava National Park, can also be
high efficiency purifiers, during both flood and dry periods. Studies have shown that, under optimal
conditions, floodplains and temporary wetlands can make a significant contribution to reducing N
and P loads entering the wetlands carried in surface water. Permanent wetlands and wetlands used
as nutrient filters at the discharges of wastewater treatment plants indicate retention rates of up to
90% of nitrates and up to 50% of phosphorous which transit through them. However, to date, the
impacts of natural floodplains and temporary wetlands on nutrient reduction have not been
systematically documented. Hence, the outcomes remain difficult to predict in quantitative terms.
The purpose of this annex is to describe in simple and qualitative terms the complexity of the
processes expected to take place in the Project areas in relation to nutrient reduction. In particular,
it will focus on the biological processes and their impacts on biodiversity. However, as indicated in
the Project description, the proposed Project intends to develop knowledge and scientific data to
better understand such solutions and facilitate their replication.
Processes affecting nutrient reduction in floodplains and wetlands
Nutrients entering a wetland carried in surface water may be in dissolved or particulate (suspended
sediment) form, and may exist as organic and inorganic compounds. Organic N or P compounds
are in either dissolved or particulate form. Inorganic compounds occur primarily in solution, as
nitrate (NO3- ) or ammonium (NH4+) for N, and as orthophosphate (H2PO4- and HPO42-) or
phosphate-containing minerals suspended in the water column for P. Once in the wetland, nutrients
are exposed to complex combinations of physical (water flow, depth, sedimentation, filtration,
absorption), chemical (denitrification) and biological (nutrient reduction through aquatic micro and
macrophytes and the roots of terrestrial vegetation) processes involving a large number of dynamic
parameters. These processes result in retention, cycling and release of nutrients, as indicated in
Figures 1, 2, and 3. Major processes affecting retention, cycling and release of nutrients in wetlands
are described in Table 1 below.
Figure 1: Simplified diagram of the Phosphorus cycle in wetlands
(Source: Phosphorus cycling in wetlands, a fact sheet of the Soil and Water Science Department, Florida Cooperative
Extension Service, Institute of Food and Agricultural Sciences, University of Florida. Published: July 1999.)
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Figure 2: Simplified diagram of the Nitrogen cycle in wetlands
(Source: Nitrogen cycling in wetlands, a fact sheet of the Soil and Water Science Department, Florida Cooperative
Extension Service, Institute of Food and Agricultural Sciences, University of Florida. Published: July 1999.)
Light
Inputs
Outflow
O2
Water
Algae
Org.
N
Org.
matter
NITRIFICATION
Fishing
Zooplankton
P
Fish
1
NO3
Fish
2
Oxygen
Bacteria
Sed.
P
Detritus
Sed.
N
Benthic
animals
Sediment
Figure 3: Much simplified scheme of nutrient cycles in wetlands
(Source: Reduction of Nutrient Discharges Project – DDNP Component – Environmental
Assessment and Public Consultation (VITUKI Kht/ VTK Innosystem Ltd.) March 2005)
Table 1: Major processes affecting retention, cycling and release of nutrients in wetlands
Process
Diffusion
(Physical
process)
Plant uptake
(Biological
process)
Litterfall
(Physical
process)
Sedimentation
(Physical
process)
Effect on Nitrogen compound
Effect on Phosphorus compound
Driven by the concentration gradient, dissolved forms of N and P can be transferred from
surface water to soil solution (porewater) and vice versa, diffusing from a region of high
concentration to regions of lower concentration.
Inorganic forms are taken up by plants either rooted in the soil or floating in the water,
including algae.
Dead plant tissue (e.g., leaves and stems) falls from the live plants and collects at the soil
surface to form a litter layer, also known as detritus.
Particulate matter (inorganic and/or organic sediment) entrained in the water column settles
out, due to the reduced water velocity, shallow water depth and filtering action of emergent
vegetation, and collects on the soil surface.
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Decomposition Organic matter, including plant detritus, organic sediments and peat, is broken down by a
(Biochemical
variety of microorganisms that utilize organic carbon as a source of energy. Organic
process)
compounds, such as proteins and amino acids, are broken down to smaller organic
molecules, both particulate and dissolved, and ultimately to ammonium (NH 4+) for N and
orthophosphate for P, which may be utilized either as a nutrient by the microorganisms or
diffuse back into the soil or water.
Ammonia
Under high-pH conditions in the wetland
volatilization
floodwater, concentration of the un-ionized
(Chemical
form of ammonia (NH3) becomes appreciable
process)
compared to NH4+, and may be released to
the atmosphere as ammonia gas. This process
is not usually a major factor for N cycling in
most wetlands, but can lead to substantial N
losses for poorly buffered waters with high
photosynthetic activity (due to the associated
daily increase in pH).
Nitrification
Microbial conversion (by Nitrosomonas and
(Biochemical
Nitrobacter spp.) of reduced inorganic N
process)
(NH4+) to the oxidized nitrate form. This
process occurs in aerobic, or oxygenated,
regions of the wetland, usually confined to
the surface water and the top few millimeters
of the underlying soil.
Denitrificatio Microbial conversion (e.g., by Pseudomonas
n
spp.) of nitrate to nitrogen (N2) gas and, to a
(Biochemical
lesser extent, nitrous oxide (N2O), which are
process)
lost to the atmosphere. The release of nitrous
oxide is of particular concern, because of
ozone-layer impacts. Denitrification occurs
only in the anaerobic, or oxygen-depleted,
regions of the wetland that typically exist
below the soil surface.
Sorption /
Retention of N in the soil by adsorption
This general term is applied to the
Adsorption
occurs through the process of cation
processes of adsorption of the
(Physicochem exchange, whereby the ammonium ion
orthophosphate ion by clays and iron or
ical process)
(NH4+) is weakly bound to soil particles by
aluminum oxides (chemisorption) in the
electrostatic attraction. Most soil profiles are
soil, and precipitation of PO4 with either
negatively charged, so the corresponding
iron and aluminum oxides or dissolved
retention of nitrate (NO3-) is rare.
calcium, to form solid compounds (Fe- and
Al-phosphates or Ca-phosphates) in the
soil or water column. These phosphate
minerals are potentially very stable in the
soil, affording long-term storage of
phosphorus.
Burial and
Partially decomposed plant detritus and other organic matter is gradually buried and
peat accretion incorporated into the soil profile. The buried material representing the portion of organic
(Physical
matter that is more resistant to decomposition. It becomes highly decomposed and
process)
compressed, forming peat (i.e., peat accretion). This process takes decades to take place.
Denitrification represents an important N removal mechanism in wetlands, because it is rapid and
results in gaseous losses of N from the ecosystem. Highly favorable environmental conditions for
denitrification are commonly found in wetland soils. The existence of an aerobic- anaerobic
interface near the wetland soil surface greatly facilitates the coupling of nitrification and
denitrification, which allows removal of inorganic N as both nitrate and ammonium.
Comparatively, the capacity of wetlands for P removal is limited, as there is no loss mechanism for
P in wetlands that is analogous to denitrification. Therefore, P tends to accumulate in wetlands at a
higher rate than does N. However, precipitation of phosphate minerals can provide a significant
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sink for P in wetlands with large stores or inputs of iron and aluminum (low-pH wetlands) or
calcium (high-pH wetlands).
The vast majority of nutrients in wetlands are in organic form, contained either in the vegetation
(live plants), plant detritus, macrofauna, microorganisms, soil (soil organic matter or peat) or water
(dissolved organic compounds or suspended sediments). Although wetlands may remove and store
substantial quantities of nutrients, they also can potentially release a significant quantity to
downstream ecosystems. In particular, wetlands’ functions may change seasonally. During the
growing season of the vegetation, late spring, summer and early fall, emergent and submerged
aquatic plants take up large quantities of nutrients from water and sediment. Algae and floating
plants absorb nutrients from surface water. These plants essentially convert the wetland into a
"nutrient sink," by taking nutrients from the water and sediment and retaining them as plant
material. By taking up and holding nutrients during the summer, wetlands decrease the possibility
of contamination downstream (Figure 4).
Figure 4. Nutrient Sink
However, this process reverses when these plants die. Then, decomposition and litterfall take place,
generating a large portion of nutrients to return to the water and sediment. During this period (in
late fall and early spring), wetlands serve as a nutrient source when water flows from the wetlands
to ecosystems downstream (Figure 5).
Figure 5. Nutrient Source
In most cases nutrients are recycled within the wetland. Emergent and submerged plants bring
nutrients from the sediment into the water column, acting as "nutrients pumps." Algae and floating
plants serve as "nutrient dumps" by taking nutrients from the water and depositing them back in the
sediment when they die and settle on the bottom. The cycle breaks when nutrients are removed
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from the wetland system, occurring when nutrient-rich water flows out of the wetland. The release
of nitrogen gas to the atmosphere by denitrification, ammonia volatilization or possibly nitrification
of ammonia also causes nutrients to be lost.
Major factors influencing the efficiency of nutrient retention capacity of floodplains
Efficient management of the above processes is critical to ensure proper nutrient retention, enhance
biological processes transforming nutrients into biomass, and avoid potential negative impacts such
as release of nutrients or maintaining optimal conditions for flora and fauna. The efficiency of such
biological processes linked to nutrient retention in floodplain ecosystems is determined by two
main multi-factor parameters:
(i)
The volume of water entering the ecosystem; and
(ii)
The active vegetation biomass within the ecosystem.
The water flow in the ecosystems is of utmost importance, more specifically the volume of water
current and its speed. On the one hand, the water inflow provides the necessary reduction-oxidation
(redox) potential for the photosynthesis; on the other hand, the river provides nutrients to the
vegetation biosynthesis. Since the concentration of nutrients in the Danube river waters remains
quite stable all year around, the nutrient retaining capacity is in proportion to the volume of water
delivering redox potential directly, and the amount of suspended solids in the river waters
indirectly, provided that the water velocity is sufficiently low to allow the suspended solids to
settle.
The other critical parameter regulating the retention capacity is the volume of vegetation biomasses
characterizing the floodplain, as it is in proportion to the level of nutrient intake. The nutrient
retaining capacity of the ecosystems will be optimal when the inundated areas of the floodplain are
covered with vegetation and when the flooding episodes are taking place during the seasonal
growing period of the vegetation cycle, when nutrient consumption is at its peak. However, the
water depths should be shallow enough to permit the vegetation to continue its biosynthesis, even
during long submersions.
On the one hand, through the restoration of the oxbows in the Gemenc and Beda-Karapancsa areas
of the Park, more water will enter the floodplain during flood events. On the other hand, the
development of small water regulation works intends to slow down the flow of water exiting the
floodplain. As a result, temporary wetlands will be created from time to time, creating suitable
conditions for the retention of nutrient loads of the Danube River and subsequently the Black Sea.
In the process, both the ecology of the riverside habitats and the quality of the water leaving the
floodplain are expected to improve. To reach such results, it is critical to integrate the specificity of
the vegetation throughout the Project area, to take into account their relative capacity to trap
nutrients and their potential limitations.
Specificity of the Gemenc- and Béda-Karapancsa floodplains
Over the last 125 years, records have shown a decrease of the water level of the Danube River by
1.6 to 1.8 meter. The cause of this decrease is the numerous hydraulic works to regulate the flow of
the Danube River. As a result, the number and frequency of flood events in the Gemenc- and BédaKarapancsa floodplains have considerably decreased, leading to a general drying of the areas.
Additionally, the flood events are shorter in time and the flood waves of the Danube River are
likely to occur at any period of time during the year. However, the probability is higher during the
6 month period between February and July than in the period between August and January.
The floodplains of Gemenc- and Béda-Karapancsa are habitats of a large variety of flora and fauna,
which has adapted to regular floods and related sedimentation followed by dry periods. In addition,
the hydrology and ecology of the Park has been modified by various human interventions. A
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significant portion of the forests occupying the floodplain of the Park are composed of nonindigenous tree species (e.g., about 50% in Béda-Karapancsa in 2002) such as acacias and poplars.
All woodlands are managed in the area. Nowadays, the natural vegetation of the Gemenc
floodplain is represented by riverine willow scrubs, riverine willow-poplar woodlands, riverine
oak-elm-ash woodlands to a lesser extent, and wetland euhydrophyte, reed, typha and sedge
communities. The nature conservation value of the flora is high: 30 rare, protected species have
been described from the region so far, a number of which are growing in the woodlands (see
Appendix I to this Annex). Higher frequency of flooding events are expected to be beneficial for
forestry (natural and cultivated), as increased land desiccation represents a threat to some species.
In terms of fauna, the number of specialized and rare species of birds, bats, fishes, amphibians and
other aquatic species is much larger than that of common species in the Gemenc and BedaKarapancsa areas. Altogether 198 bird species were detected in the Gemenc and Béda- Karapancsa
areas of the Park. That represents 52 % of the total number of 377 species described in Hungary
until now. The number of species nestling is 124 in this area, including the Ferruginous Duck
(Aythya Nyroca), the White-tailed Eagle (Haliaeetus albicilla) and Black Storks, representing 62 %
of the number of total nestling species in Hungary. About 40 % of the strictly protected species are
found in the Lower Danube stretch, according to ornithological observations (DEME, 2003). In
addition, the Park harbours two species of rare fishes (Perca fluviatilis and Gymnocephalus
cernuus), three “International Red Data Book” amphibians, and a strictly protected otter (Lutra
lutra), which population is considered stable.
The Environmental Impact Assessment of the Park component, carried out during Project
preparation, concludes that no significant negative impacts are expected if the measures included in
the Environmental Management Plan are implemented. Moreover, the rehabilitation of the
wetlands is expected to improve the ecological conditions of the ecosystem and to increase
biodiversity, as new valuable habitats will be created. Positive ecological impacts are in particular
expected with the creation of additional habitats for a number of migratory bird species of global
importance. Furthermore, the rehabilitation of the wetlands will help solve the desiccation problem
caused by the deepening of the Danube River bed, which has resulted in serious loss of wet alluvial
habitats over the years. Nevertheless, given the outstanding importance of the Park in terms of
biodiversity and nature conservation, proper attention should be paid to monitor the possible
impacts of the Project on the ecology and biodiversity of the area. In this regard, as part of the
baseline study, selected indicators species will be identified. They are to be included in the
Monitoring and Evaluation system of the Project, which is to be implemented early in the process
and prior to the investments. Monitoring of such indicator species is to be introduced in the list of
performance indicators of the Project, to ensure that their populations remain stable and serve as an
early warning system for any threats to that stability.
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Appendix 1 to Annex 17: list of endangered species identified in the Park
1.
A).
LIST OF PROTECTED PLANT SPECIES DESCRIBED IN THE GEMENC
AREA (SZARVAS, 2003)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Listera ovata
Carex strigosa
.Orchis purpurea
Crataegus x degenii
Scilla vindobonensis
Cephalantera damasonium
Nymphaea alba
Crategus nigra
Carpensium abrotanoides
Dactylorhiza incarnata
Cephalanthera longifolia
Acorus calamus
Platanthera bifolia
Gentiana pneumonanthe
Ophioglossum vulgata
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
Equisetum hyemale
Vitis sylvestris
Marsilea quadrifolia
Senecio palodosus
Leucojum aestivum
Salvinia natans
Clematis integrifolia
Trapa natans
Epipactis helleborine
Iris sibirica
Dryopteris carthusiana
Dryopteris dilatata
Nymhoides peltata
Orchis militaris
Platanthera clorantha
B).
List of fish species found in main riverbed (1), connected backwaters (2), and
disconnected standing waters (3) in the Gemenc area.
Black boxes common, grey boxes rare, x historical data (GUTI, 2001). Where no indication is
given, the presence of the fish species is suspected but was not be documented as part of this study.
Fish species
Eudontomyzon mariae
Acipenser ruthenus
Acipenser güldenstaedti
Acipenser nudiventris
Acipenser stellatus
Huso huso
Hucho hucho
Oncorhycus mykiss
Umbra krameri
Esox lucius
Rutilus rutilus
Rutilus pigus virgo
Ctenopharyngodon idella
Scardinius
erythrophthalmus
Leuciscus leuciscus
Leuciscus cephalus
Leuciscus idus
Aspius aspius
Alburnus alburnus
1
2
3
x
x
x
x
x
101
1
Fish species
Blicca bjoerkna
Abramis brama
Abramis ballerus
Abramis sapa
Vimba vimba
Pelecus cultratus
Tinca tinca
Chodrostoma nasus
Barbus barbus
Barbus meridionalis
Gobio gobio
Gobio albipinnatus
Pseudorasbora parva
Rhodeus sericeus amarus
Carassius carassius
Carassius auratus
Cyprinus carpio
Hypophtalmichthys molitrix
Aristichthys nobilis
Misgurnus fossilis
Cobitis taenia
Silurus glanis
Ameirus nebulosus
Ameiurus melas
Anguilla anguilla
Lota lota
Lepomis gibbosus
Micropterus salmoides
Perca fluviatilis
Gymnocephalus cernuus
Gymnocephalus baloni
Gymnocephalus schraetzer
Stizostedion lucioperca
Stizostedion volgense
Zingel zingel
Proterorhinus marmoratus
Neogobius fluviatilis
Neogobius kessleri
Neogobius syrman
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2
3