Veolia Voda, registered in France and headquartered in Prague, consolidates CGE’s assets in central Europe where the group has had a significant presence since the late 1990s. Three of its six first tier subsidiaries are owned 100 percent by Veolia. Partners in the other subsidiaries include Berlinerwasser and the municipalities served.

Veolia Voda SA, is 90 percent owned by Veolia Eau-Compagnie Générale des Eaux (CGE), the world’s largest water services company, in turn wholly-owned by Veolia Environnement, (VE), listed in Paris and New York with a current market capitalization of ~€10 billion. The group serves more than 108 million people in 57 countries and operates more than 4,400 contracts.

In November 2007, EBRD acquired a 10 percent stake in the Company.

IFC’s proposed equity investment is for up to €50 million via a new share issue. The capital raised would be used to support expansion of its existing operations in Central and Eastern Europe into new markets, primarily Ukraine and Russia.

70.51 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	70.51

* These investment figures are indicative

The Company currently provides drinking water and/or waste water treatment through twenty water distribution companies: thirteen in the Czech Republic, two in Slovakia, four in Hungary and one in Poland. Several other subsidiaries provide common services to the water distribution companies. The Company is looking to expand east to Ukraine and Russia.

The challenges in the water sector in this region, where access is almost universal, include inadequate and deteriorating infrastructure, high levels of leakage and poor water quality. Insufficient funding for maintenance is a pervasive weakness contributing to most of these issues. Capital is needed to rehabilitate aged infrastructure, increase the efficiency of utilities and improve water quality and sanitation services. Safe drinking water and better waste treatment impact health and productivity directly.

Veolia Voda has demonstrated its ability to enter the water sectors of post-Communist markets in central Europe, achieve significant improvements in operations and generate returns for the long term upgrading of the networks. Through its entry into Russia and Ukraine, the Company will be able to bring more reliable service, address issues of declining water quality and pollution due to poor treatment of waste and through better management, to mitigate the long run costs of maintaining their water and wastewater networks.

Veolia Voda is active on a regional scale in Eastern Europe and has a strong and stable base from which to enter higher growth markets. In addition to providing investment, the Company’s engagement in these regions is likely to facilitate improved technical, operational, managerial, environmental, and corporate governance standards in municipalities in less developed regions. The target cities in Russia and the Ukraine lie outside the St. Petersburg- Moscow- Kiev axis and have had limited opportunities to benefit from direct foreign investment;

The close partnerships required with the municipalities will promote the development of public-private partnerships (“PPPs”) and contracting-out of services in other sectors. This transaction therefore supports an important element of the World Bank Group’s strategy for both Russia and Ukraine - investment through development of the PPP model.

The provision of water and wastewater services is a corporate priority for IFC. This investment offers:

- An opportunity to team up with one of the water sector’s strongest investors and to use IFC’s presence to facilitate their entry into higher risk markets;
- Long term financing which ensures that the emerging markets strategy of a major infrastructure investor is not stalled by the current financial crisis.
- IFC’s (and EBRD’s) involvement should assist in the acceptance by local authorities of better regulatory frameworks and contractual arrangements, corporate governance standards and environmental and social policies needed to facilitate future flows of equity and debt into the sector.
- Veolia’s plans to expand beyond the markets of central Europe where over the last 10 years it has helped to significantly raise standards. In high risk contexts with changing political environments, the combination of both IFC and EBRD in the shareholding structure is seen as a first step in managing long term regulatory risks.
- Support for PPPs in regions where privatization of poorly run and underfunded public services, has been largely confined to domestic groups with limited expertise.

This is a category B project because the Company’s activities help provide safe drinking water, reduce water pollution, and contribute to improved water quality and enhanced public health in the communities it serves. Potential environmental impacts of its operations are relatively small and limited, and can be minimized through adhering to the Company’s established production processes and procedures, as well as new innovations continually introduced.

Veolia Voda has demonstrated that, upon implementation of the specific measures, their activities will meet the requirements under the IFC Performance Standards. Most subsidiaries are, or soon will be, certified to ISO 9001 and 14001, the international quality and environmental management system standards. Among other things, this ensures the operations comply with applicable laws and regulations, which include both host country requirements and EU standards, which Central European countries have adopted in recent years. Going forward and within the above described existing set of E&S management system policies and practices, Veolia Voda will adopt IFC’s Performance Standards as part of legal and other requirements that apply to future operations.