Preparation of the Project

The Municipality of Budapest signed the contract for performing the technical assistance (TA) tasks related to the Csepel sewage treatment plant project with SWECO, a Swedish-Hungarian consortium that had won the international tender, on 3 September 2002. The project was funded by ISPA support of the EU, and financial and legal terms and conditions were determined in the financial memorandum between the European Union and the Hungarian state.

The technical assistance included the preparation of the following documents:

• ISPA application form
• Feasibility study with attached drawings, financial analysis and public procurement plan
• Executive summary of the feasibility study
• Summary of the environmental impact analysis
• Tender documentation of the wastewater treatment plant
• Call for the supervision tender

The project underwent several administrative and conceptual changes during the 15-months technical assistance period, including the following:

• At the EU/EIB monitoring meeting in June 2003, the Investor was informed that the structure of the environmental permit that may be issued according to the effective permitting procedure does not comply with EU requirements. Therefore, negotiations had to be started with the competent environmental protection authority, so that it issued a complex environmental permit for the whole project. Such a permit is different from the current permitting practice of Hungary.
• At the same time, the EU also decided that the project should be prepared for CohesionFund assistance instead of ISPA funding.
• Budapest , as the Investor, did not have a waste management plan at the time of the preparation of the project, so TA consultants could not adjust their ideas to existing plans. The General Assembly of Budapest approved the waste management plan of Budapest in September 2004, long after the submission of the application. Meanwhile alternative sludge deposit methods where discussed with authorities and the current operator, feasibility studies have been prepared on co-combustion and the utilisation in forestry or agriculture, etc.
• The VAT Act has been amended.
• The Act that was published in November 2003 and the government decree on its implementation [Act LXXXIX. of 2003 and Government Decree 270/2003 (XII.24.)] introduced the environmental fee from 1 January 2004 . Therefore, the operator of the sewerage works shall pay the environmental fee, because of the caused strain on the Danube as a recipient watercourse, and the fee shall be included in the sewerage fee. Because of the significant increase of the sewerage fee, long-term changes in burdens of the population had to be recalculated, as the assistance proportion of the EU is calculated based on this.
• The new Act CXXXIX. of 2003 on public procurement was adopted in December 2003. It should have been applied to EU-financed projects from 1 January 2004 , but decrees on the implementation were published only after April 2004. Moreover, the sample contracts of different agreement types (service contracts, construction contracts, contracts for the procurement of goods) were prepared only in September 2004.
• The preparation and finalization of the assistance agreement related to the Cohesion Fund and concluded between the Ministry of Environment Protection and Water Management and the Municipality of Budapest was also time-consuming. Experts had to participate in solving VAT-problems, calculating exchange risks and elaborating guarantees or other terms of the contract. The assistance agreement was signed on 2 December 2004 .

After clarifying all questions, making all investors’ decisions and performing quality insurance tasks, the Cohesion Fund application was compiled on 31 March 2004 .

The government decided to submit the project proposal and the application for assistance from the Cohesion Fund to the European Commission by Government Decision 2061/2004 (III.12.).

According to this decision, after the quality insurance required by Government Decree 1/2004 (I.5.), the National Development Office submitted the application for assistance to the European Union in Brussels on behalf of the Hungarian state, in order to get support from the Cohesion Fund.

The decision on the application for assistance was made on 17 December 2004 , and the European Commission approved the application by its decision. According to the decision, the European Union finances the 65% of all eligible costs. The remaining portion is financed by the government and the Municipality of Budapest subject to the conditions of the assistance agreement.