Pale District Heating Project


Bosnia and Herzegovina

Project number:


Business sector:

Municipal and environmental infrastructure

Notice type:


Environmental category:


Approval date:

25 Jun 2013



PSD disclosed:

25 Apr 2013

Translated version of this PSD: Serbian

Project Description

The EBRD is considering a loan of up to EUR 4.5 million together with an investment grant of up to EUR 2.0 million for the construction of a new boiler house with a 7.5 MW biomass boiler, the replacement of existing and the expansion of the district heating network to connect new consumers, and the installation of individual heating substations together with individual heat meters for each consumer. The Project will be implemented by the Public Utility Company “Gradske Toplane” Pale (“Toplane” or the “Company”).

The Project will contribute to environmental protection and improve the quality of services in the Municipality of Pale.

Transition Impact

The main transition impact comes from the implementation of cost-recovery principles and cost-effective business performances by the Company.

A. Framework for Markets: An arm’slength-service agreement between the Municipality and the Company with the aim of setting service standards, efficiency indicators, automatic tariff adjustments and measures for bill collection will be prepared and signed.

B. Improved standards for corporate governance: The Project will target a reduction of energy costs, heat losses, switch to environmental friendly heating, and other operational improvements expected as a result over time such as higher labour productivity and improved financial reporting and transparency. A focused Financial and Operational Performance Improvement Plan (FOPIP) will be prepared and implemented to this effect.

The Client

The client is the Public Utility Company “Gradske Toplane” Pale which is wholly-owned by the Municipality of Pale.

EBRD Finance

Sovereign loan of up to EUR 4.5 million.

An investment grant of EUR 2.0 million is currently being sought from the European Western Balkans Joint Fund (“EWBJF”) to co-finance the Project.

Project Cost

EUR 8.2 million, including TC grants and related VAT costs.

Environmental Impact

The project has been categorised B in accordance with EBRD's 2008 Environmental and Social Policy. The proposed investment is expected to bring environmental and social benefits associated with the overall improvement in the quality and reliability of heating and hot water services in the Municipality, improved energy efficiency, reduction in fuel consumption and heat and water losses, and improved local air quality.

Independent Environmental and Social due diligence (ESDD) was done by an international consultancy as part of the feasibility study. ESDD included a review of the Company’s corporate environmental and social management capabilities and procedures in relation to its own workforce and construction contractors, and an analysis of the environmental and social impacts and benefits of the proposed investment programme to assess the Project against the EBRD's Performance Requirements (PRs).

Due diligence has identified a number of actions required to be addressed by the company to meet EBRD requirements and an action plan has been developed. The action plan includes items such as increase in capability and capacity to manage environmental and social issues and to develop management systems aligned with international standards and to achieve local regulatory compliance. In addition, issues associated with occupational health and safety, contractor management, waste management and development of sustainable biofuel procurement policy are to be adopted by the company. In addition, due to the proposed location of the new boiler the plan includes a commitment that the company achieves EU standards for emissions to air for sensitive environments which goes beyond local or national requirements.

The above action plan has been incorporated into an Environmental and Social Action Plan (ESAP) has been developed by the consultant and reviewed by EBRD which includes corrective actions and mitigation measures for identified issues to ensure that the company meets the EBRD requirements. In addition, a Stakeholder Engagement Plan (SEP) has been developed and these two documents are currently being reviewed by the company. The company is required to implement the ESAP and SEP and submit annual environmental and social reports to the Bank.

Technical Cooperation

• Feasibility Study, EUR 200,000, funded by the Government of Austria
Post signing:
• Project Implementation Support, including procurement, supervision, Financial and Operational Performance Improvement Plan (FOPIP) and Public Service Contract (PSC), EUR 400,000, to be financed by an international donor
• Detail Design, EUR 100,000, to be financed by an international donor.


Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168

Public Information Policy (PIP)

The PIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. Please visit the Public Information Policy page below to find out how to request a Public Sector Board Report.
Text of the PIP

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