Capljina Water Supply

Project number:


Approval date:

27 Mar 2012



PSD disclosed:

12 Dec 2011

Translated version of this PSD: Bosnian 

Project Description

The EBRD is considering providing a sovereign guaranteed loan of up to €5 million to part-finance the rehabilitation and expansion of the water supply network in Capljina Municipality, to cover Dubrave Plateau and Trebizat area.

The project will connect about 1,800 new households to the water supply system.

The objectives are to support the growth of the municipal utility company through the connection of new consumers and to upgrade the quality and reliability of the water supply system, thus improving the living standard of the population in Capljina Municipality.

Transition Impact

Transition impact from this project is likely to come from:

(i) the introduction of effective tariff reforms aiming at full cost reflective tariffs for all consumer groups;
(ii) the introduction of a public service contract between the Municipality and the utility; and
(iii) demonstration of the successful restructuring of the company, including cost reductions and improved bill collection beyond the current norms in the sector. Positive demonstration effect is also expected to come from one of the first direct company loans in the municipal sector in BiH.

The Client

Public Utility Company “Capljina” d.o.o. Capljina (The company), a limited liability company wholly owned by the Capljina Municipality providing public services in the area of water supply, wastewater, solid waste management and maintenance of public areas.

EBRD Finance

Up to €5 million loan to Public Utility Company “Capljina” backed by sovereign guarantee from Bosnia and Herzegovina.
The European Union is providing a grant co-financing in the amount of €4.5 million through the National IPA 2010 programme.

Project Cost

€12 million.

Environmental Impact

This project has been categorised B in accordance with EBRD's 2008 Environmental and Social Policy. The expansion of the water supply network to cover suburban parts of the municipality (Dubrave Plateau and Trebizat area) will improve the quality and efficiency of the water network in Capljina with mainly positive long-term social and environmental impacts. This project will be Phase 2 of a four phase programme and the due diligence also reviewed the environmental and social issues associated with the future phases of the programme.

The environmental and social due diligence (ESDD) for the project was undertaken by independent consultants and included a site visit, reviews of the Company's existing E&S management systems, and available technical and environmental documentation, including the feasibility study. The ESDD concluded the Phase 2 of the project will improve water supply and reduce water losses and the implementation of the project as well as bring the drinking water quality in compliance with national and EU requirements. The due diligence also identified that as a Municipal Service provider the Company currently is not able to comply with EU Urban Waste Water or Waste Directives, however the implementation of the full four phases of the investment programme and feasibility study requirements aims to achieve this.

The project is expected to have mainly positive long-term social and environmental benefits as it will improve the Municipality’s water supply, and expand the existing network within the municipality of Capljina connecting about 1,800 new households. The potential impacts are mainly expected to be during the project construction phase and include: dust, noise, access issues, soil and waste management. These construction impacts will be limited, localised and short-term, and can be mitigated or prevented by adhering to good construction practice. No resettlement or economic displacement is expected. However some land plots are expected to be temporarily affected during the construction phase. The planned tariff increases are not expected to result in significant affordability issues for households.

The protected Nature Park “Hutovo Blato” (Ramsar Site) is located upstream of the raw water intake. The area is of particular importance to wetland birds. Due diligence confirmed that the wetlands will not be directly impacted by the project’s water supply system as the wells used for raw water intake do not impact on the water levels in Hutovo Blato.

The Company does not have formal management systems in place and due diligence identified that some additional resources and procedures are needed to achieve compliance with EBRD’s Performance Requirements (PRs). Environmental and Social Action Plan (ESAP) has been developed and agreed with the Company to address the additional measures and includes the requirements for:

  • The development and implementation of Health, Safety, Environment and Labour Policies, plans, standards and procedures.
  • Tender documentation should include the mitigation measures required in the feasibility study and the ESAP.
  • An Equal Opportunities policy is to be developed and the existing grievance mechanism to be formalised.
  • OHS risk assessment processes and procedures are to be developed.
  • Emergency response and transport management plans.
  • Procedures for cultural heritage chance finds and UXO’s.

The Municipality and the Company have developed a Stakeholder Engagement Plan (SEP) including a grievance mechanism. The Company will provide the Bank with annual environmental and social reports, including updates on the implementation of the ESAP and SEP.

Technical Cooperation

€450,000 total estimated for assistance with procurement, works supervision, Financial and Operational Performance Improvement Programme. Source to be determined.

Implementation Summary

A sovereign loan to the state of BiH in the amount of up to EUR 5.0 million, co-financed by EU grant in the amount of up to EUR 4.5 million, for expansion of the water supply network to cover the sub-urban parts of the Municipality of Capljina (Dubrave Plateau and Trebizat, Prcavci and Zvirovici areas) and upgrading the existing system in the urban area. The project was delivered on budget and within the anticipated time frame, albeit later than anticipated given the delays to effectiveness of the loan. The Project enabled the Company to connect some 2,300 new households to the drinking water thereby improving the living standards of the population in the rural parts of the municipality. Furthermore, the company was able to achieve cost recovery of its water supply operations and introduce a tariff adjustment system. Through the introduction of FOPIP (Financial and Operational Performance Improvement Programme) and the PSA (Public Service Agreement) the Company was able to improve bill collection and reduce technical and commercial losses.


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

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Text of the PIP

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