Mostar North to Mostar South Motorway

Location:

Bosnia and Herzegovina

Project number:

51593

Business sector:

Transport

Notice type:

State

Environmental category:

A

Approval date:

15 Nov 2022

Status:

Passed Final Review, Pending Approval

PSD disclosed:

23 May 2022

Project Description

The EBRD is considering providing a sovereign loan to Bosnia and Herzegovina ("BiH") in the amount of up to EUR 220 million to be on-lent to the Federation of Bosnia and Herzegovina Motorways Ltd ("FBHM" or "Client") via Federation of Bosnia and Herzegovina ("FBH") for the construction of a new Corridor Vc motorway section of approximately 15 kilometres from the Mostar North Interchange to the Mostar South Interchange (Project). The Project is expected to benefit from an investment grant in the amount of EUR 150 million from the European Union ("EU") under the Western Balkans Investment Framework ("WBIF").

 

The project includes one interchange on the north end, a 2 km long tunnel in the middle of the section and roads connecting the motorway to the existing trunk road M17. The project is a follow on operation to the Bank's previous projects for the construction of key motorway sections of Corridor Vc in BiH which connects Port of Ploce in Croatia with Budapest and is part of the Western Balkans Core Network

Project Objectives

Support of BiH's economic development and contribution to its regional and European integration by improving connectivity between its main cities and between BiH and neighbouring countries.

Transition Impact

ETI score: 67

The project will facilitate BiH's internal and regional integration by improving its key transport infrastructure. The project will also strengthen (i) sector competitiveness with set up of a sector policy statement and service level agreement at the FBH level and (ii) resilient with the introduction of an electronic toll collection ("ETC") system as well as the Motorway company raising commercial financing via bonds.

Client Information

MOTORWAYS OF THE FEDERATION OF BOSNIA AND HERZEGOVINA LTD

The client is Motorways of the Federation of Bosnia and Herzegovina, a public company wholly owned by the government of the Federation of Bosnia and Herzegovina. The company is responsible for the development, operation and maintenance of motorways and expressways in the FBH.

EBRD Finance Summary

EUR 220,000,000.00

A sovereign loan of up to EUR 220 million on-lent to to FBHM with back-to-back guarantee from FBH. The Client may consider funding from another IFI or lender which could potentially decrease EBRD's exposure on the Project.

Total Project Cost

EUR 433,000,000.00

The total project cost including design, construction works and supervision services is estimated at EUR 433 million. 

Total financing package includes EUR 220 million sovereign loan and EUR 150 million WBIF grant. The Client's contribution of EUR 63 million is envisaged for VAT cost. 

 

Additionality

The additionality of the EBRD financing includes: (i) the financing structure; (ii) resource mobilisation; (iii) risk mitigation; and (iv) standard-setting: corporate governance improvements.

Environmental and Social Summary

Category A (ESP 2019).   The project includes the construction and operation/maintenance of a 14.2 km section of motorway from Mostar North interchange to the Mostar South interchange within the Federation of Bosnia and Herzegovina.  This project is part of the larger trans-European Vc corridor  connecting Budapest (Hungary) to Port of Ploce (Croatia).  A consultant was retained to complete the comprehensive Environmental and Social Impact Assessment (ESIA) disclosure package.  The ESIA documentation was disclosed on EBRD's web site on 9 June 2021 and includes the following documents:

i           Environmental and Social Impact Assessment (ESIA) Environmental and Social Management Plan (ESMP)

i           Environmental and Social Action Plan (ESAP)

i           Biodiversity Management Plan (BMP)

i           Non-Technical Summary (NTS)

i           Stakeholder Engagement Plan (SEP)

i           Land Acquisition and Livelihood Restoration Framework (LALRF)

i           Technical Annexes to ESIA

i           Public Consultation Report

 

The SEP includes a summary of information disclosure and community meetings conducted to date, as well as an outline of the upcoming disclosure/consultation activities.  Several small consultation  meetings have been held with the key stakeholders during the ESIA preparation including four environmental non-governmental organisation (NGOs), representatives of Local Communities (LCs) Vrapcici, Gnojnice, Bijelo Polje and Kuti and relevant ministries and local authorities. Special attention was paid to consult associations of returnees to assess their vulnerability and potential project concerns. The ESIA public disclosure and public hearing were organised in the framework of national environmental impact assessment procedure. NGOs and representatives of LCs participated in this procedure and their comments were taken into account during finalisation of the ESIA package. The results of public engagement are summarised in the SEP and Public Consultation Report (PCR).  This PCR will be published on the EBRD web site during the second quarter of 2022.

 

One of the main risks associated with this project will be contractor management, and ensuring that the contractors are aware of their responsibilities and that they implement adequate actions to avoid, minimise, mitigate and manage these risks as identified in the ESIA and associated management plans.  A comprehensive Environmental and Social Management System (ESMS) is required as part of the ESAP to ensure the contractors adequately address the environmental and social impacts and risks. 

 

The route for this project was selected based on a multi-criteria analysis of options prior to EBRD's  involvement.  As a part of the ESIA, detailed environmental and social baseline data were collected and reviewed to verify the previous route selection.  The alignment of this route is within a valley, crossing mainly developed/degraded land/habitat as opposed to the possible ridge route that would cross more sensitive undeveloped territory.  The review confirmed that the original multi-criteria analysis selected the best route for this section given the reasonable alternative options.

 

A Land Acquisition and Livelihood Restoration Framework (LALRF) has been prepared and disclosed to outline the procedures that will be applied for any potential land acquisition and livelihood restoration activities. It is unlikely there will be any physical resettlement, however the exact land acquisition scope will be provided within the Final Expropriation Study, which will be prepared upon the development of the design documentation (Preliminary Design and Main Design).   The Preliminary Design was submitted to the Federal Ministry of Environment and Tourism together with the Request for preliminary EIA in 2022.  The plan is to retain a licensed company in quarter three of 2022 to update the preliminary design and to prepare the main design.  

 

The project bypasses the city of Mostar, but goes through the villages of Kutilivac, Vrapcici, Gnojnice Gornje, and Gnojnice. Consultations with community representatives in these villages highlighted concerns about issues related to tunnelling activities, water quality, increased noise levels, degradation of air quality, risk of collision on local roads and existing water supply system, all of which have been assessed in the ESIA. A high-level contextual analysis of the three major ethnic groups was undertaken and it has not identified any significant risks especially in terms of vulnerability. 

 

In total it is estimated that the project will directly impact 358 land plots, 308 of these which are privately owned, the remainder State owned. The results of the socio-economic survey show that only 22% of households who live on land planned to be acquired for Project needs have sufficient monthly income to cover the minimum living costs. In addition, the majority of these households reported some type of vulnerability (most commonly: elderly, disabled and chronically ill persons). Among landowners who do not live on land to be acquired, only several have sufficient monthly income to cover the minimum living costs; around 7% of household heads have some type of vulnerability, whereas 10% of households have additional members with vulnerabilities. Furthermore, 12.5% of all households (those who live on land and those who live elsewhere) live in relative poverty. Therefore, assistance for these households will be facilitated by JPAC with support from the City of Mostar, as to be detailed in the Land Acquisition and Resettlement Plan for this motorway section. In terms of impacts on commercial activities, a total of three private businesses will be affected by land acquisition, while 2 additional businesses are located on land plots above the planned tunnel T5, and at this stage of Project preparation, it is not certain whether they will be affected by land acquisition (and relocated). In addition, the Project is expected to impact to some extent agricultural activities on 49 land plots affected by land acquisition i for a minority of PAP, these activities are their primary source of income. Therefore, compensation entitlements for such losses are provided within the developed LALRF and will be further specified in the Land Acquisition and Resettlement Plan.

 

The habitats of the project area are mostly represented with garrigues, screes, intensively-farmed crops interspersed with strips of semi-natural vegetation and mixed deciduous and coniferous woodland.  The project does not impact any protected area or critical habitat.  Nonetheless, a BMP was developed to ensure adequate protection is provided to achieve no net loss of priority biodiversity features which include reptiles, birds and bats. In the vicinity of Stolac Hill the motorway will be constructed in a tunnel to avoid sensitive flora. 

 

A road safety audit will be performed when the design is near final and the results will be provided to the design team for consideration in the final design. Justification for road safety measures that are rejected will need to be provided to the Bank.

 

The ESAP, ESMP, BMP and LALRF have been prepared to ensure that the project will be developed and operated in accordance with the EBRD Performance Requirements.  Through these documents and the ESIA process many measures have been defined to avoid and minimise impacts from the project. Protective panels will be installed on certain sections of the motorway to mitigate potential impacts (ie, collisions) to birds and bats, and the motorway will be fenced to prevent the ingress and impacts to large mammals.  Contractors are required to develop construction management plans to provide management/mitigation procedures to cover air emissions, water quality, land restoration, invasive species, topsoil, health and safety, waste management and emergency response, labour, worker accommodation, code of conduct (including gender based violence and harassment) and  stakeholder engagement.

 

The environmental and social performance of this project will be actively monitored by ESD with a focus on the construction activities.

Technical Cooperation and Grant Financing

ASSOCIATED DONOR FUNDED TC AND CO-INVESTMENT GRANTS/CONCESSIONAL

FINANCEPre-signing:

i TC1: Environmental and Social Due Diligence. The cost is EUR 75,000, financed by the Central European Initiative Fund ("CEI"). Assignment has been completed.

i TC2 Feasibility Study: A study split into three parts covering i) financial, economic and technical due diligence, ii) analysis to support the integration of electronic tolling and electric vehicles into the FBH road network, and iii) a review of the climate resilience aspects of the Project. The cost of the study is EUR 125,000, financed by Shareholder Special Fund ("SSF"). The assignment is ongoing.

 Post-signing:

i TC3: Procurement and legal Advisory Service. Independent consultant that will assist the Client to prepare, publish and evaluate offers from local commercial banks. The consultant will also prepare financing agreements that will be part of the tender documents. The cost of the assignment is EUR 50,000, financed by Shareholder Special Fund ("SSF").

i TC4: Corporate Development Plan ("CDP"): The aim of the assignment is to assist the Company in its capacity and institutional building in order to allow the Company to operate on a commercial basis. The estimated cost of the CDP is EUR 400,000, financed by the Austrian Municipal Infrastructure Fund ("AMIF").

i TC5: Sector Policy Statement ("SPS") and Service Level Agreement ("SLA"): The assignment is split into two areas, the SPS and SLA. The aim of the SPS is to detail the key challenges, policy priorities, implementation timelines and potential obstacles to reform the BiH road sector. The SLA aims to set out the scope and protocol of an agreement between the FBHM and the Government to manage and maintain the motorways and expressways network of the country. The cost of the assignment is EUR 100,000, financed by SSF. 

Cost sharing: The Company will be responsible for paying all VAT and other indirect taxes that are applied to the post-signing TC assignment where the Company is the contracting party as a parallel cost sharing contribution to the project (VAT is levied at 17 percent in BiH). Additionally, the Company will also provide in-kind support in the form of office space, communication connections, etc. for the consultants to work (presumed at 3 percent of the total TC budget).

Company Contact Information

Elmedin Voloder
info@jpautoceste.ba
+387 33 277 900
+387 33 277 901
www.jpautoceste.ba
Sarajevo Office Dubrovacka 6 71000 Sarajevo Bosnia and Herzegovina

PSD last updated

23 May 2022

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Business opportunities

For business opportunities or procurement, contact the client company.

For business opportunities with EBRD (not related to procurement) contact:

Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

For state-sector projects, visit EBRD Procurement:

Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

Specific enquiries can be made using the EBRD Enquiries form.

Environmental and Social Policy (ESP)

The ESP and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”.  The ESP and the PRs include specific provisions for clients to comply with the applicable requirements of national laws on public information and consultation as well as to establish a grievance mechanism to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project. Proportionate to the nature and scale of a project’s environmental and social risks and impacts, the EBRD additionally requires its clients to disclose information, as appropriate, about the risks and impacts arising from projects or to undertake meaningful consultation with stakeholders and consider and respond to their feedback.

More information on the EBRD’s practices in this regard is set out in the ESP.

Integrity and Compliance

The EBRD's Office of the Chief Compliance Officer (OCCO) promotes good governance and ensures that the highest standards of integrity are applied to all activities of the Bank in accordance with international best practice. Integrity due diligence is conducted on all Bank clients to ensure that projects do not present unacceptable integrity or reputational risks to the Bank. The Bank believes that identifying and resolving issues at the project assessment approval stages is the most effective means of ensuring the integrity of Bank transactions. OCCO plays a key role in these protective efforts, and also helps to monitor integrity risks in projects post-investment.

OCCO is also responsible for investigating allegations of fraud, corruption and misconduct in EBRD-financed projects. Anyone, both within or outside the Bank, who suspects fraud or corruption should submit a written report to the Chief Compliance Officer by email to compliance@ebrd.com. All matters reported will be handled by OCCO for follow-up. All reports, including anonymous ones, will be reviewed. Reports can be made in any language of the Bank or of the Bank's countries of operation. The information provided must be made in good faith.

Access to Information Policy (AIP)

The AIP 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 following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form.

Independent Project Accountability Mechanism (IPAM)

If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).

IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.

Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM  via email ipam@ebrd.com to get guidance and more information on IPAM and how to submit a request.

 

Share this page: