GrCF2 W2 - Banja Luka Water - Phase 2

Location:

Bosnia and Herzegovina

Project number:

49668

Business sector:

Municipal and environmental infrastructure

Notice type:

State

Environmental category:

B

Approval date:

02 Sep 2020

Status:

Concept Reviewed

PSD disclosed:

02 Jul 2020

As permitted by paragraph 2.6 of Section III of the Access to Information Policy, disclosure of this PSD was deferred in accordance with paragraph 1.4.4 of the Directive on Access to Information.

Project Description

Provision of a non-sovereign loan to the city of Banja Luka (the "city") for the rehabilitation and expansion of Banja Luka's existing water supply and wastewater network - Phase 2 (the "Project"). GrCF2 W2 - Banja Luka Water - Phase 1 (51241) is currently under implementation and covers rehabilitation and expansion of the existing water supply network.

Project Objectives

Assisting the Banja Luka Water Company ("Vodovod a.d. Banja Luka" or the "Company") to: (i) improve its performance through the reduction of costs; (ii) reduce consumption of electricity and (iii) provide a reliable supply of potable water to its customers.

Transition Impact

ETI score: 70

The expected transition impact includes: (i) improvement of the quality and reliability of water supply and (ii) improvement of the company's financial sustainability and operational efficiency by entering into a public service contract ("PSC") between the city and the company.

Client Information

CITY OF BANJA LUKA

The city is the economic, financial, political and administrative centre of the Republika Sprska ("RS"), which is one of the two political entities that make up Bosnia and Herzegovina ("BiH"). The city has a population of 199,191 people (based on the results of the 2013 census).

EBRD Finance Summary

EUR 6,000,000.00

EUR 6,000,000

Total Project Cost

EUR 10,000,000.00

EUR 6,000,000 loan from EBRD

EUR 4,000,000 potential grant from a donor 

Additionality

The additionality sources are: (i) the financing structure; (ii) the policy, sector, Institutional or regulatory change; and (iii) Standard-setting: helping projects and clients achieve higher standards.

Environmental and Social Summary

Categorised B (2014 ESP). The Phase 2 project, through the rehabilitation and expansion of the water and wastewater networks infrastructure in the City will improve the quality, safety and reliability of the drinking water supply for 12,440 customers of which 5,700 are new users, the new sanitary sewer is expected to benefit 4,200 people including 2,400 new users. The Phase 1 of the project is currently under implementation, and is linked to Phase 2.

An independent Environmental and Social due diligence ("ESDD") was undertaken by external consultants as part of the feasibility study prepared for both Phases of the Project in 2019, and this was further supplemented by the Bank's review of the additional Covid-19 questionnaire and discussions. Most of Phase 2 investments are focussed on improving the drinking water supply, and ESDD confirmed that the quality of the drinking water supply provided under PIP will meet relevant national and EU requirements. While the coverage and reliability of wastewater collection in Banja Luka will improve and the risk for groundwater contamination is reduced through construction of the new sewers, the City has no centralised wastewater treatment plant. Wastewater is discharged into the rivers Vrbanja and Vrbas untreated, thus contributing to the pollution of the Danube river and the Black Sea basin as well as presenting high risks for human health. Phase 2 of the project is a step in the right direction as it will enable Banja Luka to start to developing a longer-term solution for the City's sewage treatment. While provision of the new sanitary sewers will help to remove local urban pollution from untreated effluent, on a city level the new user connections will increase untreated direct discharges to t local rivers by an estimated 603 thousand m3/annum until a waste water treatment plant ("WWTP") is in place.

While the Project does not provide any solution for wastewater treatment under Phase 2 of the PIP, it is part of the Green City Action Plan along with a new centralised WWTP at Delibasino Selo. A new WWTP, including the associated pumping stations, addressing the pre-treatment of the industrial discharges and sludge management and disposal, has an estimated indicative cost ranging between EUR 40-59 million. The City, as stated in the GCAP, hope to have a conceptual design for a WWTP completed by 2022, with an investment in the full facility in 2030. While a WWTP is a clear priority for the City, as acknowledged by their GCAP, neither the City nor the Company have the financial capacity to build a new WWTP at the current time. Therefore, Phase 2 of the Project will require derogation from EBRD's Environmental and Social ("E&S") Policy to be sought from the Board on the basis of affordability.

To further reduce risks to human health and the environment, the Company and the City will be required to (i) conduct enhanced regular monitoring of the discharges and of water quality at the points of discharge into the local rivers and upstream/downstream and informing stakeholders accordingly of any issues; (ii) take steps for preventing contamination of the areas used for drinking water intake and recreation/leisure activities, to make sure the consequences for public health are eliminated/minimised; and (iii) carry out capacity building among public with regards to potential risks to public health and measures to be taken. These actions will be added into the updated ESAP.

The Company has an ISO 14001 certified Environmental Management System and also HACCP certificate for production and water distribution, benchmarking its practices with other water utilities in the Danube river catchment area. However, the Company has no established Occupational Health and Safety ("OHS") Management System yet and will need to further improve its OHS practices.

There are 365 employees, with over 25 per cent women, and associated human resources ("HR") policies and procedures in place are mostly aligned with PR2. There is designated staff responsible for environmental and OHS management, and the Company currently has all necessary permits in place for its operations. The Company carries out stakeholder engagement activities, including grievance mechanism, in connection with the planning and construction of its infrastructure. ESDD also confirmed that Company's response to Covid-19 has been adequate.

No significant adverse impacts were identified by the external ESDD, and any impacts will be mostly construction-related, temporary by nature, and will be mitigated through good EHS construction practice. The new pipelines will also in the majority of their length follow the existing roads. The ESDD confirmed that the PIP components will not affect any sensitive or designated nature conservation areas, however precautionary biodiversity measures including a pre-construction biodiversity assessment will be conducted once the design documentation is completed and the final alignments for the networks are defined.

The Project will not involve any involuntary resettlement, and no buildings would be affected. A Land Acquisition and Resettlement Framework ("LARF"), including the compensation matrix covering all categories of the project affected people ("PAPs"), has been prepared in line with PR5 and a detailed Land Acquisition Resettlement Plan ("LARP") will be developed based on the LARF. A Stakeholder Engagement Plan ("SEP"), including a grievance mechanism, has also been prepared for the Project.

An Environmental and Social Action Plan ("ESAP") has been prepared and provisionally agreed with the Company and the City to mitigate the identified E&S issues and impacts and to bring the Company's operations into compliance with the EBRD's PRs. The ESAP includes among others measures to be taken by the Company to: (i) ensure completion of any additional environmental and/or biodiversity studies that may be required by the competent environmental authorities for the project components in order to obtain the relevant environmental and construction permits; (ii) develop further plans for a new WWTP and the associated sludge management and disposal procedure in line with EU requirements; (iii) include in contractors contracts an obligation to develop and implement construction EHS Management Plan and apply good working practices during construction; (iv) inform all residents in a timely manner about expected construction impacts and anticipated mitigation measures; (v) finalise and disclose LARF and SEP, including external grievance mechanism; (vi) following from LARF, develop and implement a detailed LARP; (vii) develop and implement an OHS Management System; (viii) develop and implement an annual monitoring programme of the industrial discharges in the municipal wastewaters, as required by the current Water Permit; (ix) several measures, as outlined above, to reduce risks to public health. The Company will implement the updated corrective ESAP, and further capacity building and implementation support is foreseen through PIU that was established under Phase 1 with supervision and procurement support/contract management, FOPIP consultant and Instrument for Pre-Accession Assistance (IPA II) consultant too. The Bank will monitor the Project through review of Annual Environmental and Social Reports ("AESRs") and site visits as required

Technical Cooperation and Grant Financing

n/a

Company Contact Information

Sinisa Kurtes
kabinet.gradonacelnika@banjaluka.rs.ba
00387 51 244 444
00387 51 212 526
www.banjaluka.rs.ba
Trg Srpskih Vladara 1 78000 Banja Luka Bosnia and Herzegovina

PSD last updated

02 Jul 2020

Understanding Transition

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

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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.

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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.

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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.

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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 how to submit a Request for review through our confidential online form, by emailmail or telephone. IPAM is available to discuss your concerns and answer any questions you may have about the submission or handling of Requests, which follow the Project Accountability Policy and Guidance. Requesters’ identities may be kept confidential, upon request.

 

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