Project Description
Provision of EUR 13.0 million debt financing to permanently resolve inadequate pressure in the Brcko District water system and restore water quality in the main centralised water network. This involves the construction of an approximately 14 km long pipeline, a new pumping station and clean water storage reservoir at "Potocari" and targeted reconstruction of between 2-3km of the existing water supply network to reduce water losses (from 53.1 to around 41.6 per cent) whilst improving system integrity ("the Project").
The Bank's existing sovereign loan of EUR 6.5 million was signed in April 2022. A loan increase of EUR 6.5 million is needed to meet the higher financial offers received through the procurement process as a result of a:
i) change of technical specifications from the preliminary design (which was included in the Project's 2018 feasibility study) to the detailed design stage (finalised after project signing).
ii) cost increases reflecting inflation in BiH, up from 2% in 2021 to 14.4% in 2022).
The Project is a trigger project under EBRD's Green City Framework 2 ("GrCF2") and will include technical cooperation ("TC") facilitated by the Bank for the development of a Green City Action Plan ("GCAP") to identify, prioritise, and address environmental challenges through a multi-sector approach.
Project Objectives
Loan proceeds will be used to significantly improve the reliability and physical resilience of Brcko Dictrict's existing water supply system. In addition, construction of the new main transmission pipeline ("MTP"), financed under the existing loan, will also enable the network to be connected to underserved settlements in the vicinity of the new MTP, achieving full population coverage and ultimately increasing the Company's revenue stream through the addition of new customers.
The combination of reduced physical losses in the system and modernised control of the water system pumps (also proposed as part of the Project) is expected to reduce the overall energy demand by around 214 MWh/yr which translates to an energy saving per unit of water produced of 25.2 per cent post investment. The Project will also assist Komunalno Brcko (the "Company") to prepare and sign a public service contract ("PSC") with the District including the phased achievement of full cost recovery tariffs for all the Company's services.
In line with GrCF2, the Project will play a key role in helping the district to identify, prioritise and address its environmental challenges through the development of a GCAP.
Transition Impact
ETI score: 70
The Green Cities Framework II ("GrCF2") represents a strategic and multi-project approach seeking to help identify and address environmental challenges in selected large cities in our countries of operation. The primary goal is to achieve significant environmental improvements and to promote the Green transition quality within the relevant cities. In addition to the environmental objective, the GrCF2 also promotes sustainable cities through inclusive, resilient, well-governed and smart urban development. Depending on which area can generate the strongest and most relevant transition impact, either Well-governed, Inclusive, Resilient or Competitive will be pursued and presented as the secondary transition quality for each sub-Project under the framework. These transition objectives are supported by the development and implementation of a city-specific Green City Action Plan ("GCAP") aiming to identify environmental challenges, facilitate better coordination and buy-in among stakeholders and help to prioritise and develop the best ways to address the environmental challenges through targeted investments, services and policy instruments. The GCAP takes a comprehensive approach, including the consideration of gender equality in the District.
The Project will primarily help to promote the Green transition quality by introducing improved quality and reliability of water supply, reduce water losses and energy demand (by 25.2 per cent compared to baseline) in energy use per cubic metre of water. It will moreover, enable development of a GCAP that will support the District's green ambition, by prioritising local environmental challenges, and put forward a plan of targeted investment and policy actions to address them.
The Project will also support the Well-governed objective through preparation of a Financial and Operation Improvement Programme ("FOPIP"), as well as a Public Service Contract ("PSC") between the District and the Company, eliminating cross-subsidy tariff system and improving operational efficiency of the Company.
Client Information
BOSNIA AND HERZEGOVINA SOVEREIGN
The Borrower is the state of BiH. The Bank's loan will be made available to the Brcko District, an independent regional governmental unit within the state of BiH. The ultimate beneficiary of the Project is Komunalno Brcko, a public company providing municipal services. The Company is fully owned by the District.
EBRD Finance Summary
EUR 13,000,000.00
The EBRD loan will finance EUR 13.0 million related to project works and works supervision including contingency and the front-end fee.
Total Project Cost
EUR 13,000,000.00
Project costs of EUR 13.0 million include the below components:
- Construction of Main Transmission Pipeline ("MTP");
- Construction of branches, reconstruction of existing water supply network and installation of variable frequency drives;
- Supervision consultancy services
- Front-end fee
- Contingency
Additionality
Financing Structure: the overall tenor is above market average which is required for similar infrastructure projects. Commercial banks are able to offer loans with a tenor between 5 and 8 years, very rarely up to 10 years and there is less interest for infrastructure projects which require significant support during the implementation.
Policy, sector, institutional, or regulatory change: the Bank's additionality also includes implementation of corporate governance improvements envisaged for the Company. The Project will help the Company prepare the FOPIP and PSC through TC-funded consultants.
EBRD attributes: EBRD's extensive energy efficiency knowledge and long-standing relationship (including policy dialogue) with the City and ability, through the Green Cities Action Plan process, to pursue the green agenda and gender and inclusion considerations.
Standard-setting: helping projects and clients achieve higher standards
- The technical assistance for advance procurement will enable the client to implement high international procurement standards;
- Higher inclusion and gender standards will be achieved as part of the development of the GCAP.
Environmental and Social Summary
Categorised B (2019 ESP). Through the rehabilitation of the water supply pipeline and networks infrastructure in the Brcko District the Project will improve the quality, safety, efficiency and reliability of the drinking water supply for 65,000 people, reduce water losses by estimated 54,091 m3/year and GHG emissions by 184.32 tCO2/annum. An independent Environmental and Social Due Diligence ("ESDD") was undertaken by external consultants as part of the 2017 Feasibility Study update, including E&S review of the updated PIP and taking account of the Covid-19 impacts, revision of the ESAP, SEP, NTS. The ESDD confirmed that the quality of the drinking water supply provided under PIP will meet relevant national and EU requirements.
The Company has an E&S management system certified in line with ISO 14001 for environmental management and ISO 45001 for occupational health and safety. It additionally plans to develop and implement Hazard Analysis and Critical Control Points ("HACCP") practices for production and water distribution, benchmarking its practices with other water utilities in the Danube river catchment area, and also plans to introduce BAS EN ISO/IEC 17025 standard for its water laboratory quality system.
The Company has 454 employees, of which over 20 per cent are 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 a grievance mechanism, in connection with the planning and construction of its infrastructure.
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 main water pipeline and networks route in the majority of their length will follow the existing local roads and the Brcko Bypass within the zone already expropriated for the purpose of the construction of the Bypass. Therefore, no significant impacts on the local population are expected during the construction of the pipeline. The ESDD confirmed that the PIP components will not affect any sensitive or designated nature conservation areas since all the works will take place in the urban and industrial area, 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 Framework, including the entitlements matrix covering all categories of the project affected people ("PAPs") has been prepared in line with PR5. Based on LAF, a detailed Land Acquisition and Resettlement Plan ("LARP"), including Expropriation Study, will need to be developed by the PIU and included as a CP to first disbursement. LARP will also need to be implemented by the Client prior to any construction. A Stakeholder Engagement Plan ("SEP"), including a grievance mechanism, has also been prepared for the Project.
The Project does not include investments into wastewater collection or treatment, however this is a clear priority for the District given its transboundary location, and relevant commitments to address these associated issues have been added in the Environmental and Social Action Plan ("ESAP") and will be prioritised in the GCAP for the City.
The ESAP has been prepared for the Company and the District 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) Obtain new and adhere to new and existing permits, related to the construction and operation phase, with the determination of sanitary water protection zones; (iii) Develop and implement HACCP practices; (iv) Develop and implement Construction and Operation E&S Management Plans (CESMP and OESMP), Construction Waste Management Plan and Construction Site Organisation Plan; (v) Establish a Project Implementation Unit with adequate E&S capacity; (vi) Develop a grievance mechanism for workers; (vii) Monitor the implementation of the Contractor's E&S activities and require the Contractor to develop a Chance Find Procedure; (viii) prepare and implement Land Acquisition and Resettlement Plan prior to any construction; (ix) Implement the Stakeholder Engagement Plan and monitor its implementation; (x) work to develop clear plans for a new WWTP and the associated sludge management and disposal procedure.
The Company will implement the ESAP, and 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
Pre-signing:
TC 1: Advance Procurement Support: to assist the Company and the District with tendering, evaluation and contract signing. The total cost of the assignment is EUR 50,000 which was financed by the Austrian Government.
TC 2: Update of the feasibility study: to assist the Company and the District with assessing the current situation and taking account of the COVID-19 impacts, and revision of the ESAP, SEP, NTS and undertake a resettlement audit. The cost of the assignment is EUR 25,000 financed by the Austrian Government and the assignment has now been completed.
TC 3: Amendment to the main design: to assist the Company and the District with amendment to the main design for the works contract so the future water network pipe is aligned to the Brcko Bypass (a road which was financed by EBRD in 2011). The amendment will reduce the need to land acquisition. The cost of the assignment is EUR 25,000 financed by the Austrian Government and the assignment has now been completed.
Post-signing:
TC 4: Financial and Operational Performance Improvement Programme: to assist the Company to prepare and sign a PSC with the District including the phased achievement of full cost recovery tariffs, for all services which the Company is providing. The assignment will also assist in the preparation of a long-term business plan and IFRS audit. The FOPIP will also include a special chapter devoted to the organisation of the Company and optimisation of the labour force. The cost of the assignment is EUR 350,000 which is financed by the Austrian Government. The assignment is ongoing.
TC 5: Green City Action Plan: to support the District in developing an action plan that will assist to strategically plan and prioritise actions and investments to improve the District's environmental performance. The GCAP will cover inclusion and gender considerations. The cost of the assignment is EUR 275,000 which was funded by the Central European Initiative ("CEI"). The assignment is ongoing.
Reimbursement: The above assignments will be non-reimbursable transactional TCs - the total of up to EUR 730,000 of TC funds (donor) would be required to evaluate the investment and assist the Company and the District in project implementation.
Cost sharing: The Company will provide "in-kind" contributions in the form of office space, communication connections etc. for the consultants to work, presumed to amount to 3 per cent of the total TC budget.
Company Contact Information
Majazudin Vehabovic, Head of Department, Brcko District Department for Utilities Services
majazudin.vehabovic@bdcentral.net
+387 49 240 812
http://www.vlada.bdcentral.net/#
Bulevar Mira 1,
76100 Brcko Distrikt BiH
PSD last updated
28 Apr 2023
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.
