The Project consist of the construction of a solar thermal plant with a 30 MW capacity to provide additional heat energy capacity and extension of the district heating ("DH") network of the city of Pristina (the "Project"). The Project's scope includes a network extension which will be implemented in stages, with the first stage of up to 50 MW, of which 30 MW will be supplied from the solar thermal plant financed by the Project. The remaining 20 MW of network extension will be supplied from the existing combined heat and power ("CHP") facility at Kosovo B where no increase in coal consumption is expected due to the operating characteristics of the plant and its use of baseload electricity production. A further 20 MW network extension for a total capacity of 70 MW will be considered at a later stage, subject to further due diligence including confirmation of Paris Agreement alignment.
The Project aims to
- increase the share of renewable energy in Pristina's DH network, thereby enhancing Pristina's energy security and sustainability; and
- improve the financial and operational performance of Termokos JSC (the "Client" or the "Company") through the revision of tariff setting methodology and preparation of an infrastructure asset management plan
ETI score: 70
The Project is part of the EBRD Green Cities Framework 2 ("GrCF2"), a strategic and multi-project approach targeting environmental issues in selected large cities in EBRD's countries of operation. The primary goal of GrCF2 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.
The Project will primarily help promote the Green transition quality by contributing to climate change mitigation. The new plant and extended DH network will reduce CO2 emissions associated with heating, improve air quality and integrate renewable energy supply into the Pristina's DH system. The network extension will serve neighbourhoods not currently connected to the DH system, replacing individual heating systems based on direct electric heaters, rudimentary solid fuel stoves and greenhouse gas intensive lignite.
The Project will also support the Competitive transition quality through the development and implementation of Financial and Operational Performance Improvement Programme ("FOPIP"), aimed at building capacity, improving operational and financial performance as well as corporate governance of the Company. The FOPIP will include a review of the tariff setting methodology and update of tariff level requirements, address financial transparency and asset management, and support preparation of a corporate development programme ("CDP") including measures to strengthen gender and equal opportunities for the Company.
The Borrower is the Republic of Kosovo, represented by the Ministry of Finance, Labour and Transfers of Kosovo (the "Borrower").
The client is Termokos JSC (the "Client" or the "Company"), a joint-stock company 100% owned by the Municipality of Pristina (the "City") and the sole district heating provider in the city of Pristina. Its activities include production, distribution, and supply of thermal energy to the city of Pristina.
EBRD Finance Summary
A sovereign loan of up to EUR 23.2 million to the Borrower to be on-lent to the Company to co-finance its investment plan for the construction of a solar thermal plant with a 30 MW capacity and expansion of the district heating ("DH") network for a total combined capacity of up to 50 MW (the "Project"). The Project will be co-financed with a grant from the Government of the Federal Republic of Germany in the amount of EUR 31.6 million to be provided by Kreditanstalt fur Wiederaufbau ("KfW"), a grant from the Western Balkans Investment Framework ("WBIF") in the amount of EUR 22.5 million, and national contribution of the Republic of Kosovo in the amount of EUR 4.4 million.
Total Project Cost
The Project's total estimated cost is EUR 81.7 million.
- Financing Structure - Commercial long-term financing for public infrastructure investments.
- Risk Mitigation - The proposed investment will result in energy savings and lower greenhouse gas ("GHG") emissions, thereby reducing carbon transition risks and take climate action.
- Standard Setting - Technical assistance and loan conditionalities will support capacity building.
- Gender additionality - As part of FOPIP, human resources policies will be assessed from a gender perspective and recommendations will be made with a view to strengthening gender and equal opportunities in the Company
Environmental and Social Summary
Categorised B (ESP, 2019). Due diligence was conducted by an external consultant consisting of a site visit and review of an environmental and social impact assessment ("ESIA") and associated documents prepared on behalf of the Client by a consultant engaged by KfW. Due diligence remains under finalisation pending completion of the review of resettlement documentation as noted below and the PSD will be updated if required. The Client does not operate an existing environmental and social management system ("ESMS"), has limited existing environmental and social ("E&S") resources and has not yet established a project implementation unit ("PIU for the Project and associated E&S management plans are not available. An ESMS will need to be developed to manage the project during construction and operation, with dedicated resources included in the PIU.
The solar collector is located on land which, under the terms of a Memorandum of Understanding, was transferred to the City from the Municipality of Obiliq in exchange for alternative land of a larger area for development of facilities planned for the original plots. A draft Resettlement Plan ("RP") is under finalisation for the collector area, but it is currently expected that impacts will be restricted to two informal users of the site who will need to be provided with access to alternative land and livelihood restoration. The routes of the two main transmission pipelines are not yet finalised and a Resettlement Framework ("RF") is under finalisation for these and the distribution network expansion. A RP will be developed when the design is complete and impacts are expected to be limited mainly to the construction phase with limited permanent economic resettlement due to restrictions on existing activities above the pipelines.
Six-seven modern burials are located in close proximity to the solar collectors. Although the Project has avoided direct impacts by excluding this area from the Project footprint and is committed to maintaining access, the setting will be affected and the Company will need to facilitate consultations between the relatives, religious authorities and municipality to understand if the relatives prefer the option of re-location to a new burial ground planned by the municipality.
Other construction phase impacts are anticipated to be short-term and mitigated through the application of a robust Environmental and Social Management Plan ("ESMP") containing good practice mitigation measures and the equivalent contractor implementation plans.
For the water storage pit, a dam safety plan and draft operational phase Emergency Preparedness and Response Plan will need to be prepared during the detailed design phase and the safety requirements of the dam, construction and operational methodologies and monitoring regime verified by an independent dam safety engineer in accordance with PR4. Climate risks have been assessed as part of the feasibility study and a more detailed assessment will be required to be undertaken as part of the detailed design. The supply of water to initially fill the storage pit has been identified as potentially limiting including due to already experienced droughts. A water supply sustainability assessment will need to be conducted during the preparation of the detailed design and mitigations including avoidance of filling during dry season or extended filling periods incorporated into the commissioning process. One protected area (PA) is located north of the solar-thermal project site (IUCN category I Gazimestan strict nature reserve), which has been protected for natural heritage since 1953 for the Paeonia decora Anders plant. The environmental and social action plan ("ESAP") stipulates the measures to: (i) avoid any disturbance of PA and its buffer zone during construction, and (ii) undertake supplemental biodiversity assessment (SBA) for the pipeline route upon confirmation of the pipeline layout, including additional mitigation for any biodiversity sensitive area that might be registered during SBA.
The flat plate solar thermal collectors do not rely on photovoltaic technology and therefore do not contain polysilicon, supply chain due diligence was nonetheless undertaken. As a result, on a precautionary basis, the potential presence of forced labour risks has been identified for some of the other solar collector components (specifically glass and aluminium) and addressed in ESAP to ensure any supply chain issues are managed. Since the supplier of the solar collectors will be identified through the procurement process which has not yet been commenced, further supply chain due diligence will be conducted during this process and the requirement is included in the ESAP.
Existing stakeholder engagement has been conducted by the company and a Stakeholder Engagement Plan (SEP) and Non-Technical Summary (NTS) developed with the support of KfW in addition to the RP/RF, which will be required to be disclosed locally by the Client and on their website. Relationships between the Client and local authorities, involved in decision making in regards to this project, and the Municipality of Obiliq, on whose territory the solar project site is planned, are currently strained due to their view that the Municipality of Obiliq will not benefit from the expansion of the heating network while they have already borne many environmental and social impacts due to the presence of historical developments which predominately benefit Pristina municipality. The Client will need to continue engagement with the support of the City and national authorities to repair and maintain this relationship. This will be subject to on-going monitoring by the Bank.
A joint ESAP between KfW and EBRD is under finalisation and includes the above-mentioned actions. The ESAP will be agreed with the Client prior to the signing of the loan agreement. The Client will be supported by an implementation assistance provided by KfW and targeted support on ESAP implementation through a consultant financed by EBRD. The EBRD will monitor the implementation of the Project and the ESAP as well as the Company's environmental and social performance by reviewing the regular environmental and social reports and undertaking monitoring visits as needed.
Technical Cooperation and Grant Financing
TC1: Pre-feasibility study co-financed by KfW. The cost of EUR 73,900 was financed by the Renewable District Energy in Western Balkans programme ("ReDEWeB"), with additional KfW financing of approximately EUR 75,000. Completed.
TC2: Environmental and Social Due Diligence ("ESDD"), including the review of the environmental and social impact assessment ("ESIA") package prepared by KfW, an assessment of the Company's current operations and management systems, and preparation of the ESAP. The cost of this TC was EUR 49,285 and was financed by ReDEWeB. Completed.
TC3: FOPIP and ESAP Implementation Support to support Termokos in developing and implementing the FOPIP, contributing to the Project's Competitive transition quality. The TC will also support Termokos in implementing the ESAP in compliance with EBRD Performance Requirements ("PRs") 1-8 and 10 dated April 2019. The cost of this TC is EUR 400,000 and is expected to be financed by the Regional Energy Efficiency Programme for the Western Balkans ("REEP"). Approved.
Client contributions: The Client will be responsible for paying all VAT and other indirect taxes that are applied to the donor-funded TC assignment where they are the contracting party as a parallel cost sharing contribution to the project (VAT is levied at 18 per cent in Kosovo). Lastly, the Client will also provide in-kind support 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
Naim Bytyci, Director of Distribution Department
Termokos Rr. 28 Nëntori nr.181 Pristina, Kosovo
PSD last updated
02 Dec 2022
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Environmental and Social Policy (ESP)
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Independent Project Accountability Mechanism (IPAM)
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