Visoko Water Supply

Location:

Bosnia and Herzegovina

Project number:

47809

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Approval date:

20 Jul 2016

Status:

Disbursing

PSD disclosed:

10 May 2016

Translated version of this PSD: Bosnian

Project Description

The EBRD is considering providing a loan of up to €4.5 million to finance expansion of the water supply as well as repair of the existing network in the Visoko Municipality.

The Municipality is located in the central part of Bosnia, about 30 kilometres north of the Capital Sarajevo. According to the preliminary results of the census held in October 2013 some 41,500 people lived in the 13,000 households in the Municipality.

Project Objectives

The Project will target (a) expansion of the water supply network which will enable connection of new consumers and at the same time, though provision of running water, improve the living standards of the population in the municipality and (b) reduced water losses, improved resilience to climate change and improved quality of supply to existing customers through repairs of the existing network.

Transition Impact

The main transition impact rationale comes from elimination of cross-subsidies, implementation of cost-recovery principles and cost-effective business performance by the Company.

A. Institutions, laws and policies that promote market functioning and efficiency: Arms-length service agreement between the Municipality and the Utility Company, with clearly defined roles and responsibilities and the aim of eventual elimination of cross-subsidies and introduction of full costrecovery principles.

B. Demonstration of new replicable behaviour and activities: Separation of the water and wastewater activities from the solid waste management and from the maintenance of public areas will be assessed through the feasibility study.

C. Setting standards for corporate governance and business conduct: Independent Audit Report and Management Reports prepared in line with IFRS and preparation of the financial and operational performance improvement programme ("FOPIP") for the company.

Client Information

JKP VISOKO D.O.O.

Public Utility Company "Visoko" d.o.o. Visoko. The Company is wholly owned by the Visoko Municipality and is in charge for water and wastewater services, solid waste management and maintenance of public areas in the municipality.

EBRD Finance Summary

EUR 4,500,000.00

Up to €4.5 million Sovereign Loan to Bosnia and Herzegovina. The loan will be on-lent via the Federation of Bosnia and Herzegovina and the Visoko Municipality to the Public Utility Company "Visoko" d.o.o. Visoko.

Total Project Cost

EUR 6,000,000.00

Total project costs of €6.0 million.

Environmental and Social Summary

Categorised B in accordance with the 2014 Environmental and Social Policy. The expansion and reconstruction of the water supply networks and facilities in Visoko will provide significant community benefits with mainly positive long-term environmental and social (E&S) impacts such as enhanced efficiency of water supply, health benefits from improved quality and reliability of drinking water and reduction in water losses. Any adverse future environmental and social impacts associated with the project are site-specific and can be readily addressed through mitigation measures.
 
The Environmental and Social Due Diligence (ESDD) was carried out by external consultants as part of the feasibility study and included an independent E&S audit/review and an analysis of potential E&S impacts associated with the Priority Investment Programme (PIP). The ESDD confirmed that the implementation of the PIP will substantially reduce water losses from the current 45 per cent through more efficient water supply services, reduce vulnerability of the water supply to climate change related risks and connect 11,810 new inhabitants in the rural areas to safe and reliable municipal water supply.
 
The ESDD confirmed that the drinking water supplied in Visoko is generally in line with EU requirements; however only about half of the population is connected to the municipal network, while rural areas use local sources without adequate disinfection, and this poses a risk to human health and safety. Any potential adverse impacts will be associated with the construction works and will be limited, localised and short-term, and will be mitigated or prevented by adhering to good construction practice.
 
No sensitive protected areas or endangered species are found in the Project area. Currently, the Project will require land acquisition of over 200 land plots solely for the construction of the three new water supply sub-systems for Visoko municipality in Gračanica, Moštre and Poriječani.  The majority of these land plots are state owned and at least 22 land plots are privately owned, such as pasture land or agricultural land. Not all expropriation studies have been completed to date, however ESDD has confirmed that no physical resettlement of households or businesses is expected as part of the project. Some economic displacement is likely to occur since some land plots are expected to be permanently affected by the project or temporarily affected during the construction phase. It is unclear whether any informal land users are likely to be affected. Therefore the Company will be required to prepare and submit to EBRD for review and approval the Land Acquisition Plan (LAP) in line with national law and PR5, including measures to address displacement of any informal land users. The Project Implementation Support consultant is expected to assist in the preparation, implementation and monitoring of the LAP implementation by the contractors. No significant affordability concerns for the low income households are expected from the project.
 
Only about 50 per cent of the City is covered by wastewater collection networks and the Company’s wastewater treatment services do not currently comply with EU standards since there is no wastewater treatment plant (WWTP) in place. The treatment provided currently is only mechanical, and effluent is being discharged into the local Rivers Bosna and Fojnica. This has a direct negative impact on the rivers; however, these rivers are not used for drinking, recreational or agricultural purposes.  Estimated further financing of about EUR 5 million is required to construct a new WWTP with 20,000 p.e. capacity for Visoko in line with EU requirements, and this is expected to be done by 2018 and funded through grant resources.
 
The Environmental and Social Action Plan (ESAP) has been developed for the Company to structure the Project to meet the EBRD's Performance Requirements (PRs).  The ESAP requires: obtaining the required environmental and water abstraction permits for the water supply system construction/rehabilitation; the development of a formalised Environmental Management System in accordance with ISO 14001; improvements to contractor management practices; preparation of OHS and HR procedures in line with PR2 including the development of an Equal Opportunities Policy and formalisation of a workers grievance mechanism. A series of operational control procedures are also required for excavation works and trench safety, dust control, noise, management of soil and hazardous materials, unexploded ordnance (UXO), emergency response and chance finds, preparation and implementation of LAP, including measures to address displacement of any informal land users prior to starting any construction activities. The Company also needs to finalise and implement a Stakeholder Engagement Plan (SEP), including a grievance mechanism, to ensure adequate information disclosure prior to commencement of works. The Bank will monitor the project’s E&S performance and compliance with EBRD PRs through annual reports from the Company and implementation of the ESAP. The Bank may also undertake monitoring site visits

Technical Cooperation

Pre-signing

  • Project appraisal - to include engineering review of the design documentation and confirm that an appropriate technical solution has been proposed. Assignment currently ongoing. EUR 74,480, financed by the Government of Germany.· Advanced Procurement Support's to provide assistance in procurement and contracting of works and works supervision services in accordance with the Bank's PP&R and using appropriate standard tender documents of the Bank. EUR 50,000, financed by the EBRD Shareholder Special Fund ("SSF").

Post-signing

  • Project Implementation Support - including assistance to the Company with contract administration and supervision of works. The estimated cost of the assignment is EUR 300,000, proposed to be financed by an international donor or the SSF.· Financial and Operational Performance Improvement Programme ("FOPIP") - to assist the Company to prepare and implement the legal separation of water and wastewater operations from other businesses, to prepare and sign a Public Service Contract ("PSC") and a long term business plan including the FOPIP and IFRS audit. The estimated cost of the assignment is EUR 150,000, proposed to be financed by an international donor or the SSF.

Company Contact Information

Almir Hadzialic
info@jkp-visoko.ba
0038732738600
0038732735560
www.jkp-visoko.ba
Naselje Luke 16, Visoko, Bosnia & Herzegovina

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Text of the PIP

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