Project Description

Provision of a sovereign loan of up to EUR 7 million to the State of Bosnia and Herzegovina, to be on-lent to the Municipality of Pale (“Municipality”) through Republika Srpska (“RS”) and to be implemented by the municipally-owned district heating company, Gradske Toplane Pale (“the Company”). EBRD’s financing will be complemented by an investment grant in the amount of up to EUR 3 million from the Switzerland’s State Secretariat for Economic Affairs (“SECO”).

The proceeds of the loan will be used to finance part of the modernisation programme for the district heating (“DH”) system of the Municipality of Pale (the “Project”). This will include: (i) the construction of a new boiler house with the acquisition of a 10MW biomass boiler, a 10MW back-up natural gas boiler and two 100 m3 heat accumulation tanks; (ii) the replacement of the existing pipeline network as well as the installation of a central seasonal storage and heat substations with monitoring and forecasting systems; and (iii) acquisition of relevant goods and equipment (chip shredder, tractor etc).

Project Objectives

The Project aims at significantly improving the Municipality’s DH system operational efficiency while reducing air pollution resulting from the activity. The Project will also contribute to improving the Company’s corporate governance practices and the DH sector in the country.

Transition Impact

ETI score: 70

The Transition Impact of the Project will be derived from the following transition qualities:

Green: The Project will improve energy efficiency and reduce greenhouse gasses (“GHGs”) and air pollutants/emissions coming from the DH system in Pale, supporting green economy transition by also attracting more customers who currently use less efficient and environmentally-friendly domestic heating methods.

 

Well-Governed: The Project envisages implementation of Financial and Operational Improvement Programme (“FOPIP”) which will foster better governance practices through the development of a business plan, improved corporate management and accounting, enhanced operating and environmental standards and increased transparency. Furthermore, the Project will introduce a performance-based public service contract (“PSC”) between the Municipality and the Company, enabling the latter to achieve full cost recovery through an adequate tariff methodology to be devised.

Client Information

BOSNIA AND HERZEGOVINA SOVEREIGN

The Borrower is the State of Bosnia and Herzegovina. The loan proceeds will be on-lent to the Municipality of Pale through Republika Srpska (“RS”) for the ultimate benefit of municipally-owned company Gradske Toplane Pale.

EBRD Finance Summary

EUR 7,000,000.00

A sovereign loan of up to EUR 7 million, to be on-lent to the Municipality of Pale.

Total Project Cost

EUR 10,000,000.00

The total estimated Project costs is EUR 10 million.

Additionality

The Bank’s additionality is derived from: (i) providing financing with a long tenor, not available in the market from commercial sources on reasonable terms and conditions; (ii) closing the funding gap for public sector investments without crowding out other sources such as IFIs, government or commercial banks; (iii) capacity strengthening of the Client; (iv) triggering enhancing practices at the sector level; (vi) best international procurement standards; and (v) EBRD’s expertise for the adoption of gender standards.

Environmental and Social Summary

Categorised B (2019 ESP). Modernisation for the district heating (“DH”) system in the Municipality of Pale will lead to substantial environmental and social benefits, reduce air emissions and help to improve overall local air quality in Pale. ESDD has been carried out by independent consultant as part of the Feasibility Study, including audit of the existing Company’s management systems and operations and assessment of the proposed priority investment programme. The Company has internal documents and procedures related to the protection of the environment, health and safety of workers and community, however it does not have a full E&S management system (“ESMS”) in place and requires further improvement of its internal capacity and existing operational practices to implement the project in line with EBRD PRs. It is expected that a local Environmental Impact Assessment (“EIA”) may be required for the Project in accordance with national legislation, and this decision will be made by the Ministry of Spatial Planning, Construction and Ecology. Subsequently, the project will be required to obtain an environmental permit, a water permit for the proposed heating plant and the biomass storage facility, as well as relevant construction and operation permits. The implementation of the Project is expected to bring significant E&S benefits, including sustainable biomass sourcing in compliance with RED II Directive; reducing fuel consumption, heat losses and lower water consumption, with resultant reduction in GHGs. The new biomass district heating plant will be located away from the urban centre of the City and be designed to meet EU environmental (such as EU BAT) and Taxonomy standards. Electrostatic filters will be installed, and the Project will also comply with the MCP Directive and meet the air emissions thresholds prescribed by this Directive. These planned measures aim to minimise the adverse effects on air pollution. Specifically, PM emissions are expected to decrease by 98%, while SOx, NOx, CO and VOC emissions will be reduced by approx. 57%. It is expected that Project’s implementation will also result in a reduction in biomass demand compared to the current situation (by about 57%). The required amount of biomass for the DH plant will be sourced primarily from PC Sume Republike Srpske that is FSC certified for sustainable forest management and undertakes additional activities aimed at forest health and biodiversity protection and monitoring. The proposed 10MW back-up natural gas boiler will ensure security of heat supply in the event of maintenance or breakdown in the biomass system. The envisaged maximum use duration of the natural gas boiler is 3 day per annum. Some potential negative E&S impacts and risks associated with construction activities are considered low and will be mitigated by implementing good construction practice, management of the contractors and implementation of the specific mitigation measures on better waste management, health and safety for construction workers and addressing any temporary community health and safety impacts. No significant negative impacts are expected. Additional measures have been considered for the operation phase, including pre-treatment of wastewater discharges from the new heating plant and implementation of the Procedure for Sustainable Biomass Procurement to ensure sustainably sourced biomass for the new DH plant. Detailed mitigation measures for project implementation are defined within the Environmental and Social Management Plan (“ESMP”) for contractors and stipulated also in the Environmental and Social Action Plan (“ESAP”) for the Company to structure and implement the project in line with EBRD PRs. ESAP is currently being finalised and will be agreed with the Client prior to Board approval. A project-related Non-technical summary (“NTS”) and Stakeholder engagement plan (“SEP”) have also been developed for the project and will be disclosed locally by the Company.

Technical Cooperation and Grant Financing

It is envisaged that TC support for this operation will be provided to assist the Municipality and the Company with the: (i) Procurement, implementation and supervision of the Project and related works; (ii) Development and signing of a performance-based PSC between the Company and the Municipality to establish an adequate tariff methodology for the Company to achieve a phased full cost recovery; (iii) Development of FOPIP to support the Company in establishing improved corporate governance, planning and communications practices, as well as assistance with ESAP implementation . TC support will also be provided for the creation of a District Heating association to improve communication and cooperation between DH companies at entity or state level.

Company Contact Information

Boris Gojkovic
direktor@toplanepale.com
+387 57 227 033
www.toplanepale.com
Sprskih ratnika 54, Pale 71240, Bosnia and Herzegovina

Implementation summary

PSD last updated

15 Sep 2023

Understanding Transition

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

Business opportunities

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Tel: +44 20 7338 7168

Email: projectenquiries@ebrd.com

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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.