Bijeljina Phase 2 Wastewater Treatment Plant

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The EBRD is considering providing a loan of up to €5 million to part-finance the construction of a waste water treatment plant and the construction of the primary waste water collector, further development of secondary waste water collection network and expansion of the potable water supply network in the city of Bifeliina. The objectives of the project are to enable the compliance with the EU directive for urban waste water and to prevent further pollution of underground water (aquifers) that are used as the source of potable water, thus reducing the health hazard for the town’s population. This is the second project with Vodovod i Kanalizacija. The incremental transition impact relates to introduction of a company loan to a municipal utility for the first time in the country, to improved environmental standards that go beyond current national standards and introduction of reasonable efficiency targets on areas such as labour cost and technical losses. This transaction also supports the implementation of the transition impact potential identified for the first water project through strengthening the loan covenants. Vodovod i Kanalizacija Bijeljina is a joint stock company with 65% of the equity owned by the Government of Republika Srpska, 10% owned by the Republika Srpska Pension Fund and 5% by the Restitution Fund of Republika Srpska. The remaining 20% is owned by individuals and investment funds. Up to €5 million Loan to Vodovod i Kanalizacija Bijeljina with Sovereign Guarantee from Bosnia and Herzegovina, to be backed by a counter guarantee from Republika Srpska The European Union is providing a €5.5 million of grant co-financing (€2 million through the EU Municipal Window for the wastewater treatment plant and €3.5 million through the National IPA 2009 Crisis Response package for expansion of water supply and wastewater collection Bijeljina networks). Swedish International Development Cooperation Agency is providing additional grant co-financing equivalent to €4 million? for the wastewater treatment plant. €21 million. Screening category and rationale for classification This project has been categorised "B" in accordance with EBRD's 2008 Environmental and Social Policy. The construction of a Wastewater Treatment Plant (WWTP) with initial capacity of 40,000 population equivalent, primary and secondary waste water collectors and increased connections to the water supply network in Bijeljina will have mainly positive long-term social and environmental impacts. Where there is adverse future environmental and social impacts associated with the project, these are site-specific and readily addressed through mitigation measures. Information reviewed The environmental and social due diligence included a site visit, review of the Company’s EHS management practices; environmental, health and safety and social (EHSS) management systems; and a review of the project design requirements to assess current performance against EBRD's Performance Requirements (PRs). Project related documents (an environmental and social summary of the project, Stakeholder Engagement Plan and a summary of the Environmental and Social Action Plan) are available on the Sponsor’s website. Environmental and Social issues Due diligence showed that the Project will significantly improve Bijeljina’s waste water quality, increase the number of connections to waste water network, protect the local community from environmental and public health risks (primarily via contamination of ground water and potable water sources from septic tanks), thus having high social and environmental benefits for the town. The construction of the WWTP will enable compliance with the EU Urban Waste Water Directive (Council Directive 91/271/EEC) requirements to be achieved. As for the sewage sludge treatment, disposal to agricultural land is the recommended option and measures to ensure safe application will be instituted as part of the procurement process for the construction of wastewater treatment plant. The quality of drinking water supplied by the Company meets the standards set in the EU Directive on the quality of water intended for human consumption (Council Directive 98//83/EC). The project will enable the Company to maintain this compliance. The Company does not have formal management systems in place, but has recently established an Environmental Unit to develop systems to monitor the wastewater network. Due diligence identified that some additional resources and procedures are needed to achieve compliance with EBRD’s Performance Requirements (PR’s). Issues to be addressed include: Summary of Environmental and Social Action Plan An Environmental and Social Action Plan (ESAP) has been developed to address potential environmental and social impacts identified during the due diligence. The ESAP will include the requirements for the following: The Company will provide the Bank with regular reporting on its environmental performance and the implementation of the ESAP. €400,000 for assistance with project management, procurement and reporting Funded by the European Union under the Western Balkan Investment Framework.