Emergency Power System Reconstruction Project

complete

Emergency reconstruction of war-damaged generation, transmission and distribution facilities in Bosnia and Herzegovina. The objectives of the operation are to: (i) restore power supply to areas which have been affected by the war across the territory of Bosnia and Herzegovina; and (ii) strengthen the financial management and performance of the power sector. The proceeds will be used for: EPBiH: meters, transformers and distribution rehabilitation equipment; EPRS: meters and transmission equipment; EPM: meters, transmission and hydro-power plant rehabilitation equipment. The operation contributes to the transition process by supporting the supply of electricity, which is essential for revitalising the economy. It is also assisting in the commercialisation of the power sector and will contribute to the transition to a market economy by introducing institutional change in the form of economic pricing of electricity and improved bill collection rates as well as economic pricing for the downstream and upstream sectors. The borrower of the proposed loan is the state of Bosnia and Herzegovina. The proceeds will be on-lent to the three utilities which generate, transport and distribute electricity in their respective zones: Elektroprivreda Bosne i Herzegovine (EPBiH) in the Bosnian-populated areas of the Federation, Elektroprivreda Republika Srpska (EPRS) in Republika Srpska (Serb Republic), and Elektroprivreda Mostar (EPM) in the Croat-populated areas of the Federation. The proposed Bank investment will consist of a US$ 15.6 million loan (ECU 12.5 million), of which US$ 7.2 million will be on-lent to EPBiH, US$ 4.8 million to EPRS, and US$ 3.6 million to EPM. The total project cost is US$ 160 million (ECU 128 million), the balance being provided by a concessional loan from the World Bank and grants from a number of donors, including the European Union, Austria, Belgium, Canada, the Czech Republic, France, Ireland, Japan, Norway, the Netherlands, Sweden, the UK, USA and the Central European Initiative. The project was screened as B/1, requiring an analysis of main environmental impacts associated with the project and an audit to identify any soil and water contamination. Due to a combination of political, safety and physical constraints, it was not possible to carry out an independent environmental investigation prior to Final Review. However, as the Bank will be financing equipment for the rehabilitation of the transmission and distribution networks, the environmental impacts are unlikely to be significant. The only specific environmental issue of some concern is the possibility of past contamination from polychlorinated biphenyls (PCBs) in the existing transformers. In this regard, a letter has been requested from the three regional utilities confirming that such contamination has not occurred. Transmission and distribution component Rehabilitation of the 220 kV and 110 kV lines will not create any additional adverse environmental impact. The following mitigation measures are proposed for this component: (i) risks of electrocution will be minimised by providing anti-climbing devices and installing danger signs; and (ii) noise from substation transformers will be reduced by adopting stringent specifications in the tender documents. There are no adverse impacts arising from the rehabilitation of the distribution network, as it will involve only the replacement of damaged equipment. All equipment procured under the project will be free from PCBs. A training programme for engineers and operators on health and safety procedures and practices will be provided as technical assistance within the scope of the project. A reliable supply of electricity will reduce the use of wood for heating and cooking, and will reduce the further destruction of the parks and forests in and around Sarajevo and other cities used extensively as a supply of wood during the war. Hydro component The rehabilitation works on the Jajce hydro-power station involve the replacement of damaged or non operational equipment. The operational regime of the plant will not change, but the efficiency of the plant will be increased. In addition, the improved generation of the hydro-power plant may well reduce the use of other non-renewable sources of energy. Disposal of used equipment and its recycling will be monitored by the Project Implementation Unit and the project coordinator. As an additional environmental component, a part of the Austrian grant funds will be used to restore the ecological balance in one of the national parks on the Pliva River. Due to the war damage and the inability to maintain the park's artificial waterfall, which forms part of the Jajce hydro scheme, a cavern was opened, which has resulted in approximately 70 per cent of the river flow being diverted underground. The sealing of the cavern will reinstate the flow downstream and restore ecosystems in and around the river bed. There are four studies financed under this operation: Long Term Investment Study, Training Programme, Commercial Management Study, Tariff Study.