Montenegro Water Services and Climate Resilience Phase 1 Project

pipeline

The proposed operation is the first phase under the Montenegro Water Services and Climate Resilience Multiphase Programmatic Approach (MPA), a multi-phase engagement designed to support the long-term transformation of the water sector in Montenegro. The total estimated cost of the program is approximately USD 200 million, with a proposed IBRD financing envelope of approximately USD 100 million, complemented by additional contributions from other development partners including the OPEC Fund.The Phase 1 project, spanning four years from 2026 to 2030, will focus on strategic investments in water services infrastructure, priority actions to improve coastal water security, and measures to strengthen water sector governance. Phase 2, covering 2030 to 2033, will scale up investments in the modernization and expansion of water services infrastructure, implement integrated catchment-based restoration measures to secure coastal water security, and mobilize additional financing from other development partners to support these efforts. The third phase, from 2033 to 2036, will consolidate the scaled-up activities, ensuring the sustainability and impact of investments made in the earlier phases. During this phase, the program will continue to mobilize additional financing to reinforce long-term improvements in water services and sector resilience.The Phase 1 project aims to enhance water services and climate resilience in Montenegro by financing strategic investments in water services infrastructure, advancing integrated approaches to coastal water security, and strengthening the enabling environment for effective sector governance and management. These activities will bolster Montenegro’s economic and environmental sustainability while supporting EU accession efforts and alignment with EU water directives. The operation is organized into four components.Component 1: Strategic Investments in Water Services Infrastructure and ResilienceThis component aims to rehabilitate, modernize and expand water services infrastructure, thereby increasing access, efficiency, safety, and resilience of services for households and businesses. The activities focus on the improvement of the reliability of public water services through targeted investments in:- Rehabilitation of dated centralized water supply systems to reduce water losses, mitigate health risks, and enhance the technical and financial sustainability of water utilities;- Expansion of centralized wastewater treatment services to reduce water pollution and improve environmental health; and - Modernization and expansion of decentralized water services infrastructure to better serve rural populations in remote areas.Component 2: Integrated Approaches for Coastal Water SecurityThis component addresses pressing challenges in securing the coastal water supply managed by the Regional Water Supply Company for the Montenegrin Coast. It includes:- Enhancement of Lake Water Treatment Capacity: Increasing the treatment capacity by 250 liters per second to address water supply shortfalls during peak summer seasons, supporting local needs and tourism growth.- Hydromorphological Regime Enhancement of the Morača River: Comprehensive assessment and modeling to improve the sediment regime, connection with the adjacent groundwater bodies, mitigate flooding risks, and ensure sustainable long-term availability of water resources for coastal water supply.Component 3: Strengthening the Enabling Environment for Effective Water Sector Governance and ManagementThis component aims to enhance the capacities of national and subnational entities and water utility operators for effective management, planning, regulation, and performance improvement. Key activities include:- Development of Institutional, Legal, and Policy Frameworks: Supporting legislative amendments and the development of a national water strategy.- Improvement of Economic Regulation System: Strengthening the Regulator (REGAGEN) through IT system development and tariff methodology implementation.- Capacity Development for Water Utilities: Expanding capacity building programs on priority topics like Asset Management and Energy Efficiency.- Support for Rural Water Services Delivery: Analyzing and improving management structures and service delivery for rural systems.Component 4: Project ManagementThis component will support effective project management and coordination to ensure timely and efficient implementation of all project activities.