Novi Sad District Heating Project

cancelled

Translated version of this PSD: Serbian The EBRD is considering providing a loan of up to €18.5 million for financing the rehabilitation/modernisation of the city heating system focusing on energy efficiency and tariff reform to be based on actual measured consumption at individual user levels. Overall the prospective project to contain three components: 1. Modernisation of substations (app. 3,000 pcs); 2. Biomass pilot project; 3. Installation of heat cost allocators and thermostatic radiator valves in pilot buildings. The Bank adds significant value to the Project in terms of institutional development, skill transfer and tariff reform. The Bank works closely with the PUC (Public Utility Company) to define a billing methodology and tariff levels within the affordability constraints to ensure full cost recovery including the investment costs. Novi Sad would be the first town in Serbia to fully implement a system allowing consumers to control their consumption of heat. Furthermore, the project of new biomass fired heating will serve as a pilot and demonstration project showing a way forward for the introduction of alternative fuels in the region and less dependency on imported, fossil gas. The PUC is Serbia’s second largest and it will set energy efficiency and environmental management standards for other companies in the country. Public Utility Company “Novi Sad Heating Plant”, a municipal company producing and distributing heat energy and hot water in the City of Novi Sad. A loan of €18.5 million extended directly to the PUC. Total project costs are estimated at €20.6 million. The Project has been categorised B. The environmental and social due diligence is currently being finalised and any impacts potentially associated with the proposed transaction will be addressed in an environmental action plan. The project is expected to bring significant environmental benefits. The construction of a biomass-fuelled boiler will save significant amount of natural gas, it will lead to reduction of thermal energy and GHG emissions and will result in an overall increase of energy efficiency. In addition, it is estimated that the level of energy efficiency will increase significantly with the introduction of metering stations and consumption-based billing which will create incentives for energy saving. A total of up to € 0.55 million in technical cooperation funds is required to properly design and implement the project, including: 1) pre-signing TC for the Feasibility Study/Business Plan and environmental and social due diligence (€100,000) 2) post-signing TCs on Establishment of a Project Implementation Unit (€300,000) and Corporate Development Programme (€150,000). TC funds will be provided by an international donor.