Pale District Heating Project

cancelled

Translated version of this PSD: Serbian The EBRD is considering a loan of up to EUR 4.5 million together with an investment grant of up to EUR 2.0 million for the construction of a new boiler house with a 7.5 MW biomass boiler, the replacement of existing and the expansion of the district heating network to connect new consumers, and the installation of individual heating substations together with individual heat meters for each consumer. The Project will be implemented by the Public Utility Company “Gradske Toplane” Pale (“Toplane” or the “Company”). The Project will contribute to environmental protection and improve the quality of services in the Municipality of Pale. The main transition impact comes from the implementation of cost-recovery principles and cost-effective business performances by the Company. A. Framework for Markets: An arm’slength-service agreement between the Municipality and the Company with the aim of setting service standards, efficiency indicators, automatic tariff adjustments and measures for bill collection will be prepared and signed. B. Improved standards for corporate governance: The Project will target a reduction of energy costs, heat losses, switch to environmental friendly heating, and other operational improvements expected as a result over time such as higher labour productivity and improved financial reporting and transparency. A focused Financial and Operational Performance Improvement Plan (FOPIP) will be prepared and implemented to this effect. The client is the Public Utility Company “Gradske Toplane” Pale which is wholly-owned by the Municipality of Pale. Sovereign loan of up to EUR 4.5 million. An investment grant of EUR 2.0 million is currently being sought from the European Western Balkans Joint Fund (“EWBJF”) to co-finance the Project. EUR 8.2 million, including TC grants and related VAT costs. The project has been categorised B in accordance with EBRD's 2008 Environmental and Social Policy. The proposed investment is expected to bring environmental and social benefits associated with the overall improvement in the quality and reliability of heating and hot water services in the Municipality, improved energy efficiency, reduction in fuel consumption and heat and water losses, and improved local air quality. Independent Environmental and Social due diligence (ESDD) was done by an international consultancy as part of the feasibility study. ESDD included a review of the Company’s corporate environmental and social management capabilities and procedures in relation to its own workforce and construction contractors, and an analysis of the environmental and social impacts and benefits of the proposed investment programme to assess the Project against the EBRD's Performance Requirements (PRs). Due diligence has identified a number of actions required to be addressed by the company to meet EBRD requirements and an action plan has been developed. The action plan includes items such as increase in capability and capacity to manage environmental and social issues and to develop management systems aligned with international standards and to achieve local regulatory compliance. In addition, issues associated with occupational health and safety, contractor management, waste management and development of sustainable biofuel procurement policy are to be adopted by the company. In addition, due to the proposed location of the new boiler the plan includes a commitment that the company achieves EU standards for emissions to air for sensitive environments which goes beyond local or national requirements. The above action plan has been incorporated into an Environmental and Social Action Plan (ESAP) has been developed by the consultant and reviewed by EBRD which includes corrective actions and mitigation measures for identified issues to ensure that the company meets the EBRD requirements. In addition, a Stakeholder Engagement Plan (SEP) has been developed and these two documents are currently being reviewed by the company. The company is required to implement the ESAP and SEP and submit annual environmental and social reports to the Bank. Pre-signing: • Feasibility Study, EUR 200,000, funded by the Government of Austria Post signing: • Project Implementation Support, including procurement, supervision, Financial and Operational Performance Improvement Plan (FOPIP) and Public Service Contract (PSC), EUR 400,000, to be financed by an international donor • Detail Design, EUR 100,000, to be financed by an international donor.