Zagreb Holding Water and Sewer Investment Project

complete

The proposed project will involve the issuance of bonds by the Zagreb Holding Company in one or more tranches to finance a portion of the capital investment requirements of its business units over the next 3-4 years. These investments are currently expected to include water and wastewater network rehabilitation and expansion; public transport improvements; and refinancing of some existing debt of the Company’s businesses. Improved corporate governance in establishing appropriate relationships between City and Company, as well as improving financial accounting and cost recovery for City or business units. Develop potential private sector participation through identification of potential outsourcing or spin-off of some of the Company’s operations or business units. Gradsko Komunalno Gospodarstvo (“GKG” or “Zagreb Holding Company”) was recently established as a holding company for the City of Zagreb’s associated business units which perform various municipal services, including public transport, water and wastewater, gas distribution and solid waste management. EBRD will be a potential purchaser of bonds issued by the Company, together with other market investors. Estimated at EUR 260 million equivalent in Croatian Kuna or Euros or a mixture of the two currencies. Screened C/1, requiring an Environmental Audit of the Holding Company and its subsidiaries. In addition, specific components of the investment programme to be financed with the EBRD proceeds will need to undergo environmental appraisal in accordance with the EBRD Environmental Policy. The Environmental Audit is being undertaken by independent consultants to review the Holding Company’s corporate environmental management as well as to identify, assess and manage the environmental issues associated with its subsidiaries’ assets and operations. The consultant is also preparing Environmental Analyses of EBRD financed components, which fall within environmental category “B” under the EBRD’s Environmental Policy. Each Environmental Analysis will identify and assess potential environmental and social impacts and propose mitigation measures to ensure that the investment components fully meet Croatian and EU EHS standards. Any EBRD financed components that fall under environmental Category “A” in accordance with the Bank's Environmental Policy, will need to undergo an independent Environmental Impact Assessment (“EIA”) and public consultation process as per the EBRD requirements. An Environmental Action Plan is being developed as part of the due diligence to address measures needed for achieving compliance with Croatian environmental regulations and with European Union environmental standards, for the organisation of EHS management of Zagreb Holding and related responsibilities as well as for meeting environmental permitting requirements applicable under current legislation. This section will be updated upon completion of the environmental investigations. Consultants funded by the Government of the Netherlands are engaged to review project investments, environmental impact, and financial structure.