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Framework DTM 48171: Green Cities Framework

Sub-project DTM 49668 GrCF Banja Luka Water Project

Technical, Financial and Environmental & Social Due Diligence

TERMS OF REFERENCE

1. TERMINOLOGY – DEFINITIONS

The Assignment: the Contract of which these Terms of Reference form a part.

The Bank: The European Bank for Reconstruction and Development, the EBRD

The City: Banja Luka, Capital of Republika Srpska, one of the two political entities that make Bosnia

and Herzegovina.

The Company: Vodovod Banja Luka, a joint stock company majority (65 per cent) owned by the City

in charge of water supply and wastewater collection and treatment in the City.

The Client: The City will be the Client for this assignment.

The Consultant: The Entity contracted to carry out the works described in these Terms of Reference.

The Lenders: The EBRD.

The Project: Expansion and reconstruction of the water supply and wastewater system in the City of

Banja Luka

2. INTRODUCTION

The utility company “Vodovod Banja Luka” (the “Company”) supported by the City of Banja Luka

(the “City”), approached the European Bank for Reconstruction and Development (the “EBRD”, or the

“Bank”) with a request to finance the priority investments (Priority Investment Programme, or “PIP”)

aimed at improving water supply and wastewater services (the “Project”). The Project will support the

City in improving its provision of water and wastewater services, particularly to the currently

underserved population. The loan proceeds will finance expansion and rehabilitation of existing

drinking water supply and wastewater networks. The exact scope of the proposed PIP will be shared

with the Consultants in order to perform the due diligence. Total capex needs are estimated at EUR 10

million to be provided in two equal tranches of EUR 5 million each. The loan will be on-lent through a

legislated cascade of sub-loans from BiH via Republika Srpska (“RS”) to the City.

As an economic, financial, political and administrative centre of the Republic of Srpska (“RS”), the

City entrusted water supply and wastewater collection activities to the Company. The Company is a

joint stock company, with base equity of EUR 18.1 million as of end 2016, divided into 35.4 million of

shares. The City of Banja Luka holds the majority of the Company’s shares of 65 per cent, 15 per cent

is held by the Pension and Restitution Funds owned by the Government of the Republic of Srpska, and

the remainder is under the ownership of private funds.

The Company provides services to 186,000 consumers in the City of Banja Luka, the municipality of

Celinac and a portion of the municipality of Laktasi. It has 339 employees (as of end 2016), of which

94 are women.

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The water and wastewater infrastructure in the City of Banja Luka suffers from historic

underinvestment. The poor condition of the network is also accompanied by a relatively low

connection rate of inhabitants. In this context, specifically the settlements with a high population rate

of refugees are not yet connected. Only about 20 per cent of the water supply networks have been

recently built and in the old parts of the network water losses are in places higher than 50 per cent.

Illegal connections are another issue that the Company faces, present mostly in rural areas. Users

illegally route water for uncontrolled irrigation and household use. This practice is unsafe as

inhabitants are manually diverting water supplies, which compromises system performance.

The existing drinking water system consists of groundwater wells, water treatment plants, storage and

distribution pipework. It is understood that there is sufficient water supply to meet water demand for

the foreseeable future provided that the system losses are addressed. The drinking water distribution

network length is 830 km. During 2016, the Company produced and distributed 27.3 million m3 of

drinking water, of which 17.2 million m3 was charged to consumers. Non-Revenue Water (“NRW”) is

37.0 per cent of the water put into distribution. The Company has managed to achieve improvements

of 2.1 per cent reduction of water losses over the 2014- 2016 period, and for further improvements the

company should ideally progress to its economic level of leakage, addressing both physical and

commercial losses.

The wastewater system is underdeveloped: the wastewater collection network currently covers

approximately 60 per cent of inhabitants of the City with many individual households connected to

septic tanks, where many of these tanks are sub-standard. The City has no centralised wastewater

treatment plant and the wastewater collected is discharged into the rivers Vrbanja and Vrbas untreated.

Septic waste collection is poorly managed with little arriving at designated sanitary landfill sites.

Whilst the lack of formal wastewater treatment of sewage is not unusual for the country it causes

environmental and social harm and needs to be addressed. The scale and impact of this harm is

unknown and may be exacerbated with increased water and wastewater connections – this will be

confirmed during technical, environmental and social due diligence. The collectors that are currently in

use date back to 1912, and they are in urgent need of rehabilitation. The wastewater system has not

followed the expansion of the water supply network and totals 397 km.

The City and the Company are preparing design documentation for the Project. Signing of the Loan is

planned in the first half of 2019 and works are planned to start in July 2019. To that effect an advanced

procurement process will be launched in the first quarter of the 2019 that is when the priority

investment components to be financed by the first tranche of the Loan are identified and confirmed by

this assignment. Design and tendering for the components that will be financed by the second tranche

of the Loan will be done in the second half of 2019.

The Bank wishes to commission a suitably qualified consultant (the “Consultant”) to prepare a detailed

Technical, Financial, and Environmental and Social Due Diligence study as well as the resilience of

the Project to climate change.

3. ASSIGNMENT OBJECTIVES

The overall objective of the assignment is to prepare and carry out Technical, Financial, and

Environmental and Social Due Diligence, which the Bank can use to appraise the Project and take a

decision on the prospective financing.

This Project will be based on an effective least cost short-term investment programme, designed on

the basis of a long-term development plan. The short-term investment plan will be justified on the

basis of thorough technical, financial and economic analysis. Furthermore, the Consultant will

develop an efficient Project Implementation Plan, including procurement schedule, and carry out an

energy saving and environmental assessment (including resource utilisation and the impact on GHG

emissions) of the short-term investment programme

Specific objectives of the assignment shall, inter alia:

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Confirm the need for investment;

Identify a cost-efficient and sustainable Priority Investment Programme to be financed by the

Loan and advise on the most appropriate project implementation arrangements including

tender packaging, contracting, supervision and a need for external procurement support;

Analyse the ability of the Company to service its debt including this Loan within the

generally accepted limits for the affordability of tariffs limits;

To the extent possible:

- Assess the potential impacts of climate change on the project in order to build in resilience

to climate change related risks;

- Assess the resource efficiency opportunities (including energy and water efficiency and

waste minimisation potential and the impact on GHG emissions) on the project;

Establish the key technical, institutional and social risks that could impede project success

and identification of measures to reduce, remove or mitigate these risks;

Analyse possible options and recommend, on the least cost basis, the best solution for

collection and treatment of households and industrial wastewater as well as for the rainfall

water;

Review baseline assessment work data from the Technical DD assignment and carry out some

additional baseline data collection to assess the current situation;

Verify the project category as B under the 2014 EBRD Environmental and Social Policy

(“ESP”)1. If the Consultant considers the project category should be revised as A, they shall

immediately notify the EBRD.

Carry out an Environmental and Social Assessment (Environmental and Social Due Diligence

- ESDD) of the Project, against the 2014 ESP and associated Performance Requirements

(“PRs”), to identify its environmental and social risks, impacts and benefits and to structure

the Project to comply with the Bank's Environmental and Social Policy ("ESP") and

Procurement Policies and Rules ("PRs").

Calculate the Bank’s standard measuring indicators and GET impact indicators (Annex 2).

4. SCOPE OF WORK

In order to meet the objectives above, the Consultant shall undertake the following tasks:

(1) Baseline Study/Review/Description and Assessment of Existing Situation;

(2) Environmental and social assessment (“ESA”);

(3) Long-Term Development Plan;

(4) Short-Term Investment Programme

(5) Financial Analysis;

(6) Economic Analysis;

(7) Project Implementation Plan;

1 http://www.ebrd.com/news/publications/policies/environmental-and-social-policy-esp.html

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4.1 Baseline Study/Review/Description and Assessment of Existing Situation

This task involves the review of the present management practices of the Company and status of the

water and wastewater services in the City so as to identify and assess any risks that are associated

with the Company and their existing operations. This review shall allow the Bank to better understand

the present situation in institutional, legal, financial, technical and environmental and social terms.

The Study shall also identify respective needs and concerns of different disadvantaged groups and/or

those with less voice, such as women, to be addressed in the design, implementation, and monitoring

and evaluation of the project.

The following shall, inter alia, be addressed:

4.1.1. Financial assessment

The Consultant will prepare a description and analysis of the financial position and prospects of the

Company. To this end, the Consultant will, inter alia:

A. Current financial and tax situation

i) Prepare an Income Statement, Balance Sheet, and Cash Flow Statement for the current and

previous 2 years restated in accordance with International Accounting Standards;

ii) Prepare a revenue breakdown by customer group including collection rate (overall and in

cash) presented for each customer group separately;

iii) Review the capital structure, detailed cost breakdown between different services, fixed and

variable costs for each category (personnel, electricity, materials, etc.), including an

explanation of real term increases/decreases compared to previous years, indebtedness,

sources of funds for operation and capital expenditure, degree of financial self-sufficiency;

iv) Assess the total asset value with breakdown in major categories of assets, explanation of the

latest asset revaluation (with explanation of how any such revaluations were accounted for),

confirmation of depreciation rates for the different categories of assets, calculation

methodology and assessment of the adequacy of deprecations;

v) Analyse extraordinary revenue, in particular received subsidies and proceeds from sales of

assets;

vi) Analyse extraordinary expenditures, in particular tax and other late payment penalties (basis

and amounts);

vii) Assess the current use of "profits" (Appropriations Fund and Reserve Funds);

viii) Review all rules regarding tax, VAT, duties etc. which are relevant for the investment

programme and the financial performance of participating Company.

B. Accounts receivable

i) Assess the current billing and collection system, including any plans for its development;

ii) Assess the total amount of accounts receivable, breakdown by category and age and

expressed as a percentage of annual revenues by customer groups, paying particular attention

to the amounts due and collection record of the budgetary entities (municipal, regional, and

federal – military, defence industry, education, etc.);

iii) Collate a list of all major debtors indicating their ownership, the list shall include all debtors

whose debt exceed 5 per cent of the total amount of accounts receivable, and at least the 10

largest debtors for each participating Company;

iv) Assess the scope for reduction of receivables, and the likelihood that current receivables are

collectible;

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v) Identify what kind of collection methods have been used (default interest or other penalties,

judgements, threat of bankruptcy proceedings, cut-off of water supply etc.), and if these have

proved unsuccessful, evaluate why; and

vi) Review the criteria for estimating the provision to cover losses resulting from bad debts and

analysis the adequacy of bad debt provisions.

C. Liabilities

i) Analyse the total amount of debt, breakdown by category and age and expressed as

percentage of annual costs by creditor groups;

ii) Collate a list of all major creditors, the list shall include all creditors whose debt exceed 10

per cent of the total debt, and at least the 5 largest creditors for each participating Company;

iii) Identify what kind of collection methods have been used by the creditors to collect their

receivables, in particular any legal or other enforcement measures (default interest or other

penalties, judgements, threat of bankruptcy proceedings, non-delivery of supplies, employees

industrial actions etc.) and to what extent this has caused disruptions to ordinary activities of

participating Company; and

iv) Analyse wages and tax arrears.

D. Non-cash settlements

i) Analyse the extent and effects of non-cash settlements;

ii) Identify those clients whose accounts are regularly settled, directly or indirectly, through off-

setting, describe the amounts involved, whether or not settlements are made at nominal value,

regularity and mechanisms used, and identify the possible tax or other consequences;

iii) Identify the extent of barter settlements, describe amounts involved, regularity, major clients

with which barter is used, breakdown of major type of goods or services involved, how the

goods or services are evaluated, on-traded and at what prices (profit or loss), and identify the

possible tax or other consequences hereof; and

iv) Identify the extent of tax settlements with all levels of government: municipal, regional,

federal, identify regularity and amounts involved.

E. Conclusion

Based on the conclusions from the sub-tasks outlined above the Consultant shall prepare a summary

which will conclude on at least the following points: financial standing of the Company (s); level of

costs and operational efficiency; and adequacy of current tariff level.

4.1.2. Institutional and legal assessment

The Consultant will assess the present legal status of the Company and the institutional framework in

which it operates. To this end, the Consultant will, inter alia:

i) Identify the respective roles of central, regional, and local authorities in financing and

management including for example: the method and responsibilities for setting of tariffs; the

regulatory responsibilities of various organisations that exist and the nature of their

relationship with the Company. As a part of this work the Consultant shall collect, translate

(the relevant parts) and outline the main contents of relevant laws and regulations governing

these relations.

ii) Analyse the relationship between the Company and the City. This analysis shall include a

specification of the rights and responsibilities of Company and to what extent it operates at an

“arms-length” basis from the City (i.e. are the objectives of the Company clearly defined, to

which extend does it operate flexibly and freely in pursuit of those objectives, and the degree

of accountability that characterises the relationship). Describe the legal status of the Company

and present the statutory documents in English.

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iii) Assess and update the relationship between the Company and owner (City), and in particular

how the owner governs the Company, including the role of the General Director, if

applicable, and formal and informal ways of influencing the Company by the owner.

iv) Assess and update the ownership of the Company and the Company assets, and identify to

what extent the ownership will affect the implementation of the Project

v) Update the legal and institutional framework governing the status and operations of the

Company (legislation, statutes, service agreement etc.) and define, if any changes needed.

vi) Identify any legal requirements for the implementation of the Project.

vii) Assess and update the efficiency of the existing organisational structure and identify what

changes are needed

viii) Assess and update the influence from applicable legislation on the Company’s

operations, particularly any price regulation mechanisms (e.g. tariff regulation), and identify

legal requirements influencing the implementation of the investment programme

ix) Identify legal/political issues or problems, which would prevent the Company from evolving

into the autonomous Company (including specifically the creation of a joint stock Company)

or outsourcing non-core business. Consider specifically issues related to ownership and

control of assets, the establishment of tariffs, management independence, investment and

personnel decisions, etc.

x) Identify shortcomings of the current organisational/institutional framework and make

recommendations how to enhance them.

xi) Identify shortcoming of the current governance structure, and propose feasible improvements

in the medium term.

xii) Recommend reasonable loan covenants and implementation timing in this area.

xiii) Identify which stakeholders (non-governmental organisations, academic community,

donors, local experts, the media, users’ groups, etc.) are working on issues related to water

supply broadly and more specifically, on sustainable water supply/sanitation, gender equality

goals and access-related questions.

xiv) Assess and update the linkages developed with stakeholders in original FSTechnical DD, such

as with women’s groups, in order to incorporate their concerns into the Project, so as to

improve communication, information and services and to better reach out to women or other

user groups.

xv) Assess and update interactions between the management of the Company and representatives

of consumer groups and other stakeholders.

4.1.3. Operational efficiency assessment

The Consultant shall make an assessment of the financial and operational efficiency of the Company,

and in particular identify areas where cost savings could be achieved through planning,

rationalisation, system development, more efficient resource use and separation of non-core-

activities. In addition to key areas, such as collection performance and unit electricity costs covered in

other tasks, the Consultant will, inter alia:

i) Assess the organisational structure and management: number, number and percentage of

women and men in total staff count as well as across all levels/categories, skills and attributes

of employees; human resources development policies and practices, including training and

incentive schemes (identify any potential employment opportunities for women as part of the

new services to be offered, if applicable); appropriateness of the organisational structure;

operation of major departments or groups identified on the existing table of organisation;

policies and practices relative to strategic planning, project preparation and implementation,

operational planning and control, allocation of tasks, supervision of task execution, and

related matters.

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ii) Assess the administrative systems and procedures: customer service, accounting and record

keeping, personnel management and training programs, financial record keeping, financial

planning and management, investment planning and execution, and management information

system and related matters.

iii) Define relevant benchmarks of operational efficiency of the Company (such as Infrastructure

Leakage Index, non-revenue water, number of connections per employee, number of residents

served per employee, level of breakdowns, response time for breakdown/accident reporting,

number of administrative staff, resource use per unit of output etc.. Comparison should be

made with best practice from other comparable cases.

iv) Assess operation and maintenance (O&M) of assets: methods, policies, and procedures

relating to the operation and maintenance of facilities, including support systems such as

repair facilities and spare parts inventories, existence of preventive maintenance programs,

meter management, monitoring of energy use, system information and mapping, and other

matters relating to O&M. As a result of such assessment the Consultant shall identify

measures of efficiency improvements which will lead to substantial reduction of operating

costs.

4.1.4. Demand and affordability assessment/Socio-Economic data

A. General

Based on 3-5 years of historical data and information readily available (Consultant’s reports, data

generated by City, Republika Srpska institutions etc.) the Consultant will compile and present socio-

economic data of relevance to the project including, inter alia:

i) population data including historical development (number of people, general spatial

distribution, in and out migration, minority and vulnerable groups, etc), trends, growth rates,

and review of proposed municipal development plans to obtain basis for population

projections;

ii) Update sex disaggregated data on household incomes and expenditures, including income and

expenditures per decile, household sizes, number of breadwinners, average expenditures for

essential goods, profile and geographic distribution of poverty, percentage of single-headed

households, people living with disabilities, war veterans, and any other circumstances, etc

iii) household incomes, household sizes, number of breadwinners, average expenditures for

essential goods etc.;

iv) Update an overview of consumption behaviour of the City, particularly water consumption

and level of awareness on efficient water use;

v) health information, with regard to mortality and morbidity associated with water borne

diseases;

vi) Update health information with regard to any adverse health effects related to the lack of or

insufficient quality of water and wastewater services disaggregated by sex and other relevant

socio-economic and demographic variables.

B. Affordability

Update the affordability analysis in consultation with the EBRD’s Office of Chief Economist. The

affordability analysis will be based on desktop research and available data.

The Consultant will establish at which levels tariffs would be affordable to customers without causing

a socially or politically unacceptable financial strain.

It is recognised that the tariff adjustments required for the realisation of the Project can only be

determined in detail at a later stage of project preparation, but the Consultant should gain a clear

understanding of the limits of affordability as early as possible.

For example, if the data is available, the Consultant shall examine differences in the affordability to

pay for the services by different socio-demographic groups at both individual and household level (i.e.

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females and males; single-headed households, elderly; people living with disabilities, ethnic

minorities and vulnerable groups in the community) and reflect them in the affordability analysis and

the assessment. The Consultant should follow EBRD methodology on affordability analysis and

assess and comment on the current social safety nets covering minimum water consumption of

vulnerable households and households with specific needs

The Consultant will design and implement a survey instrument, which will provide data to assess the

affordability and willingness to pay of both domestic and industrial customers taking into account the

improved services and current customer perception of service quality. On the basis of this survey, and

by other means, such as interviews and focus groups, the Consultant will:

i) Assess the level of tariffs that would be affordable for domestic customers, particularly mid

and low level income households. Document and explain the research and analyses carried

out that support the opinions offered and state methodological assumptions. Examine the

issues over the life of the project, making assumptions about how real income will increase,

how attitudes may change, etc. Present comparisons with other countries/cities.

ii) Evaluate whether non-residential users have any particular reason to object to the new tariff

levels. Assess whether there could be any impact on industrial or business location decisions.

iii) Assess whether there are other factors that could lead to serious objections by users, City

officials or politicians, or particular interest groups.

C. Tariff Setting and Subsidy Payment Policy

The tariff setting and subsidy payment policy for the water and wastewater services during the

financing period is a fundamental issue. The long term financial health of municipal utilities is

partially reliant upon: (i) a tariff setting formula/ methodology that allows for the recovery of all

recurrent costs including capital investment costs; (ii) adequate billing and collection practices; and

(iii) receipt of adequate subsidy payments when consumer tariffs are below cost recovery levels.

The Consultant will evaluate current tariff setting and subsidy payment policies, and recommend

improvements. To this end, the Consultant will, inter alia,

i) examine the current billing and collection methodologies and prepare recommendations on

further improvements in accordance with industry best practices;

ii) evaluate the current tariff by consumer groups and business lines, to determine to what extent

all recurrent costs are included;

iii) recommend changes to the tariff setting formulae that ensure that the benefits associated with

gains in efficiency are shared between the Company and customers in an equitable and

transparent manner;

iv) Evaluate and update the degree of receivables by consumer groups and suggest the solutions

to reduce them if necessary

v) identify any cross subsidies and establish a plan for the orderly phasing-out of cross-subsidies

over a three to four year period, ensuring that customer tariffs remain affordable;

vi) describe the mechanism for the calculation and payment of subsidies (if relevant) and make

recommendations for the implementation of any formula or operational changes;

vii) Identify what the Bank should require for the Bank financed project (with specific timing);

viii) Identify any protection mechanisms available to the most vulnerable decile of the

population regarding payment of utility bills;

ix) Recommend reasonable loan covenants and implementation timing in this area.

4.1.5. Technical evaluation of municipal service infrastructure

The Consultant will evaluate the current technical quality and quality of service provision. To this

end, the Consultant will:

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A. Service characteristic assessment

Describe and assess the key attributes of the current service and the service development over the last

3 years, including inter alia:

i) Service area: physical, administrative and political delineation

ii) Customers: number of customers and people served by category, i.e. domestic, industrial,

commercial, official, public etc.

iii) Quality of service: provided in terms of water availability, from water resources resilience to

customers (pressure, reliability) using Water quality monitoring: practices and standards.

B. Infrastructure evaluation

Assess the Company infrastructure and equipment components in terms of capacity, energy

efficiency, performance, state of repair, maintenance practices, age, quality of materials and

equipment, adequacy and environmental impact.

In each case, the Consultant will identify opportunities for improvements in technical efficiency

through the use of alternative technologies and/or infrastructure solutions.

4.1.6. Resource Use

i) Identify the main physical raw materials or resources used in providing services (i.e., natural

gas, oil or coal for heat, electricity for pumping etc.) and show monthly consumption of each

for the previous 2 year period;

ii) Indicate comparative values of material or resource input required to provide similar service

levels according to reasonable standards of international best practice for similar operations;

iii) Indicate levels of material or resource savings which may be anticipated as a result of meeting

such standards of international best practice for similar operations (expressed in terms of

gross savings and savings per unit of output); and

iv) Ensure the relevant data in the Resource Utilisation and GHG Emissions Table is completed

(See Attachment 1).

4.1.7. GHG emission assessment

i) Assessment of GHG emissions associated to the operations including identification of main

source of emissions;

ii) If applicable, indication of allocation of CO2 emission allowance (as per EU ETS) and

estimated costs associated to comply with such allocation and the provisions of the EU ETS;

and

iii) Ensure the relevant data in the Resource Utilisation and GHG Emissions Table is completed

(See Attachment 1).

4.1.8. Resilience to climate change

The baseline study should take account of the current climatic conditions and projected climate

change in so far as they have the potential to affect water supply and wastewater discharges.

i) The Consultant shall compile readily available data on existing climate conditions using

reliable sources such as the IPPC Data Distribution Centre, the Royal Netherlands

Meteorological Institute (“KNMI”) and other sources as appropriate;

ii) The Consultant shall collate and analyse future climate projections from Global Climate

Models (“GCM”) using readily available information from reliable sources, e.g. Climate

Wizard (www.climatewizard.org) and from Bosnia and Herzegovina’s Second National

Communication to the UNFCCC;

iii) The Consultant shall analyse the collated data, determine the risks associated with climate

change and advise on the level of confidence associated with climate change projects and the

implications for the project.

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iv) The Consultant shall assess the implications of climate change arising from analysis of this

data including:

Rising temperatures leading to the melting of glaciers and consequent impact of river

systems and flows.

Adequacy of and changes in water supply (both surface water and groundwater).

Drinking water quality.

Power supply, energy availability and energy costs.

Asset protection and maintenance.

Water demand and changes in demand, e.g. increased demand due to more extreme heat

days.

Please refer to Annex 0 for additional information on sourcing data on climate change projections.

Please also note that the time period for assessing risk is the lifetime of the project and not just the

lifetime of the loan.

4.2 Environmental and social assessment (“ESA”)

Prior to undertaking the environmental and social assessment, the Consultant is required to confirm

the scope of PIP and screen the Project proposal against the EBRD’s Environmental and Social2

Policy (“ESP”)3 and associated Performance Requirements (“PRs”) to confirm the project category (A

or B). New large-scale groundwater abstraction activities exceeding 10 million cubic metres annually,

or greenfield Waste Water Treatment Plants (WWTPs) of the capacity over 150,000 PE (or major

expansions of the existing WWTPs by over that amount) are typically categorised as A, while

upgrades of the existing water and wastewater facilities and networks are typically categorised as B.

The results of the screening and the Project category will need to be discussed and agreed with

the EBRD (ESD) prior to proceeding with E&S Assessment task.

The scope of work described below is applicable to a typical brownfield category B project, which is

the most typical of assignments in the water/wastewater sector. Should the Project proposal (PIP)

involve any Category A components, the terms of reference for the ESA will be revised by the EBRD

to include an Environmental and Social Impact Assessment (“ESIA”) in line with the ESP. The

revised ToR will be agreed with the Consultant together with the necessary cost implications.

Objectives of the E&S Assessment

The objective of the E&S Assessment is to identify and assess the potentially significant existing and

future adverse environmental and social impacts associated with the Client’s current operations and

the proposed Project, assess compliance with applicable laws and the EBRD ESP and PRs, determine

the measures needed to prevent or minimise and mitigate the adverse impacts, and identify potential

environmental and social opportunities, including those that would improve the environmental and

social sustainability of the Project and/or the associated current operations.

The assessment process will be commensurate with, and proportional to, the potential impacts and

issues of the Project and the Client’s existing operations. The assessment will cover, in an integrated

way, all relevant direct, indirect and cumulative environmental and social risks, impacts and benefits

of the Client’s operations, the Project and the relevant stages of the project cycle (e.g. pre-

construction, construction, operation, and decommissioning or closure and reinstatement).

2 The ESP (2014) defines social as “those issues which pertain to project-affected people and their communities and workers

and related to socioeconomic status, vulnerability, gender identity, human rights, sexual orientation, cultural heritage, labour

and working conditions, health and safety and participation in decision making”. 3 Available at http://www.ebrd.com/downloads/research/policies/esp-final.pdf

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An Environmental and Social Audit (as defined in Section Error! Reference source not found.3) is

required to assess the Client’s current operations in terms of compliance with national legislation,

national or local permitting requirements, the relevant provisions of the EBRD Environmental and

Social Policy and Performance Requirements (2014), including EU environmental standards. Further,

the audit must review possible historical environmental and social issues, such as potential

contamination of soil and/or groundwater or land acquisition disputes.

The Environmental and Social Assessment (as defined in Section 4.2.4) will also determine whether

further studies are required, focusing on specific risks and impacts, such as climate change,

resettlement, retrenchment, biodiversity, human rights and / or gender.

Specifically, the Consultant will:

Identify existing and Project-related environmental and social impacts and risks.

Describe and characterise a relevant environmental and social baseline commensurate with

the risks posed by the current site operations and the Project.

Assess potential gender aspects and priorities among nearby communities to understand

women and men’s concerns (e.g. determine women’s current activity schedules/ water use

practices, attitudes towards public health etc.).

Carry out E&S Assessment and Audit and develop a draft E&S Assessment report in

accordance with the Bank’s requirements as defined in the ESP, including a Compliance

Summary table with the Bank’s PRs.

Prepare a Livelihood Restoration Framework, if needed;

Prepare a draft Stakeholder Engagement Plan (SEP), draft Environmental and Social Action

Plan (ESAP) and draft Non-Technical Summary (NTS).

Identify if any additional studies will be required to cover relevant aspects in greater detail

(e.g. biodiversity, resettlement, retrenchment, etc.). (Any such work will be commissioned

under separate Terms of Reference).

Finalise all documentation further to the EBRD, other lenders’ (if involved) and Client’s

comments.

This Terms of Reference for the E&S Assessment refer to various E&S guidance documents (e.g.

E&S Guidance 1). These are available as a separate package of E&S guidance documents.

4.2.1. Applicable requirements:

The E&S Assessment is to be carried out in accordance with:

Applicable local, national and regional requirements, including those related with ESIAs /

EIAs and associated public disclosure and consultation requirements.

The EBRD’s ESP (and the incorporated Performance Requirements (PRs)), and relevant

European Union (EU) requirements (including, but not limited to, the EU EIA Directive (as

amended), EU Drinking Water Directive (98/83/EC), EU Urban Waste Water Treatment

Directive (91/271/EEC), EU Water Framework Directive, Sewage Sludge Directive

(86/278/EEC), IE Directive etc.).

Requirements of other potential lenders, such as other International Financing Institutions

(IFIs) and commercial banks adhering to the Equator Principles4.

Relevant international conventions and protocols relating to environmental and social issues,

as transposed into national legislation.

4.2.2. Review of Available Data and Site Visit

4 Information on the Equator Principles is available at: www.equator-principles.com

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The Consultant will review the following studies and baseline data available from the Client.

Data and documentation are in English and local language in use in Bosnia and Herzegovina. This list

is not exhaustive and the Consultant must be prepared to review, and also request, further

documentation that does not appear above.

Following the review of available data, the Consultant will visit the site, to obtain any supplementary

information needed to complete the E&S Assessment (Sec. 4.2.44) and carry out the on-site activities

necessary to fulfil the E&S Audit reporting requirements (Sec. Error! Reference source not

found.3).

The data review process will include a simple media search to determine whether any relevant issues

regarding the Project, Client or Beneficiary have been reported through the media and to determine

the importance of these through additional verification during the due diligence work. If no relevant

issues are identified through this process the Consultant will include a statement to this effect in its

report.

Following completion of the data review and site visit the Consultant will deliver a summary of key

findings.

4.2.3. Environmental and Social Audit

The E&S Audit is required to review the current and, to a limited extent, past operational performance

of the Client’s existing operations and facilities in terms of their compliance with relevant national

environmental laws and regulations and EBRD PRs, including relevant EU environmental standards

and guidelines. Consultant should provide cross-reference with the respective sections of the

Technical DD study, in case of any overlap.

Key issues to be covered under the E&S Audit may include, but not be limited to:

A review of the Company’s existing environmental and social management systems, policies

and practices;

Organisational capacity and resources, including description of the number of personnel;

number and percentage of women and men in total staff count as well as across all

levels/categories;

Human Resources and employment (e.g. child labour, forced labour, and non-discrimination,

workers’ organisations, contractor management, retrenchment and employment) policies;

A review of equal opportunities policies and practices in the Company; assessment of

potential employment opportunities for under-represented groups in the workplace (i.e.

women or men, people with the disabilities, different age groups, ethnic groups, etc.) and

recommendations on what measures need to be made or what policies need to be revised to

ensure equality of opportunity in the Company;

Occupational health and safety (local and national requirements, applicable EU/ international

requirement and standards, key health and safety issues, control and major accident hazards,

current health and safety monitoring programme, summary of regulatory compliance status,

summary of health and safety expenditures, emergency response etc.);

Pollution prevention measures available at both facilities and overall regulatory compliance

with national requirements and pertinent EU standards including applicable Best Available

Techniques and Best Available Techniques Reference Documents. In addition, this

assessment will need to review compliance with best international practice as a benchmark

against current operations and planned plant upgrades;

Industrial hygiene (including worker exposure, and rates of industrial diseases) and worker

health and safety;

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Use and management of hazardous substances (including chlorine and other chemicals

handling);

Community health, safety and security as it relates to the Company’s existing operations;

Major hazards assessment and management; environmental management plans in the event of

an incident, accident of spill both on land and water;

Current company policy and practice in relation to avoidance of third party intrusion into

potentially hazardous areas (fences, security, personnel, others);

Management of potentially hazardous works (including excavation works, work in confined

places, etc.);

Traffic management;

Contractor management and oversight;

Waste management and waste minimisation;

Sludge management practices;

Noise and vibrations both during construction and operation of the Company’s facilities;

Other construction related impacts (aerosol emission, dust, temporary severance to traffic,

water cuts, others);

Procedures for identifying and safe handling of UXOs (unexploded ordnance);

Overview of current Client’s policy and procedures regarding land acquisition (compensation

policy, consultation activities related to land acquisition including grievance management, if

applicable);

Review the Client’s corporate procedures for assessing projects with potential biodiversity

impact;

Identification of potential past environmental liabilities which may affect the Bank (e.g. soil

and ground water contamination as a consequence of past and present operations);

Overview of the Client’s supply chain (e.g. suppliers of main materials and resources

including energy; presence of women-owned businesses) and identification of relevant

environmental, social, labour and/or reputation issues; and

Public interaction, including historical responsiveness to public comments, complaints and

questions. The audit should also identify the Company’s main stakeholder groups and current

stakeholder engagement activities in line with PR10.

Monitoring practices and results.

The Consultant will be guided by the relevant requirements of the Bank’s E&S Performance

Requirements. The findings of the E&S Audit should also be considered in the completion of the PR

compliance assessment.

4.2.4. Environmental and Social Assessment

Please note that that the environmental and social assessment should be commensurate with the

Project and its associated risks and impacts. It should be a high level assessment focusing on key

risks and impacts. A comprehensive Environmental and Social Impact Assessment of the Project is

not required. Where available the E&S assessment should refer to (and review) the local EIA done

for the Project.

Project Description & Identification of Relevant Associated Activities & Operations:

The Consultant will prepare a description of the Project including details of any alternatives5

considered for the project and information on neighbouring operations and activities. In accordance

with EBRD PR1, paragraph 9, the Consultant will identify:

Any potentially significant environmental and social issues or risks associated with relevant

other activities or facilities, which are not part of the Project but which may be directly or

5 Project alternatives to include: Zero (“no project”) alternative, siting and routing alternatives, infrastructure and traffic

connection alternatives, design alternatives

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indirectly influenced by the Project, exist solely because of the Project or could present a risk

to the Project

Cumulative impacts of the Project in combination with impacts from other relevant past,

present and reasonably foreseeable developments.

Unplanned but predictable activities enabled by the Project that may occur later or at a

different location.

Environmental and social risks associated with the primary supply chains central to the

Project’s core operational functions.

Analysis of Legal Requirements

The Consultant will identify applicable local, regional and national environmental and social laws and

regulatory requirements of the jurisdictions in which the Project operates, including those laws

implementing host country obligations under international law. The Consultant will analyse

local/national assessment and permitting requirements and the EBRD environmental and social

requirements and compare them within a gap analysis in tabular format. In EU Member States,

provide copies of permitting documents issued by Competent Authorities and opine whether the EIA

screening process has met relevant EU requirements.

As required, the Consultant will identify any issues that require legal interpretations for the Bank to

raise with its legal advisors. The Consultant is not required to provide legal opinions.

The Consultant will identify, review and take into consideration any relevant strategic level

assessment documentation.

Baseline Conditions

The E&S Assessment will include a review of the aspects of the physical, biological and socio-

economic environment likely to be affected by the proposed Project. The Study shall also identify

respective needs and concerns of different disadvantaged groups and/or those with less voice, such as

women, to be addressed in the design, implementation, and monitoring and evaluation of the project.

Indicative guidance on the contents of the overall assessment is provided in E&S Guidance 1 of the

E&S guidance pack and in Annex 1 below.

The baseline assessment will include consideration of the Baseline Study in section 4.1 and the inter-

relationship between the relevant factors, as well as the exposure, vulnerability and resilience of these

factors to natural and manmade disaster risks.

Project Assessment

In accordance with the Bank’s ESP (2014), the Consultant will analyse the potential environmental

and social impacts and risks of the Project, as well as opportunities that the Project may provide,

including infrastructure development (e.g. water, wastewater, a heat and electricity distribution

networks, transportation access) and other associated facilities, for which the EBRD financing is

being sought.

The E&S Assessment will include a review of the likely effects of the proposed Project on the

physical, biological and socio-economic environment to provide an identification and characterisation

of potential E&S impacts, including beneficial (as well as adverse) impacts.

This review will be structured to include all relevant stages of the Project’s life, e.g. construction,

operation and maintenance, closure and decommissioning, and residual E&S impacts. The level of

analysis and reporting will be commensurate with the risk magnitude of the identified issues.

Indicative guidance on the contents of the overall assessment is provided in E&S Guidance 1 of the

E&S guidance pack and Annex 1 attached to this document.

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As part of the Project Assessment, the Consultant will also:

Include confirmation of whether:

o the Project involves large-scale groundwater abstraction activities with abstraction

volumes exceeding 10 million cubic metres per year and are abstraction volumes are

sustainable (noting the water use, including surface water bodies);

o the Project is in line with the EU Water Framework Directive;

o the Project is in compliance with the EU Drinking Water Directive (98/83/EC);

o the capacity of the municipal wastewater treatment plants (greenfield and/or

expansions) will exceed 150,000 population equivalent;

o the project is in compliance with the Urban Wastewater Treatment Directive

(91/271/EEC), including treatment standards;

If an EIA has been prepared under the national requirements, include a summary statement of

compliance of the national EIA’s process with the EU EIA Directive, including:

o how the project was screened by the national authorities;

o which EIA procedure was followed;

o how public participation process was carried out;

o potential cumulative impacts and area of influence issues (e.g. raw material sourcing);

and,

o whether any impact on designated or identified nature conservation areas or other

sensitive areas has been identified.

Quantify the environmental benefits of the proposed investments, focusing on quantifying the

pollution reductions and cross-border environmental benefits resultant from the project. (See

Annex 2)

Assess the extent to which relevant national and European Union environmental, social,

health and safety laws, regulations and standards will be met within the framework of the

proposed investment programme.

Assess the occupational health and safety issues by the Company and its contractors

undertaking the Project related works, including employees and workers exposure to noise,

dust, electricity, physical and other risks during modernization and refurbishment works.

Assess public safety and security issues and the impacts on stakeholders. This should include

an assessment of potential gender-specific health and security issues and impacts (i.e. impacts

during construction and maintenance phase of the service, temporary or permanent disruption

of the service, timetable of the provision of water, safety concerns of accessing the water

supply depending on the water supply system/location and any other security aspects (for

example, an increase of male workers in the area, which may lead to an increase in the risk of

harassment and assaults).

Assess community health, safety and security risks and benefits, including traffic

management and potential nuisance to local community during both construction and

operation of the Project.

Assess whether or not the proposed investment programme would disproportionally affect

women and identify any opportunities to specifically address their needs and concerns so as

to enable them to benefit to an even greater extent from project activities.

In case resettlement or displacement is anticipated, the Resettlement Action Plan and

Livelihood Restoration Plan shall provide provisions to compensate women as well as men

for loss of livelihood, address gender issues in planning and executing the resettlement

throughout the whole resettlement process (consultation and participation, resettlement

planning, and resettlement and rehabilitation) in line with PR5.

Verify and confirm to the Bank whether categorisation as “B” for the Project is correct.

The Bank has previously identified high rates of worker accidents on water and waste water projects,

which are associated with excavations, working in confined spaces and the movement of vehicles and

mobile plant. Therefore the consultant shall pay particular attention during E&S assessment to the

capacity and competency of the company to manage risks associated with these hazards, comparing

them against good internal practice.

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In addition to mentioned above the Consultant is required to perform the Energy Saving Analysis to

estimate the savings in energy consumption and Greenhouse Gas (GHG) emissions reduction

resulting from reduced energy consumption of the upgraded system components, and the implications

for GHG emissions (positive and/or negative) of any changes in the way waste water and sewage

sludge are treated. EBRD’s methodology for the quantification of GHGs is recommended for use (see

the EBRD’s website for details6).

Management of Impacts and Issues

For each identified adverse future impact, issue and/or risk, the Consultant will propose measures to

avoid, minimise, mitigate or compensate for them.

EBRD PR Compliance Assessment

Based on the results of the E&S Assessment, the Consultant shall evaluate the compliance status of

the Project with the EBRD PRs using the format provided in E&S Guidance 2 of the E&S guidance

pack. Note that the compliance assessment should also take into consideration the findings of the E&S

Audit (Sec. Error! Reference source not found.3)

4.3 Long-Term Development Plan

The Consultant will develop an affordable, least cost strategic investment programme for the

forthcoming 15 years. This plan will outline the general development direction and determine the

basic polices and parameters which will lead to least cost improvements within financial constraints.

4.3.1. Service objectives, standards and policies The Consultant will, if necessary, revise present service objectives, policies, planning criteria and

design parameters, standards and specifications. The Consultant shall propose policies and criteria,

which will guide later planning and design effort. These shall be discussed and agreed with the

Company, and other agencies concerned. In conclusion, the Consultant will, inter alia:

a) Define the service area in view of political, administrative and technical criteria;

b) Estimate projections of population and broad trends in its spatial distribution in the service area;

c) Estimate projections of industrial development as it pertains to municipal service development.

d) Define norms and standards

e) Estimate future service demand projections.

f) Define future sector development policies, including performance objectives over time.

4.3.2. Long-term investment programme – water Different potential investment strategies or options shall be broadly outlined (and tentative cost

estimates prepared) including at least: (i) a minimum cost facilities rehabilitation strategy (to maintain

the increased level of service/repair established by the project); and (ii) outline of strategic

development plans including improvement, rehabilitation and expansion over the next 15 years with a

view to meeting the criteria developed in Section 4.2.1.

The preferred option will be selected on the basis of both financial and technical criteria, and be

further developed into the long-term investment programme. For this programme, the Consultant shall

6 EBRD’s GHG Assessment Methodology can be found at

http://www.ebrd.com/downloads/about/sustainability/ghgguide.pdf

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summarise in appropriate maps the location, capacity, and staging of major infrastructure components

and to explain and justify the proposed course of action.

Particular attention shall be given to:

a) existing facilities and studies and projects already prepared including their consistency with

national and EU norms on drinking water quality;

b) examining alternative solutions within the context of existing system configuration and capacities;

c) the rehabilitation, repair and upgrading of existing facilities and operational improvements;

d) the scope for improved resource and raw material ustilisation through both efficiency

improvements and (where possible) use of renewable energy sources (e.g. biogas generation and

utilisation)

e) measures aimed to control and reduce GHG emissions associated to the operations

f) least cost staging/phasing of system expansions;

g) maintenance and operation implications, specifically the effect of expected increases in the costs of

electricity and gas; and

h) effects of conservation (demand management) and loss reductions on future system capacity

requirements.

4.3.3. Long-term investment programme – waste water

Wastewater services:

Taking into consideration studies carried out earlier (by the Company and others) and other

information available, the Consultant shall compile, present and interpret data and information,

covering the past three years, on service characteristics, including:

Service area: physical and administrative delineation;

Connections: number of wastewater connections by user category, i.e. domestic (number of

people served by the wastewater network), domestic (number of people served by septic tanks),

industrial, commercial, official, public, etc.

Establish the extent of foul only and combined (foul and surface water) systems present and the

proportion of connections to both

Wastewater flows and characteristics: total and per capita flows, diurnal variation, solids and

organic loadings or other important characteristics of strength of wastewater, if important,

distinguish between industrial and other wastewater sources (such as tankered waste),

determination of relationships between dry weather and wet weather flows for combined

systems, frequency and magnitude of storm water overflows and water bodies to which they

flow, and degree of infiltration within the sewer network and/or exfiltration.

Industrial wastewater: description of wastewater flows from the main industrial sources in

terms of flow volumes and chemical/physical characteristics with special emphasis on

toxic/hazardous materials discharged into the municipal wastewater collection system if

information is available.7

Description of monitoring of wastewater flows and quality: description of standards and

practices used. Establish an overall view of the current flow metering accuracy (+/-x per cent).

Wastewater Collection Systems:

7 The description will be based on available data, the time schedule and budget do not allow survey or production of new

data.

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Taking into consideration information available, the Consultant shall describe and assess the present

wastewater collection system, including:

Preparation of an overview of existing systems and facilities, including area served, length,

diameter and type of main sewers, whether separate or combined, pump stations, discharge

points and storm water overflows, location of major wastewater contributors (industry). Present

schematic (please, note that detailed configuration map might not be available to the Consultant

due to current security regulation in Bosnia. the Bosnia), and identify scale and possible

implications for environmental pollution in areas not connected to a wastewater network. .

Assessment of main system components: capacity, performance (including total and unitary

energy consumption kWh/m3), state of repair, reliability (blockages per km, sewer collapses per

km, number of serious pollution incidents from overflows, properties internally flooded),

adequacy, operational maintenance practices, age, remaining asset life and quality of materials

and equipment (pipes, valves, pumps, etc.), and infiltration/inflow.

The Consultant shall provide an opinion on the operational performance (effectual drainage) of

the wastewater collection network including relief points based on the evidence acquired. The

Consultant's view will be supplemented with information provided from relevant site visits and

interviews with the operating personnel and taking account of customer contacts.8

Wastewater Treatment, Sludge Management and Disposal

The City of Banja Luka does not have any wastewater treatment facilities. Untreated wastewater from

the network is usually disposed in the nearest recipient and it all eventually ends up the River Vrbas.

Taking into account the information collected about the morphology and geology of the service area,

the quantities and qualities of foul and surface water, the current type of the wastewater network and

the percentage of population coverage the consultant will recommend the most appropriate, least cost

solution for wastewater collection and treatment for the city of Banja Luka. The analyses will include

discussion whether one large WWTP would be more cost efficient or a number of smaller WWTPs.

For each case the consultant will compare at least two wastewater treatment processes and also advise

on the most appropriate sludge treatment and disposal solution. The wastewater collection, its

treatment including wastewater sludge handling shall be compliant with national and EU norms. The

costs that would be compared must include investment cost (in the network and the WWTP(s)) and

the operating costs (including maintenance and depreciation) during the 25 years period. The

consultant will compare the NPV of various options using appropriate discount rate.

The consultant will gather information and present good and bad examples from wider region with

similar climate condition

The consultant will further describe and assess:

Description of applicable laws and regulations concerning wastewater treatment and sludge

disposal: institutional responsibilities and interdependencies (local and regional governments),

including incentives (fees and fines) levied ;

Assess conditions of the effluent receiving water bodies (including River Sava)

Assess the impact of treated and untreated wastewater disposal and storm water overflows have

on the water quality of the receiving waterbody and downstream with special emphasis on

industrial hazardous and toxic waste products and analyse compliance with applicable ambient

water quality standards, effluent standards and applicable regulations.

Assess alternative solutions for treatment, transport and disposal of sludge if appropriate.

Assess whether the recovery of nutrients in sludge is technologically and economically feasible

and applicable in the Country.

8 Hydraulic modelling will not be included, since the time schedule and budget do not allow sufficient modelling with

calibration, and simple modelling without calibration will not give added value to the study.

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Analyse the utilisation of reclaimed waste water for irrigation and other likely purposes in

terms of technical and economic aspects and associated environmental and social risks with it.

Present regulatory status for the utilisation of reclaimed waste water.

Assess anaerobic stabilization of sludge and utilisation of waste methane for the generation of

heat or electricity and utilisation of digestate as fertilizer.

The Consultant will identify opportunities for improvements in technical efficiency through the use of

alternative technologies (including energy and water efficiency solutions, resource recovery) and/or

infrastructure solutions (such as rationalising assets). In addition the consultant will give an opinion

on:

The robustness of existing infrastructure repair and renewal programmes including a view of

the balance between proactive and reactive capital maintenance practices

The quality and completeness of asset inventories, asset condition and performance and the

systems used to record, retrieve, monitor and analyse this information

The competency of current asset management practices

4.3.4. Long-term institutional development options

The Consultant will provide a plan for institutional development, with the aim of the Company

moving towards a fully commercial entity. This plan should include intermediate options, for

example, making use of performance based service contracts, and/or management contracts. The plan

should take into account the abilities of the local private sector in the sector.

4.4 Short-Term Investment Programme

On the basis of the long-term investment programme identified above and other information available

the Consultant shall propose, justify and develop in more technical detail a short –term investment

programme for the forthcoming 2 years. This investment programme should be a bankable project,

which the EBRD is able to finance.

4.4.1. Propose and justify the short-term investment programme

The short-term investment programme shall be oriented towards maximisation of operational cost

savings and improved operational efficiency of the Company (including improved energy use and

reduced GHG emissions), improving and sustaining an improved service standard. The selection of all

project components must be clearly explained and justified within the context of the outlined strategic

long-term investment programme and the budget proposed. The Consultant shall also propose a

staging/phasing approach to deal with the issue of possible further budget constraints due to decreased

affordability. Project components shall be shown to be part of least cost solutions (in terms of capital

as well as operation and maintenance costs) in conjunction with an acceptable technical standard (in

terms of quality and reliability).

4.4.2. Detailed Programme Description and Cost Estimates

For each of the sub-components selected, reasonable estimates of quantities and costs (with an error

margin not exceeding 15per cent based on preliminary engineering designs and on applicable previous

bidding experience in the country) shall be prepared. Potential cost savings upon implementation of

the project should be identified and estimated. Operational costs review shall be prepared and costs

are specified among fixed and variable for each sub-component. Project sub-components shall be

designed in a way to minimise foreign currency requirements in operation and maintenance costs

(However, this should not happen at the expense of quality and reliability of services).

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It is important that due care is shown in preparation of these cost estimates. Taxes, duties, technical

and financial contingencies are to be considered and specified. Financial contingencies are to be

calculated based on an investment schedule translating the implementation schedule (see below) into

investment figures (on a semi-annual basis). Foreign and local costs are to be specified.

4.4.3 Resources and Materials Savings Summary

A detailed breakdown of anticipated savings in resources and raw materials resulting from the

proposed short term investment programme will be prepared. This will refer and compare to the best

practice performance standards identified in Section 4.1.1 (E) above and will also indicate further

savings, if any, anticipated through implementation of the full long term investment programme

described in Section 4.2.2. The anticipated resource savings will be summarised in the Resource

Utilisation and GHG Emissions Table provided as Attachment 1.

4.5 Financial Analysis

The purpose of this task is to confirm that the water Company will have the financial capacity to fully

support the short term investment programme (the project), and the least-cost long-term investment

programme, and thus to demonstrate the financial viability of the project.

The financial viability of the enterprises and the project must be demonstrated by means of financial

projections over the lifetime of the loan. The projections shall be fully consistent with the long-term

development plan and be based on prudent assumptions on the Company’s revenues and expenditures.

Financial projections shall include annual balance sheets, income and cash flow statements. The

model shall be prepared to accommodate variations in the real exchange rate. The model shall address

the issue of tradable vs. non-tradable costs and fixed vs. variable costs. The Bank will provide

forecasts for inflation and exchange rates to be used by the Consultant.

Financial viability requires that the finances of the enterprise, including the financing plan for the

project will be balanced at all times over the project execution period i.e. operational revenues and

contributions must be sufficient to finance all operation and maintenance costs, debt service

obligations etc. The financial IRR and debt service cover ratio for the bank’s loan shall be calculated.

For planning purposes, it shall be assumed that the Project will be financed partly from the internal

cash generation of the Company, partly from contributions from other local sources (if any) and partly

from loans from the Bank and/or other co-financiers. The Bank staff will provide co-ordination in

putting together a feasible financing plan for the Project.

It is likely that tariff levels will have to increase over the project implementation period. The financial

model shall be used to model alternative tariff scenarios and determine an appropriate tariff

adjustment policy, which will ensure the financial viability of the enterprise and give sufficient

comfort to providers of finance. In order to assess the affordability of the project the Consultant shall

calculate the projected tariff affordability ratio and discuss the affordability of the assumed household

and industrial tariffs. It should be noted that balancing on one hand the size of the project and on the

other hand the required increase of tariffs would involve alternative scenarios and iteration.

The financial analysis shall include a calculation and discussion of sensitivity to changes in key

income and expenditure variables, including foreign exchange and interest rates, and assess the risks

for the Company. The Consultants will identify key variables to which the financial status of the

Company is sensitive. In consultation with the EBRD over their scope, a range of scenarios shall be

developed in order to test the sensitivity of the project to changes in key assumptions underlying these

variables.

The model and all its assumptions will be discussed in detail with the Company and the City. The

model shall be constructed in such a way so as to facilitate the explanation of the model.

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4.6 Economic Analysis

The Consultant will assess the economic cost-benefit of the proposed components to be financed via

the project. The analysis should identify any quantifiable economic benefits and estimate non-

quantifiable benefits to obtain an economic internal rate of return calculation for the project.

Consultant should allocate a limited amount of staff resources and time to this component.

4.7 Project Implementation Plan

The Consultant shall prepare a Project Implementation Plan (PIP) for the Project, which will cover all

aspects of Project implementation, and include, inter alia:

Project programme - a detailed Project programme (using appropriate presentation format: e.g.

linked activity programmes, etc.) for completion of the whole Project - showing all activities and

key events for design, approvals, construction, commissioning, completion, etc.

Project budget - a detailed cost budget for the whole Project. This will be based on existing

proposals of cost estimates.

Procurement - a procurement and expediting plan. This will take into account the procurement

rules of EBRD. The plan shall be organised so as to minimise the number of contracts.

Project risk matrix - a risk matrix outlining the key challenges and risks associated with the

Project and the measures proposed to deal with them.Project institutional plan – a proposal on

how to address the key shortcomings identified in the institutional framework. This will include

appropriate incentive structures, and any contractual agreements required. Consideration should

be given to effective regulation and monitoring of the sector

5. IMPLEMENTATION ARRANGEMENTS AND DELIVERABLES

The duration of the assignment will be 12-14 weeks. The Consultant shall report to the EBRD whilst

liaising with representatives of the Company and the City.

The Company will provide the Consultant with working space, necessary furniture and telephone

connections.

The Company will designate senior officials (or the Head of PIU) to be the primary contact persons

with specific responsibility for assisting the Consultant and co-ordinating activities.

The Company will make available all of their records, plans, reports, designs and other documents as

appropriate, but it will be the responsibility of the Consultant to translate these documents, if

necessary.

The Company will provide access to all of their facilities and employees for questioning or assistance

relative to an understanding of the functioning of system facilities.

The Consultant shall be responsible for paying for all international telephone connections, office

supplies, external printing. The Consultant shall pay for all local transportation required by the

Consultant’s staff throughout the duration of the assignment.

The Consultant shall be responsible for providing suitably qualified interpreters/translators to work

with their staff.

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5.1 Reporting

The Consultant will report to the EBRD. The Consultant shall produce in the course of the assignment

the following reports:

Inception Report: Within 2 weeks of the assignment commencement, and following the site

visit, initial data review and initial opinion as to a project proposal, the Consultant shall

present to the Bank an Inception Report presenting the initial findings, with an emphasis on

findings having an impact on the time schedule and factors affecting these Terms of

Reference. The Bank will provide comments on the inception report to the Consultant.

Draft E&S Assessment report: The Consultant shall submit, also within 8 weeks from the

Assignment Start Date, to the Bank

o Draft Environmental and Social Audit and Assessment Report, which includes a PR

compliance table (see E&S Guidance 1 & 2 of the E&S guidance pack and Annex 1b

below) – within 10 weeks of the Assignment Start Date

o Draft Environmental and Social Action Plan (ESAP) (see E&S Guidance 3 of the

E&S guidance pack) - within 10 weeks of the Assignment Start Date

o Draft Stakeholder Engagement Plan (SEP) (see E&S Guidance 4 of the E&S

guidance pack) – within 10 weeks of the Assignment Start Date

o Draft Non-Technical Summary (NTS) for disclosure to the public (see E&S Guidance

5 of the E&S guidance pack) – within 10 weeks of the Assignment Start Date

o Draft Resettlement-Livelihood Restoration Framework (R-LRF)

The Consultant shall distribute the Draft E&S Assessment report package to the Bank, the Company

and the City for comments and shall organise a joint meeting to present the Report (“Presentation”)

with all parties in the City within 2 weeks after distribution of the Report.

Three copies of all reports in English/local language in use in Bosnia and Herzegovina are required.

All parts of the report in English and local language in use in Bosnia and Herzegovina shall also be

provided in electronic-readable format, in both Word and PDF. Supporting data in the local language

in use in Bosnia and Herzegovina in the appendices need not be translated for English versions of the

documents.

NB: The Consultant will remain available for any further clarifications or questions and, if necessary,

further revisions – as required, at least until the project (or its respective Phase/Tranche) has passed

the EBRD Board and the ESAP with any changes and additional corresponding plans has been agreed

with the Client.

5.2 Steering Committee

The Consultant will organise the following Steering Committee meetings:

i) Inception meeting – this meeting will be held at the outset of the assignment to discuss the

overall implementation of the assignment;

ii) Mid-term meeting – this meeting will be held following the completion of the description of the

existing situation (Task 4.1) and draft long-term development plan (Task 4.2);

iii) Final meeting – this meeting will held following the completion of all tasks, and the delivery of

the draft final report.

5.3 Donor visibility

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Given the assignment is funded through the EBRD’s donor funded technical cooperation programme,

the Consultant will be required to support the Client to ensure visibility of these resources. Support on

these visibility aspects can be obtained from the Bank’s Communications Department. Measures

could include but not be limited to:

All documents produced by the Consultant should mention donor support and bear the logo of

the donor, when appropriate.

Donor support to the project should be acknowledged in any public communication (press

releases, launch of facilities).

Local representatives of donors should be invited to any public event organised to promote

the project (press conferences, inaugurations, possibly stakeholder participation programmes).

5.4 Facilities for the Consultant, and access to information

The Company (or the City) will provide furnished and services office accommodation for the

Consultant, plus suitable office space for meetings. The City will also provide access to all relevant

information, maps, studies, models, legal documents etc. at no cost to the Consultants. The City (or

the City) will deliver the materials in the original version (i.e. not necessarily in English).

The Consultant will be responsible for all local and international transport, living accommodation and

expenses for its staff, together with communications materials, printing, report production and

translation

5.5 Timetable

The assignment will have a total duration of 14 weeks.

5.6 Deliverables

All deliverables will be sent to the EBRD. The Client will receive copies of the deliverables.

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Annex 0: Supplementary information on assessment of impacts of climate change

Obtaining data on observed and future climatic conditions

Data on observed trends in climatic conditions is available from www.ipcc-data.org/maps/

(gridded data) and http://climexp.knmi.nl (station data). Broad-scale information on projected

climate change should be drawn from the Intergovernmental Panel on Climate Change Fourth

Assessment Report of Working Group I (IPCC AR4 WGI report), Chapter 11

(http://www.ipcc.ch/publications_and_data/ar4/wg1/en/ ch11.html). Projections of future

climate change (temperature and precipitation) for the City region for the 2050s should be

drawn from a wide range of climate change models, to understand the implications of

uncertainties in climate modelling. BiH’s Second National Communication (SNC) to the

UNFCCC provides information only on a limited number of climate models. However, a

broader set of models is available from http://www.climatewizard.org/. At a minimum, the

mean, minimum and maximum climate model projections from this set should be included, for

the A2, A1B and B1 greenhouse gas emissions scenarios (to capture the effects of emissions

uncertainty). It should be noted that GCMs provide information on changes in climate at a

coarse spatial scale (typically about 250km x 250km) so they may under-represent the changes

that will be experienced at the sites.

1. Assessing the implications of changes in climate as part of the Study

The projected changes in climate will affect a wide range of aspects of relevance to the Study,

including for instance:

Rising temperatures leading to melting of glaciers and consequent impact of river systems and

flows.

Adequacy of and changes in water supply (both surface water and groundwater).

Drinking water quality.

Power supply, energy availability and energy costs.

Asset protection and maintenance.

Water demand and changes in demand, e.g. increased demand due to more extreme heat days.

Further information on climate change impacts for the area is provided in the SNC and this

information can be utilised in the Study. However, as noted above, the SNC is based on a small

number of climate model projections, and so it does not fully capture the uncertainties in climate

modelling which need to be understood as part of the Study. The SNC also does not provide

information on the full set of impacts and mitigation measures that will be relevant to the Study.

Therefore, the risk assessments and development of adaptation measures for the Study will need to

incorporate future climate change projections. The IPCC Task Group on Climate Impact Assessment

(IPCC-TGCIA) has produced guidance9, published by the UNFCCC explaining the use of climate

scenario data in impacts assessments, which will help in undertaking this study. In addition, the

UNFCCC has published a compendium on methods and tools to evaluate impacts of, and vulnerability

and adaptation to, climate change10

.

9 http://unfccc.int/adaptation/nairobi_work_programme/knowledge_resources_and_publications/items/5402.php

10 http://unfccc.int/adaptation/nairobi_workprogramme/knowledge_resources_and_publications/items/5457.php

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Annex 1. Environmental baseline conditions for water and wastewater projects

1. Potable Water Supply and Distribution

The Consultant will collect and evaluate relevant data related to the nature and integrity of water

sources, potable water treatment processes and distribution networks, quality of the distributed supply

as well any information on the nature of demand (industrial and domestic) as compared to the extent

of supply. The Consultant will draw primarily on existing sources of information though reasonable

effort should be made to verify the validity of this. The Consultant should aim to collect sufficient

information on the environmental baseline of the project so as to allow for subsequent monitoring and

evaluation of the Company’s environmental performance and the environmental impact of the project

using the key E&S impact and performance parameters. The following information is required at a

minimum (the majority of this information has to be already analysed as part of the baseline study

task).

(i) Water Sources

The nature of catchment (watershed) area management, in particular, the level of protection

offered to the quality and quantity of source waters (e.g. from uncontrolled/untreated

discharges, run-off from agricultural land, groundwater contamination, over-abstraction, etc.).

Description of water sources (amounts, seasonal variations, and water quality vis a vis current

national and EU standards).

Based on available information on the impacts of the predicted climate change on water

resources in Bosnia and Herzegovina, such as Bosnia and Herzegovina’s National

Communication to the UNFCCC, assess the vulnerability to climate change impacts of the

Company’s water resources and water supply infrastructure in medium-to-long-term, as well

as where relevant, make recommendations for improving the project’s and the Company’s

operations’ resilience to climate change risk;

Main industrial users and polluters in the catchment area.

Current water quality monitoring of source waters: standards, nature and frequency.

Measures required or being considered to enhance the quality and quantity of water sources in

the catchment area.

(ii) Consumer Demand

Estimation of existing and future demand for water supplies by sector (domestic, commercial,

public, industrial, including survey of major water users, particularly industry); conflicting

demands (present and future).

Domestic water consumption (per capita); comparison with consumption levels in Western

Europe.

(iii) Water Treatment and Distribution Network

Type and quantity of chemicals used for drinking water treatment; chemicals handling,

storage, use and final disposal, contingency planning and emergency response;

Quality of service provided: biological, physical and chemical quality of potable water

provided in comparison with national and EU environmental standards;

Effectiveness and adequacy of water treatment technology used and a general assessment of

whether the existing technology meets existing international best practice for water treatment;

Identify and assess the risks of potential environmental liabilities associated with past and

current operations;

Any environmental or worker and public health and safety issues associated with current

operations;

Anticipated environmental and worker and public health and safety benefits which are likely

to arise from project implementation;

Any actions required to meet applicable national and EU standards. Benchmark the current

drinking water against national normative requirements and EU standards for drinking water

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quality. Provide an estimate of the investment costs needed to bring the facilities and

operations in compliance with (i) national and (ii) EU standards;

Any areas for immediate improvement including, for example, efficiency improvements,

emission reductions.

(iv) Hot Water Distribution Network (if applicable)

Assess any environmental or health and safety issues associated with hot water distribution

and identify any potential mitigating measures.

2. Wastewater Collection, Treatment and Discharge

The Consultant will collect and evaluate the available data related to the volumes of wastewater and

storm-water generated in the catchment area, methods of effluent treatment and quality and quantity

of wastewater released (with or without treatment) to the environment. The adequacy of the current

wastewater treatment and sewerage systems and their management with respect to existing and

predicted future demand needs also to be considered. The Consultant should aim to use sufficient

information on the environmental baseline of the Project to allow for subsequent monitoring and

evaluation of the Company’s environmental performance and the environmental impact of the Project.

The following information is required at a minimum, the majority of this information has to be

already analysed as part of the baseline study:

(i) Wastewater Sources

the number of people served by wastewater network, the number of households/persons

served by septic tanks;

other industrial, commercial, official and public generators of wastewater, to the extent

allowed by available information;

wastewater flows and characteristics: total and per capita flows, organic loads or other

important characteristics of wastewater; if applicable, distinguish between industrial and other

wastewater sources; frequency and magnitude of storm-water overflows and water bodies to

which they flow, and infiltration of wastewater flows into the water supply network. A

discussion of the possible implications for groundwater pollution of areas not connected to

wastewater collection (if applicable);

industrial wastewater flows from the main industrial sources in terms of flow volumes and

chemical/physical characteristics with special emphasis on toxic/hazardous pollutants

discharged into the municipal wastewater collection system to the extent allowed by available

information;

an analysis of the adequacy of pre-treatment of industrial wastewaters vis a vis the efficiency

of wastewater treatment: a description of the effectiveness and adequacy of industrial pre-

treatment facilities, the impact of industrial wastewater on municipal wastewater treatment

plant operation;

a description of the monitoring of wastewater and effluent flows and quality: a description of

the standards and practices used, laboratory capacity.

(ii) Wastewater Collection Network

a description of existing wastewater collection system, including sewage pumping stations

and sewerage network;

an estimate of the condition and effectiveness of the system;

a review of any potential environmental and/or health issues associated with the system.

(iii) Wastewater Treatment Processes, Sludge Management and Disposal

a description of current wastewater treatment processes, including sludge management

(treatment and/or disposal) commenting on process efficiency at various stages vis a vis

industry norms and outline possible causes of under-efficiency. If applicable, an analysis of

the impacts of industrial wastewater on municipal wastewater treatment plant operation,

highlighting the adverse effects of any industrial effluents (if data on industrial effluents is

available), which may impact microbial processes;

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benchmark the current wastewater discharges against national normative requirements and

EU standards for urban wastewater discharges. Provide an estimate of the investment costs

needed to bring the facilities and operations in compliance with (i) national and (ii) EU

standards;

a description and analysis of sludge management (temporary storage, handling, collection,

treatment and final disposal): condition, maintenance practices; assess whether their

efficiency and whether they currently meet national requirements; compare with EU

requirements, highlighting adverse effects of any industrial effluents on the sludge quality

which may cause the sludge to be classified as hazardous waste and set specific requirements

for the disposal and treatment of the sludge;

assess ability to utilize sludge in agriculture (refer to relevant national requirements and EU

Directive), to recycle the sludge for other type of utilisation and to produce methane for heat

production;

quality of effluent discharge consistency over a three year period and comparison with current

national and EU standards;

worker and public health and safety issues associated with current operations, safety

equipment and practices (inoculations, health checks, protective wear, toxic/explosive gases);

an analysis and assessment of the impact of effluent and untreated wastewater discharges (if

applicable) and storm water overflows on receiving water body quality with special emphasis

on impacts of industrial hazardous and toxic pollutants, analysing compliance with applicable

effluent standards and applicable regulations;

a description of monitoring of wastewater and effluent quality; a description of standards and

practices, an outline of emergency and contingency plans in relation to process breakdown,

storm water overflow, etc.

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Annex 2: Standard measuring indicators and GET impact indicators

Standard measuring indicators:

Sector Indicator Data point to be collected

Projected after

implementation

completion*

Water Supply

Total population

benefitting from access to

tap water.

Number of persons

connected to improved

access to tap water.

Annual reduction in

tonnes of CO2 equivalent

derived from the lowering

of water losses system-

wide.

Average (for sector) kwh

used to produce 1 m3 of

water

multiplied with,

amount of m3 of water

losses eliminated

multiplied with,

average tons of CO2

generated by energy

generation in the country.

Annual m3 potable water

produced.

Number of persons

connected to improved

access to tap water

multiplied by average

consumption of water in

m3/year.

Wastewater

Total population

benefitting from access to

wastewater services.

Number of persons with

improved access to

wastewater services.

Annual m3 of wastewater

treated.

Total m3/year of

wastewater treated through

improved wastewater

treatment plant and/or total

m3/year of wastewater

supplied to existing

wastewater treatment plant

through improved network.

* measured two years after projected full loan disbursement

GET impact indicators (as applicable):

GET impact

indicator

Unit Data point to be collected

Primary energy

saved

GJ/yr Project energy use compared to baseline11

energy use.

Primary energy includes:

1. Direct use of fossil fuels

2. Direct use of biomass.

3. Use of electricity, multiplied by a loss factor to take

into account country average generation efficiencies and

electricity grid losses12

11 The baseline is defined as the expected conditions without the project two years after full loan disbursement. The baseline

is compared to the conditions projected with implemented project two years after full loan disbursement. 12 For example, with an average electricity generation efficiency of 40% and grid losses of 7%, the primary energy use

(MWh) is 2.7 x the direct electricity use (MWh).

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CO2 emissions

reduced

ton

CO2e/yr

Project CO2 emissions compared to baseline CO2 emissions.

CO2 emissions include:

1. Emissions as a result of direct use of fossil fuels

2. Indirect emissions as a result of the use of

electricity13

3. Emissions of other Greenhouse gases (in particular

methane14

) expressed in CO2 equivalents.

Water saved m3/yr Project water use compared to baseline water use. Water savings must

be determined for the following project activities:

1. Water recycling projects that recover wastewater

streams for reuse or alternative use.

2. Application of technology or management actions

that lead to effluent water quality improvements in regions

with water scarcity15

3. Water loss prevention and water demand

management

Material savings ton/yr Material use compared to baseline material use. Material savings

must be determined for project activities aimed at

waste minimisation:

1. Minimisation of waste streams by integrated

measures (i.e. improvement of existing installations,

processes or procedures/management)

2. Waste recycling projects that reuse waste as inputs

into new products or as a resource

13 The CO2 emissions as a result of the use of electricity are determined by multiplying the use of electricity (MWh) with the

country specific grid emission factor (ton CO2/ MWh) in line with the joint MDB list of grid emission factors.

14 Tons of methane emissions (ton CH4) can be converted to tons of CO2 equivalents (ton CO2e) by applying the a factor of

25 (ton CO2e/ton CH4) 15 Qualifying for ‘water saved’: treated waste water with an effluent quality at or exceeding internationally accepted effluent

water quality standards.

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Annex 1: Standard measuring indicators and SRI impact indicators

Standard measuring indicators:

Sector Indicator Data point to be collected

Projected after

implementation

completion*

Water Supply

Total population benefitting

from access to tap water.

Number of persons connected to

improved access to tap water.

Annual reduction in tonnes of

CO2 equivalent derived from

the lowering of water losses

system-wide.

Average (for sector) kwh used to

produce 1 m3 of water

multiplied with,

amount of m3 of water losses

eliminated

multiplied with,

average tons of CO2 generated

by energy generation in the

country.

Annual m3 potable water

produced.

Number of persons connected to

improved access to tap water

multiplied by average

consumption of water in

m3/year.

Wastewater

Total population benefitting

from access to wastewater

services.

Number of persons with

improved access to wastewater

services.

Annual m3 of wastewater

treated.

Total m3/year of wastewater

treated through improved

wastewater treatment plant

and/or total m3/year of

wastewater supplied to existing

wastewater treatment plant

through improved network.

* measured two years after projected full loan disbursement

SRI impact indicators (as applicable):

SRI impact

indicator

Unit Data point to be collected

Primary energy saved GJ/yr Project energy use compared to baseline16

energy use.

Primary energy includes:

4. Direct use of fossil fuels

16 The baseline is defined as the expected conditions without the project two years after full loan disbursement. The baseline

is compared to the conditions projected with implemented project two years after full loan disbursement.

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5. Direct use of biomass.

6. Use of electricity, multiplied by a loss factor to take into account

country average generation efficiencies and electricity grid losses17

17 For example, with an average electricity generation efficiency of 40% and grid losses of 7%, the primary energy use

(MWh) is 2.7 x the direct electricity use (MWh).

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CO2 emissions

reduced

ton CO2e/yr Project CO2 emissions compared to baseline CO2 emissions.

CO2 emissions include:

4. Emissions as a result of direct use of fossil fuels

5. Indirect emissions as a result of the use of electricity18

6. Emissions of other Greenhouse gases (in particular methane19

)

expressed in CO2 equivalents.

Water saved m3/yr Project water use compared to baseline water use. Water savings must be

determined for the following project activities:

4. Water recycling projects that recover wastewater streams for reuse

or alternative use.

5. Application of technology or management actions that lead to

effluent water quality improvements in regions with water

scarcity20

6. Water loss prevention and water demand management

Material savings ton/yr Material use compared to baseline material use. Material savings must be

determined for project activities aimed at

waste minimisation:

3. Minimisation of waste streams by integrated measures (i.e.

improvement of existing installations, processes or

procedures/management)

4. Waste recycling projects that reuse waste as inputs into new

products or as a resource

18 The CO2 emissions as a result of the use of electricity are determined by multiplying the use of electricity (MWh) with the

country specific grid emission factor (ton CO2/ MWh) in line with the joint MDB list of grid emission factors.

19 Tons of methane emissions (ton CH4) can be converted to tons of CO2 equivalents (ton CO2e) by applying the a factor of

25 (ton CO2e/ton CH4) 20 Qualifying for ‘water saved’: treated waste water with an effluent quality at or exceeding internationally accepted effluent

water quality standards.