Report No. PID8399

Project Name -Third Electric (@+) Power Reconstruction Project

Region Europe and Central Asia Region

Sector Distribution & Transmission

Public Disclosure Authorized Project ID BAPE58521

Borrower(s) Bosnia and Herzegovina

Implementing Agency Address EPBIH, EPM AND EPRS Address: See below.

Environment Category B

Date PID Prepared March 20, 2000

Projected Appraisal Date March 28, 2000

Public Disclosure Authorized Projected Board Date May 30, 2000

1. Country and Sector Background (i) Reconstructing the power system. In 1990, BiH produced 12,900 Gigawatt hours (GWh) of electricity from generating plants located on its territory. Electricity consumption was 11,822 GWh. The system comprised 13 hydropower plants with a total capacity of 2,034 megawatts (MW) and an average output of 6,922 GWh/year, and 12 thermal power plants with a total capacity of 1,957 MW and an output of 9,252 GWh in 1990. The thermal power plants were brown coal and lignite fired, with the fuel coming from mines within BiH. BiH was responsible for operating its own system and meeting local demand. However, being part of the former Yugoslav network, the 400 kilovolt (kV) power grid in BiH was controlled by the Yugoslav Electric Power Industry's (JUGEL) dispatching center in Belgrade. Power Public Disclosure Authorized exchanges were also controlled by JUGEL.At the beginning of 1996, more than half of generating capacity had been put out of operation because of direct damages, destroyed transmission lines or lack of coal. Most plants had also suffered from lack of maintenance during the war. About 60% of the transmission network and control system in the Federation was seriously damaged, including transmission facilities and interconnection lines to neighboring countries. The transmission network and control system in RS were also heavily damaged, particularly in those areas located close to confrontation lines. The 400 kV system in BiH was almost completely out of operation (the main exception was the -Podgorica 400 kV transmission line). Many distribution networks were badly damaged in both the Federation and RS as a result of fighting and lack of maintenance. Many transformer stations, buildings, telecommunications and maintenance facilities and equipment were also either seriously damaged or destroyed.Rehabilitation enabled total generation to reach 11,423 GWh in Public Disclosure Authorized 1999 (89% of the 1990 level) and consumption within BiH to reach 9,533 GWh in 1999 (83% of the 1990 level). However, despite these achievements, the remaining needs are still very large and many facilities remain to be reconstructed. Investments are also needed to improve reliability, safety and environmental protection. The Federation and RS governments place high priority on continued reconstruction of the power system as one of the primary means to relaunch economic activity. IDA and other international donors have been supporting this reconstruction, mainly through the Emergency Electric Power Reconstruction Project (Cr. No. 2903) (Power 1) and the Second Electric Power Reconstruction Project (Cr. No. 3071) (Power 2). Further investments are needed to continue the post-war reconstruction program. (ii) Improving cost recovery. All three power enterprises were severely affected during the war by revenue constraints arising from the inability of households as well as commercial and industrial enterprises to pay for their electricity consumption. Revenue collection during the war dropped to as low as 25% of invoiced amounts, leading to severe cash deficits. Since the Dayton peace accord, the revenue situation of the three enterprises, both in terms of tariff levels as well as collection performance, has improved, particularly for EPBiH. In 1999, revenue collection by EPBiH, EPM and EPRS reached 99%, 80% and 75% respectively of the amounts billed. The collected revenue is estimated to have covered 137%, 1309 and 1069 respectively of cash expenses. In 1999, total distribution losses were reduced to 12% of electricity entering the distribution network for EPBiH and 26% for EPM and EPRS. Of these amounts technical losses were 12 percentage points or fewer. The rest consisted of non-technical losses, that is unbilled consumption due to such factors as lack of meters, meter tampering or bypassing. An adverse factor is that operating costs appear to be excessively high because of overstaffing and possible overestimation of depreciation. Cash operating costs of EPM have also been growing rapidly, by over 30% in 1999. The Elektroprivredas need to make further progress to reach full cost recovery, including coverage of appropriate depreciation charges. This will require progress in: (i) increasing billing and collection, (ii) improving cost efficiency, (iii) reducing distribution losses; and, if necessary, (iv) increasing tariff levels. There is also a need for asset revaluation in order to ensure realistic depreciation charges necessary for asset replacement. All three Elektroprivredas have been implementing recommendations for improving billing and collection and reducing distribution losses made by a recently completed electricity tariff study.(iii) Improving tariff structures. In 1999, the average industrial electricity tariff rate of about US$ 0.06/kWh (kilowatt hour) in BiH was close to the average in OECD Europe of US$ 0.07/kWh. By contrast, the household rates of about US$ 0.05/kWh was much lower than the OECD Europe average of US$ 0.13/kWh. The tariff study recommended large rate increases, mainly for households, phased in over the period 1999-2003. It also recommended the establishment of a three-block tariff structure for households, under which the high-priced third block would compensate for the low-priced "lifeline" first block, and a system of vouchers to allow targeted low income consumers to pay for their lifeline consumption of electricity. On October 1, 1999, the RS Government raised tariff rates to about the level recommended by the study, and gave each municipality the authority to designate 6.7% of collected electricity revenue for the reduction of arrears on previous electricity bills of specified consumer groups. The Federation Government is expected to raise tariff rates for EPBiH and EPM in 2000, with the increases being concentrated on household consumers. The strategy of the Federation and RS Governments expected to be set out in their Power Sector Policy Papers is to gradually remove the distortion between household and other tariff rates, introduce lifeline tariff rates, and possibly establish further direct assistance to needy groups. (iv) Improving power co-ordination between EPBiH, EPM and EPRS. Since the war, power exchanges between the different parts of BiH have been restricted because of the

-2 - breakdown of many transmission lines and the existence of three separate vertically-integrated power enterprises. Where before the war there was one dispatch center for BiH, each EP has subsequently been dispatching its own power stations for the benefit of its own consumers. For purposes of frequency control, EPRS is synchronized with the power system of FRY, while EPBiH and EPM are synchronized with the power system of Croatia. However, EPBiH provides some ancillary services free-of-charge to both EPM and EPRS. Both frequency regulation and reserve for the EPM service areas in Central Bosnia are provided by EPBiH by means of the Jablanica hydropower station. Similarly Jablanica provides frequency regulation for the EPRS service areas around Prijedor, Modrica and , as well as power supply when EPRS cannot supply itself. Initially electricity exchanges between the Elektroprivredas were in kind and constrained so that net trade between any pair of Elektroprivredas was always zero or close to it (e.g., exports from one company to a service area with a power deficit of another company were offset by imports of the same amount from a power surplus area of the other company). The development of commercial trade was also hindered by difficulties in making payments because of a poorly functioning banking system. More recently, commercial exchanges have been initiated on a limited scale. Enhancement of power exchanges would: (i) permit surplus power of one company to be used to alleviate shortages of another company (caused by inadequate generation capacity or by outages of large generating units or surges in power demand); (ii) reduce transmission costs by allowing the most direct routes to be used, regardless of whether these routes cross the territories of the other companies; and (iii) reduce generating costs by permitting the lowest cost generating units in the country to be used at each time of day and year. A Joint Power Co-ordinating Center (ZEKC) was established in March 1999 to co-ordinate the operation of the BiH power system in a safe, effective and efficient manner. Further progress towards improved power exchanges would be demonstrated by the establishment of more commercial trade contracts between the three companies, and a readiness by the companies to help each other out in emergencies, and to accept the power dispatch recommendations of ZEKC. These improvements are expected to occur. All three Elektroprivredas have declared their support for BiH to rejoin the European Union for the Co-ordination of Transmission of Electricity (UCTE). (v) Power sector reform. Prior to the war, BiH had a single vertically-integrated socially-owned power company. There are currently three vertically-integrated companies (two in the Federation and one in RS) serving three separate groups of consumers (Bosniacs, Croats and Serbs). The current arrangements lack the economies of scale and co-ordination that existed before the war. They also lack the potential benefits of competition (lower costs and prices and greater supply quality and reliability). Until now, although private investors have expressed some interest, there has not been any private sector investment in the sector. Private involvement, particularly if it comes from abroad, could bring valuable expertise as well as new resources for investment. However, privatization may require significant third party guarantees in order to reduce perceived risks. The challenge for the future is to establish clear policies for reform in the Federation and , incorporate these in electricity legislation which is in tune with developments in the European Union, establish a regulatory framework, and establish a power sector structure which is conducive to both the emergence of beneficial competition and privatization. Both the Federation and RS Governments are now preparing policies for power sector reform

-3 - along these lines with assistance from international consultants. These policies will be consistent with Directive 96/92 of the European Parliament and of the Council of December 19, 1996 concerning common rules for the internal market in electricity. This Directive establishes the conditions for a liberalized electricity market in which power distribution companies and at least the largest final consumers would have the right to choose their electricity suppliers. The Federation and RS policies are expected to provide for restructuring of the sector, including corporatization and commercial operation of power sector companies, access on equal terms to transmission networks, and establishment of an independent system operator. The new policies are also expected to provide for the early establishment of regulatory agencies and for eventual privatization of some of the power companies. The Entity and State Governments are simultaneously preparing Entity and State laws, also with international assistance, that will incorporate the new policies. (vi) Restructuring the coal mine sector in the Federation. Investments have been carried out to enable the Federation coal mines to meet the needs of the thermal power stations of and over the next several years. In the medium term, the forecast needs of the power stations could be met from a small number of low-cost mines. The other mines appear to be financially and economically unviable. A coal sector restructuring study is being carried out under Power 2, which will confirm which mines are economically viable, recommend restructuring for the mines, and propose appropriate measures to protect redundant coal miners and help them find alternative employment.

2. Objectives The project development objective is to continue the post-conflict reconstruction program in the power sector and to ensure access to reliable, lower cost electricity, to be supplied with reduced environmental and safety risks, and improved cost recovery by suppliers. The component outputs contributing to this objective include: (i) increased transmission capacity; (ii) increased distribution capacity; (iii) improved operation of the BiH power system on an integrated basis; (iv) establishment of a legislative and regulatory framework conducive to competition and eventual privatization; (v) improved availability and safety at hydropower plants; (vi) reduced pollution at thermal power plants; and (vii) institution building through corporatization of the power companies and operation on a commercial basis.

3. Rationale for Bank's Involvement - Bank involvement in the proposed project will serve as a catalyst for securing other donor financing.- Because of its broad sector involvement, the Bank is able to take a lead role among donors in encouraging institutional reform and strengthening, general sector restructuring and reform as well as helping establish overall sector reconstruction investment priorities.- The Bank is contributing to improved co-ordination between the Elektroprivredas and the Energy Ministries of the two Entities by designing the project to include co-ordinated investments by all three Elektroprivredas and by strongly encouraging improved power system co-ordination.- Procurement in accordance with World Bank procurement guidelines would help to minimize costs of equipment purchase and installation.

4. Description

-4- The project would focus on restoration of the 400 kV and other high voltage transmission systems, especially reconstruction of damaged substations. This would help BiH to restore the pre-war interconnections with the other parts of former Yugoslavia and eventually to re-join the UCTE. The project would also include a Supervisory Control and Data Acquisition (SCADA) System component to improve power dispatching and facilitate the operation of the high voltage network within BiH on an integrated basis. It would include investments in power distribution to provide electricity to returning refugees and to reconstruct damaged facilities, thereby relieving serious overloading in some areas and enabling reduction in the high levels of technical distribution losses. It would provide investments at selected hydropower stations to improve safety and plant availability. Investments at thermal power stations would be limited to reducing pollution. Technical assistance would be provided for (i) procurement and implementation of the physical components; (ii) ZEKC; (iii) a survey of socially vulnerable electricity consumers; (iv) corporatization and commercialization of the power sector enterprises; and (v) establishment of regulatory agencies. Training would be included for (i), (ii), (iv) and (v).As the investment needs for full rehabilitation of the power system are still very significant, a feasibility study was carried out by AGRA Monenco-Teshmont to evaluate priority components and the sequence of reconstruction implementation covering the high voltage transmission components of the BiH power transmission system, the distribution systems of the respective Elektroprivredas, and the safety- and availability-related rehabilitation requirements of the Trebinje, Rama and Jablanica hydropower plants. Priorities were established for reconstruction and rehabilitation of the respective transmission facilities in each of the areas in accordance with specific criteria. The distribution components included in the proposed scope of the Power 3 project represent only a part of the total rehabilitation requirements of the distribution facilities. Similarly, significant rehabilitation of the 110 kV system is required for further strengthening and improvement of the power system of BiH. Costs were estimated for reconstruction and rehabilitation of each component, and contract packages established in a manner that would permit co-financier contributions to be obtained on a packaged or individual component basis. The economic viability of the proposed transmission, distribution and hydro plant components was established. The Final Report was submitted by the Consultants in January 2000.The components proposed by the AGRA Monenco-Teshmont feasibility study have a total cost, including physical and price contingencies, of about US$ 153,000,000 (Variant 1A). Other principal components of the project, which were not included in the scope of the AGRA Monenco-Teshmont feasibility study, include a SCADA and associated telecommunication system, investments at thermal power plants aimed at reducing pollution and technical assistance. A SCADA system, comprising three regional control centres and an overall central dispatch centre, together with an associated telecommunication system will be included under the Power 3 project to permit modern integrated operation of the BiH system. The scope of the system is being defined through a separate feasibility study being funded by USTDA, and the interim report is expected by the end of March 2000. The cost of the system has been provisionally estimated at US$ 36 million. The SCADA and telecommunication facilities required at the substations to be rehabilitated under the Power 3 project have been included in the scope defined by the AGRA Monenco-Teshmont study.Based on discussions with the

- 5 - Elektroprivredas, a review of their proposals for investments in pollution control measures, and site visits to examine the present environmental conditions which the proposed measures would mitigate, a pollution control investment program has been prepared for each of four thermal power stations. In general, the proposed investments follow the Environmental Management Plans (EMPs) prepared under the previous two power projects in Bosnia (Power 1 and Power 2). The specific components proposed to be financed under the IDA Credit are:EPBiHTransmission Lines (IDA Financing US$ 10.51)Reconstruction of war damage, including right-of-way clearing, replacement of damaged parts of existing towers, construction of new towers to replace destroyed ones, dismantling of damaged insulators, hardware and conductors and ground wires, and stringing, along the following lines:1) TL 400 kV 10 - 4 (US$ 4.08 million).2) TL 400 kV Sarajevo 10 - Sarajevo 20 (US$ 0.81 million).3) TL 400 kV Mostar 4 - (US$ 1.11 million).4) TL 400 kV Visegrad - Tuzla (US$ 1.39 million).5) TL 400 kV - Ernestinovo (US$ 1.20 million).6) TL 220 kV - Mraclin (US$ 0.40 million).7) TL 220 kV Tuzla - Gradacac - Djakovo (US$ 0.14 million).8) TL 110 kV Mostar - (US$ 1.38 million).EPMTransmission Lines (IDA Financing US$ 3.78 million)Reconstruction of war damage, including right-of-way clearing, replacement of damaged parts of existing towers, construction of new towers to replace destroyed ones, dismantling of damaged insulators, hardware and conductors and ground wires, and stringing, along the following lines:1) TL 400 kV Sarajevo 10 - Mostar 4 (US$ 0.71 million). 2) TL 400 kV Mostar 4 - Gacko (US$ 1.10 million). 3) TL 400 kV Ugljevik - Ernestinovo (US$ 0.84 million). 4) TL 220 kV Jajce - Mraclin (US$ 0. 07 million).5) TL 220 kV Kakanj - Prijedor (US$ 1.06 million).Substations (IDA Financing US$ 3.93 million)1) TS 220/110/35 kV Jajce 2 (US$ 2.05 million): Rehabilitation of primary electrical equipment including replacement of 220 kV and 110 kV circuit breakers, 220 kV and 110 kV busbar disconnectors, 220 kV and 110 kV line disconnectors, 110 kV instrument transformers, arresters, line traps and secondary equipment comprising protective relays, control, metering, fault recording equipment (including breaker fail protection) and communication equipment.2) TS 220 kV Mostar 3 (US$ 1.88 million): Rehabilitation of primary electrical equipment including replacement of 220 kV circuit breakers, 220 kV busbar disconnectors, 220 kV line disconnectors, line traps and secondary equipment comprising protective relays, control, metering, fault recording equipment (including breaker fail protection) and communication equipment.Technical Assistance Component (IDA Financing US$ 1.00 million)1) Technical assistance to the PIU of EPM for procurement and monitoring of implementation (US$ 1 million).EPRSTransmission Lines (IDA Financing US$ 9.78 million)Reconstruction of war damage, including right-of-way clearing, replacement of damaged parts of existing towers, construction of new towers to replace destroyed ones, dismantling of damaged insulators, hardware and conductors and ground wires, and stringing, along the following lines:1) TL 400 kV Visegrad - Tuzla (US$ 2.09 million). 2) TL 400 kV Mostar 4 - Gacko (US$ 1.36 million). 3) TL 400 kV Sarajevo 10 - Sarajevo 20 (US$ 0.79 million). 4) TL 400 kV Ugljevik - Ernestinovo (US$ 1.73 million). 5) TL 220 kV Jajce - Prijedor (US$ 0.55 million). 6) TL 220 kV Prijedor - Sisak (US$ 0.63 million). 7) TL 220 kV Tuzla - Gradacac - Djakovo (US$ 0.97 million). 8) TL 110 kV Mostar - Nevesinje (US$ 1.55 million).9) TL 220 kV Dubrovnik- Trebinje (US$ 0.11 million).Technical Assistance Component (IDA Financing US$ 1.00 million)1) Technical assistance to the PIU of EPRS for procurement and

- 6 - monitoring of implementation (US$ 1 million).

5. Financing Total ( US$m) Government 0 IBRD IDA 30 OTHER 166.2 BENEFICIARIES 28 Total Project Cost 224.2

6. Implementation Financing PlanOf a total project cost of US$ 224.2 million, it is proposed that IDA would provide a Credit in the amount of US$ 30 million. An additional US$ 28.0 million would be provided by the three Elektroprivredas out of their own internally-generated funds. The remaining financing required (US$ 166.2 million) would be provided by cofinanciers through parallel financing arrangements, with each donor responsible for separate components. As a result, possible delays in implementation of one donor's component would generally cause little or no delay in implementation of other donors' components. The loan amounts and terms of the cofinanciers would be confirmed during the appraisal mission. A reasonably firm project financing plan would need to be confirmed prior to negotiations of the IDA Credit.Lending ArrangementsThe IDA Credit would be lent to Bosnia and Herzegovina for 35 years with a 10 year grace period and at the standard IDA service charge. The funds would be onlent through the Federation Government to EPBiH and EPM and through the Government of Republika Srpska to EPRS.ImplementationThe proposed project would be expected to be completed within the three-year period October 1, 2000 - September 30, 2003. Management of all aspects of project implementation, except those to be carried out by the Federation and RS Governments (i.e., sector reform), would be carried out by EPBiH, EPM and EPRS, who would be responsible for execution of their respective parts. The PIUs responsible for implementation of Power 2 would continue for the proposed project. The Financial Management Review and Procurement Capacity Assessment have identified the need for strengthening each of the Elektroprivreda's PIUs with qualified financial and procurement staff. In addition, international consultants would work together with the PIUs of EPM and EPRS as needed, during project implementation. The foreign consultants would be employed to assist with procurement and would provide in-house training to the Elektroprivredas' procurement staff. An international consultant would also be hired to carry out all the procurement activities for the rehabilitation and/or reconstruction of the inter-Elektroprivreda transmission lines included in the project. ProcurementA detailed procurement plan, along with project procurement elements, their estimated costs, bidding methods, packaging and estimated schedules would be developed during the appraisal mission. Supervision and Monitoring The assessments carried out by the Bank show that the Elektroprivredas are capable of implementing the proposed project with the support of foreign consultants, as appropriate. As this is a complex project with a major reform component, three responsible implementing agencies and several cofinanciers, a significant supervision effort would be required. Quarterly progress reports would be provided by the implementing agencies. The Bank would carry out a mid-term review of the project no later than June 30, 2002. In addition to the topics covered

-7 - under the PMRs, the mid-term review would include an in-depth review of the economic viability of the project components, based on actual costs and benefits achieved to-date, and of the overall institutional and financial performance of the Elektroprivredas. Based on the outcome of the mid-term review, measures would be taken to ensure the efficient completion of the project. An Implementation Completion Report (ICR) would be prepared by the Association with inputs from the Elektroprivredas not later than six months after completion of the project. The ICR would evaluate how well the objectives of the project have been met, the overall performance of the project, the performance of the Elektroprivredas and lessons learned.

7. Sustainability Factors critical for sustainability include: (i) continued political stability; (ii) continued macroeconomic progress in both Entities, which is needed to restore consumers' ability to pay for electricity; (iii) satisfactory financial performance of the three Elektroprivredas; (iv) satisfactory co-ordination between the enterprises to operate the BiH power system as a whole; and (v) steady progress towards establishing a strong regulatory framework, a competitive power market, and an environment that encourages private investment in the power sector. A further contributor to sustainability would be restoration of 400 kV transmission facilities in neighboring countries (especially reconstruction of the Ernestinovo substation and associated transmission lines). At this time, the prospect for sustainability of Power 3 is likely.

8. Lessons learned from past operations in the country/sector The project would build on the successful performance of Power 1 and Power 2. One point already realized and taken into account is that, since the expected international financing would cover only part of the large remaining reconstruction needs, it is essential to obtain the agreement of all the project implementing agencies on the investments to be included under the project and the allocation of the project between the three Elektroprivredas. An important contribution of the main feasibility study was to lay the basis for this agreement, which was tentatively reached during the preappraisal mission and is subject to the necessary financing being found. A second lesson is the importance of ensuring the timely availability of cofinancing. A donors' meeting was held following the preappraisal mission in December 1999. Preliminary commitments by donors are expected to be made by March 2000. If these are insufficient to cover the foreign financing needs the project scope will be adjusted down to reflect the likely financing before negotiations. A third lesson is the importance of securing financing early for technical assistance in order to avoid delays in project components that depend on prior completion of that technical assistance. A fourth lesson is the importance of having strong, well-staffed PIUs. The PIUs being used for Power 2 would be expected to continue under Power 3 and technical assistance would be provided where necessary. Special emphasis is being given to establishing sound project procurement and financial management systems within the PIUs. A fifth lesson is that progress towards power sector co-ordination and reform requires patience and an active role by the Bank because of the need to gain the agreement of the implementing agencies and the Entity Governments under the existing political climate. The project would benefit from activities under previous projects in an additional way. The

- 8 - environmental components included under the project were based partly on the Environmental Management Plans prepared under Power 1 and Power 2. A lesson learned from experience in other countries in the Europe and Central Asia region is the desirability of minimizing barter trade arrangements. The project would contribute to this goal by emphasizing measures to strengthen the financial viability of the Elektroprivredas and encouraging actions towards corporatization and operation on a commercial basis. Agreement would also be sought on specific actions such as increasing the proportion of bills to be paid in cash for coal purchases by EPBiH.

9. Program of Targeted Intervention (PTI) N

10. Environment Aspects (including any public consultation) Issues : Transmission linesThe major issue associated with the restoration of the transmission system is to assure that the system being restored is safe with respect to exposure of local residents to electromagnetic radiation by establishing that the levels are within acceptable limits (BiH, EU standards, etc.) during operation. Other issues are associated with movement of men, materials, and equipment during construction (noise, dust) and noise and communication interferences during operation.Transmission substationsThe major issue is the possible presence of polychlorinated biphenyls (PCBs) in the transformers or other equipment in the substations (e.g. condensers) and, if found, the manner in which the PCBs will be disposed of. Minor issues include establishing that exposure of local residents to electromagnetic radiation and noise from restored substations is within acceptable limits (BiH, EU standards, etc.). Additionally, if any of the existing transformers have experienced leaks, the possibility of existing soil and/or groundwater contamination will be investigated.DistributionA minor issue is associated with disruption to transport, communications, etc. during the construction phase.Thermal Power StationsSince the objective is to reduce pollution, there should be no major negative environmental issues.Hydropower StationsSince the objective is to rehabilitate existing plants in order to improve safety and availability, there should be no negative environmental issues.

11. Contact Point:

Task Manager Mr. Iftikhar Khalil The World Bank 1818 H Street, NW Washington D.C. 20433

12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop

Note: This is information on an evolving project. Certain components may

-9- not be necessarily included in the final project.

There are three implementing agencies for the project, EPBiH, EPM and EPRS. EPBiH's address is given on the first page. The addresses of the other agencies are as follows:

Other Agency(ies):Elektroprivreda Bosnia and Herzegovina Address: Vilsonovo Setaliste 20, 71000 Sarajevo, Bosnia and Herzegovina Contact Person: Mr. Meho Obradovic, General Manager Tel: 387 71 47 24 81 Fax: 387 71 44 59 11

Elektroprivreda Mostar (EPM) Address: Dr. Mile Budaka 106A, Mostar, Bosnia and Herzegovina

Contact Person: Mr. Matan Zaric, General Manager Tel: 387 88 32 32 16 Fax: 387 88 31 08 47

Elektroprivreda Republika Srpska (EPRS) Address: Trebinje, Republika Srpska, Bosnia and Herzegovina Contact Person: Mr. Slobodan Mrdic, General Manager Tel: 381 89 24 969 Fax: 381 89 24 970

Processed by the InfoShop week ending March 24, 2000.

- 10 - Annex

Because this is a Category B project, it may be required that the borrower prepare a separate EA report. If a separate EA report is required, once it is prepared and submitted to the Bank, in accordance with OP 4.01, Environmental Assessment, it will be filed as an annex to the Public Information Document (PID) .

If no separate EA report is required, the PID will not contain an EA annex; the findings and recommendations of the EA will be reflected in the body of the PID.