Bosnia and Herzegovina Sarajevo Urban Roads
Total Page:16
File Type:pdf, Size:1020Kb
PUBLIC DOCUMENT OF THE EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT Approved by the Board on 12 February 20201 BOSNIA AND HERZEGOVINA SARAJEVO URBAN ROADS [Redacted in line with the EBRD’s Access to Information Policy] [Information considered confidential has been removed from this document in accordance with the EBRD’s Access to Information Policy (AIP). Such removed information is considered confidential because it falls under one of the provisions of Section III, paragraph 2 of the AIP] 1 As per section 1.4.8 of EBRD’s Directive on Access to Information (2019), the Bank shall disclose Board reports for State Sector Projects within 30 calendar days of approval of the relevant Project by the Board of Directors. Confidential information has been removed from the Board report. 1 PUBLIC PUBLIC TABLE OF CONTENTS Page TABLE OF CONTENTS ........................................................................................... 2 ABBREVIATIONS / CURRENCY CONVERSIONS ............................................. 3 PRESIDENT'S RECOMMENDATION ................................................................... 4 BOARD DECISION SHEET ..................................................................................... 5 ADDITIONAL SUMMARY TERMS FACTSHEET .............................................. 7 1. STRATEGIC FIT AND KEY ISSUES ............................................................ 9 1.1 STRATEGIC CONTEXT................................................................................ 9 1.2 TRANSITION IMPACT ............................................................................... 10 1.3 ADDITIONALITY ....................................................................................... 11 2. MEASURING / MONITORING SUCCESS ................................................. 14 3. KEY PARTIES ................................................................................................ 15 3.1 SARAJEVO CANTON ................................................................................. 15 3.2 BOSNIA AND HERZEGOVINA .................................................................... 16 4. MARKET CONTEXT .................................................................................... 16 5. FINANCIAL / ECONOMIC ANALYSIS ..................................................... 17 5.1 FINANCIAL PROJECTIONS ....................................................................... 17 5.2 SENSITIVITY ANALYSIS ........................................................................... 17 5.3 ECONOMIC INTERNAL RATE OF RETURN ................................. 17 5.4 PROJECTED PROFITABILITY FOR THE BANK .......................................... 17 6. OTHER KEY CONSIDERATIONS .............................................................. 17 6.1 ENVIRONMENT ......................................................................................... 17 6.2 INTEGRITY ................................................................................................ 18 ANNEXES TO OPERATION REPORT ................................................................ 19 ANNEX 1 – FINANCIAL ANALYSIS SUMMARY ............................................. 20 ANNEX 2 – PROJECT IMPLEMENTATION ..................................................... 20 ANNEX 3 – ECONOMIC ANALYSIS ................................................................... 20 ANNEX 4 – MAP WITH SITE LOCATION ......................................................... 21 ANNEX 5 – TRANSITION IMPACT SCORING CHART .................................. 22 2 PUBLIC PUBLIC ABBREVIATIONS / CURRENCY CONVERSIONS BAM Bosnian marka BiH the State of Bosnia and Herzegovina CBA Cost-Benefit Analysis CIPS Chartered Institute of Procurement & Supply CO Carbon monoxide CP Condition Precedent DD Due Diligence DSCR Debt Service Coverage Ratio EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation EHSS Environment, Health and Safety and Social EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return ENPV Economic Net Present Value E&S Environmental and Social ESAP Environmental and Social Action Plan ESIA Environmental & Social Impact Assessment ESDD Environmental and Social Due Diligence FBiH Federation of Bosnia and Herzegovina GDP Gross Domestic Product HSE Health, Safety and Environmental IFI International Financial Institution IFRS International Financial Reporting Standards IMF International Monetary Fund KM Local abbreviation for BAM LA Loan Agreement LAF Land Acquisition/Expropriation Framework LAP Land Acquisition/Expropriation Plan LARF Land Acquisition and Resettlement Framework LSA Loan Support Agreement LTIP Long Term Investment Plan NEAP National Environmental Action Plan NOx Nitrogen oxides NPV Net Present Value NTS Non-Technical Summary O&M Operations & Maintenance PA Project Agreement PIP Priority Investment Programme PIU Project Implementation Unit PM Particulate matter PP&E Property, Plant and Equipment PP&R Procurement Policies and Rules PRs EBRD’s Performance Requirements PSA Project Support Agreement RAP Resettlement Action Plan SEP Stakeholder Engagement Plan SSF EBRD Shareholder Special Fund TC Technical Co-operation CURRENCY CONVERSIONS EUR 1.0 = BAM 1.96 (nominal exchange rate) 3 PUBLIC PUBLIC PRESIDENT'S RECOMMENDATION This recommendation and the attached Report concerning an operation in favour of Bosnia and Herzegovina (“BiH” or the “Borrower”) are submitted for consideration by the Board of Directors. The facility will consist of a sovereign loan to BiH in the amount of up to EUR 30 million to be on-lent through a legislated cascade of sub-loans via the Federation of Bosnia and Herzegovina (the “FBiH”) to the Sarajevo Canton (the “Canton”). The operation will enable the Canton to construct a dual tube tunnel including a connecting road to the tunnel and a dual carriageway road at the end of the Sarajevo bypass with a total length of 2.3 km (the “Project”). The Project will be implemented by the Sarajevo Canton Road Directorate (the “Directorate”). The loan will be provided in three tranches: (i) Tranche 1 in the amount of EUR 3 million to be committed upon signing; (ii) Tranche 2 (uncommitted) in the amount of EUR 7 million; and (iii) Tranche 3 (uncommitted) in the amount of EUR 20 million. The Project will help the Canton upgrade and modernise its main road network and improve transport connectivity within the city of Sarajevo and between Sarajevo and other parts of the Canton which are expanding. The Project is in full synergy with two other projects approved by the EBRD in 2019 to improve public transport in Sarajevo through the acquisition of new trolleybuses and reconstruction of tram tracks. The expected transition impact of the Project includes Well-governed and Integrated qualities by assisting the Directorate to obtain procurement certification by internationally recognised institutions and corporate governance improvements to the Directorate through the establishment of a separate legal entity, and improvement of the existing transport infrastructure to promote better connectivity within the Canton. TC support for this operation has been provided by the EBRD Shareholder Special Fund (“SSF”) and the Infrastructure Project Preparation Facility (“IPPF”) for project preparation, resettlement framework and procurement certification by internationally recognised institutions. I am satisfied that the operation is consistent with the Bank’s Strategy for BiH, the Transport Sector Strategy 2020-2024, the Municipal and Environmental Infrastructure Sector Strategy 2019-2024 and with the Agreement Establishing the Bank. I recommend that the Board approve the proposed loan substantially on the terms of the attached Report. Suma Chakrabarti 4 PUBLIC PUBLIC BOARD DECISION SHEET BOSNIA AND HERZEGOVINA – SARAJEVO URBAN ROADS - DTM 49840 Transaction / Board approval2 is sought for a sovereign loan of up to EUR 30 million in favour of Bosnia Board Decision and Herzegovina (“BiH”). The loan will be on-lent through a legislated cascade of sub-loans from BiH via the Federation of Bosnia and Herzegovina (the “FBiH”) to Sarajevo Canton (the “Canton”). The loan will be provided in three tranches: (i) Tranche 1 in the amount of EUR 3 million to be committed upon signing; (ii) Tranche 2 in the amount of EUR 7 million; and (iii) Tranche 3 in the amount of EUR 20 million. Tranche 2 and Tranche 3 are expected to be committed in 2020 and 2021 respectively with the approval delegated to Management. Disbursement of Tranche 2 and Tranche 3 will be subject to achievements of transition benchmarks. The Project benefitted from TC support provided from the Infrastructure Project Preparation Facility (“IPPF”) for technical, economic and environment due diligence and the resettlement framework and from EBRD Shareholder Special Fund (“SSF”) for advanced procurement support and procurement certification by Chartered Institute of Procurement & Supply (“CIPS”). [REDACTED] Client BiH’s credit ratings (Moody’s: B3; S&P: B) were both affirmed while S&P upgraded its outlook to positive3. Existing exposure: Total portfolio in BiH as at 31 December 2019 was EUR 1,239 million out of which EUR 204 million was in the private sector and EUR 1,035 million was in the public sector of which EUR 1,002 million was sovereign. Main Business Concept: The Project involves the construction of a twin pipe tunnel in Kobilja Elements of Glava and connection road to the tunnel (on the 1st Transversal); and a dual carriage way at the Proposal the end of the Sarajevo bypass road (on the 9th Transversal