Republic of North MACEDONIA SOLID WASTE MANAGEMENT in 4

SOLID WASTE MANAGEMENT IN 4 REGIONS OF NORTH MACEDONIA

BASELINE AND FINANCING OPTIONS STUDY

TERMS OF REFERENCE

I. BACKGROUND

A. Highlights on the regions

Republic of North Macedonia is a landlocked country in the middle of the southern Balkan Peninsula with an area of 25,713 km2. It is a small, open economy well integrated into international trade, with a gross domestic product of US$11.33 billion as of 2017. The country has approx. 2.1 million inhabitants and a population density of 80.7 inhabitants per km2. The territorial distribution of the country’s population is uneven. Some 57 per cent of the population live in urban areas, mainly in the five largest cities: in the capital Skopje (population of 327.6 thousand), Kumanovo (109.3 thousand), Bitola (91.8 thousand), Tetovo (92.0 thousand) and Prilep (75.0 thousand). The legal framework on waste management in the country is centred around the 2004 Law on Waste Management which was enhanced with the adoption of the following legislation: 2009 Law on Management on Packaging and Packaging Waste, 2010 Law on Management of Batteries and Accumulators and Waste Batteries and Accumulators, and 2012 Law on Management of Electric and Electronic Equipment and Waste Electric and Electronic Equipment.

While the 2008 Strategy for Waste Management for the period 2008–2020 is valid, the National Waste Management Plan for the period 2009–2015 has expired and a new national waste management plan for the period 2018–2024 is currently being prepared.

Solid waste services form part of the responsibilities delegated to the municipalities as part of the decentralization in the country. Municipalities are responsible for organizing the collection, transportation and disposal of municipal solid waste; supervising transportation and disposal of industrial non–hazardous waste, deciding on the location of waste management facilities, issuing local regulations on waste management, financing and supervising dumpsite and non-compliant landfill closures and termination of waste management facilities.

Municipal Solid Waste Management (“MSWM”) is organised in planning regions as defined in the Law on Balanced Regional Development. Accordingly, there are 8 MSWM planning regions: Vardar, Eastern, Southwestern, Pelagonia, Polog, Northeastern, Skopje as well as Southeastern

1 region. The subject of this Terms of Reference (“ToR”) is Southeastern region, Southwestern region, Pelagonia and Vardar regions.

Figure 1: Statistical regions in North Macedonia

Source: http://www.stat.gov.mk/Publikacii/RegionalenGodisnik2018.pdf A new Waste Management Law is under consultation with relevant stakeholders; it sets out a new tariff setting methodology which involves the Regulatory Commission in setting regionally harmonised tariff that will enable for a full cost recovery.

Southeast Region The Southeast Region (“SE region”) stretches across the south easternmost part of the country and covers the area of Strumica-Radovish and Gevgelija-Valandovo Valley. According to data of 2013, 173,472 inhabitants or 8.4% of the total population of Macedonia live in the region. The

2 region covers 10.63% of the total area of the country, with a population density of 62.5 inhabitants per km2. It is the fifth region in the country as per population density.

SE region comprises of the following 10 municipalities: Municipality of Bogdanci, Municipality of Bosilovo, Municipality of Valandovo, Municipality of Vasilevo, Municipality of Gevgelija, Municipality of Dojran, Municipality of Konche, Municipality of Novo Selo, Municipality of Radovish and Municipality of Strumica.

At present the solid waste management system in the region is very poorly developed. As indicated earlier, MSWM is under the jurisdiction of municipalities via municipal public enterprises. In terms of regionalisation, very limited regional coordination has been developed to date and each of the public enterprises operates under their own regulations. This creates a dysfunctional system having negative consequences for the entire planning region. In addition, the current waste collection, transport and disposal system does not cover the whole region, i.e. most of the villages are not covered from this system resulting in the existence and continuous creation of new illegal landfills.

The largest quantities of waste generated in the region are from mining, packaging waste, absorbents, cleaning towels, filtration materials and protective clothing, thermal processes waste, construction and demolition waste, waste from agriculture, forestry, processing industry and municipal waste. Illegal dumpsites are often a result of the fact that most rural settlements do not have access to municipal solid waste collection and disposal services.

Southwest, Pelagonia and Vardar Regions1 The Southwest (“SW”), Pelagonia and Vardar regions are inhabited by 220,000, 231,000 and 153,000 people, respectively (based on 2015 census data from the State Statistical Office of the Republic of North Macedonia). The population density for the three regions is 65.8 inh/km2 (SW), 49 inh/km2 (Pelagonia), and 37.9 inh/km2 (Vardar).

The SW region comprises the southwest part of the Republic of North Macedonia. According to the 2017 population estimates, 10.6% of the total population in the country lived in this region. It takes up 13.4% of the total area of the country and has a population density of 65.8 citizens per km2. The configuration of the terrain, encompassing the river basins of Treska and Crn Drim and the Ohrid Lake basin. Tourism has great importance for the development of this region, mostly owing to the natural characteristics of Ohrid Lake and the cultural and historical significance of the Ohrid area, protected by UNESCO. The SW region is comprised of the following nine municipalities: Centar Župa, Debar, Debarca, Kičevo, Makedonski Brod, Ohrid, Plasnica, Struga and Vevčani.

The Pelagonia Region is located in the south of the Republic of North Macedonia and comprises the Pelagonia basin and the Prespa Lake basin. This region is the largest, covering 18.9% of the total land area of the country, but also one of the most sparsely populated, having a population density of 48.8 people per km2. In 2017, 11.1% of the total population of the Republic of North

1 Information from the Statistical Yearbook: http://www.stat.gov.mk/Publikacii/RegionalenGodisnik2018.pdf

3 Macedonia lived in this region. The Prespa Lake, the Pelister National Park and the winter tourist resort Krusevo represent the basis for development of summer, winter and cultural tourism in the region. Pelagonia statistical region is divided into 9 municipalities: Bitola, Demir Hisar, Dolneni, Krivogaštani, Kruševo, Mogila, Novaci, Prilep and Resen.

The Vardar Region comprises the central part of the Republic of North Macedonia and spreads along the Vardar River and Ovchepole Basin. This region had the smallest number of citizens, 7.3% of the total population, in 2017. It covers 16.2% of the area of the Republic of North Macedonia and at the same time is the most sparsely populated region with only 37.9 citizens per km2. Vardar statistical region is divided into 9 municipalities: Čaška, Demir Kapija, Gradsko, Kavadarci, Lozovo, Negotino, Rosoman, Sveti Nikole and Veles.

For all three regions, extensive feasibility studies and cost benefit analyses were developed in 2017, funded by the European Union’s instrument for pre-accession assistance (IPA). The title of the studies is “Preparation of necessary documents for establishing of an Integrated and financially Self-sustainable Waste Management System in Pelagonija, Southwest, Vardar and Skopje Regions”2. The feasibility studies were carried out separately for each region and include the following:  Background information and review of the existing waste management system;  A project description with proposed technical components;  Socio-economic context of the project;  Waste generation, composition (morphological data) and a future forecast;  Legal and regulatory framework;  An option analysis including the location of central and local waste management facilities and a description of selected sites;  A proposed investment project including a conceptual design of storage facilities, transfer stations, existing dumpsites and non-compliant landfills (incl. closure and remediation activities), new regional sanitary landfills and a technical description of other proposed facilities (mechanical-biological treatment (“MBT”), material recovery facility (“MRF”), green waste composting plant);  CAPEX and OPEX estimates for the above;  An environmental and social assessment;  A financial and economic analysis and risk assessment; and  Information on procurement and implementation.

2 EuropeAid/136347/IH/SER/MAK

4 B. Current project concept per region

As a consequence of the current solid waste situation in the abovementioned four regions and the need for investment, the Ministry of Finance and the Ministry of Environment and Physical Planning (“MoEPP”) have approached the European Bank for Reconstruction and Development (the “Bank” or the “EBRD”) with a request to provide assistance in developing the most appropriate financing structure for the respective waste management systems.

At this stage, it is envisioned that: - For the SE region, the project is expected to take form of one regional sanitary landfill (“RSL”), two transfer stations, an upgrade of the waste collection infrastructure (collection vehicles, bins, containers) and possibly the closure of dumpsites as a first step. It is further envisaged to be developed and operated by an existing or new state / regional controlled entity in conjunction with the private sector. In a later phase the waste management system might be extended with a mechanical-biological treatment plant and an additional source-separation of recyclables and the necessary accompanying infrastructure. - For the SW, Pelagonia and Vardar regions, the feasibility studies assessed transfer stations (number and locations) and one Central Waste Management Facility (“CWMFs”) for each region, where the RSL, MRF, and the MBT plus composting plant shall be located. The following Table shows the results of the feasibility studies for the three regions.

Collection (2 bin Transfer Region system: residual waste Recycling Treatment Disposal stations and dry recyclables)  Separate collection  Recyclables: will be  Residual waste going  RSL with of recyclables and diverted into a MRF into a MBT: residues wood packaging at for recovery of glass, mechanical part from MRF / “green points” paper, plastic, metals (recyclables, RDF) – MBT (recycling banks)  Green waste will be biological part: Southwest 4  Separate collection diverted to windrow anaerobic digestion of green waste composting facility to and composting of  Residual waste produce compost digestate collection  Separate collection of WEEE and CDW  Separate collection  Recyclables: will be  Residual waste going  RSL with of recyclables and diverted into a MRF into a MBT: residues wood packaging at for recovery of glass, mechanical part from MRF / “green points” paper, plastic, metals (recyclables, RDF) – MBT (recycling banks) biological part: Pelagonia 2  Green waste will be  Separate collection diverted to windrow anaerobic digestion of green waste composting facility to and composting of  Residual waste produce compost digestate collection  Separate collection

5 of WEEE and CDW  Separate collection  Recyclables: will be  Residual waste going  RSL with of recyclables and diverted into a MRF into a MBT: residues wood packaging at for recovery of glass, mechanical part from MRF / “green points” paper, plastic, metals (recyclables) – MBT (recycling banks)  Green waste will be biological part: Vardar 3  Separate collection diverted to windrow biological of green waste composting facility to stabilisation (aerobic  Residual waste produce compost composting). Remark: collection no RDF production  Separate collection of WEEE and CDW

Different collection scenarios and treatment options were discussed in the mentioned feasibility studies, but for each of the three regions a two bin collection system (residual waste plus dry recyclables) and MBT as treatment technology were proposed. In two regions the MBT was proposed being with RDF production and anaerobic digestion (for the biological part) and in one region the biological part should be bio stabilisation (no RDF production foreseen).

II. OBJECTIVES The Bank wishes to select a suitably qualified consultant (the “Consultant”) to conduct tasks as presented in detail in Section 3 of this ToR.

The objectives of this assignment are twofold:  Perform a study for the SE region and  Perform a single study for SW, Pelagonia and Vardar regions.

The regions were grouped as above due to different levels of technical advancement of the solid waste projects. Namely, for the three regions (SW, Pelagonia and Vardar) comprehensive feasibility studies were prepared in 2017 financed by the EU via IPA. Therefore, the scope of technical works is expected to be considerably less than for the SE region

For the SE region the main technical documents available are a pre-feasibility study prepared in 2008 and the regional waste management plan from 2017.

A. Phasing of the assignment This assignment covers Phase 1 of the wider project, and serves as decision support for the Government in order to determine the technical solutions and financial options for the four planning regions under consideration: (i) SE region and (ii) SW, Pelagonia and Vardar regions. After the Government decides on the next steps for the respective regions, detailed technical due diligence is expected to be carried out in Phase 2, subject to separate ToRs. It is envisaged that the Consultant will be involved also in Phase 2, subject to the subsequent agreement between the Consultant and the Bank.

6 B. Objectives of the Assignment per region Southeast Region The works in the SE region will include a Baseline Assessment of the waste management system, to identify and scope the project to establish a robust and efficient solid waste management system and to assess the Financing Options for the region. The Assignment will be based on the existing data in the form of: the pre-feasibility study for the SE region (2008)3, the Regional Waste Management Plan for the South East Region (2017, in Macedonian) and the Program for Development of the SE planning region (2015-2019), which will be complemented by any additional studies and updated for more recent data as necessary.

The specific objectives of the assignment4 for this region are to:

 Prepare a Baseline Assessment  Analyse and describe the current waste management system, legal framework and waste flows in the region and review the legal / regulatory context of the Project, including tariff setting methodology.  Perform a financing options study for the region based on the results of the analysis above.

Southwest, Pelagonia and Vardar Regions

 Based on the three comprehensive feasibility studies from 2017, the Consultant shall: o advise on the validity and reasonability of data (baseline data and forecast); o assess and confirm the used methodology for scenario analysis and the proposed scenarios; o assess the reasonability for the proposed results (i.e. the selected scenarios in terms of selected collection systems, locations and technologies and in terms of CAPEX / OPEX estimates); o if applicable, revise the proposed technological options; and o explore potential synergies in terms of waste management infrastructure between the three regions. As the feasibility studies were carried out separately for each region, the consultant shall assess options to combine regions and the proposed waste management solutions; o propose (based on the above analysis and if applicable) a new scoping of the waste management project for the three regions considering the potential

3 Pre-feasibility Assessment of Options for Establishment of an Integrated Solid Waste Management System in the South-East Region, Macedonia - Final Report. Prepared by PointPro Consulting for the Regional Environmental Centre (REC) - Country Office Macedonia (2008). 4 All terms and definitions used here are based on the Directive 2008/98/EC on waste (Waste Framework Directive) and other relevant waste-related legislative acts from the EU.

7 synergies between the three regions and also prepare CAPEX/OPEX estimates for the new proposed solution.  In addition, the consultant shall assess the needs of the Southwest, Pelagonia and Vardar regions according to regional waste management plans (cross-check with EU targets/strategies and national waste strategy) and the feasibility of the proposed components.  The consultant shall perform a financing options study for the three regions based on the results of the analysis above.

Common objectives for all regions

 Assess the current market structure and key financial and funding arrangements for the sector. Describe the current governance and regulatory arrangements of the market structure – decision making over tariffs / funding and other strategic decisions. Provide high level assessment of the efficiency of the existing market structure based on comparisons of costs, waste generation and recycling and other KPIs against relevant comparators and best practices.  Identify potential (e.g. industrial) users of source-separated materials/recyclables or other products (e.g. refuse derived fuel – RDF) and barriers and requirements for the development of a market for such products.  Identify and describe the project or projects that will be subject to a detailed feasibility study.  Update the already existing information and revise, where necessary, the underlying background and calculations of the technical components.

III. SCOPE OF WORK

A. Southeast Region Task 1: Baseline Assessment and Forecast The Consultant shall prepare a Baseline Assessment based on the existing information, i.e. the pre-feasibility study for the SE region (2008), the Regional Waste Management Plan for the South East Region (2017) and the national waste strategy, and update the existing data as necessary and feasible. In addition, the Consultant shall conduct a high-level forecast of future demographics and waste generation / composition in the SE region. a) Current Demographics and Waste Generation The Consultant will, inter alia:  Analyse the available demographic information (including updating it, as necessary) and describe (may include maps) and quantify the demographics of the SE region including: o Towns, villages and rural profile; o Population, households and their characteristics (urban, rural);

8 o Key commercial activities (agriculture, commercial, industrial, etc.) and other waste generators (schools, offices, institutions etc.); o Population, households and other waste generators covered and not covered by the solid waste management services in the SE region; o Current solid waste collection service coverage rates.  Review and update the current solid waste generation and composition in the SE region including: o Review current quantities of MSW generated (MSW that is formally collected plus other disposal practices) for each category of waste generators, i.e. households (urban vs. rural) and other generators (e.g. commercial entities, institutions, schools, small businesses etc.); o The quantities of MSW generated should be presented as total (tonnes per year) and relative quantities (kg per capita per year). The quantities of MSW generated (tonnes per year) by large commercial waste generators should be displayed separately; o Identify and quantify other types of waste generated, such as C&D waste, hazardous waste, medical waste etc. Quantities of any potential biodegradable waste streams such as agricultural waste, market waste, waste from food processing industry and slaughterhouse waste, kitchen and restaurant waste etc. should also be assessed; o Provide reasonable waste composition data of MSW for each category of waste generators (households and other generators). The composition data should also display recyclables, organic waste and combustible fractions where possible and should consider differences in urban and rural areas. b) Current Solid Waste Management Practices The Consultant shall analyse the available information and update it, as necessary, to describe current waste management practices and market structure in the SE region. The Consultant shall describe, inter alia:  Waste collection: Assess current quantities of waste collected5 by formal waste management systems (MSW and specific other wastes including C&D waste, medical and any other hazardous waste and other potential biodegradable waste streams such as agricultural waste, market waste, waste from food processing industry and slaughterhouse waste, kitchen and restaurant waste). Describe the collection systems and equipment in place for different waste generators and waste types. The Consultant will also assess specific generators, and the impact on the waste quantities and potential exports of waste streams to other regions / countries.

5 Waste generated = Waste collected by formal operators + other disposal practices (illegal dumping, backyard burning, home composting, animal feeding, informal waste picking etc.). Generated waste shall be assessed in Chapter 3.1.1, waste collected and other disposal practices in Chapter 3.1.2.

9  Other disposal practices: The Consultant will assess other waste disposal practices for all waste streams (illegal disposal (dumping), backyard burning, home composting, animal feeding, informal sector waste picking at the level of waste generators etc.) predominant in the SE region.  Source separation and recycling: Describe existing (and/or past) experience with waste separation at the source (at the level of households and businesses/institutions/industries). In case source separation of recyclables (or source separation of other waste streams) exists, the Consultant shall assess the quantities and describe the collections systems and infrastructure in place.  Waste transfer: Describe any transfer stations or facilities that exist in the SE region including their capacities and facilities.  Waste separation, sorting and treatment: Review and describe existing waste separation, sorting and treatment facilities including location, technologies, capacities, inputs and outputs and their condition.  Recycling, reuse, waste to energy: Review existing or potential markets (including requirements and barriers) for source-separated recyclables or sorted recyclables including existing and potential local, regional and/or national off-takers of recyclables or other products, i.e. paper & cardboard, glass, ferrous and non-ferrous metals, plastics, RDF, organic waste and products from organic waste (e.g. compost) etc. and market prices for recyclables or costs for disposal if specific waste streams have to be sent into specialised facilities.  Landfill: Describe existing landfills and/or other disposal facilities in the SE region including their general designs and remaining capacities. The Consultant shall also describe existing dumpsites (size, location, disposed of volume / tonnage, types of waste disposed of, disposal period, technical characteristics (e.g. is there a baselining system in place, leachate / landfill gas collection etc.).  Legal and regulatory context of the Project: Review the current legal and regulatory environment for solid waste management in Macedonia, including tariff setting methodology, PPP Law, central and local government policies and responsibilities, and cross subsidies as they relate to the PPP and sovereign financing options.  Market structure: - Identify key companies and organisations operating within the sector, their costs and revenue flows, sources of funding and regulatory arrangements for tariff setting (if applicable) subsidy payments and investment. Provide high level assessment of sector organisation and performance across financial and operational KPIs against comparable benchmarks. Highlight any examples of poor practice or opportunities for improvement. c) Forecast of Future Waste Quantities and Composition The Consultant shall verify the future trend of demographics, waste generation and composition for all waste streams in the SE region. To this end the Consultant shall prepare likely future scenarios of MSW generation (and other specific waste as described above) in the SE region and the demand for waste treatment / disposal facilities based on:

10  Potential changes of MSW (and other waste streams) generated / collected due to: o Changes in the size of the population in the SE region; o Potential increases in the collection service coverage rate (if applicable); o Potential changes in the relative waste quantities (per capita generation) due to socio-economic changes (e.g. increased per capita waste quantities due to increasing household consumption expenditures); o Changes of other non-household waste generators (small businesses, institutions, schools, commercial entities etc).  Potential changes in the MSW composition (e.g. recycling targets aligned with national and/or regional waste management plans).  Revise and, if necessary, adapt the scenarios that were developed in the previous studies and assess the impact of these scenarios on recycling rates and quantities and quantities sent to landfill and the landfill lifespan / volume used.

Task 2: Definition and Scoping of the Project Based on the findings of Task 1, the Consultant shall carry out a review and analysis to identify a series of waste management components and investment requirements to establish a robust solid waste management system for the SE region which seeks to ensure 100% waste collection, a high degree of waste separation and treatment, a high degree of recycling and reuse of waste materials and limited waste sent to landfill. The Consultant will assess the needs of the SE region according to the regional waste management plan from 2017 and the feasibility of the proposed components. The Consultant shall, if necessary adjust the suggested components with updated data and will consider a stepwise (phased) approach of implementation of the components taking into consideration affordability aspects in Macedonia in general and SE region in particular. It is expected that the solid waste management system will consist of the following typical components:  Waste collection and source separation: The Consultant will identify whether additional investments, or changes in the current approach to collection are required to increase waste collection service coverage rates, improve collection, enable collection / separation of recyclables at the source, revise plans and needed infrastructure for increased source- separation of recyclables etc.  Transfer stations: The Consultant will verify the number of transfer stations needed and the locations proposed.  Sorting and treatment: The Consultant will present a preferred option for waste sorting and treatment, including locations, capacities, technologies and offtake options and requirements (compost, biogas, refuse derived fuel (RDF), etc.).  Disposal: The Consultant will verify the proposed RSL concept, its location, size and technical specifications. The RSL shall be implemented in accordance with the EU Directive on landfilling. The Consultant shall adjust, in case necessary.

11  Closure of illegal landfills and dumpsites: the Consultant shall review (in case available) existing data and plans for the closure of dumpsites in the region and in case necessary adjust.  CAPEX / OPEX: Assess for new facilities or review and where necessary, update existing cost estimates (CAPEX and OPEX) of the new planned / closed equipment and facilities.  Revenues / other costs: the Consultant shall estimate potential revenues in the system, e.g. selling recyclables, or disposal costs of specific waste streams etc.  The consultant shall confirm whether all selected locations (sites) as outlined in the regional waste management plan are still available. When conducting the review and identifying the Project, the Consultant will consider land availability, existing road networks, topography and driving times, technologies available and their effectiveness and reliability, capacity constraints and requirements, environmental and social considerations and waste off-takers (e.g. RDF, recyclables, other products) and requirements to enable waste offtakes.

Task 3: Financing Options Study Based on the performed Baseline Assessment and the scoping of the Project, analyse the financing options for the Project. In this Financing Options Study, the Consultant shall analyse the options of a Public Private Partnership, and other alternatives for private sector involvement possibly combined with sovereign financing and/or EU grants (e.g. WBIF). In this Study the Consultant shall consider the affordability of solid waste services for the waste generators and the Government, service quality and the optimal implementation timeline, as the major selection criteria. a) Pro Forma Financial Model Prepare a pro forma financial model, using the existing and forecasted revenue and cost information, as well as the capital investment requirements, obtained during the previous parts of this Assignment. The model shall cover at least 15 years and be utilised in the assessment of potential service delivery options listed in Section 3.3.2 below. b) Service Delivery Alternatives to be Assessed Alternatives The Consultant shall assess all viable potential alternatives for future service delivery including PPP options as listed below, as well as sovereign loan financing. In particular the consultant will assess which alternatives are valid under the PPP or Concession Laws. Corporatisation: The SE region forms a separate legal corporate entity to manage solid waste service provision. The SE region continues to own the enterprise, but it operates with more of the freedom and flexibility generally associated with a private sector business.

12 Service Contract: The SE region pays a fee to a private firm to provide specific operational services such as waste collection, treatment, landfilling, and operating of existing facilities. Typical duration: 1 – 5 years. Management Contract: The SE region pays a fee to a private firm to assume overall responsibility for operation and maintenance of a service delivery system, with the freedom to make day-to-day management decisions. Typical duration: 5 years. Lease Contract: A private firm rents facilities from the SE region and assumes responsibility for operation and maintenance. The lessee finances working capital and replacement of capital components with limited economic life, but not fixed assets, which remain the responsibility of the SE region. Typical duration: 10 years. Public-private Partnership - Concession: A private firm handles operations and maintenance and finances investments (fixed assets) in addition to working capital. Assets can be owned by the firm or the SE region for the period of the concession and where owned by the firm are transferred back to the SE region at the end of this period. The project is designed to generate sufficient revenues either from tipping fees, or selling of by-products to cover the private firm’s investment and operating costs, plus an acceptable rate of return. The SE region exercises a regulatory and oversight role and commit to make payments when waste is not available or it is not of an pre-agreed quality. Typical duration: 15+ years. Build-Operate-Transfer (BOT): A form of concession, with an emphasis on construction of new, stand-alone facilities. The SE region may or may not receive a fee or share of profits. Typical duration: 15+ years. Assessment Criteria The purpose of the assessment will be to determine those service delivery alternatives which will enable the SE region to meet its capital expenditure priorities and regulatory compliance, ensure sustainable and affordable delivery of solid waste services to all constituents and the optimal Project implementation timeline. The following factors are to be determined for each identified service delivery alternative: a) Impact of each of the service delivery alternative on the cost of solid waste services and their affordability for the population of SE region. b) The ability of potential private sector participants to economically provide the required capital, effect service delivery within standards to all eligible recipients and receive a reasonable return on its investment, within the range of potential tariff(s) which may be levied. c) The effect on the technical quality of the service delivery. d) Implementation timeline of each service delivery alternative. e) The service delivery efficiency of each service delivery alternative. f) The likely response from all stakeholders. g) Risk sharing between public and private sectors h) Cost recovery efficiency. i) Previous successful cases in similar markets

B. Southwest, Pelagonia and Vardar Regions

Task 1: Baseline Assessment a) Gap analysis in the Baseline Assessment and forecast Based on the three comprehensive feasibility studies the Consultant shall verify the waste generation data and the used socio-demographic data and, if necessary adjust the data. In addition, the consultant shall verify the forecast of population and waste generation rates. The consultant shall assess the data used in the feasibility studies and  Review the current quantities of MSW generated (MSW that is formally collected plus other disposal practices) for each category of waste generators, i.e. households (urban vs. rural) and other generators (e.g. commercial entities, institutions, schools, small businesses, tourism etc.);  Identify and quantify other types of waste generated, such as C&D waste, hazardous waste, medical waste etc. Quantities of any potential biodegradable waste streams such as agricultural waste, market waste, waste from food processing industry and slaughterhouse waste, kitchen and restaurant waste etc. should also be assessed;  Review waste composition data of MSW for each category of waste generators (households and other generators). The composition data should also display recyclables, organic waste and combustible fractions where possible and should consider differences in urban and rural areas.  If necessary, the consultant shall revise the MSW generation rates and adjust the forecast.  Legal and regulatory context of the Project: Review the current legal and regulatory environment for solid waste management in Macedonia, including tariff setting methodology, PPP Law, central and local government policies and responsibilities, and cross subsidies as they relate to the PPP and sovereign financing options.  Market structure: - Identify key companies and organisations operating within the sector, their costs and revenue flows, sources of funding and regulatory arrangements for tariff setting (if applicable) subsidy payments and investment including local producers of RDFs and derivatives. Provide high level assessment of sector organisation and performance across financial and operational KPIs against comparable benchmarks. Highlight any examples of poor practice or opportunities for improvement.

Task 2: Verification of proposed solutions for the three regions Based on the results of the previous Task, the Consultant shall review the three comprehensive feasibility studies and assess:  the used methodology for the scenario analysis and the reasonability of the proposed scenarios;  the proposed results (i.e. the selected scenarios in terms of selected collection systems, locations and technologies and in terms of CAPEX / OPEX estimates); and

14  if applicable, revise the scenarios and proposed technological options in the respective selected scenario.  The consultant shall confirm whether all selected locations (sites) as outlined in the feasibility studies are still available. Task 1 and 2 are dealing mainly with the verification of the results of the three feasibility studies.

Task 3: Exploring synergies between the three regions The Consultant shall explore potential synergies in terms of the proposed waste management infrastructure between the three regions. Namely, the consultant shall assess options to combine regions with respect to the proposed waste management solutions. The consultant shall consider potential synergies (among others):  regarding waste collection for different waste streams according to the verified (or newly proposed) scenario. This includes collection systems (bring system, kerbside collection/recycling banks or other possibilities), number and location of transfer stations etc.;  with regard to number and location of CWMFs and the respective number, types and capacities of technologies included in the CWMFs. Based on the above analysis, the consultant shall (if applicable) propose a new scoping of the waste management project for the three regions considering the potential synergies between the three regions and also prepare CAPEX/OPEX estimates for the new proposed solution. The consultant shall consider a stepwise approach of implementation and focus as a first step at the components considered feasible.

Task 4: Financing Options Study Based on the performed Baseline Assessment and scoping of the Project, the Consultant shall analyse the options of a Public Private Partnership, and other alternatives for private sector involvement possibly combined with sovereign financing and/or EU grants (e.g. WBIF). In this task the Consultant shall consider the affordability of solid waste services for the waste generators and government, service quality and the optimal implementation timeline, as the major selection criteria. Profitability for the private partner shall also be assessed. a) Pro Forma Financial Model Prepare a pro forma financial model, using the existing and forecasted revenue and cost information, as well as the capital investment requirements, obtained during the previous parts of this Assignment. The model shall cover at least ten (15) years and be utilised in the assessment of potential service delivery options listed in Section 3.3.2 below. b) Service Delivery Alternatives to be Assessed Alternatives

15 The Consultant shall assess all viable potential alternatives for future service delivery including PPP options as listed below, as well as sovereign loan financing. In particular the consultant will assess which alternatives are valid under the PPP or Concession Laws. Corporatisation: The three regions (each or in combination) forms a separate legal corporate entity to manage solid waste service provision. The three regions continue to own the enterprise, but it operates with more of the freedom and flexibility generally associated with a private sector business. Service Contract: The regions pay a fee to a private firm to provide specific operational services such as waste collection, treatment, landfilling, and operating of existing facilities. Typical duration: 1 – 5 years. Management Contract: The regions pay a fee to a private firm to assume overall responsibility for operation and maintenance of a service delivery system, with the freedom to make day-to-day management decisions. Typical duration: 5 years. Lease Contract: A private firm rents facilities from the each region and assumes responsibility for operation and maintenance. The lessee finances working capital and replacement of capital components with limited economic life, but not fixed assets, which remain the responsibility of the region. Typical duration: 10 years. Public-private Partnership - Concession: A private firm handles operations and maintenance and finances investments (fixed assets) in addition to working capital. Assets can be owned by the firm or the region for the period of the concession and where owned by the firm are transferred back to the region at the end of this period. The project is designed to generate sufficient revenues either from tipping fees, or selling of by-products to cover the private firm’s investment and operating costs, plus an acceptable rate of return. The region exercises a regulatory and oversight role and commit to make payments when waste is not available or it is not of an pre- agreed quality. Typical duration: 15+ years. Build-Operate-Transfer (BOT): A form of concession, with an emphasis on construction of new, stand-alone facilities. The region may or may not receive a fee or share of profits. Typical duration: 15+ years.

Assessment Criteria The purpose of the assessment will be to determine those service delivery alternatives which will enable the three regions to meet their capital expenditure priorities and regulatory compliance, ensure sustainable and affordable delivery of solid waste services to all constituents and the optimal Project implementation timeline. The following factors are to be determined for each identified service delivery alternative: a) Impact of each of the service delivery alternative on the cost of solid waste services and their affordability for the population of each region. b) The ability of potential private sector participants to economically provide the required capital, effect service delivery within standards to all eligible recipients and receive a reasonable return on its investment, within the range of potential tariff(s) which may be levied. c) The effect on the technical quality of the service delivery.

16 d) Implementation timeline of each service delivery alternative. e) The service delivery efficiency of each service delivery alternative. f) The likely response from all stakeholders. g) Risk sharing between public and private sectors. h) Cost recovery efficiency. i) Previous successful cases in similar markets.

IV. IMPLEMENTATION ARRANGEMENTS The duration of the Assignment will be 16 weeks and will require site visits. The Consultant shall report to the EBRD. EBRD contacts are: Roland Ramusch ([email protected]) and Biljana Milosheska ([email protected]). MoEPP, the Centre for development of the SE region and Centres for development of Southwest, Pelagonia and Vardar Regions will cooperate with the Consultants, respectively will designate senior officials to be the primary contact persons with specific responsibility for assisting the Consultant and co-ordinating activities with other municipalities where required. Those institutions will make available their records, plans, reports, designs and other documents as appropriate for the assignment, and provide access to all the relevant facilities and employees, who will be available to answer questions and assist in understanding of the functioning of the municipal solid waste management system in the relevant regions. The Consultant shall be responsible for paying for international telephone calls, office supplies and external printing. The Consultant shall pay for all international and local transportation required by the Consultants’ staff throughout the duration of the assignment. The Consultant shall be responsible for providing suitably qualified interpreters/translators to work with their staff.

V. DELIVERABLES In the course of the assignment, the Consultant shall produce the following reports: Draft and Final Inception Report: Within 4 weeks of the commencement of the Assignment, 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 its initial findings, with an emphasis on findings having an impact on the time schedule and factors affecting this ToR.

During the Inception phase the Consultant will organize a Kick-off mission which will enable introduction to all the relevant stakeholders and gathering of the necessary information and data. Draft Final Report: Within 12 weeks of the assignment commencement, the Consultant will submit a draft report documenting the Assignment, including the updated baseline assessment,

17 identification and scope of the Project and Financing Options Study (including the pro-forma financial model), to the EBRD.

The draft Report will be presented to the MoEPP and the relevant regional authorities in the format of a workshop organized by the Consultant.

Final Report: Within 2 weeks of receiving comments from the EBRD, the Consultant will deliver a final report.

Draft reports will be delivered in MS Word format. Final reports will be delivered in MS Word and Adobe PDF format. The financial model will be delivered in MS XLS format.

The Consultant may stagger the works for (i) Southeast region and (ii) Southwest, Pelagonia and Vardar Regions respectively, upon presentation of the rationale to the Bank and the Bank’s confirmation that such approach is acceptable.

VI. CONSULTANT’S PROFILE The Consultant will ensure that appropriately qualified experts are available, as required, for each of the tasks outlined above. It is expected that the assignment will be led by an appropriately qualified team leader, accompanied by both key and supporting experts. Based on the fields of expertise and the tasks mentioned above, it is proposed that the team of the Consultant should consist of at least the following international and local experts:  Team Leader with a preferred minimum of 15 years professional experience in the field of solid waste management, as well as a comprehensive experience of similar assignments, preferably in the Western Balkan region. He/she should demonstrate management and administration experience, including experience with procedures of international financing institutions (preferably including EBRD’s).  Solid waste expert(s), with a preferred minimum of ten years’ relevant professional experience  Financial specialist with a preferred minimum of 10 years relevant professional experience including experience in private sector participation in the solid waste sector.  Legal and institutional expert, with experience of PPPs and public finance in the solid waste sector

All experts must be independent and free from conflicts of interest in the responsibilities accorded to them. The Consultant is expected to incorporate local experts in the team and demonstrate sufficient knowledge of the solid waste market in North Macedonia as well as a capacity to operate effectively in the country with regards to language capacity and local logistical support.