Consulting Services for Public Disclosure Authorized SUPPORT TO WATER RESOURCES MANAGEMENT IN THE DRINA RIVER BASIN PROJECT ID NO. 1099991 MONTENEGRO– INVESTMENT PRIORITISATION FRAMEWORK Public Disclosure Authorized VOLUME 1 – MAIN REPORT Public Disclosure Authorized Public Disclosure Authorized November 2017 Consulting Services for SUPPORT TO WATER RESOURCES MANAGEMENT IN THE DRINA RIVER BASIN PROJECT ID NO. 1099991 MONTENEGRO – INVESTMENT PRIORITISATION FRAMEWORK VOLUME 1 – MAIN REPORT November 2017 PROJECT NO. A038803 DOCUMENT NO. 1 VERSION C DATE OF ISSUE November 2017 PREPARED all authors and institutions as in inception report CHECKED Nadja Zeleznik, REC APPROVED Roar Selmer Solland, COWI Consulting Services for SUPPORT TO WATER RESOURCES MANAGEMENT IN THE DRINA RIVER BASIN PROJECT ID NO. 1099991 This document has been produced with the financial assistance of the European Western Balkans Joint Fund under the Western Balkans Investment Framework. The views expressed herein are those of authors and can therefore in no way be taken to reflect the official opinion of the Contributors to the European Western Balkans Joint Fund or the EBRD and the EIB, as co‐managers of the European Western Balkans Joint Fund. World Bank Montenegro – Investment Prioritisation Framework Support to Water Resources Management in the Drina River Basin i Table of Contents Page No Acronyms and Abbreviations ........................................................................................................................... viii Executive Summary ........................................................................................................................................... xiv 1. INTRODUCTION ............................................................................................................................................. xiv 2. METHODOLOGY .............................................................................................................................................. xv 3. RESULTS ......................................................................................................................................................... xix 4. FINAL PROPOSAL OF BASIN DEVELOPMENT ................................................................................................ xxi 5. RECOMMENDATIONS ................................................................................................................................... xxii 1 Introduction ............................................................................................................................................ 1-1 1.1 Background ............................................................................................................................................. 1-1 1.2 Scope of Work and TOR .......................................................................................................................... 1-1 1.3 Layout of the Report ............................................................................................................................... 1-2 1.4 Main issues of the public consultation ................................................................................................... 1-2 1.5 Summary of main issues that influence development of water resources – key drivers ...................... 1-3 2 Setting core water management development targets – key objectives .............................................. 2-1 2.1 Provision of sufficient quantity of potable water ................................................................................... 2-1 2.2 Provision of sufficient quantities of water for other economic needs ................................................... 2-3 2.3 Provision of sufficient quantities of hydroelectric energy ..................................................................... 2-3 2.4 Environmental protection ...................................................................................................................... 2-4 2.4.1 Aquatic ecosystem ................................................................................................................. 2-4 2.4.2 Water quality protection ....................................................................................................... 2-6 2.4.3 Provision of minimal environmental flow .............................................................................. 2-8 2.4.4 Alluvial and riparian ecosystems ............................................................................................ 2-9 2.4.5 Protected areas ...................................................................................................................... 2-9 2.5 Reduction of adverse impacts of floods and droughts ......................................................................... 2-10 3 Inventory of Changes for DRB development .......................................................................................... 3-1 3.1 Short term and Long term goals for DRB development ......................................................................... 3-1 3.2 Assessing Risk ......................................................................................................................................... 3-3 3.3 Financing and its influence on priorities ................................................................................................. 3-4 3.3.1 General aspects of hydropower plants financing .................................................................. 3-4 3.3.2 Possible financing development alternatives for proposed scenarios .................................. 3-4 3.3.3 Factors which affect the financing strategy ........................................................................... 3-5 3.4 Review of all documentation regarding water related investments ...................................................... 3-6 3.4.1 Biodiversity investments ........................................................................................................ 3-6 3.4.2 Protected area investments ................................................................................................... 3-7 3.4.3 Waste water investments ...................................................................................................... 3-8 World Bank Montenegro – Investment Prioritisation Framework Support to Water Resources Management in the Drina River Basin ii 3.4.4 Waste landfills investments ................................................................................................... 3-9 3.4.5 Social investments ................................................................................................................. 3-9 3.4.6 Hydropower investments .................................................................................................... 3-11 3.5 Technical and Economic Analysis ......................................................................................................... 3-11 3.5.1 Technical Analysis ................................................................................................................ 3-11 3.5.2 Economic Analysis ................................................................................................................ 3-12 3.5.3 HPP Investment Input Data .................................................................................................. 3-13 3.5.4 Operation and maintenance costs ....................................................................................... 3-13 3.5.5 Results from the Financial Analysis ...................................................................................... 3-15 3.5.6 Economic analysis methodology .......................................................................................... 3-15 3.5.7 Results of the economic analysis ......................................................................................... 3-18 3.6 Prioritisation and effect on development strategies ............................................................................ 3-19 3.7 Prepare inventory of significant changes ............................................................................................. 3-19 3.8 Hydropower Review ............................................................................................................................. 3-20 3.9 Short review of mini HPP and their influence ...................................................................................... 3-20 3.10 Recommendations for hydropower operation concessions ................................................................ 3-21 3.11 Effect of infrastructure on floods ......................................................................................................... 3-24 3.12 Analysis of Environmental and Social Impact of investments .............................................................. 3-24 3.12.1 Methodology (for environment and social criteria) ............................................................ 3-25 3.12.2 Definition of the environmental impacts ............................................................................. 3-26 3.12.3 Definition of the social impacts ........................................................................................... 3-37 3.12.4 Environmental and social impact assessment for the future investments options ............ 3-42 3.12.5 Preliminary mitigation measures ........................................................................................