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European Bank for Reconstruction and Development

CAZIN WASTEWATER PROJECT


FEASIBILITY STUDY

Final Report

Cazin, August 2012

HOLINGER International Consultants


Kasthoferstrasse 23, CH-3000 Berne 31, Switzerland
Phone +41 (0)31 370 30 30, Fax +41 (0)31 370 30 37
HOLINGER Ltd
Kasthoferstrasse 23, CH-3000 Berne 31
Telefon +41 (0)31 370 30 30, Fax +41 (0)31 370 30 37

Version Date Filename Responsible Approval Distribution

Final 10.09.12 Berhard Wiedmer Ueli Steiner EBRD Sarajevo, electr.


Sandi Zulic
Cazin Wastewater Project Final Report
Feasibility Study August 2012

TABLE OF CONTENTS

EXECUTIVE SUMMARY 6

VOLUME 1: BASELINE STUDY 18

1. INTRODUCTION 19

1.1 Project Description 19


1.2 Initiatives in the Municipality of Cazin* 20
1.3 Water Supply System 24
1.4 Wastewater Collection and Treatment 25
1.5 Current Legislation relating to Water and Environmental Protection 27
1.6 Structure of the Report 28

2. SOCIO-ECONOMIC CHARACTERISTICS OF CAZIN CITY 29

2.1 Location andUrban Development of Cazin 29


2.2 City General Development Plan 29
2.3 Economic Development of Cazin 30
2.4 Population and Households 30
2.5 Employment and Income 33
2.6 Social Services 35

3. NATURAL CONDITIONS AND PUBLIC HEALTH 36

3.1 Detailed Description of Climate 36


3.2 Geomorphology 37
3.3 Geology 38
3.4 Hydrogeological Aspects 40
3.5 Assessment of Public Health in Cazin 42

4. TECHNICAL ASSESSMENT OF THE COMPANY 45

4.1 Service Area 45


4.2 Customers and Consumption 45
4.3 Quality of Service 47
4.4 Assessment of the Current Wastewater Collection and Treatment 55

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5. INSTITUTIONAL AND MANAGEMENT ASSESSMENT 59

5.1 Institutional and Legal Framework of the Water Sector in BiH 59


5.2 Organisation and Structure of Vodovod 61
5.3 Management Assessment 62

6. FINANCIAL PERFORMANCE 65

6.1 Tariffs and Fees 65


6.2 Financial Performance of the Company 66
6.3 Current Affordability 72

7. ENVIRONMENTAL AND SOCIAL AUDIT 74

7.1 INTRODUCTION 74
7.2 PR 1 – ENVIRONMENTAL AND SOCIAL APPRAISAL AND MANAGEMENT 75
7.3 PR 2 – LABOUR AND WORKING CONDITIONS 77
7.4 PR 3 – POLLUTION PREVENTION AND ABATEMENT 78
7.5 PR 4 – COMMUNITY HEALTH, SAFETY AND SECURITY 79
7.6 PR 5 – LAND ACQUISITION, INVOLUNTARY RESETTLEMENT AND ECONOMIC
DISPLACEMENT 80
7.7 PR 6 – BIODIVERISTY CONSERVATION 82
7.8 PR 7 – INDIGENOUS PEOPLES 82
7.9 PR 8 – CULTURAL HERITAGE 82
7.10 PR 9 – FINANCIAL INTERMEDIARIES 82
7.11 PR10 – INFORMATION DISCLOSURE AND STAKEHOLDER ENGAGEMENT 82

8. LONG-TERM INVESTMENT PROGRAMME 84

8.1 Service Objectives 84


8.2 Investment Strategies 84
8.3 Proposed Measures in the Long Term Investment Plan 87
8.4 Preliminary Long List of Project 99
8.5 Prioritisation of Investments 101
8.6 Final LTIP 103

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VOLUME 2: FEASIBILITY STUDY 105

9. PRIORITY INVESTMENT PROGRAMME (PIP) 106

9.1 General Approach 106


9.2 Investment Envelope 107
9.3 Proposed PIP Investment Costs 107
9.4 Associated Costs 109
9.5 Location for the WWTP 1 109

10. FINANCIAL AND ECONOMIC ANALYSIS 112

10.1 Objectives of the Financial Analysis 112


10.2 Structure of the Financial Model 112
10.3 Main Inputs and Assumption to the Financial Model 113
10.4 Explanation of the Financial Model 119
10.5 Required Tariffs 120
10.6 Affordability 122
10.7 Sensitivity Analysis 126
10.8 Financial Performance of Vodovod 127
10.9 Economic Analysis 131
10.10 Objectives of the Financial Analysis 132
10.11 Structure of the Financial Model 132
10.12 Main Inputs and Assumption to the Financial Model 133
10.13 Explanation of the Financial Model 139
10.14 Required Tariffs 140
10.15 Affordability 142
10.16 Sensitivity Analysis 146
10.17 Financial Performance of Vodovod 147
10.18 Economic Analysis 151
10.19 General Provisions 152
10.20 Implementation Plan for Cazin Wastewater Project 152
10.21 Procurement Strategy 153

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11. ENVIRONMENTAL AND SOCIAL ANALYSIS 160

11.1 Scope of work 160


11.2 Report organization 160
11.3 Legal Framework 162
11.4 Description of the proposed project 165
11.5 Environmental and Health and Safety Impact Analysis 166
11.6 Mitigation Measures 177
11.7 MONITORING and reporting 182

12. ENVIRONMENTAL AND SOCIAL PLANS 187

12.1 The Purpose of the ESAP 187


12.2 Responsibilty for Implementation 187
12.3 Monitoring and Reporting Requirements 187
12.4 Stakeholder Engagement Plan 188

13. FINANCIAL AND OPERATIONAL PERFORMANCE IMPROVEMENT


PROGRAMME (FOPIP) 202

13.1 Introduction 202


13.2 Financial Performance Improvements and Indicators 202
13.3 Operational Performance Improvements and Indicators 205
13.4 Service Level Improvements and Indicators 207

ANNEX 1: E&S DETAILED GAP ANALYSIS 210

ANNEX 2: DETAILED ESAP 253

ANNEX 3: PUBLIC SERVICE AGREEMENT (PSA) 266

ANNEX 4: COMPARISON OF OFFICIAL PLANNING DATA 278

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Abbreviations and Acronyms


BOD5 Biological oxygen demand after 5 days
CAD Computer Aided Design
COD Chemical oxygen demand
DMA District Metering Area
D,d,Φ Diameter
EBRD European Bank for Reconstruction (“the Bank”)
ESAP Environmental and Social Action Plan
E&S Environmental and Social
EUR, € Euro
FIDIC International Federation of Consulting Engineers
FS Feasibility Study
GHG Green House Gases
GOS Government of Switzerland
IFI International Financial Institution
IFRS International Financial Reporting Standards
lcd Litres per capita per day
LTIP Long-term Investment Plan
NRW Non-Revenue Water
m.a.s.l. Meters above sea level
O&M Operation and Maintenance
OM Operation Manual
PIP Priority Investment Programme
PRs EBRD Performance Requirements
SCADA Supervisory Control and Data Acquisition
SECO Swiss State Secretariat for Economic Affairs
SWOT Strengths, Weaknesses, Opportunities and Threats
ToR Terms of Reference
USD US Dollars
UV Ultra-Violet
VAT Value Added Tax
VODOVOD Water Utility of Cazin
WS Water Supply
WWTP Wastewater Treatment Plant

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EXECUTIVE SUMMARY

(1) Background
The water and wastewater utility company of Cazin ("Vodovod" or the "Company"), together with the Mu-
nicipality of Cazin ("Cazin" or the "Municipality"), have approached the European Bank for Reconstruction
and Development ("EBRD" or the "Bank") with a request for a loan in the amount ofup to EUR 4 million,
with sovereign guarantees as well as counter guarantees from the Federation of Bosnia and Herzegovina
and the Municipality, towards financing part of the costs related to development of a wastewater collection
and treatment system (the "Project").
Grant funds in the amount of EUR 700,000 have been approved by the Western Balkans Investment
Framework ("WBIF"). The funds will be used to finance two assignrnents. The funding for the first assign-
ment concerns the preparation of this feasibility study ("FS"), which is covered by the respective Terms of
Reference ("TOR").
The FS is necessary for the EBRD and the potential donors to determine the feasibility of the Project from
a technical, financial, environmental and social aspect and to confirm its eligibility for grant funding. The FS
will also identify possibilities and recommend a programme for financial and operational performance im-
provements in the Company (the "FOPIP"). It also produces legal framework for introduction of an arms
length arrangement between the Company and the Municipality in form of an adequate public service
agreement ("PSA").

(2) Baseline Findings


Cazin is located in the northwest part of BiH, in the Federation of BiH and the Una-Sana Canton at the
border with the Republic of Croatia. The Municipality has an area of 356 km2 and an estimated population
of 70,000. The estimated population of the municipal centre is 12,000 inhabitants.
Public Utility Company “Vodovod” d.o.o.Cazin (the “Company”) is a municipally owned company with 62
employees. The core activity of the Company is the water and wastewater management for the service
area of Cazin. The Company’s consumer area includes the town and the 54 surrounding settlements cov-
ering a total of around 15,000 household connections (of which 14,000 in individual houses) and 900
commercial customers. This represents 95 per cent of the inhabitants of the entire municipality. The re-
maining 5 per cent is supplied from several small local systems that are not operated by the Company.
Potable water is supplied from six springs through a combination of gravity and pumping. The combined
yield of these sources is in the range between 300 and 330 l/s.
The primary source of wastewater is the sanitary wastewater from households and commercial customers.
Only a small number of individual households are connected to the sewerage network. 10 per cent of the
population and 23 per cent of the companies in the Municipality are connected to the sewage network in
some way. A majority of the population and the companies (estimated at 58 per cent) use septic tanks.
Most of these tanks are not constructed to meet relevant engineering standards, many are damaged and
obsolete. The remaining 32 per cent of the households, which do not have septic tanks, discharge
wastewater directly into the nearest watercourses, open channels or karsts sinkholes. Accordingly, the
quantity of untreated wastewater that pollutes the underground aquifers and surface watercourses is signif-
icant. However, it is assumed that only soak-away pits within protected areas such as the Mutnik well field
is seriously endangering groundwater streams.
The main recipient of collected wastewater and surface water in the central part of the Municipality is the
stream Čajin Potok. This stream is a part of the Danube watershed area (through the rivers Korana, Kupa
and Sava). Untreated wastewater from Cazin poses continuous health hazard for the downstream popula-
tion in Croatia, which is supplied from the well fields in the alluvium of the Korana River (Slunj, Cetingrad
and Karlovac).

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The existing sewage system is of a combined type (the same sewer transports both the wastewater and
surface water) with a total length of approximately 8,000 meters. It is made of concrete pipes with a diame-
ter range between 200 mm and 600 mm. Occasionally, the capacity of the system is not sufficient to evac-
uate both wastewater and surface water at the same time.
The overall objective of the Project is to assist Cazin in its sustainable development of wastewater infra-
structure, which will, in addition, enable the Municipality to become compliant with EU directives pertinent
to urban wastewater and sludge treatment and contribute to Bosnia and Herzegovina meeting the EU envi-
ronmental acquis communautaire in the medium to long term.
Further, the Project will contribute to environmental protection, protection of water resources, minimize the
risks to public health and improve the quality of drinking water through the implementation of sewage and
wastewater treatment infrastructure in the Municipality. This will be achieved by: (i) increasing the number
of population connected to the sewage networks, and (ii) reducing the direct discharges of untreated
wastewater by the construction of a wastewater treatment plant (“WWTP”).

(3) Long-Term Investment Plan (LTIP)


The following measures to improve the waste water collection and treatment system as well as for the wa-
ter supply system have been identified:

Long List of Investment Projects Wastewater Collection and Treatment


No. Item Priority Amount
(million
€)
WW-01 Construction of WWTP 1a (1st phase Cazin City) High 4.0
WW-02 Construction of WWTP 1b (2nd phase Cazin City), conditional to WWTP 1a High 5.4
WW-03 Construction of WWTP 2 (“Korana River”) Medium 4.75
WW-01 Main sewer Cazin City and Mutnik branch High 4,05
WW-02 Tertiary network and peri-urban secondary network – Cazin City High 5.4
WW-03 Main sewer, secondary branches downstream to Korana River Medium 9.65
WW-04 Independent systems, main sewer, secondary branches and tertiary net- Low to 18.14
works – U2, K1, G3, G4 Medium
WW-05 Construction ofindependent new wastewater treatment plants - U2, K1, G3, Low to 5.50
G4 Medium

Long List of Investment Projects in O&M Sewerage


No. Item Priority Amount
(million
€)
O&M Equipment
OM-01 Cistern Trucks equipped with high pressure flushing pump-2, ICB–2, Trucks- High 0.590
2, Vans-2, Pick-up–1, Car–1, Drainage pumps–2, PE-pipes welding set-1

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Long List of Investment Projects Water Supply


No. Item Priority Amount
(million
Euro)
WS-01 District Management Programme (DMP): High 0.3 per
Input needed (expertise, resources, hardware, etc.): year (as
Internal team of Company (working group) dealing to 80% with issues relat- of 2013)
ed to DMP. External support by senior expert. Procurement of equipment
and pipe material for analysis and repair works on the water network and for
all other activities.
WS-02 Master Plan: High 0.1
Input needed (expertise, resources, hardware, etc.):
Consultant for preparation of Master Plan considering all technical, financial
and economic aspects of the Municipality of Cazin.

WS-03 Energy Saving Programme: High 0.4


Input needed (expertise, resources, hardware, etc.):
Consultant for assessment of water supply system with regard to energy
consumption. Means for implementation of recommended measures.

WS-04 Pipeline Replacement and Renewal Programme: Medium 0.3 per


Input needed (expertise, resources, hardware, etc.): year (as
Consultant for planning of renewal concept of the distribution network. In- of 2013)
vestments in the renewal of the water supply system need to be budgeted on
an annual basis.

WS-05 Water Quality Improvements: Medium 0.4


Input needed (expertise, resources, hardware, etc.):
Consultant for verification and design of sustainable disinfection systems and
effective protection of water sources across entire water supply area, includ-
ing monitoring concept. Investments on the basis of the assessment.

Option: Design and construction of sand filters at specific sources to protect Low 0.8
against turbidity.

WS-06 Improvement of Procedures related to Revenue Collection: Medium 0.4


Input needed (expertise, resources, hardware, etc.):
Consultant and internal auditor to propose internal organisational measures
related to revenue, billing and collection transaction cycle.

WS-07 Customer Relationship Management: Medium 0.1


Input needed (expertise, resources, hardware, etc.):
Consultant and top management for development of customer relationship
strategy and improvement of communication with customers.

WS-08 Automatic Control System (SCADA): Medium 0.8


Input needed (expertise, resources, hardware, etc.):
Consultant for planning and design of automatic control system for entire
water supply area, including all key facilities. Data transfer via radio or other
suitable systems where available (cables, etc.). Investments on the basis of
the design and cost estimate.

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(4) Priority Investment Plan (PIP)


The PIP shall according to the ToR be implemented in the years 2012 to 2015, having the facilities and
infrastructure available at the beginning of 2016. As the Consultant outlined in Chapter 8 “LTIP”, there
needs to be an emphasis on the waste water sector, accompanied by measures in the water supply sector.
The LTIP in itself sketches out the long-term investment that envisages an all-encompassing adaption of
the water related infrastructure in the long run. From this long-list measures are to be evaluated and be
proposed in the PIP.
The most important criteria are:
 Best effectiveness and the least cost

 The total investment of all proposed measures has to suffice the intended loan- and grant ar-
rangements and be affordable within the financial analysis that has been included in this report
 The proposed measures should best pursue financial and operational sustainability of VODO-
VOD and its customers
 The measures should be complementary among water supply and waste water management in
order to increase service performance and financial viability of VODOVOD
 A lower number of different measures allows for easier “packaging” and potentially shortens
planning, tendering and approval processes. This is a vital factor for the timely implementation
within a rather challenging project schedule.
Based on the above criteria, the following list comprises the priority measures.

Proposed PIP including investment cost

No. Item Mio


Euro
PWS-03 Pipeline Replacement and Renewal Program in Mutnik: 0.50
Input needed (expertise, resources, hardware, etc.):
Planning of renewal concept of the distribution network. Invest-
ments in the renewal of the water supply system need to be budg-
eted on an annual basis.

PWW-01 Main Sewer City and Mutnik Branch 3.30


Supply and laying pipes in urban and rural areas (residential) Main
sewer and Mutnik branch

PWW-02 Tertiary Network City 2.55


Supply and laying pipes – Tertiary network – Cazin town

PWW-03 Construction WWTP 17’000eq 4.00


Construct new wastewater treatment plant WWTP 1a

Total Investment waste water collection and treatment, rehabilita- 10.35


tion water mains Mutnik (Euro)

Associated costs cost

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No. Item Mio


Euro
VAT VAT to be paid on the investment cost, approximately 2

Land Cost for land acquisition and compensation in case the land 0.5
does not fully belong to the Municipality

Total Estimated associated costs (Euro) 2.5

(5) Financial Analysis


Institutional and Management Assessment
The overall conclusion of this review is that Vodovod has a functional organisational internal structure with
well-designed and established budgeting and reporting practices. The computer system allows timely and
efficient information flows between the different departments and with external stakeholders. The staff has
adequate educational and practical qualifications but could benefit in future from an improved training pro-
gramme. The introduction of a Service Agreement with the Municipality and the FOPIP will definitely con-
tribute to further improvements in certain areas such as accountability to the owner, increased financial
and operational efficiency and consumer relationship management.
Financial Performance
3 3
Current tariffs for water supply are correspondingly 1KM/m and 2KM/m for residential and legal entities
3 3
and 0.30KM/m and 0.40KM/m for sewage. Since the tariffs have not been changed since May 2007 Vod-
ovod incurs losses in 2011 and in 2012. The collection rate of the Company is reported to have been at the
level of 94% at least since 2008, thus being the highest in the country
The review of the P&L Statement reveals constant revenue from main activities during the last three years
with slight increase in 2011 due to the commissioning of the sections of the new Ljubijankici water supply
system. The services provided to third parties consist of relatively small scale construction works and these
tend to decrease for lack of demand.
After the split in 2003 of the previous municipal company, Vodovod ‘inherited’ accounts receivable at the
value of KM 815’546 which increased over the years and in 2009 reached KM 1.76 million. Vodovod was
allowed to write off uncollectible debt in 2011 and 212. The annual amount of new accounts receivable is
relatively low. Most of the debtors are legal entities, often the same ones every year.
Household expenditures for water and wastewater services at current levels are quite below the interna-
tionally accepted threshold and thus do not give any grounds for concerns.
Financial and Economic Analysis
The implementation of the Short-term Investment Programme, proposed within the framework of this as-
signment, will require substantial financial funds. The results of the financial model show that the invest-
ments are financially feasible and the proposed tariffs are affordable.
The financial evaluation of the STIP is based on a user-friendly financial model which calculates the future
tariffs for water and wastewater that will guarantee the financial sustainability of Vodovod and will allow the
company to meet its financial obligations towards EBRD. It is based on defining the required revenue from
water supply and wastewater collection and treatment.
The short-term investment programme will be financed through debt and grants as indicated in the follow-
ing table:

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FINANCING PLAN, in 1000 € Total 2013 2014 2015


EBRD Loan to Municipality
Main sewer City and Mutnik Branch (1) 3'802 1'521 1'141 1'141
Total EBRD financing 3'802 1'521 1'141 1'141

Grants
EC 2'000 800 600 600
SIDA 2'000 600 800 600
ORIO 2'000 600 800 600
Shortage of financing 551 220 165 165
Total financing sources 10'353 3'741 3'506 3'106

ORIO O&M Grant since 2016 1'427


(1) Including the replacement of w ater main

In the course of the study preparation one of the donors withdrew his support from the project. We believe
that with the Feasibility Study already completed, the City and Vodovod will be in a better position to find
another grant for replacing this donor and covering the still missing funds of about € 0.55 million.
All assumptions and inputs to the financial models have been coordinated and accepted by Vodovod.
The financial model calculates the following full-cost recovery tariffs for water and wastewater:
WATER SUPPLY 2012 2013 2014 2015 2016 2017 2018 2019 2020
Water tariff (current terms) 1.09 1.30 1.30 1.28 1.29 1.29 1.32 1.35 1.38
Annual increase, % 18.89% 0.14% -1.57% 0.84% 0.10% 2.17% 2.19% 2.21%
Water tariff (constant terms) 1.09 1.27 1.24 1.19 1.17 1.13 1.12 1.11 1.11
Annual increase/decrease, % 15.99% -2.30% -3.97% -2.09% -2.81% -0.81% -0.79% -0.77%

WASTEWATER SUPPLY 2012 2013 2014 2015 2016 2017 2018 2019 2020
W/W tariff (current terms) 0.30 0.32 0.58 0.78 1.54 1.53 1.51 1.50 1.48
Annual increase, % 8.01% 79.18% 34.01% 98.30% -1.10% -1.04% -0.97% -0.89%
W/W tariff (constant terms) 0.30 0.32 0.55 0.72 1.39 1.34 1.28 1.23 1.19
Annual increase/decrease, % 5.38% 74.81% 30.74% 92.52% -3.98% -3.92% -3.85% -3.78%

It is assumed that cross subsidies between he consumer groups will be eliminated and both categories of
consumers will be charged with eh same tariff.
Water tariff will have to be raised by some 20% in order to reach the cost-recovery level but otherwise it is
not further affected by the investment program.
The implementation of the STIP with almost € 10 million invested in the wastewater sector alone will re-
quire practically a ‘new’ wastewater tariff, much higher than the current one. To avoid steep tariff increas-
es we have proposed the following staged or ‘managed’ increase of the wastewater tariff starting already in
2013:

PROPOSED W/W TARIFF INCREASE


2012 2013 2014 2015 2016
% per year 100% 50% 30% 30%
W/W Tariff, KM/m3 0.30 0.60 0.90 1.17 1.52

As suggested by the Bank in July 2012 MTR presentation, we have considered tariff scenarios with ‘Pollu-
tion Charge’ – a fee to households that are not connected to the sewage. This approach is found by all
stakeholders fair, since these households pollute environment through poorly built septic tanks. The follow-
ing table summarizes the results of evaluating the affordability for each of the tariff scenarios:

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Pollution Charge for HH not


Scenario 2016 Tariffs in Current Terms Affordability
Connected to Sewage

Water Wastewater 1.28 BE per HH 1 BE per HH Retired


KM/m3 KM/m3 Aver.salary Aver. Salary 2 Aver. Pensions 1 Aver. pension

Base Case No Pollution Charge 1.29 1.54


HH with water and canalisation 3.71% 5.58% 2.65% 5.31%
HH with water supply only 1.54% 2.32% 1.38% 2.76%

Scenario 1 2 KM/month/connection 1.29 1.02


HH with water and canalisation 3.07% 4.62% 2.22% 4.45%
HH with water supply only 1.72% 2.59% 1.69% 3.38%

Scenario 2 3 KM/month/connection 1.29 0.76


HH with water and canalisation 2.75% 4.13% 2.01% 4.02%
HH with water supply only 1.81% 2.72% 1.85% 3.69%

Scenario 3 4 KM/month/connection 1.29 0.50


HH with water and canalisation 2.42% 3.65% 1.79% 3.59%
HH with water supply only 1.90% 2.85% 2.00% 4.01%
BE = Bread Earner
HH = Household

Economic Analysis
The evaluation proves that the benefits of the proposed Short Term Investment Program from the view-
point of local economy and society are considerable and justify the planned investment. The EIRR of the
project over its technical lifetime is over 17.45% while the benefit-cost ratio is 1.8.

(6) Environmental and Social Analysis


The EBRD Environmental and Social Policy defines specific Performance Requirements (PR) for key are-
as of environmental and social issues and impacts. Compliance with the EBRD PRs is provided in tables
where the proposed activities are compared against the requirements of each specific PR. For each of the
compliance findings, the tables also provide recommendations / comments as guidance for achieving
compliance.
The results of Environmental and Social Audit showed that the Company is mainly partially complying with
EBRDs requirements and that there is room to improve the overall performance regarding the manage-
ment of both environmental and social aspects.
PR 1: The Company has no written HSE/Social Policy, does not hold any quality/environmental certifica-
tion and no HSE Plan/Manual is in place. However, the Company is functioning based on its internal regu-
lation system. In addition, the Client as a public company has to adhere to the set of legislation prescribed
by the relevant authorities. The lack of a comprehensive HSE Management Plan at Corporate level has
repercussions on the global HSE performance of the Company. Although, in terms of drinking water sam-
pling and testing, the Company is compliant with national and EU legislation, during the audit, some envi-
ronmental issues related to wastewater management have been revealed: wastewater management is not
in compliance with EU standards (i.e. direct sewage discharge on surface receptor without any treatment).
From time to time, the Company sends some of the employees to workshops and trainings related to envi-
ronmental protection issues, organized by a third party. However, no specific training matrix has been de-
veloped by the Company either for general HSE issues. Currently, no formal monitoring system is in place
to assure that the environmental and social standards are respected.
PR 2: No cases of forced labour are reported within the Company. Also, there are no identified cases of
discrimination (e.g. gender, race, nationality, ethnic origin, religion or belief, disability, age or sexual orien-
tation) or employment of minors. The Company has no register of work-related accidents and sickens, but
they do keep track record at workers files and also report state at collective health insurance and health
centre. Monitoring of use for the protective equipment by workers is not being implemented. There are no
written emergency procedures or any kind of training programme in case of accidents. The Company pro-
vides grievance mechanism for workers to raise reasonable workplace concerns, in accordance to local
legislation. Contractors are hired in accordance with the national Law on Public Procurement.

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PR 3: In terms of drinking water sampling and testing, the Company is compliant with national and EU
legislation. However, current wastewater management does not meet those requirements. Project imple-
mentation will ensure compliance with EBRD requests and national and EU legislation on wastewater
management. The Company is monitoring the energy and natural resources consumption. However, there
is currently no management plan to improve to maintain or improve the energy efficiency of the on-going
water supply and wastewater treatment. All waste generated by the Company is collected and managed by
the local solid waste company PUC “Čistoća” - legitimate enterprise licensed by the relevant regulatory
agency. Generally, the Company produces a very small amount of hazardous waste. Sodium hypochlorite
and chlorine gas are used for water disinfection. Currently, the Company stores its sodium hypochlorite
tanks in front of the Company’s premises, in the open, which is not in line with the guidelines for sodium
hypochlorite storage. The Company adopted a General Act on Maintaining, Use and Monitoring of Water
Facilities and Response in Case of Breakdown or Accident which lists chlorine as a toxic material and em-
phasises dangers of chlorine explosion, however, this Act needs to be updated with written procedures on
safe chlorine management and emergency preparedness.
PR 4: At present, Rulebook on Occupational Safety and Rulebook on Fire Protection is used by the Com-
pany, as well as accident/incidents forms in case of accident. The Company does not analyse the causes
of occupational accidents; the accidents are only reported on Company protocol. During construction
works, there is a possibility of safety risk situations (trench hazard etc.), as well as temporary disruption of
local traffic and pedestrian movement, however, these situations can be mitigated by application of good
engineering and construction practices. It is expected that at the stage of the WWTP operation, there might
be odour impact on nearby population. This will be taken into account in the process of adopting the loca-
tion of WWTP and during the design phase. No emergency preparedness policies have been issued by the
Company concerning accident hazards and no emergency preparedness exercises have been conducted
with the local community representatives so far.
PR 5: The institution in charge for administering the expropriation, in behalf of the Company is the Munici-
pality of Cazin. The resettlement is not foreseen by the project. Temporary land acquisition and establish-
ing the right to access (the right of way, incomplete expropriation) within the trajectory of the sewage line
will be set in place during construction and later operation of the infrastructure. The Municipality has
adopted the decision on public interest for the land acquisition purpose. Permanent land acquisition will be
required at the location of the WWTP. However the resettlement is not envisaged and potential locations
do not hold any households. Negotiations regarding the settlements should not pose substantial difficulties.
Given the status of the land and its current use, no economic displacement is expected. Affected land plots
are mostly owned by private owners. One of the 17 plats is public property. Expropriation study is under
preparation. The Municipality is in charge for the expropriation and will carry out the consultations with
affected parties in accordance with local legal requirements. The Project will establish a grievance mecha-
nism (within SEP) that needs to be made available to all affected stakeholders.
PR 6: Project implementation will result in improvement of quality parameters of the wastewater dis-
charged into the natural water bodies. The project does not impact any protected site or biologically sensi-
tive area. No Natura 2000 sites are in the near proximity of the WWTP construction area.
PR 7: Not applicable.
PR 8: It is envisaged that the Project will have no impact on cultural heritage. However, if the contractors,
during the construction phase, unexpectedly encounter anything suggesting the possibility of finding ob-
jects and sites of cultural/archaeological significance, it is necessary to immediately suspend work and
inform relevant competent authorities.
PR 9: Not applicable.
PR 10: It is expected that the project will have mainly positive long-term impacts to the affected communi-
ties. The client has identified several stakeholders, including company users, employees, local NGOs and
vulnerable groups. A Stakeholder Engagement Plan (SEP) has been developed on the basis of the EBRD

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requirements in order to define the type and scope of project-specific information that will be made availa-
ble to the public and to specify the proposed grievance mechanism.

(7) Environmental and Social Analysis


The Environmental and Social Analysis provides the description of potential environmental, social, health
and safety impacts on the workers and the community, as well as the benefits and risks associated with
the Project during construction, operation and maintenance, with regard to compliance with BiH national
laws and EU legislation.
Public Utility Company “Vodovod” is a municipally owned limited liability company whose scope of work is
water supply and wastewater collection for the area of Cazin Municipality. The Company supplies 95% of
the population with potable water and covers 10% with sewage system. No wastewater treatment is under-
taken at the moment because the Municipality does not have a WWTP.
The national legal framework regarding this Project can be divided into laws and/or regulations regarding
the environmental aspect of the project, legal framework regarding occupational health and safety and
laws and/or regulations pertaining to land acquisition and expropriation. Where national legislation is not
applicable or is nonexistent, corresponding EU regulations should be regarded.
The permitting process and screening procedure in BiH is in line with EU EIA Directive. Projects which
require an Environmental Impact Assessment may not be issued an Urban Planning Consent or Construc-
tion Permit unless an Environmental Permit is obtained in line with FBiH laws. Wastewater treatment plants
which treat over 50 000 PE are subject to Environmental Impact Assessment and the Environmental Per-
mit is issued by the Federal Ministry. For plants and facilities below the thresholds identified in FBiH regu-
lation, the Environmental Permit is issued by the competent cantonal ministry. Therefore, wastewater
treatment plants < 50 000 PE are subject to cantonal regulations and are under the jurisdiction of Ministry
of Construction, Physical Planning and Environment of Una-Sana Canton.
The Project will contribute to environmental protection, protection of water resources, minimize the risks to
public health and improve the quality of drinking water through the implementation of sewage and
wastewater treatment infrastructure in the Municipality. This will be achieved by: (i) increasing the number
of population connected to the sewage networks, and (ii) reducing the direct discharges of untreated
wastewater by the construction of a wastewater treatment plant (“WWTP”).

Environmental and social benefits the Project


Protection of ground water and sanitary protection of drinking water sources: The key benefits of the
Project will be reduction of pollutant discharges due to wider coverage by the sewage networks and provi-
sion of a new WWTP. The main expected positive impacts are overall increased water quality due to
wastewater collection and treatment as well as minimization of risks of waterborne diseases which are
connected to current poor wastewater management. The construction of a sewerage network and WWTP
will improve conditions of the watercourses in the area, mainly Mutnica River and its’ tributary Čajin
Stream.
Minimizing ecosystem deterioration: The ecosystem of the recipient river will be greatly improved, as
water will be treated prior to its discharge. The improved water quality of these rivers will also have an indi-
rect positive impact on species (amphibians, fish, etc.) and habitats surrounding these rivers (i.e. flood-
plains).
Improvement of soil conditions and agricultural land use: Improvement of soil conditions and agricul-
tural land use
Reduction of the water losses, energy efficiency improvements: A positive impact on soil quality may
result if treated wastewater is reused in irrigation, thereby increasing soil fertility, resulting in increased
agricultural productivity and/or a reduction in the use of chemical fertiliser.

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Reduction of the water losses, energy efficiency improvements: The replacement of water supply
pipelines will reduce the loss of water in the water supply system and therefore raise the energy efficiency
(as pumping stations will not be as heavily burdened as they are now with old and leaky pipes often of
lower nominal pressure installed than required).
Additional environmental and social benefits arising from the project are:
 Minimizing the risks of occurrence of water borne diseases in the Municipality of Cazin;
 Aesthetics and ambient improvement of the entire area, especially along watercourses;
 Creation of better environment for economic growth;
 Increasing the standard of living in the Municipality of Cazin.

Environmental and social impacts


Beside the environmental and social benefits, due to its nature, the proposed project might have certain
influence on the environment, primarily during the construction phase related to the extension of the exist-
ing sewerage network, construction of a new secondary sewerage network and construction of the WWTP
as well as its operation later on. Potential adverse environmental and social impacts of the Project are
analysed with regard to flora and fauna, water and groundwater, soil, air, noise, solid waste, cultural herit-
age and impacts on people. Most of them are temporary and will occur during the construction phase and
as such may be mitigated and/or avoided.
Flora and fauna: The most impacts are expected to occur during the construction phase, such as minor
impacts on the river ecosystem during river regulation, impacts on flora and fauna on local basis during
excavation works, etc. However, habitat disturbance, during pipeline construction or replacement, will oc-
cur within a narrow strip of the area (working corridor width 6 meters in total). There are no sensitive or
protected natural areas in the Municipality of Cazin; therefore, no such impacts are envisaged. The opera-
tion phase does not foresee any major negative impacts on flora and fauna. All potential impacts are sus-
ceptible to moderation by means of adequate and good working practices.
Water and groundwater: Negative impacts, short - term in character, which might occur during construc-
tion of the WWTP and sewerage pipelines are mostly due to excavation works, with occurrences of en-
hanced erosion or precipitation of suspended materials in the water body, resulting in water quality reduc-
tion. . Contamination of surface and groundwater might occur as a result of accidental release or spilling of
oils, fuels, grease and other pollutants pertaining to the mechanization and vehicles and as a result of un-
controlled disposal of construction waste into the river bed during construction. In the operation phase,
sewerage pipelines are not expected to have negative impacts on water quality, as the reason for their
construction is collection of wastewater. The main expected positive impacts are overall increased water
quality due to wastewater collection and treatment as well as minimization of risks of waterborne diseases
which are connected to poor wastewater management and low water quality. Due to inadequate operation
of the WWTP, accidental spills may cause decrease of the recipient quality. However, these occurrences
may be avoided and/or mitigated using good working practices and adhering to prescribed H&S guidelines.
Soil: Construction works related to the removal of superficial layer of humus, excavation of the ground, as
well as the presence of mechanization units and workers on the construction sites will cause certain soil
disturbances, however,, those impacts are reversible and can be mitigated. Major impacts on soil may
occur during operation phase of the WWTP if sludge is not treated and disposed of as prescribed by EU
and national regulations and the Sludge Management Plan.
This Project foresees sludge stabilization at constructed wetlands which provide high levels of mineraliza-
tion and dewatering of sludge and enable an adequate time frame in which final sludge disposal paths will
be developed in BiH.
Air: During construction, the majority of air pollution is expected from earthmoving and pipe-laying machin-
ery. These impacts will be short term and will have neither significant influence on local population nor is
pollutant emission above the values set by legislation in force expected. During the WWTP lifecycle, emis-

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sions pertaining to its operation (biological treatment) are unavoidable, so it is necessary to undertake miti-
gation measures which ensure they have minimal impact on the surrounding area.
Noise: Noise is unavoidable during construction, but will be kept within limits set by national regulations.
During operation, noise will be generated by the WWTP but this is not considered significant as it will be
placed away from densely populated human settlements and will be mitigated to keep noise levels at a
minimum.
Solid waste: Some wastes are expected to occur during construction, mainly construction waste and sur-
plus soil. These will need to be disposed of accordingly or reused. Hazardous wastes associated with the
project may include a variety of materials such as oil contaminated material, solvents and similar. These
materials need to be segregated and stored separately, in appropriate containers placed under a roofed
and protected area and they should be re-used (and/or recycled) or handled and/or disposed of by li-
censed contractors. During operation of the WWTP, wastes are expected to be generated from preliminary
and mechanical treatment operations. These will have to be handled and disposed of by licensed opera-
tors. Sludge is to be managed according to Sludge Management Plan.
Cultural heritage: No impacts are envisaged, but recommendation for the introduction of a „Chance Find
Procedure“ is specified in the ESAP.
Impacts on people: Traffic disturbances may occur mainly due to the transport necessary construction
material and during the construction of linear objects (collectors and secondary network) which may re-
quire complete closure of specific streets for pedestrians and vehicles in urban areas. A decrease in traffic
safety may also occur during this period. These impacts can be mitigated by applying measures proposed
in Traffic Management Plan. Increased noise levels due to machinery operation are likely to occur, but they
are a normal part of construction and will be short – term. Dust arising from construction activities is also
unavoidable. However, aforesaid impacts will occur mainly during construction phase, which has a limited
duration, while the same are not expected in the course of the operational phase. During phase of WWTP
operation bad odour and an increased quantity of insects may occur if the WWTP is not operated accord-
ing to projected parameters or due to extremely high temperatures, but this impacts can be mitigated by
using good construction and operation practices.

Mitigation measures
Abovementioned short term negative impacts mainly associated with construction activities and impacts
associated with operation of the WWTP need the implementation of mitigation measures which, based on
the timeline of their execution, may be classified as:
 Mitigation measures prior to the execution of construction works;
 Mitigation measures during the execution of construction works and
 Mitigation measures during the operational phase of the project.
Mitigation measures during the execution of construction works are usually related to a good working prac-
tice, which reduces negative influences on the water and land quality and noise level as well. Since the
implementation of such measures is direct responsibility of the Contractor, specific requirements for both
execution of works and implementation of mitigation measures ought to be included in the tender/contract
documentation. During construction works, mitigation measures include measures regarding materials
supply and transport, measures for the construction site and measures related to construction activities.
Most mitigation measures which should be implemented during the operation phase are related to the
proper functioning of the WWTP. These include monitoring and control of WWTP processes. Certain miti-
gation measures are related to the sewage collection system and its correct operation. Mitigation
measures which should be implemented during all Project lifecycle are proposed as a part of Environmen-
tal and Social Analysis.

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The Client will establish and implement monitoring procedures to assess the project compliance with envi-
ronmental and social requirements. Framework Monitoring Plan is given as a part of Environmental and
Social Analysis; however, it can be updated in line with provisions set in the Application for Environmental
Permit for WWTP that needs to be developed during the environmental permitting process..Monthly pro-
gress reports should be prepared by the Contract Supervisor and sent to Municipality/Company HSE man-
agement for approval. In addition, the responsible HSE person should prepare periodic HSE progress re-
ports and a summary should be made publicly available.

Environmental and Social Action Plan


Taking into account the findings of the environmental and social appraisal and the result of consultations,
the Environmental and Social Plan (ESAP) has been developed for the Project which contains mitigation
and performance improvement measures and actions that address the identified social and environmental
issues. Mitigation measures included in the ESAP are designed to ensure the Project compliance with
relevant local laws and regulations, as well as EBRD’s Environmental and Social Policy (2008).
The Company (Public Utility Company “Vodovod” d.o.o. Cazin) is responsible to implement ESAP in ac-
cordance with the proposed measures and defined time schedule. The Company will establish procedures
to monitor and measure compliance with the environmental and social provisions of the legal agreements
including effective implementation of the ESAP and improvements achieved over time against the baseline
established during appraisal.
Detailed measures relating to development of HSE Policy, HSE Standards and Procedures, mitigation of
any adverse impacts on the environment and PAP, hazardous wastes segregation and appropriate dis-
posal, regular maintenance and monitoring of all treatment systems; development of “Chance Find Proce-
dure”, relevant information to the public, development of an internal grievance procedure etc. are outlined
in the ESAP table.

Stakeholder Engagement Plan


The Stakeholder Engagement Plan (SEP) has been developed on the basis of the EBRD requirements in
order to define the type and scope of project-specific information that will be made available to the public
and to specify the proposed grievance mechanism. The aim of SEP was to explain how The Public Utility
Company “Vodovod” d.o.o. Cazin will communicate with people and institutions that may be affected by or
interested in the Project, at various stages of project preparation and implementation.
During the development of SEP project stakeholders that need to be informed about the Project activities
and consulted throughout the entire project cycle have been identified.Particular attention needs to be paid
to PAPs and vulnerable groups, especially to those who are directly affected by Project activities. In order
to adequately respond to the needs of different groups, communication and information channels have
been designed for all identified stakeholders in accordance with their needs. SEP contains information
about the stakeholders, tools for communication, documents and information that the Company is required
to publish, timetable of main consultation and obligations of contractors, etc.
SEP includes a grievance mechanism for stakeholders to raise any concerns related to the Project.
Company and Municipality are responsible for the implementation of the SEP during the entire project
cycle, including the grievance mechanism. All contractors in charge of carrying out specific Project
activities are also obliged to implement the SEP. The provisions of SEP implementation, including the
grievance mechanism, entrusted to contractors need to be laid out in the tender documentation and
contracts signed with the contractor. Company and Municipality will be included in monitoring of
Contractor’s application of grievance mechanisms and involved in addressing the concerns.

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VOLUME 1: BASELINE STUDY

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1. INTRODUCTION

1.1 Project Description


Cazin is located in the northwest part of BiH, in the Federation of BiH and the Una-Sana Canton
2
at the border with the Republic of Croatia. The Municipality has an area of 356 km and an esti-
mated population of 70,000. The estimated population of the municipal centre is 12,000 inhabit-
ants.
Public Utility Company “Vodovod” d.o.o.Cazin (the “Company”) is a municipally owned company
with 62 employees. The core activity of the Company is the water and wastewater management
for the service area of Cazin. The Company’s consumer area includes the town and the 54 sur-
rounding settlements covering a total of around 15,000 household connections (of which 14,000
in individual houses) and 900 commercial customers. This represents 95 per cent of the inhabit-
ants of the entire municipality. The remaining 5 per cent is supplied from several small local sys-
tems that are not operated by the Company. Potable water is supplied from six springs through a
combination of gravity and pumping. The combined yield of these sources is in the range be-
tween 300 and 330 l/s.
The primary source of wastewater is the sanitary wastewater from households and commercial
customers. Only a small number of individual households are connected to the sewerage net-
work. 10 per cent of the population and 23 per cent of the companies in the Municipality are con-
nected to the sewage network in some way. A majority of the population and the companies (es-
timated at 58 per cent) use septic tanks. Most of these tanks are not constructed to meet relevant
engineering standards, many are damaged and obsolete. The remaining 32 per cent of the
households, which do not have septic tanks, discharge wastewater directly into the nearest wa-
tercourses, open channels or karsts sinkholes. Accordingly, the quantity of untreated wastewater
that pollutes the underground aquifers and surface watercourses is significant. However, it is as-
sumed that only soak-away pits within protected areas such as the Mutnik well field is seriously
endangering groundwater streams.
The main recipient of collected wastewater and surface water in the central part of the Municipali-
ty is the stream ČajinPotok. This stream is a part of the Danube watershed area (through the riv-
ers Korana, Kupa and Sava). Untreated wastewater from Cazin poses continuous health hazard
for the downstream population in Croatia, which is supplied from the well fields in the alluvium of
the Korana River (Slunj, Cetingrad and Karlovac).
The existing sewage system is of a combined type (the same sewer transports both the
wastewater and surface water) with a total length of approximately 8,000 meters. It is made of
concrete pipes with a diameter range between 200 mm and 600 mm. Occasionally, the capacity
of the system is not sufficient to evacuate both wastewater and surface water at the same time.
The overall objective of the Project is to assist Cazin in its sustainable development of
wastewater infrastructure, which will, in addition, enable the Municipality to become compliant
with EU directives pertinent to urban wastewater and sludge treatment and contribute to Bosnia
and Herzegovina meeting the EU environmental acquis communautaire in the medium to long
term.
Further, the Project will contribute to environmental protection, protection of water resources,
minimize the risks to public health and improve the quality of drinking water through the imple-
mentation of sewage and wastewater treatment infrastructure in the Municipality. This will be
achieved by: (i) increasing the number of population connected to the sewage networks, and (ii)
reducing the direct discharges of untreated wastewater by the construction of a wastewater
treatment plant (“WWTP”).

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1.2 Initiatives in the Municipality of Cazin*

1.2.1 Foreign Initiatives


Support of the Western Balkans Investment Framework
For the purpose of the implementation of the preparatory Phase of the Cazin Waste Water Pro-
ject, the Municipality of Cazin has been granted 700,000 EURO by the Western Balkans Invest-
ment Framework (WBIF) to which the Cazin Municipality submitted the application for the Public
Invitation (Round_5) in the beginning of 2011.
The approved funds will be used for the preparation of the necessary study-design documenta-
tion for the construction of the central drainage system and waste water treatment system in ac-
cordance to the following:
 Feasibility Study
 Primary Design for the Central waste water treatment plant (WWTP)
 Final Design with the Tender Documents for the priority components which have been
proposed by the Feasibility Study
The implementation of the project will be performed through the European Bank for Reconstruc-
tion and Development (EBRD) which has already contracted the preparation of the Feasibility
Study. (More information is available on the link: http://www.wbif.eu/projects/1073).
Support of the ORIO grant programmeis provided through the Netherlands Ministry for Foreign
Affairs and Ministry for Development Cooperation. In the beginning of 2011 the Cazin Municipali-
ty applied the project for the construction of the central sewage system through the Ministry of
Agriculture, Water Management and Forestry. The Project for the construction of the central
sewage system of the Cazin Municipality is earmarked with 3.6 million Euro of grant.
In accordance to the submitted application these funds have been approved for financing the fol-
lowing phases of the project:
 Development phase of the project which implies and includes all activities regarding
the preparation of the project implementation and it concerns the preparation of the
study-design documentation and resolving the property relations and obtaining the
necessary permits and approvals for construction (108,534.80 Euro)
 Implementation Phase of the project which implies the works on the construction of
the waste water sewage network and waste water treatment plant (2,064,734.91 Eu-
ro)
 Operation and maintenance phase which implies the support to the project during the
first ten years of operation and maintenance of the plant through the co-financing of
the operation costs (1,426,516 Euro).
(More information is available on the link: http://www.agentschapnl.nl/node/116823

Swiss Agency for Development and Cooperation (SDC):


SDC has been successful in the field of local governance, particularly in the processes of decen-
tralisation and democratization in a number of municipalities of Bosnia and Herzegovina. The
Municipality of Cazin is one of the partner municipalities that have implemented these principles,
thereby strengthening their own capacities in attracting donor funding and project implementa-
tion.

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Below follows a list of Swiss initiatives related to the Cazin project.


 Governance in Municipal Water and Environmental Development (2010-2012): The
project has supported the strengthening of local authorities and civil society capacities
in order to improve the work of administration and governance at the municipal level.
The project also advocated the creation, in the field of water and environmental sani-
tation, at the higher levels of government, of an environment (e.g. legal framework, in-
ter-municipal and inter-entity cooperation, cooperation between different departments
/ services, communication and coordination with other actors in the sector, etc.) which
would allow municipal level to satisfactorily perform its functions.
 During three years of project implementation (2010 - 2012) a Strategic Plan for Water
and Environment (SRPVOS) for Cazin municipality, for five key sectors, were devel-
oped: water supply, drainage and wastewater treatment, solid waste management,
flood control and local government and its partners
 Preparation of studies, project documentation and implementation of decentralized
collection and treatment of wastewater in the municipality of Cazin (local community
Ljubijankic): Municipality Cazin has through GOV-WADE Project and their own capac-
ities ensured funds for the construction of decentralized sewage network for
wastewater treatment for the priority pilot target area in the local community Ljubi-
jankic. The goal of the project is the improvement of the general hygienic situation
and the protection of sources of drinking water from Ljubijankic spring. This project in
the priority area includes the construction of:
- Central sanitary sewer in the central part of the local community Ljubijankic, with
the length of about 5,000 m
- Wetlands for waste water treatment with the capacity of 600 PE.
 Introduction to decentralized wastewater management in the Una-Sana Canton - DE-
CENT: The project should result in development of project documentation and con-
struction of decentralized sewage system with constructed wetlands for wastewater
treatment for approximately 400 people in Polje agglomeration - Municipality of Cazin.
In addition, it is expected that throughout this project the municipalities will strengthen
their own capacities to manage decentralized sewer sys-tems, as well as to strength-
en the capacities of local consultants, suppliers and contractors for design and con-
struction of constructed wetlands for wastewater treatment.
Besides the municipality of Cazin, the project is implemented also in the municipalities
of Bihac and Bužim. In addition to the municipal level, it is expected that the project
will strengthen the capacity of the Una-Sana Canton and ministries through the de-
velopment of cantonal framework for wastewater management. The project should
establish models and potential for replication in the Una-Sana Canton and beyond in
B&H.

Centre for International Cooperation and Development (CMSR) Slovenia:


CMSR is an independent, non-profit research and advisory organization working in the field of in-
ternational economic relations. Based on the Law on International Development and Coopera-
tion, Government of the Republic of Slovenia has authorized CMSR to, on behalf of the Govern-
ment, to implement the technical and operational part of international cooperation and develop-
ment.
 Sewage and waste water treatment in LC Stijena: Cazin Municipality has, in the late
2009, applied its project proposal for funding by the Government of the Republic of
Slovenia, to the Centre for International Cooperation and Development (CMSR).

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 The project proposal suggested the funding of decentralized sewage system with fa-
cilities for wastewater treatment (WWTP) for the local community Stijena in the munic-
ipality of Cazin. The project proposal has been assessed as eligible for funding, pri-
marily in the field of design and construction of WWTP, while, according to their rec-
ommendation, Cazin municipality should finance the design and construction of sew-
erage system with supporting facilities. For this project Preliminary and Primary de-
sign for collection and wastewater treatment in LC Stijena have been developed.

1.2.2 Existing General Plans and Documentation


During the past 30 years a significant number of spatial and urban planning documents has been
prepared concerning the infrastructure development of Cazin municipality.
The Consultant reviewed the following study-project documents (ref. Annex 2), that were provid-
ed by the Municipality of Cazin:
 The first Spatial Plan of the Municipality of Cazin had been adopted in 1984. The plan
was prepared by the Institute for Urbanism in Banja Luka. The preparation of this plan
was preceded by the detailed surveys structured in the large number of separate sec-
tor studies, among others, the study for water supply and drainage and treatment of
the waste water for the area of the Municipality of Cazin had been consulted.
 The spatial plan of the Municipality of Cazin 2002 - 2020, was prepared by the Insti-
tute for Architecture, Urbanism and Spatial Planning Sarajevo in 2006. For the water
supply sector, the analysis of the existing state (population and economy) has been
performed with a special review for the protection of drinking water sources. For the
needs of the preparation of this spatial plan, the data from the Hydro Technical Study
have been fed into the Spatial Plan 1984. Water supply in the area of the municipality
had been analysed through the options of the regional water supply concept, supply
by pooling and local distribution of the water supply of the City and the Municipality of
Cazin.
 The spatial plan emphasized the importance of integration of the existing local supply
systems to the level of unique and modern water supply systems for the entire area of
the municipality. In addition, it suggested the preparation of a strategy for the long-
term solution of the water supply of the residents and commercial clients of the Munic-
ipality. Along the strategic questions, the improvement measures for the protection of
drinking water sources are being particularly suggested to improving the drinking wa-
ter quality, increasing the coverage and the recommendations that are concerning the
development of future water resources.
 The urban development plan of the Municipality of Cazin 2002 – 2020 and the
amendments to the existing urban development plan were prepared by the Institute
for Architecture, Urbanism and Spatial Planning, Sarajevo in 2007. This planning ex-
ercise aimed at analysing the water supply situation in the area of the Municipality of
Cazin. For the water supply sector, the analysis assessed existing and potential water
sources, capacities and specific water consumptions of the population for the period
from 1981 until 1999. The existing water supply systemhad been analysed in detail for
each source, respectively the sub-system (Stovrelo, Vignjevici, Tahirovici and Mutnik).
The water supply plan for the period 2002 – 2020 included the detailed projection of
the necessary water quantities based on the specific consumption for the three plan-
ning periods (2002/2012/2022).

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A comparative overview of the most significant input data is given in Annex 2


The water supply concept for the urban area is particularly analysed due to the large percentage
of non-revenue water based on the assumption that large water quantities are lost in the water
supply systems of Vignjevici and Mutnik. The plan includes the analysis of the present and future
projection of the exploitation and protection of these sources. This improvement is addressed to
technical and institutional measures. Unclear at the moment is the allocation of specific funds
through the local budget.

1.2.3 Conclusions and Recommendations towards General Planning


By the review of the stated spatial planning documentation, it can be concluded that several con-
flicts occur. In the following, the Consultant would like to highlight the most important ones:
Demography

 The last population census was performed back in 1991.After the war a significant
migration happened from the territory of the Municipality of Cazin to the countries of
West Europe.
 For the preparation of the projection of population growth on the area of the Munici-
pality of Cazin different sources are being used : For 2010, the Federal Institute for
Statistics (62.468 inhabitants) and the Municipal Administration (69,560 inhabitants)
have been used.
 The natural population growth is significantly lower regarding the pre-war and its pro-
jections for the planning period. They vary from 0.5-06%.
Water supply

 In all of the consulted planning documents different figures are used.


 Specific consumption per capita per day is significantly overestimated (180-200 l/s)
compared to the measured consumptions (<150 l/s). The same is true for the projec-
tions.
 Specific industrial consumption is unrealistic as it foresees a very quick return to the
pre-war consumption,
 Non-revenue water is being projected rather than showing measures on how to de-
crease it.
 The maintenance of the drinking water quality on the sources is stated as one of the
future biggest challenges as well as the need to survey the possibility of the intake of
the additional quantities of drinking water.
Drainage and treatment of the waste water

 In all of the reviewed documents, the baseline data are varying


 The construction of one central and 18 decentralized WWTPs is proposed
 In several documents different locations of the future central WWTP are stated
 Separate systems for waste water drainage are proposed
 The specific water consumption per capita per day (250 l/cap/day, population 190
l/cap/day + industry, craft workshops and public institutions 60 l/cap/day) is signifi-
cantly higher the measured one, which is < 150 l/cap/day.
Storm water drainage

 For the calculation of the storm water quantities the data from the Federal Hydro-
meteorological Institute have been used for the Municipality of Cazin,

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 For the calculation of the relevant discharge capacities, the rain intensity of 170
l/ha/day, with a return period of 2 years has been used. Duration was set at 15
minutes.
 Different precipitation runoff coefficients were used in the reviewed documents.

1.3 Water Supply System

1.3.1 Existing Studies and Project Documentation


During the past 40 years a significant number of study-project documents has been prepared that
concern the construction of the water supply system in the Municipality of Cazin.
The Consultant reviewed the following project documents that were provided by the Municipality
of Cazin.

1.3.2 Period 1978 – 2004


According to the data on the available study-project documentation in the period from 1978 until
1989, surveys of ground water have been performed and extensive documentation has been
prepared for the sources Mutnik and Vignjevići (studies, detailed designs). In the period from
1985 until 1987, hydrogeological and sanitary surveys have been prepared sources of Vignjevica
Vrelo, Mutnik, Pajica Potok and Trzacka Rastela. After the war in 1997, the detailed designs have
been prepared for Tahirovici and implemented in 2000 under a loan agreement with Kuwait
Fund. The water supply system of Ljubijankici was developed in 2004 under a loan agreement
with the World Bank.
Sanitary protection zones were established for Vignjevici, Tahirovici and Mutnik in 2004.

1.3.3 Feasibility study for the rehabilitation of the water supply system Cazin (Una-Sana
Programme Office IBG Ltd Bihac, 2002).
The Feasibility Study for the reconstruction and rehabilitation of the water supply system in Cazin
has been prepared in the post-war period for the KfW Bank. The assessment was based on the
analysis of socio-demographic, socio-economic, institutional, technical, environmental and finan-
cial aspects. Also the general, legal, organizational and the financial status of the water supply
company have been assessed.
The main challenges were identified as the high percentage of non-revenue water (>66%), dete-
rioration of the drinking water quality, low efficiency of the operation of pumping stations, high
operation and maintenance cost, and organisational issues.
Unfortunately, the Municipality of Cazin did not accept the loan conditions offered by the KfW
Bank back then, and it decided to a new water supply subsystem Ljubijankici for which it received
a loan from the World Bank.
Instead of the reconstruction and rehabilitation of the existing water supply system the municipali-
ty decided for its extension to the north eastern part where the inhabitants did not have a regular
24-hour supply.
During the past few years, the original project concept proposed in the FS has been implemented
to a smaller extent and the percentage of non-revenue water decreased to approx. 52%.

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1.4 Wastewater Collection and Treatment

1.4.1 Existing studies and project documentation (wastewater collection)


In the past 30 years a considerable number of research-design documents related to the con-
struction of a comprehensive sewerage system and wastewater treatment has been developed.
But only few facilities of the mentioned system were actually built.
The documentation comprises the following components:
a) Conceptual design for the sewer and WWTP for Cazin Municipality – book I and II (1983/84,
Energoinvest-Higra, Sarajevo)
Main findings:
 The disposal of waste water covers the urban part of the municipality while the rural part
of the municipality is not considered.
 The separate sewer system with a total of about 65 km of sewers and about 30 km of
storm water pipelines has been proposed.
 The main waste water treatment (WWTP)was proposed west of Begova kafana settle-
ment. at the mouth of the Čajin potok into the river Mutnica.

b) Sanitary sewer of Cazin town - Final design (1986, Hidroprojekt Zagreb)


The final design was developed based on the previous Conceptual design of 1984 and it in-
cluded 8,044 m of the main sewer and about 30 km of secondary sewage network (about 10
km, minimum diameter of 200 mm and 20 km, minimum diameter of 300 mm). The construc-
tion of the proposed system has not been implemented yet.

c) Sanitary sewer of Cazin town – Innovation of the Final design (2000, Energoinvest-Higra Sa-
rajevo
An important change regarding the conceptual design dating back to 1983 is that the new lo-
cation for the central waste water treatment plant was closer (Slatinske bare - INCEL) to the
city by about 3.7 km. The total length of the main sewer according to this design was about
4.9 km

d) Conceptual design for collection and wastewater treatment in Municipality Cazin - Book I, II, III
and IV (2006, the Department of Water Resources Sarajevo)
This Conceptual design, developed at the level of a Master Plan, provides details for the con-
struction of a separate sewer system, a central sewage system and several (18) independent
decentralized systems with the planning period from 2005 to 2035. The length of the main
sewer of the central sewer system is approximately 16.5 km, with diameters of 300 to 800
mm. The project proposes the collection and waste water treatment for about 2/3 of the popu-
lation of Cazin Municipality.
The WWTP was proposed near the settlement Tržac, close to the state border and river Ko-
rana as the recipient. The design also includes the connection of secondary sewers from nine
suburban areas to the main sewer.

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Other more remote villages of the municipality should, due to the terrain, have decentralized
collection and treatment systems. In total, 18 sub-projects for decentralized wastewater treat-
ment with the capacity from 100 to 5000 PE had been proposed. The construction of commu-
nal septic tanks (below 100 PE), for part of the population in rural areas were also considered.

e) Final design for the section I of the main sewer (2007), the Department of Water Resources
Sarajevo) and Final design for the section II of the main sewer (2008, the Department of Wa-
ter Resources Sarajevo);
Aforementioned Conceptual design (Master Plan) for waste water collection for the entire mu-
nicipality of Cazin formed the basis for the development of the final designs of I and II sections
of the main sewer. For the first phase of the project (section I) the route in the length of ap-
proximately 7.0 km was designed, mostly through the urban city area, from the central part of
town to the mouth of the Radetina river into Mutnica respectively. Designed pipeline diameters
are DN 300 to DN 600 mm. For the second phase of the project (section II) the route in the
length of approximately 9.5 km was designed, with the pipeline diameter of DN 600 to DN 800
mm.
Secondary sewers that are not included in the final design should be connected to the main
sewer. Secondary and tertiary systems within the City are not included in the conceptual de-
sign.

1.4.2 Conclusions and recommendations


After revision and the analyses of the research-design documentation, the following can be con-
cluded:
 For the entire municipality of Cazin, a Conceptual design (Master Plan) for waste water col-
lection has been developed and serves the municipality of Cazin as a basis for further elabo-
ration of the necessary design for the construction of the new sewerage systems, both in the
urban area, as well as for decentralized sewer system in rural parts of the municipality.
 In several research-design documents reviewed by the Consultant, unfortunately, several
different locations for the construction of the main WWTP (Tržac, Ratkovac and Incel) were
proposed.
 Final designs for the construction of the main sewage collector with a total length of approx-
imately 16.5 km have been developed and the Municipality started the construction of the
main sewer. Unfortunately, detailed design documentation for construction of secondary and
tertiary sewage system, which is to be connected to the aforementioned main sewage col-
lector, has not been developed.
 Only separate sewerage systems have been designed, leaving the possibility open for the
connection of already constructed mixed system in the old part of the town. Two storm water
overflows are planned.
 Storm water collection is designed so as to be collected (roads, roofs, squares, concrete and
other surfaces, etc.) and transported, via shortest route, to the receiving water body, Čajin
potok. No treatment of these streams is planned.
 the new sewer system was designed with the specific water consumption per capita in the
amount of 190 l/c/d (urban area) and 180 l/c/d (rural areas), which is almost 20% more than
the current consumption.

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1.5 Current Legislation relating to Water and Environmental Protection


Further specific documents on legislation are quoted in the Environmental and Social Chapters.

1.5.1 Federal and Cantonal Laws


The water and environment sector in the Una-Sana Canton and Cazin Municipality are regulated
at several levels:
 Water Law of the Federation of Bosnia and Herzegovina (published in 2006 in Official Jour-
nal of the Federation B&H, No. 70/06, but came into force on 1 January 2008)
 Water Law of Una-Sana Canton (published in 2011 In the Official Gazette of USC, No.
4/11);
 Law on Waste Management (Official Gazette of FB&H 33/03)
 Law on Environmental Protection of the FB&H (Official Gazette of FB&H 33/03)

1.5.2 Decrees
 Decree on Conditions for Discharge of Wastewater into Natural Recipients and Public Sewer
Systems (Official Gazette of FB&H ", No. 6/12)
 Decree on Building Structures and Interventions Important for the Federation of Bosnia and
Herzegovina and on Building Structures, Actions and Interventions that May Largely Affect
Environment, Life and Health of People in the Federation of Bosnia and Herzegovina, for
which the urban development approval is issued by the Federal Ministry of Physical Plan-
ning ("Official Gazette of F B&H", No. 85/07 and 29/08)
 Decree on Building Structures and Interventions Important for Una-Sana Canton and on
Build-ing Structures, Actions and Interventions that May Largely Affect Environment, Life
and Health of People, for which the urban development approval is issued by the Ministry of
Construction, Physical Planning and Environment of Una-Sana Canton ("Official Gazette of
F USC", No. 22/11)

1.5.3 Other Legislation


Relevant laws and regulations governing relations between the Canton, Municipality and the
Company are as follows:
 Law on Communal Activities USC (Official Gazette of USC, No. 4/11);
 Law on Physical Planning and Construction (Official Gazette of USC 10/11, 13/11)
 Law on Waste Management of USC (Official Gazette of USC 4/12)
 Law on Public Enterprises of the Federation of Bosnia and Herzegovina (Official Journal of
FB&H 8/05, 81/08;
 Law on Companies of the Federation of Bosnia and Herzegovina (Official Gazette of FB&H
23/99)
 Law on Public Procurement of Bosnia and Herzegovina (Official Gazette of FB&H 49/04,
19/05, 52/05, 8/06, 24/06, 70/06, 12/09, 60/10)
 Internal documents of the Company.

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1.5.4 Municipal Regulations


 Decision on Communal Order (Official Gazette of the Municipality of Cazin 3/07),
 Decision on the Harmonization of the Decision on Establishing the PUC "Vodovod" ltd Cazin
as of 23 November 2002 in accordance with the Law on Enterprises and Law on Public En-
terprises.
In line with obligations under the Water Law and the Law on Communal Activities of USC Munici-
pality of Cazin has drafted the following decisions:
 Decision on the Conditions for Connection to Public Sewerage system and Connection Fee
in the Municipality of Cazin (draft)
 Decision on Wastewater Collection and Treatment in the Municipality of Cazin (draft)
 Decision on Communal Order (draft).

1.6 Structure of the Report


The report is divided into the parts “Baseline Study” and “Feasibility Study and comprises the fol-
lowing main chapters:

EXECUTIVE SUMMARY

VOLUME 1: BASELINE STUDY

1. INTRODUCTION

2. SOCIO-ECONOMIC CHARACTERISTICS OF CAZIN CITY

3. NATURAL CONDITIONS AND PUBLIC HEALTH

4. TECHNICAL ASSESSMENT OF THE COMPANY

5. INSTITUTIONAL AND MANAGEMENT ASSESSMENT

6. FINANCIAL PERFORMANCE

7. ENVIRONMENTAL AND SOCIAL AUDIT

8. LONG-TERM INVESTMENT PROGRAMME

VOLUME 2: FEASIBILITY STUDY

9. PRIORITY INVESTMENT PROGRAMME (PIP)

10. FINANCIAL AND ECONOMIC ANALYSIS

11. ENVIRONMENTAL AND SOCIAL ANALYSIS

12. ENVIRONMENTAL AND SOCIAL PLANS

13. FINANCIAL AND OPERATIONAL PERFORMANCE IMPROVEMENT


PROGRAMME (FOPIP)

14. FINANCIAL AND OPERATIONAL PERFORMANCE IMPROVEMENT


PROGRAMME (FOPIP)

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2. SOCIO-ECONOMIC CHARACTERISTICS OF CAZIN CITY

2.1 Location andUrban Development of CazinCazin is located in the north-western part of


Bosnia and Herzegovina, the Federation of Bosnia and Herzegovina and belongs to the Una-
Sana Canton. The following figure shows its geographical location:
Figure 2.1: Location of Cazin within BiH

Cazin is situated at 376 m above sea level, with moderate continental climate. The average an-
nual temperature is 9.5°C, with annual amplitude of temperature of 20.6°C. The relief is low and
hilly with watercourses valleys between the hills. The highest peak (797 m) in the area is Mala
Gomila. The territory of the Municipality Cazin covers 356 square kilometres.
The proximity of Cazin to major centres in the Republic of Croatia and some touristic destinations
such as the National Park "Plitvice Lakes", the rivers Korana and Una, and the thermal water
sources in Gata, offers favourable conditions for the economic development of the municipality.
Through the main road M-4.2 Cazin is well connected to the Cantonal centre Bihac and to other
cities in the FBiH and RS.
Cazin Municipality consists of 54 settlements organized in 23 local communities.

2.2 City General Development Plan


The Municipality of Cazin has developed an Urban Master Plan for the period 2002 – 2022. This
Plan designates areas for future residential development as well as creation of an industrial zone
for small and medium enterprises, construction of a road and other communal infrastructure. Fur-
thermore, the Plan is focused on intensifying the development of agriculture and tourism.

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A Spatial Plan is in the preparatory phase and is being developed in line with the federal Spatial
Plan.
With regard to the water sector, the Spatial Plan foresees improvement of water sources protec-
tion and activities for identifying new potable water sources.
In 2010 Cazin Municipality elaborated a strategic plan for water and environment which provides
the main guidelines for improvement of these sectors. A significant number of projects included in
this plan have already been implemented with financial support from the Municipality and foreign
donors, local and international financing institutions.

2.3 Economic Development of Cazin


Activities that employ the largest number of people are: trade, processing industry and construc-
tion. Additionally, agriculture and tourism have also important role in the development of the mu-
nicipality.
Out of the total number of registered legal entities by sector in 2008 and 2009, the highest num-
ber of legal entities is in the wholesale and retail trade and maintenance, about 40%. It is fol-
lowed by other social and service activities (17%) and the processing industry (12%).
The Municipal department in charge of economic development reports that in 2009 there are
about 936 registered private enterprises, most of them in the service sector: craft shops and res-
taurants. The following graph illustrates the share of the different economic activities in Cazin
over the period 2007-2009:

Figure 2.2: Economic Activities in Cazin Municipality

2.4 Population and Households

2.4.1 Population data


The socio-economic data in BiH is in general very scant. One major reason for this is that the last
population census was in 1991 and since then the statistics has not consistently monitored the
social developments and especially the trends at the level of smaller towns.
The following graph illustrates the movements of Cazin population since 1991 as reported by the
municipality:

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Figure 2.3: Cazin Population Development, 1991 - 2009

Population growth in Cazin Municipality

In 1991 the population of Cazin was 63'406 which decreased substantially during the war and
has recovered to the level of 62'468 in 2009. The ethnic composition of the population is domi-
nated by the Bosnians group.

With a population density of 175 inhabitants per km² Cazin is among the densest populated mu-
nicipalities in the Federation of Bosnia and Herzegovina and BiH as well.

Figure 2.4: Population Density

Population density in 2009 (inhabitant/km)

In recent years, the natural population growth is positive and constant with an average rate of
4.29 ‰ during the last four years. This rate is higher than the population growth rate in BiH. Tak-
ing into account this natural growth rate, not including a potential change in population due to mi-
gration, the total population in future could change significantly, and therefore there could be ad-
ditional pressure on existing infrastructure in the municipality (communal, school, health).

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Figure 2.5: Population Natural Growth

Natural population growth per 1000 inhabitants

Some twenty years ago the urban population was less than 20% of the total, as the following fig-
ure illustrates:

Figure 2.6: Urban and Rural Population in Cazin Municipality in 1991:

Although currently there is no official data on the rural and urban population, the migration to the
towns is very strong and as a result we could assume that the share of the urban population has
grown.
The changes that occurred in the age structure of population are related to the decrease of
young people (under 14 years of age) in the total population and increase of people over 65
years.
The current population structure is characterized by a significant proportion of the working age
population (14-64 years).
Finally, the social developments in Cazin municipality are largely determined by the economic
migration abroad. Although it is recognized that the official statistics fails to propose exact figures
in this respect, the Cazin municipality estimates that there might be around 13'000 people work-
ing abroad. We have assumed that these people are included in the population count mentioned
above.

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2.4.2 Household Data


The municipality of Cazin is administratively divided in 23 local communities, each one with its
own council. According to information from these local communities’ councils, the number of
households in the municipality is 16’397. With total reported population of 62'468 people the av-
erage household size thus is 3.8 people. Other estimates indicate 4 or 4.2 people, however they
seems unjustified. Based on detail data from Vodovod customer database, the average number
of people in a household is 3.6.

2.5 Employment and Income


About 48% of the total Cazin population or 44’000 people are in working age. Out of this 48% are
female and 52% male.
Official information on employment and unemployment are not systematic and adequate. The
reasons for this might be related mainly to two factors: (i) very high extent of shadow economy
where no data is reported, and (ii) very high temporary economic migration in the neighbouring
and western countries.
The Cantonal Unemployment Department reports that in January 2012 the officially registered
employed persons in Cazin were 5’303 while the unemployed were 9’957. In addition, Cazin mu-
nicipality estimates that some 3’300 are self-employed in the agricultural sector and some
13’000, mostly men, work abroad. In total these groups amount to over 31’000 people out of the
total working force of 44’000. The difference is not accounted for, so we can assume that they do
not work but are not registered as unemployed.
With working people of total over 21’000 and estimated households of 16’397 we can conclude
that there are 1.28 bread-earners per family.
The following table indicates the sectors in which the officially employed people are occupied:

Table 2.1: Overview of employment by sectors – data for USC and Cazin Municipality for 2009
Sector Employed in USC Employed in Municipality per Location
per sectors sectors coefficient

1 2 3 4 5 6
Agriculture, hunting and 1.091 3,3% 89 1,6% 0,74
forestry
Fishing 55 0,2% 0 0,0% 0,00
Mining and quarrying 141 0,4% 35 0,6% 0,18
Processing industry 5.680 17,4% 1.042 19,2% 0,99
Energy, gas and water 880 2,7% 105 1,9% 0,62
production and supply
Construction 2.357 7,2% 605 11,1% 1,80
Retail and wholesale 6.588 20,2% 1.290 23,8% 1,31
trade and maintenance
Hotels and restaurants 1.902 5,8% 265 4,9% 1,16
Transportation, storage 1.663 5,1% 269 5,0% 0,73
and communications
Financial mediation 733 2,2% 81 1,5% 0,61
Realestate, renting and business 889 2,7% 112 2,1% 0,55
services
Public administration and defence 3.273 10,0% 373 6,9% 0,63

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Sector Employed in USC Employed in Municipality per Location


per sectors sectors coefficient

1 2 3 4 5 6
Education 3.950 12,1% 754 13,9% 1,61
Health and social service 2.354 7,2% 232 4,3% 0,63
Other social and service industry 1.027 3,2% 176 3,2% 0,83
Total number of employed 32.587 100,0% 5.428 100,0%

Cazin is a trading centre of the Una-Sana Canton, which could be attributed to its favourable ge-
ographical position. According to the Federal Bureau of Statistics the majority of employees are
in trade (23.8%), processing industry (19.2%) and education 13.9%. The employment level in the
construction sector in the municipality of Cazin is higher (11.1%) compared to the level of em-
ployment in the Canton (7.2%) and the Federation (6.2%). The same applies to the trade sector
where the level of employment in the municipality is 23.8% while on average it is 20.2% in the
Canton and 18.2% in the Federation (18.2%).
There is no available data on the salary by economic sector. The only available estimate is pro-
posed by the Cazin Municipality and it indicates an average salary of 668 KM in 2009 as com-
pared to 792 KM in Federation BiH.
There is no data at city’s level on the net revenue coming from people working abroad. The na-
tional statistics report just an annual lump sum which cannot be apportioned to Cazin. Therefore
we can assume that the income of households in which at least one person works abroad would
be considerably higher than the reported average salary. With 13’000 people working abroad and
over 16’000 households, it would be reasonable to assume that at least half of the households
have income which is not accounted for by the statistics and which is much higher than the in-
come of households depending on domestically generated salaries and wages. An indirect sup-
porting argument of this estimate could be the housing fund of the whole municipality in which re-
cently constructed or renovated two-storey houses constitute more than 90% of the total. This
comes to confirm the assumption that the undeclared households’ income is quite high but the
lack of any relevant data does not allow ascribing a monetary value to it.
The types and levels of pensions for the Federation, Canton and Cazin for 2009 are indicated be-
low:

Table 2.2: Average pension in Federation of B&H and Cazin Municipality

Type of pension Total


Age Disability Family
No. Amount No. Amount No. Amount No. Amount Aver.
KM million KM KM KM pension
million million million (KM)
Cazin 925 0.334 962 0.288 1'387 0.396 3'274 1.018 311.21
USC 7'520 2.903 5'175 1.518 8'201 2.417 20'896 6.839 327.31
F B&H 147'326 63.783 71'862 23.372 106'296 33.966. 325'484 121.12 372.13
(Data from the Report on paid pensions from regular payment for April 2012 – Federal Pension and Disability Insurance Institute
Mostar).

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2.6 Social Services


Social protection of population in the municipality of Cazin is achieved through the work of the
Center for Social Welfare Cazin, established and financed by the municipality. Additional funds
are provided by the relevant Cantonal Ministry of Health and Social Welfare and from the budget
of the Federal Ministry of Labour and Social Policy.
Material aid provided by the Center is regular social aid, financial compensation for unemployed,
allowance for care and service etc. The provision of material aid is regulated by the Law on
Social Protection (Articles 10-15) and the Centre for Social Welfare is obliged to prepare a list
consisting of the social groups entitled for support.
Municipal Councils in Una-Sana Canton may provide subsidies for various social categories by
financing costs of their utility services.

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3. NATURAL CONDITIONS AND PUBLIC HEALTH

3.1 Detailed Description of Climate


Climatic characteristics of the wider area of Cazin Municipality are defined by its regional and ge-
ographic position and relief build. As the Municipality is positioned somewhat deeper into the
continent (approx. 67 km from the coast line); it’s climate is characterized by intermediate climatic
properties – both maritime and continental, with cold winters and warm and dry summers.
The area of Cazin Municipality is characterized by distinct vertical altitudes, so vertical climate
zonality is quite pronounced in this area. This zonality is enhanced by relief forms which are re-
lated to pronounced gradients, therefore, it can be stated that the area has sub-mountainous cli-
matic characteristics.
Figure 3.1: Annual temperature at MS Cazin

Based on perennial observation of meteorological data, the mean annual temperature is 9, 5 °C.
Annual temperature amplitude is 20, 6 °C. The coldest months are January, with a mean temper-
ature of – 1, 4 °C, December (- 0, 8°C), and the warmest are July (19, 2 °C) and August (18,
7°C). The remaining summer months have temperatures below that average. As the terrain ele-
vation increases, the temperature is reduced by 0, 5 to 0, 6°C for every 100 meters. Snow is typi-
cal for January, when temperatures are lowest. Snow retention period for January is 7 days and
for December, February and March the corresponding period is 6 days. The remaining winter
months have temperatures slightly higher than the season’s average, which is approx. 0,2 °C.
2
Mean annual precipitation in this area is 1,213 mm/m . Lower parts of the Municipality have ap-
2 2
prox. 1,194 mm/m of rain, and higher planes of the area receive approx. 1,300 mm/m . Months
with the largest amounts of precipitation are April, May and June, and with the least amounts are
in December and January.
Potential evapotranspiration (PET), measured at the Bihać Meteorological Station amounts to
615 mm/year. In Cazin, evaporation is taken as 0,85 of the PET value in Bihać and for water sur-
face it is 1.25 of the PET value for Bihać MS.

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In Cazin Municipality, the most frequent winds are northern winds (occurrence 19, 3 %) and the
rarest are south-eastern winds (occurrence rate 3, 6 %). Highest velocity winds are south and
south-eastern, with a speed of 2,2 m/s, and lowest velocity winds are northern and eastern (1, 6
m/s).
Figure 3.2: Occurrence (a) and mean velocity (b) of winds in Cazin

3.2 Geomorphology
The area of the considered region is characterized by mildly sloping terrain at Skokovi – G.
Koprivna – D. Koprivna and relatively flat terrain at Čoralići, D. Baraka and the wider area of Ca-
zin town.
The greatest absolute elevation is in the northern and eastern part of the terrain (515 m a.s.l.)
and the lowest is in Čajin Stream bed and its entry into Mutnica River (270 – 272 m a.s.l.).

Figure 3.3: Morphology of Cazin Municipality with inhabited settlements by size (Source: Digital
atlas of BiH)

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This terrain belongs to the outer Dinarides and from morphological point of view is very charac-
teristic in different formations and processes. Generally, two morphological units can be differen-
tiated:
 northern unit – characterized by hilly undulating land with striking ravines, pronounced karstifi-
cation process, karst formations in the areas of Žunići, Velagići and D. Koprivna,
 southern unit – characterized by gently sloping terrain of the Miocene plateau where continu-
ous and intermittent streams have formed the present day relief. Areas near streams are
characterized by swamp formations due to slight inclines, meandering of flat coasts over-
grown with vegetation and erosion deposits.
Complex tectonic movements have basically shaped the present day relief. Main fracture struc-
tures of the Dinarides have been broken with numerous vertical faults that, in certain areas, the
Dinaride’s continuity is practically broken.

3.3 Geology
The geological build-up of the terrain is very complex. It consists of Mesozoic and Cenozoic sed-
iments in complex tectonic relationships which affects global hydrogeological relations on terrain.
The oldest formations in Mutnik, Vignjevići and Tahirovići are sediments of Middle Triassic with a
thickness of about 400 m. They occur as massive and stratified dolomites.
The Upper Triasic continually overlays the Middle Triasic. It contains approximately 92 – 96 %
dolomitic components, and is partially silicified with a strong laminar structure. These layers are
400 – 600 m thick.
Middle Miocene makes up the catchment area of Mutnik source with two distinct layers:
 limestones and limestone marls with intercalations of tuff and coal,

 conglomerates, marl, clays and sand.


Quaternary formations are quite widespread in the Mutnica river valley and its tributaries.
Rock creep can be found in steep gradients in the form of loose earth covering, overlying the
parent rock. It is composed of fragments of Triassic and Jurassic limestone and dolomite mixed
with ruddle.
Marsh sediments are usually linked to rivers Mutnica and Toplica. They are composed of multi-
colored sandy and marshy clays, covered in humus and overgrown with marsh vegetation.
Alluvial deposits composed of gravel, sand and sandy clays are found in beds of Mutnica River
and its larger tributaries: Krivaja, Orozov Stream, etc.
The tectonics of this area plays a major role in the hydrogeological aspect. Since the terrain in
good portion consists of solid compact rock, the structural composition is characterized by rup-
tured deformations of bloc tectonics. Major fault lines and borders between structural blocs are
mostly of Dinaric direction, while minor fault zones have various spatial orientations.

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Figure 3.4: Morphology of Cazin Municipality with inhabited settlements by size (Source: Digital
atlas of BiH)

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3.4 Hydrogeological Aspects

3.4.1 Surface waters


In general, this area is characterized by relatively big differences in water network density, dis-
charges in major water sources of the area, etc. Waters of this area belong to three catchment
areas: Korana River catchment area (through its tributary – Mutnica River), Glina River catch-
ment area (through Pivnica Stream and its smaller tributaries) and Una River catchment area
(through the catchment area of Koprivska River).
Mutnica River is the longest river of Cazin Municipality, with a length of approx. 19, 5 km. It origi-
nates from karst sources and mostly flows in south – north direction up to Hušići village where its
largest tributary, Čajin Stream, joins it.
Čajin Stream originates northeast of the town centre from a karst source and has a total catch-
ment area of approx. 63 km2. After the confluence of Čajin Stream and Mutnica River, it abruptly
changes direction westward until it enters Korana River.

3.4.2 Groundwater
The catchment areas of Mutnik, Vignjevići and Tahirovići, according to porosity, intensity and
depth of karstification, general permeability and mutual spatial orientation of its geological units
have the following hydrogeologic mediums:
 high hydraulic and very high hydraulic-conductivity aquifer:
 permeable aquifers with intergranular porosity,

 permeable aquifers with fracture and cavernous porosity;


 very low hydraulic-conductivity aquifers and low hydraulic-conductivity aquifers,

 impermeable rock media


Permeable aquifers with intergranular porosity are found in alluvial planes of the rivers Mutnica
and its larger tributaries: Krivaja, Orozov Stream, Radetina and Gračanica. Fractured and cav-
ernous porosity and permeable aquifers are found in parts of the terrain with dolomite and lime-
stones, interchanging in the geological column, thus creating aquifers with varying yields.
Triassic, Jurassic and Cretaceous carbonates: dolomites and lime stones are the main aquifer
medium of the catchment area of Vignjevići Vrelo, Mutnik and Tahirovići sources. Groundwater
flow directions are mainly caused by tectonics i.e. privileged groundwater pathways, which are
determined by the position and transmissivity of fault structures. Older faults which are of north-
west-southeast direction enable migration of groundwater towards the north from the carbonate
plateau west of Ostrožac, which supplies Vignjevići and Mutnik with water. Major flows of
groundwater are mostly directed towards Mutnik. Tahirovići is a separate source with a small
catchment area.
Very low hydraulic-conductivity mediums are found in the north and northwest terrain and repre-
sent a relative roof layer to the karst aquifer, thus Mutnik source is an artesian well.
Vignjevići source is located on Brown deep and medium deep earth on solid lime stones and do-
lomites. These soils require careful management because of their profile depth and porous base,
making their absorption capacity reduced and surface and groundwater eutrophication hazard
significantly increased.

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Mutnik source is located south of Vignjevići on Brown earth on clay, with occurrence of alluvial-
diluvial Gleyic soils along the watercourse valley. Both of these soils are heavy mechanical soils
so there is no danger of vertical percolation of pollutants into groundwater. Still, consideration
should be given to surface erosion which can be very pronounced on slopes due to limited verti-
cal percolation into subsurface layers because of its clayey character.
Tahirovići source is located on Alluvial-diluvial Gleyic soil, while its immediate vicinity consists of
Brown Rendzina on tough lime stones. Due to its Gleyic characteristics, this soil has an imper-
meable or poorly permeable base. This makes vertical percolation limited to surface layers and
no percolation of pollutants is possible to groundwater, but only runoff to surface waters.
Karst sources in Jurassic sediments are low in yield (about 0, 02 – 2, 0 l/s). Čajin Stream source
is the only one with a higher yield (15 l/s). Sources in Miocene sediments are also of low yields
(0, 1 – 0, 8 l/s).

3.4.3 Flow of Mutnica River and Čajin Stream and their impact on Mutnik and Vignjevići
sources
In the catchment areas of Mutnik and Vignjevići, evacuation of surface waters is performed by
Mutnica watercourse and available surface hydrographic network of its tributaries. All surface wa-
ters migrate towards Korana River in Croatia. Impact of surface waters from Mutnica and its tribu-
taries is possible on Mutnik and Tahirovići sources, as they are located in the immediate vicinity
of the water source bed.
Water is drawn using vertically drilled wells from Mutnik source, at a depth of up to 300 m in karst
aquifer. When in stationary mode, there is no possibility of surface water contamination from
Mutnica River; however, during pumping, due to pressure loss and terrain configuration (lime-
stone sediments make up the surrounding area of Mutnica River) this possibility exists.
No systematic measurements have been undertaken on Mutnica River and Čajin Stream, so their
discharge rates have been calculated using approximate method, by analysing specific discharge
of Korana and Glina catchment areas. Discharge rates for these rivers are given in the table be-
low.

Table 3.1. Discharge rates


3
Discharge rates Q (m /s) Specific
Orographic
Water level mean dis-
Watercourse catchment
station (profile) 2 Qmed Qmin Qmax charge
area (km ) 2
(l/s/km )
Korana Velemerić 1490 29,5 2,94 566 19,9
Glina Glina 1145 18,1 2,86 450 ? 18,8
Mutnica Mutnik source 24 0,427 0,050 > 20 17,8
Čajin Stream Mouth of Mut- 60 1,07 0,150 > 35 17,8
nica River

Geologic and hydrogeological relations and calculated discharge rates indicate that recharge of
these sources is mostly performed by vertical infiltration and seeping of rainwater in distinctly
karstic parts of the catchment areas, and most probably by redistribution of water in the karstic
cavernous system. This leads to a conclusion that the effect of surface water sources is not dom-
inant on yields of the sources in the area.

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3.5 Assessment of Public Health in Cazin


Primary public healthcare services in Cazin are provided by Health Centre Cazin (Dom zdravlja
Cazin), which has one emergency unit, 7 teams of family healthcare, 14 family infirmaries, one
diabetes centre and one pregnancy centre.
The structure of medical personnel employed in these facilities is: 6 general practitioners, 19
specialists, 3 gynaecologists, 7 dentists, 86 technicians and 71 employees of other professions.
Socially endangered people and members of their family have access to public health services
via the Centre for Social Work which provides health insurance for these persons.
Right to health insurance is available to all persons, independent of their social status, who have
the following medical conditions: cerebral palsy, leukaemia, malignant diseases, severe diabetes,
TBC and celiac. Right to healthcare, regardless of their social status, is available to all children
from birth to school commencement, as well as seniors over the age of 65.
Monitoring of public health services is provided by the Institute for Public Health of Una-Sana
Canton (Zavod za javno zdravstvo USK). Their core responsibilities are to control infectious dis-
eases through surveillance, analysis, treatment and prevention. With the aim of surveillance, con-
trol and prevention of water borne diseases, Institute conducts potable water sampling and test-
ing.
The Company is required by the Law on Waters of the Federation of Bosnia and Herzegovina
(Official Gazette of FBiH, no. 70/06) and Regulation on Drinking Water Health Safety (Official
Gazette of BiH, no. 40/10) to perform regular potable water sampling and testing. The legislation
does not stipulate exact locations of sampling; however, it provides guidelines. Sampling and
testing of potable water is carried out twice per month. During each sampling event, a total of 10
to 12 samples are collected at points of interest to the Company, both raw (water sources) and
treated water (“hotspots” - sources which supply schools, restaurants, cafes etc.). Water is tested
by the Institute for Public Health of Una-Sana Canton. Institute for Public Health sends the results
of water testing to the Company within 3-4 days. In case any of the samples are not in accord-
ance with potable water parameters set by the national regulation (which is in accordance with
EU Directive on the Quality of Water Intended for Human Consumption), the Institute for Public
Health immediately informs the Company by phone. Otherwise, no specific reporting procedure
exists between the public health institute and the Company.
The table below gives the bacteriological and chemical quality of water (regular analysis of raw
and potable water performed by the Institute for Public Health of Una-Sana Canton) for 2010 and
2011:
Table 3.2: Water quality by sources (results from regular analysis of raw and drinking water
quality, resources, network and residual chlorine concentration)

Data in 2010
Bacteriological quality Chemical quality
Negative samples Positive samples Negative samples Positive samples
180 64 211 33
Data in 2011
188 39 220 7
Source: PUC “Vodovod”

Major rainfall causes ammonia and faecal bacteria to occur periodically at water sources, and as
neither the Company nor any other authority monitors groundwater levels and its quality, no spe-
cific data exists on the impacts of waste water on the groundwater table of the area.

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The table below gives a more detailed breakdown of water quality by water source (data for
2011):
Table 3.3: Water quality analysis of Cazin's watersources for 2011

SOURCES
PAJIĆA
VIGNJEVIĆI MUTNIK TAHIROVIĆI LJUBIJANKIĆI STOVRELA
STREAM
No. of
No. of No. of No. of No. of No. of
bacteri- No. of No. of No. of No. of No. of No. of
bacterio- bacterio- bacterio- bacterio- bacterio-
MONTH

ological chemical chemical chemical chemical chemical chemical


logical logical logical logical logical
anal- analyses analyses analyses analyses analyses analyses
No.

analyses analyses analyses analyses analyses


yses
Neg. results

Neg. results

Neg. results

Neg. results

Neg. results

Neg. results

Neg. results

Neg. results

Neg. results

Neg. results

Neg. results

Neg. results
Pos. results

Pos. results

Pos. results

Pos. results

Pos. results

Pos. results

Pos. results

Pos. results

Pos. results

Pos. results

Pos. results

Pos. results
1 I 4 - 4 - 3 1 4 - 4 - 4 - 1 3 4 - 1 1 2 - 2 - 2 -
2 II 2 1 3 - 4 - 4 - 3 1 3 1 4 - 4 - 2 - 2 - 2 - 2 -
3 III 4 1 5 - 4 - 4 - 4 - 4 - 3 1 3 1 2 - 2 - 2 - 2 -
4 IV 4 - 4 - 4 - 4 - 4 - 3 1 3 1 4 - 2 - 2 - 2 - 2 -
5 V 4 - 4 - 3 1 4 - 4 - 4 - 3 1 4 - 2 - 2 - 2 - 2 -
6 VI 4 - 4 - 3 1 4 - 1 3 3 1 1 3 3 1 2 - 2 - 1 1 2 -
7 VII 4 - 4 - 3 1 3 - 2 1 3 - 1 3 4 - 1 - 1 - 1 1 2 -
VII
8 I
4 - 4 - 3 1 4 - 4 1 5 - 3 1 3 1 1 - 1 - 1 1 2 -

9 IX 4 - 4 - 4 - 4 - 4 - 4 - 1 3 4 - 1 - 1 - 2 - 2 -
1
X 4 - 4 - 4 - 4 - 4 - 4 - 2 2 3 1 1 - 1 - 1 1 2 -
0
1
XI 4 - 4 - 4 - 4 - 4 - 4 - 3 1 4 - 1 - 1 - 2 - 2 -
1
1
XII 2 - 2 - 2 - 2 - 1 - 1 - - 2 2 - 1 - 1 - - 1 1 -
2
4
Tot 2 50 - 41 5 45 - 39 6 42 3 25 20 42 4 17 1 18 - 18 5 23 -
8
Source: PUC “Vodovod”

The Health Centre Cazin provided the basic data on the water borne diseases observed in Cazin
Municipality.

Table 3.4: Data on water borne diseases in Cazin Municipality

Year
Diseases 2012
2009 2010 2011 Total
5 months
Hepatitis - - - - -
virosa (A)
Enterocolitis 31 25 43 23 122
Dysenteria - - - - -
Salmoneloza 2 1 2 - 5
Source: Health Centre Cazin

A characteristics of water borne diseases is that they are transmitted via the fecal-oral route,
meaning that the causes of illness are excreted from infected hosts (as a source of infection) in
faeces and urine and enter the new host through orally or through the lining of the digestive tract.
These diseases have a pronounced seasonal character - they are more common in sum-
mer/autumn periods - and have a hygienic and epidemiological importance in areas where sew-
age system is not managed properly or where the supply of hygienic water is insufficient.

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Some areas of the Municipality are not connected to the communal water supply system, but
have local sources which are not controlled by the Institute for Public Health. These sources are
not disinfected accordingly, and outbreaks of waterborne diseases have been noted in communi-
ties that are supplied by means of private sources (most likely shallow wells and surface waters).
One water source at Mutnik well field has been found unsuitable for drinking, with noted amounts
of bacteria as pumps are located at only 60 m depth. -This water source has been closed for a
longer period. The Company stated that insufficient funds prevent them from pumping water from
greater depths.
Another significant problem is the lack of any wastewater collection system for approximately
2,400 households. They have local septic tanks which are not constructed to meet EU or national
standards, often of faulty construction, and wastewater is either dumped at the nearest water-
course, or spread informally on the surrounding ground, where cattle is sent for grazing, thus in-
creasing the possibility for infections. There is no authorized company for maintenance of these
septic tanks, and the Company has no control over them, as they are considered private proper-
ty.
All industrial wastewater, which amounts up to 20% of overall wastewaters, including oils, lubri-
cants, paints, butchers’ shops wastewater, etc. is also discharged into nearest watercourses, and
no monitoring systems nor does information on quantities or types of water pollution exist.
Generally, the inhabitants show a low level of awareness regarding problems in waste water
management and treatment (Local Environmental Action Plan of Cazin Municipality, 2011).

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4. TECHNICAL ASSESSMENT OF THE COMPANY

4.1 Service Area


The service area for water supply of the Company covers almost the whole surface of the Munic-
ipality of Cazin. The Company’s consumer area includes the town and 54 surrounding settle-
ments, which represents 97.5% of the inhabitants of the entire municipality. There are a few small
rural villages and settlements in remote areas, which have their own small local schemes and are
not operated by the Company. There are no connections to neighbouring municipalities.
The water supply system of Cazin consists of the four principle systems of VIGNJEVICI, MUT-
NIK, TAHIROVICI and LJUBIJANKICI, and two small subsystems STOVRELA and HODO-
ROVAC. We have decided to utilize this division of the water supply system of Cazin for our as-
sessment. It allows consideration of individual characteristics of the different systems for the
analysis as well as for design and development of interventions.
The Technical Sector of Company JKP “VODOVOD'' CAZIN is concentrated on the urbanized
settlements and areas of the Municipality of Cazin. The service areas of the water supply net-
works, of the sewerage networks and wastewater management in fact are not functionally con-
gruent, since very few households in Cazin city are connected to sewer system. The water supply
network covers 97.5 % of the population and local economy of the entire Municipality of Cazin –
urban, rural and single households.
2
Total Service area urban and rural: 35,494 ha = 354.94 km
2
Service area regarding to sewerage networks refers to Cazin city: 41 ha = 0.41 km
Based on the registered consumers in the service areas, the resulting average population density
is in the range of 176 inhabitants per km2. This is considered a medium level density in the Mu-
nicipality of Cazin.
Maps of the service area will be added in the draft final report

4.2 Customers and Consumption

4.2.1 Customer Structure


The Company serves two main groups of customers: residential and legal entities.
Residential consumers occupy two distinct types of housing:
 one-family homes, which represent more than 90% of housing, and
 multi-storey apartment buildings.
While 97% of the population is connected to water supply, only 10% of the total residential con-
sumers are connected to the sewage system; the rest of the population have septic tanks (soak
away pits that either infiltrate into the karstic underground or into the next water course). The fol-
lowing table summarizes the number of connections by consumer groups:

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Table 4.1: Consumer structure of VODOVOD


Water Connections 2008 2009 2010 2011
Population 13936 14429 14737 15'212
Legal entities 792 849 872 878
Total 14'728 15'278 15'609 16'090

Wastewater Connections 2008 2009 2010 2011


Population 1560 1627 1627 1'624
Legal entities 495 495 484 498
Total 2'055 2'122 2'111 2'122

It is expected that with the completion of the Ljubijankici water supply project in 2012 the number
of the residential consumers connected to the water supply system will reach 15’402 and the
number of legal entities – 887.
For all consumers that are connected to the sewage system, the volume of wastewater is consid-
ered equal to the water consumption.

4.2.2 Water Consumption and Wastewater Collection (as billed)


The water consumption and wastewater collection for the last four years has been constant with
slight increase in 2011 when completed sections of the Ljubjanciki water supply system were
commissioned:
Table 4.2: Annual water consumption by categories
Billed Water Consumption, m3 2008 2009 2010 2011
Population 1'566'824 1'784'395 1'774'156 1'869'535
Legal entities 227'968 205'597 200'311 191'135
Total 1'794'792 1'989'992 1'974'467 2'060'670

Billed Wastewater Collection, m3 2008 2009 2010 2011


Population 208'632 209'868 199'320 204'113
Legal entities 125'961 112'195 108'808 103'794
Total 334'593 322'063 308'128 307'907

4.2.3 Metering and Billing


All consumers in Cazin municipality have water meters which are ownership of the Company.
According to law the meters have to be replaced every 5 years. For lack of financial funds how-
ever meters are replaced only when they do not function or are damaged. The Company reports
the installation of new meters and the number of the replaced ones in its Annual Reports. The fol-
lowing table summarises this information:
Table 4.3: Imnventory of consumer meters
2009 2010 2011
Installation of new meters 418 404 494
Replacement of old meters 765 806 470

The Company has an extensive and efficient consumer database which is updated on a daily ba-
sis. It contains detailed information on consumer characteristics, consumption history and bill-
ing/payment history.

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Vodovod has a Billing and Collection Department with 12 employees out of which 10 are control-
lers (collectors. The latter visit the consumers, take the readings of the meters, deliver previous
month’s bills and collect payment. Each collector is designated to a specific number of users and
specific part of the service area. The work of the collectors is monitored on a daily basis, includ-
ing number of distributed bills, amount of collected income and percentage of income collected in
the area they cover. Collectors that have better achievement are rewarded with performance bo-
nus while the poor performance leads to corrective administrative measures.
The consumer bill is produced electronically and contains the following information:

Table 4.4: Sample of monthly water consumption for four-member family in households
in KM
No. Descrpition Amount Price Total
1. Water consumption per meter - (1 KM/m3) 20 1,00 20,00
2. Sewage - (0,30 KM/m3) 20 0,30 6,00
3. Meter base fee 3/4'' 1 2,00 2,00
4.* Water protection fee (0,04 KM/m3) 20 0,04 0,80
5.* Water usage fee (0,04 KM/m3) 20 0,01 0,20
Total VAT excluded 29,00
VAT basis 28,00
VAT 4,76
Total VAT included 33,76
*Note: VAT is not calculated to water fees for protection and usage of water.

When the collector receives payment on the spot, the second part of the bill, containing identical
information, is submitted to the Billing and Collection Department for recording the payment in the
data base. Beside direct payment to the collectors, residential consumers can pay either in the
main office or a second cash office in the town centre. Legal entities pay most often through the
banks.
Usually the bills are produced and delivered on a monthly basis. Exceptionally, in winter condi-
tions when temperatures are low, most of water-meters are not read because consumers protect
them fromdamage. In that case, billing is done on the basis of average monthly consumption and
adjustments with water-meter readings are done when spring comes. Safety aspect for collectors
during water-meter reading is very good.

4.3 Quality of Service

4.3.1 Overview Water Supply


The four principle systems of VIGNJEVICI, MUTNIK, TAHIROVICI and LJUBIJANKICI, and two
small subsystems of STOVRELA and HODOROVAC supply the majority of the inhabitants of the
entire municipality with water (97.5%). Some of the key infrastructure of the water supply systems
of Tahirovici and Ljubijankici were completed in the last ten years. These systems enabled the
Company to significantly increase the service area and the number of customers. The water sup-
ply systems of VIGNJEVICI and MUTNIK are much older as they were built in the period of for-
mer Yugoslavia. The materials used and the quality of the works executed at that time, in particu-
lar for the construction of the distribution networks, were not of good quality and therefore the
Company suffers most problems in these areas.

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The four major systems use underground water by means of wells, while two smaller subsystems
use water of karst springs. Sanitary protection zones have been defined for all these sources.
The total maximal yield of all sources for the water supply in Cazin amounts to 300 – 320 l/s. Po-
tential sources for further increase of the water quantity produced are Vrelo source with a capaci-
ty of about 50 l/s and Mlakulja source with 30 l/s. Both of them were tested in the past for exploi-
tation as drinking water. In addition, it is planned in the coming years to increase production of
the source at LJUBIJANKICI by 50 l/s.
The customers in the Municipality of Cazin have in general 24-hour access to piped drinking wa-
ter. However, there are certain problems related to low pressure in the systems of VIGNJEVICI
and MUTNIK at peak water demand during summer. A limited number of households (ca. 100)
has a reduction in supply in these periods.
Customers are in general content with the service of the Company. Complains are related to the
level of the tariffs.)

4.3.2 Facilities
Pumping stations
At Water Sources:
There are six major water production sites in the water supply system of Cazin, which are
equipped with bulk water meters. The following table presents the water produced in the years
2010 and 2011:
Table 4.5: Main water supply sources in Cazin Municipality

No. Water Source Water Production in 2010 Water Production in 2011


[m³] [m³]

1. Vignjevići 1’849’546 1’897’280

2. Mutnik 1’204’253 1’228’954

3. Tahirovići 654’594 663’476

4. Ljubijankići 261’489 255’237

5. Stovrela 88’237 87’571

6. Pajića potok 34’287 98’127

TOTAL 4’092’406 4’230’645

The characteristics of the pumping stations at these sources are described below:
1. “VIGNJEVICI”
The source consists of 4 wells with a maximum yield of 100 l/s. Pumps are installed at different
depths (18 - 81 m). The difference in elevation between the pumping station and the reservoir
“MIHALJEVAC” is 114 m. Specific energy consumption per m3 is high. The source has been ex-
ploited since 1979.

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2. “MUTNIK”
The source consists of two wells with a maximum yield of 75 l/s. Pumps are installed at depths of
around 28m. The difference in elevation between the pumping station and the reservoir “STRA-
ZA” is around 72 m. Specific energy consumption per m3 is moderate. The source has been ex-
ploited since 1985.

3. “TAHIROVICI”
The source consists of three wells with a maximum yield of 40 l/s. Wells have depths of 70 –
180m. Specific energy consumption per m3 is high. The construction of the system of Tahirovici
continued in 2001 after the implementation of this project had been interrupted due to the war.

4. “LJUBIJANKIĆI”
The source consists of three wells with a maximum yield of 78 l/s. Wells have depths up to 340m.
Specific energy consumption per m3 in this system is very high. The source has been exploited
since 2011. The project was financed by the World Bank. There is potential to increase the ca-
pacity of the source by one additional well of 50 l/s. It has been planned to implement this project
including a filter station in the period 2012 to 2014.

5. “STOVRELA”
The source consists of two catchments which are supplied by a few small springs. The minimum
total yield is at around 10 l/s. The water is transported by gravity to the reservoir “SOSIN KA-
MEN”. The source has been exploited since 1887.

6. “PAJIĆA POTOK”
The source was put in service in 2011. The minimum total yield is at around 10 l/s. The water
from this source is used for the system of “TAHIROVICI”.

Within the Network (Booster pump stations):


The hilly landscape and a large number of settlements (54) scattered all over the area of the Mu-
nicipality require the utilization of numerous booster pump stations. There are in total 17 of such
booster pump stations within the network to distribute the water in different regions. These sta-
tions are often located in the reservoirs. During 2011 two booster pump stations were put into
operation in order to raise the pressure level in four settlements. One more booster pump station
is planned for 2012.

Reservoirs
3
There are in total 35 reservoirs with a total volume of 16’000 m for the storage of the water.
3 3
Their volumes vary from 25 m to 3’000 m . The reason for such a high number of reservoirs is
again the character of this rural region with many small settlements. The Company plans to install
video surveillance at the main reservoirs for better control.

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Distribution Network
The network of the water supply system of Cazin has a total length of around 1’500 km, consider-
ing all pipelines of a diameter bigger than DN50. The pipelines are made of many different mate-
rials (cast iron, asbestos cement, PVC, PE, steel, galvanized iron and ductile cast iron). The old-
est parts of the water supply network originate from the Austro-Hungarian period. Cast iron and
asbestos cement pipes prevail in the main system, which were installed in the 70s and 80s.
Network management is hardly possible due to the lack valves on the pipelines. If valves are in-
stalled, they are often defective or inaccessible (e.g. road caps covered with asphalt).
The local supply schemes sometimes face pressure drops which are caused by hydraulic irregu-
larities. Due to the lack of pipe material and for own cost savings, smaller pipe diameters were
installed than was hydraulically required.
House Connections and Domestic Water Meters
The regulation of the Company requires that service lines shall be paid by the registered custom-
ers. The service lines are now made of HDPE. Before 1995, service lines were made of galva-
nized pipes, which are often damaged by internal and external corrosion. Domestic water meters
are installed at around 90% of the service lines to record consumption. There might be water me-
ters that are not in a reliable condition. VODOVOD will be liable to make sure that water meters
are held in a technically good condition and also be organising and financing for it within their
regular budget.

4.3.3 Other Technical Characteristics


Water Quality
Certain risks are related to water quality. The Municipality of Cazin lies in a karstic area and
drinking water is exploited from karstic aquifers. These aquifers are vulnerable to contamination
due to their specific hydrogeological properties. Therefore, karstic aquifers require increased pro-
tection.
Regular analysis of the drinking water is conducted according to the valid BiH Regulations on hy-
gienic standards of potable water (two times a month by the Department of Public Health). Sam-
ples are taken from sources (raw water) and from the network (water treated with chlorine). Most
of the problems have been identified at the source MUTNIK (appearance of ammonia and fecal
bacteria), LJUBIJANKIĆI (increased turbidity and fecal bacteria) and TAHIROVIĆI (turbidity).

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Table 4.6: Data on water quality samples in 2011 are summarized in the table below

Bacteriological quality Chemical quality

No. of No. of not- No. of No. of not-


corresponding corresponding corresponding corresponding
samples samples samples samples

VIGNJEVIĆI 48 2 50 --

MUTNIK 41 5 45 --

TAHIROVIĆI 39 6 42 3

LJUBIJANKIĆI 25 20 42 4

STOVRELA 17 1 18 --

PAJIĆA POTOK 18 5 23 --

TOTAL: 188 39 220 7

The Company informed that the reason for the relatively high number of positive samples is that
some of the samples were taken before disinfection. In cases when samples did not meet the
standards, another water quality test had to be done, which did in each case fulfil the require-
ments.
It has been reported that 80 illegal landfills were registered in 2010, out of which 46 were re-
moved. Illegal landfills occur in locations without continuous waste collection service and along-
side the roads. 58% of households in municipality of Cazin have septic tanks, which are generally
in bad condition and leaking. Sludge is mainly spread over fields. This situation presents a per-
manent threat to the quality of the raw water taken from the sources for the drinking water supply.
Neither of the above mentioned water supply systems do have water treatment, except for disin-
fection, before the distribution via network. Disinfection is conducted by means of sodium hypo-
chlorite or chlorine gas. No sand filters are used against high turbidity, which sometimes occur in
periods of long-lasting rainfall events (especially at Tahirovici and Ljubijankici).
Protection zones were created and formally put into force for the major sources of the system. A
total of 12 zones with a surface of 4’850 ha and around 4’700 inhabitants were defined.

Water Losses
The rate for Non-Revenue Water amounts to 52% for the whole service area. The company has
estimated that about half of them account for technical and the other half for administrative loss-
es.
The table below indicates the main losses in 2010 expressed in Non-Revenue Water (%) per sys-
tem:

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Table 4.7: Overview NRW

Produced Billed amount Losses


System
amount [m³] [m³] [%]

VIGNJEVIĆI 1.849.546 886.784 52,1

MUTNIK 1.204.253 382.319 68,3

TAHIROVIĆI 654.594 366.628 44,0

LJUBIJANKIĆI 261.489 204.343 21,9

STOVRELA 88.237 74.737 15,3

PAJIĆA POTOK 34.287 24.144 29,6

TOTAL: 4.092.406 1.974.467 51,8

Water supply systems of VIGNJEVIĆI, MUTNIK and STOVRELA constructed in pre-war period
are the main cause of physical losses in the system.
The water supply systems of TAHIROVICI, PAJICA POTOK and LJUBIJANKICI were
constructed in the after-war period with the use of new generation materials (ductil cast iron,
PEHD, PVC).
The number of illegal connections is very high, in particular in the local supply schemes, which
were later connected to the main systems. The list below indicates the number of illegal connec-
tions that the Company’s task force has identified:
In 2009: 69
In 2010: 108
In 2011: 73
According to the Company, more time should be invested in the detection and identification of il-
legal connections. This has not been possible over the last three years, as the Company was
heavily involved in the implementation of the works for the completion of the system in LJUBI-
JANKICI.
The number of recorded breaks and leakages reported in the past two years are listed below:
In 2010: 1’806
In 2011: 1’936
Another problem is that there are areas in which pipes of lower nominal pressure are installed
than required (i.e. PN 6 bar). This is above all the case in local supply schemes, which were con-
nected to one of the principle systems after years of autonomous operation.
The need for pressure management in the framework of a master plan is evident to properly ad-
dress the problem of excessive pressure in parts of the network.

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Electricity consumption
The electricity cost is estimated to be at around 20% of the total cost. The main cause lies in the
high number of pumping and booster stations which are needed for the transportation of the
drinking water.
The table below indicates different figures in context with the electricity consumption in the past 4
years:
Table 4.8:

System 2008 2009 2010 2011

Water Production [m³] 4'453'835 4'079'581 4'092'406 4'230'645

Total electricity consumption,


3'867'839 4'008'143 4'227'440 4'604'960
[kWh]

Specific electricity consump-


0.87 0.98 1.03 1.09
tion [kWh/m³]

Increase to previous year [%] -- 13.1% 5.1% 5.4%

Increase in 2011 as comp. to


-- -- -- 25.3%
2008

The increase in electricity cost over the last four years is closely related to the completion of the
project in LJUBIJANKIĆI. The new booster pump stations which were put into operation also con-
tribute to the higher consumption. Generally speaking, improvements made in the field of water
supply in the municipality of Cazin have resulted in higher electricity consumption.

Operation and Maintenance


Operational Monitoring, which includes activities such as inspections of plant equipment, catch-
ment area, condition of wells etc. as well as monitoring of pressure behavior in the network, water
supply reductions, etc. are done irregularly and not according to a specific plan. However, the
Company has identified a few key operational parameters (water production, water consumption,
energy consumption), which are monitored on a regular basis.
No maintenance plan exists, which determines the tasks to be performed at maintenance objects,
the maintenance frequency and the responsible entity for each task. Maintenance is done on an
ad-hoc basis and according to highest requirements.

4.3.4 Assessment of Current Water Supply Situation


The current situation with regard to the water supply in Cazin and the performance of the Com-
pany are assessed in the table below. The assessment evaluates the priority of an intervention
needed in a specific area of the water supply.

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Table 4.9: Needs assessment in the water supply sector

Need for Inter- Comment / Remarks


vention

low mode- high


Item
rate

This is currently the main problem, which needs to be


Non-Revenue
addressed comprehensively and sustainable.
Water (Water X
Measures need to address technical and administra-
losses)
tive losses.

The current situation often requires ad-hoc decisions to


Water Quality X ensure the supply with water of good quality. Measures
shall be well planned and be sustainable.

Energy consumption is high and must be decreased as


electricity cost will further increase. Energy-efficient
solutions must be developed for system infrastructure
and operation. Sound engineering planning is required
Energy efficiency X
in this respect. The Company should be able to benefit
from varying electricity tariffs (typically higher during
day time hours and lower at night) for production and
pumping facilities.

The Company has been involved very much in the


implementation of new projects and third party services
Operational Effi-
X over the last years. Teams of skilled staff need to be
ciency
formed and trained to enhance effectiveness of opera-
tion. Materials shall be standardized.

Certain funds have been budgeted in the work pro-


Long- term in- gramme and financial plan for 2012 – 2014. It is im-
vestment plan- portant that annual renewal of the network supports
X
ning for facilities issues related to energy efficiency and is implemented
and network in a systematic manner. No master plan is available to
direct investments in line with an agreed strategy.

It is recommended to identify procedures required for


operation of all activities from catchment to consumer.
Operation &
X There is currently no SCADA in use, which could facili-
Maintenance
tate operation of the system. Planning of maintenance
on an ad-hoc basis is not sustainable.

External Factors The inefficient court system impedes collection efforts


(court system, by the Company. The legal position of the service pro-
X
politics, sector vider in the realization of debts is weakened. Amplifica-
water policies) tion of enforcement efforts is required in all levels.

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4.4 Assessment of the Current Wastewater Collection and Treatment

4.4.1 Wastewater Collection Overview


Wastewater system coverage is very low, approximately 10% of water consumers/ inhabitants
and local Municipal small scale industry are connected to sewerage networks existing only in the
central zone of Cazin town.The topographical situation with asteady slope from South to North
and vice versa, as well as from East to West is actually advantageous to rehabilitating and oper-
ating a functioning wastewater drainage system without using excessive pumping energy.

There are no emergency cases of blockages reported so far, but attention has to be paid on
leakages. However, complaints arising in respect of wastewater are not being registered
presently. The Municipality of Cazin covers a total number of 16,498 households.

The local existing settlements and communities are currently not being covered with sewer-
age networks. This reportenvisages the implementation of the following independent sewage
systems U2, K1, G3, and G4 as follows:

Una river basin:


U2 – Viljeniča, Stijena, Podgredina, Miostrah – 7,040 inhabitants

Korana river basin:


K1 – Šturlić, Hadžin potok – 3,437 inhabitants

Glina river basin:


G3 – Lidani, Ponievići – 816 inhabitants
G4 – Krakača, Pećigrad, Donja, lučka, – 5,434 inhabitants
Gornja Lučka, Rosići, Mujakići

There are no existing sewerage networks in systems U2, K1, G3, G4 presently but the mas-
terplan proposes generally to build separate systems.

Cazin town
The existing sewerage network covers only a small district in the city centre of Cazin town.
The number of currently connected users amounts to 2,122 including households, economy,
industry, agriculture, etc. and the estimated equivalent inhabitants are 7,603 equal to 38% of
Cazin town.

The remaining 72% - 4,000 users estimated as 14,400 equivalent inhabitants are partially
connected to septic tanks discharged in closest local watercourses or open channels.

Periurban and rural areas


The number of households currently not connected to sewerage network is 14,376, estimated as
51,754 inhabitants.
58% of the above mentioned households respectively inhabitants have septic tanks discharged in
local watercourses or infiltrated into the karstic underground.

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Sludge deriving from emptying the septic fosses are currently spread disposed of in agricultural
areas.
The remaining 42% have either soak away pits either directly discharging the wastewater into
nearby local watercourses and ditches.

4.4.2 Sewerage Network


Main Network Characteristics of Cazin city
Old existing network
The existing sewerage network is of gravity type and presently functioning as a mixed system.
The total length of tertiary and minor collectors, faecal, storm water and mixed collectors is 1,800
meters.
The network consists of concrete pipes ø 200, ø 250 and ø 300 and PVC pipesø 150.
Newly constructed sewerage system – Main sewer
The Main sewer is being designed as gravity split sewer system temporary collecting storm water
to drain the domestic wastewater at the end only and the same refers to tertiary network and mi-
nor branches.
Company VODOVOD recently in year 2012 has constructed as per approved Detail design and
Construction permit issued by Municipality of Cazin 470 m of the Main sewer in GRP pipes ø
300.
Additional 430 m of the same material and diameter will be constructed until the end of year
2012. The Detail design is in procedure of approval and issuing of Construction permit is pend-
ing.
The Municipality of Cazin is able to cover the costs of 2000m through local funds. The main sew-
er will be completed till the end of 2013.

Network Characteristics – Sewerage systems U2, K1, G3, G4


The sewerage networks of systems U2, K1, G3, and G4 are foreseen in the preliminary design to
be constructed in pipes of ø 300.

Network Maintenance
The sewerage network developed as single branches covers only small part of the city. Within
this study any conditional analysis has not been carried out and it could only be estimated that at
least proper flushing of pipelines, emptying of manholes is carried out.
In order to provide proper sanitation services the network should be enlarged to cover more wa-
ter consumers.

4.4.3 Wastewater Flows and Quality


Cazin town
3
Estimated wastewater quantity per day/ households and industry/ is 738.5 m /d

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Independent sewage systems U2, K1, G3, and G4


The estimated parameters of wastewater flow and quality for systems U2, K1, G3, and G4 are
shown in the following tables:
Table 4.10: Connected Inhabitants equivalent

Independent sewage system U2 G4 K1 G3

Domestic persons

Total persons in project areas 7,014 5,434 3,437 816


Connection rate (%) 90% 90% 90% 90%
Connected inhabitants 6,312 4,891 3,093 734

Industrial + commercial person equiva-


lent
Percentage of domestic persons 20% 20% 20% 20%
Connected industry 1,262 978 619 147

Total Person Equivalents 7,574 5,869 3,712 881

Table 4.11: Wastewater specific loads per inhabitant/equivalent

Independent sewage U2 G4 K1 G3
system
Parameter Abbr. Specific Specific Specific Specific Unit
Unit Load- Unit Load- Unit Load- Loading
1 1 1
ing Fac- ing Factors ing Factors Factors in
1
tors in in in g/(capita·d)
g/(capita·d) g/(capita·d) g/(capita·d)
Wastewater lcd 100 100 80 80
Biological Oxygen BOD5 60 60 60 60
Demand
Chemical Oxygen COD 120 120 120 120
Demand
Total Suspended Sol- TSS 70 70 70 70
ids
Total Kjeldahl Nitrogen TKN 11 11 11 11
Total Phosphorus Ptot 2.5 2.5 2.5 2.5

Total loads for independent WWTPs

Table 4.12: Load calculations for independent sewerage systems

Parameter Unit U2 G4 K1 G3
3
Wastewater Qw m /d 840 650 328 80
3
Drainage Water (20% of wastewater) Qd m /d 68 130 66 16
3
Dry Weather Flow m /d 1,008 780 394 96
Peak Flow h 14 14 12 10
3
m /h 67 52 30 9
l/s 19 14 8 2
Biological Oxygen Demand kgBOD5/d 504 390 246 60

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Chemical Oxygen Demand kgCOD/d 1,008 780 492 120


Total Suspended Solids kgTSS/d 588 455 287 70
Total Kjeldahl Nitrogen kgTKN/d 92 72 45 11
Total Phosphorus kgPtot/d 21 16 10 3

There are no existing wastewater treatment plants on the territory of Cazin Municipality so far.

4.4.4 Storm Water Drainage


There is a storm water gravity collection system mixed with the domestic wastewater in Cazin. All
storm water is collected in single pipe lines and open channels along main roads and discharged
into gutters, creeks, ditches and open channels leading to Cazin Potok river.
Currently, a separate storm water collection system mixed with the domestic wastewater is under
construction together with the relevant storm water overflows. Short connections will drain the
water to close flowing Cazin Potok river which appears as natural storm water main collector.
With regard to that fact detail design documentation about Cazin Potok river bed correction is in
preparation and approval procedures and issuing of construction permits are soon expected.
However, due to the poor coverage of the existing sewerage network, much bigger amounts
of the storm water is drained into the soil.

4.4.5 Conclusions with Regard to Rehabilitation Strategy


Cazin town
As far as the existing sewerage network is concerned, it shows a total length of 1,800 m. There is
no significant scope of rehabilitation work.
Some parts of the pipe lines have to be replaced but major attention has to be paid on connect-
ing the branches to a common system which finally will be up-graded to a separate system.

Cazin town and rural area

On the background of the large number of existing septic tanks being in generally bad condition
and being maintained by only one cistern truck the Consultant recommends additional mainte-
nance equipment.

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5. INSTITUTIONAL AND MANAGEMENT ASSESSMENT

5.1 Institutional and Legal Framework of the Water Sector in BiH


One of the main peculiarities about BiH is that although it is one country, it is made up of two enti-
ties, each one developing its own policy for water management and with its own municipal struc-
tures and laws. The cantons in Federation Bosnia i Herzegovina (an administrative level missing
in Republika Srpska) retain great authority over the powers, actions and revenue of municipali-
ties. This means that no institutions on national level are involved in the sector and no national
policy exists.
Another specific feature of the water sector organisation is that under the former Yugoslavia it
was more decentralised than many of its neighbours in Central and Eastern Europe. Central con-
trol of local decision-making was consciously relaxed in several stages beginning of late 1970’s.
In addition to the above, we should also mention the old Yugoslavian tradition of communities
voting for self-financed projects, which were then funded by a surcharge on salaries within the
municipality. This indicates that historically the local communities have been actively supporting
the development and management of the water supply on a local level.
The following diagram presents schematically the current institutional organisation of the water
supply and sewerage sector in FBiH:

Figure 5.1:Institutional organisation of the water supply and sewerage sector in FBiH

All infrastructure municipal assets in FBiH are owned by the municipalities (unlike Republika
Srpska where 50% of public utilities own them). The relationship between the municipality as an
asset owner and the public utility as an operator of the assets is based either on a Concession
Agreement (e.g. Zenica and Travnik) or on a Statute or Founding Act.

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Financing of the water sector is provided in a different degree by the three administrative levels
as indicated by the diagram. However, after the war the main financial flows have been provided
by the international donors
The legal and regulatory framework of the water sector in BiH is schematically presented by the
following figure:

Figure 5.2:Legal and regulatory Framework

The entity and canton laws are targeted mainly to strategic issues of the development and opera-
tion of the water supply and sanitation sectors. In line with BiH intentions to join the EU, these
laws comply to a very high extent with the requirements of the European Union water legislation.
According to the Water Law “public water supply” means all activities related to water intake,
treatment, transport and distribution to users, if daily quantities are larger than 10 m3. It regulates
main issues regarding drinking water quality for public supply systems: water quality itself, protec-
tion of water sources and proper evidence and reporting on quantities used for public water sup-
ply. Main concern of entity law is prohibition of exhaustion of water resources and in that sense
public water supply systems are mentioned.
The Law on Principles of Local Self-Government, adopted in 2005, defines competences of self-
government local unit, that are among others, management, financing and improvement of the
operations and facilities of the local public infrastructures for water supply, wastewaters disposal
and treatment, etc.
The Law on Communal Services regulates methods of managing and operating public enterpris-
es. According to this law a public enterprises is “enterprise employing at least 50 employees” and
carry out activities of public interest, and in which municipality, city, canton or federation of BIH is
owner of at least 50% at least 50% plus one share.
It should be noted that on federal and canton level Bosnia and Herzegovina has reached a legal
framework that is a good base for future developments on approximations of national regulations
with EU legislation requirements.

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The secondary legislation on municipal level deals mostly with operational issues of the water
supply companies. Some of the project-relevant documents will be discussed in different sections
of this report.

5.2 Organisation and Structure of Vodovod


In 2002 the communal services in Cazin were split into two companies: one responsible for waste
management and the second one, Vodovod, responsible for the water supply and sewage. Thus
Vododvod was registered with the court in 2002 and later, in 2005, following a process of ‘har-
monisation’ with relevant federal and cantonal laws took the legal form of a Limited Liability Com-
pany. All assets related to the water supply and sewage system were transferred on the balance
sheet of Vodovod, while the Municipality is the only shareholder of the Company.
The organisational structure of Vodovod complies with the requirements for public companies
stated in the federal and cantonal legislation. It is presented by the following figure:

Figure 5.3:Organisational structure of Vodovod

The management of the Company is provided by: Assembly, Supervisory board, Company man-
agement and Auditing Board.
The Assembly’s functions are listed in detail by the Company Statute. They concern mostly the
strategic development of the enterprise and include, among other, approval of three-year devel-
opment plan, distribution of profit, etc. The Assembly is summoned whenever necessary but at
least once a year.
The Supervisory Board (SB) is appointed by the Assembly, consists of five external members
and meets whenever necessary, in practice – on a monthly basis. The functions of this body are
quite numerous and include supervision of the operational and financial performance, appoint-
ment and supervision of management staff, supervision of regulation compliance, etc.
The functions of th eAudit Board, namely review of the annual financial statements of Vodovod,
are performed by an external auditing house.

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The Company is managed by a Director appointed by the SB and is organised within 3 main divi-
sions: legal and general services, financial and technical, each one headed by a manager. This is
the standard set up of a commercially operating company which provides for minimum layers of
management with decisions taken at the most appropriate delegated level within the organisa-
tion.
At the moment of preparing this report, Vodovod is managed by an acting director since the
mandate of the previous director is over and a procedure for selecting a new one is underway.
The overall organisation of Vodovod with two bodies above the Director level seems to be a typi-
cal structure in BiH and we understand it is required by law. Due to the sensitivity of the topic,
during our interviews with Vodovod we could not draw univocal conclusions concerning the role
and efficiency of the Assembly and the Supervisory Board, especially regarding the direct inter-
ference of the latter in the operation of the Company.
It is required by law that Vodovod signs a service agreement with the municipality within a given
timeframe after the founding of the enterprise. We understand that the deadline for this has ex-
pired but so far such agreement does not exist. Therefore the ToR for this project demands that
the Consultant propose a draft agreement and when enforced it may transfer direct controlling
functions to the Municipal Council.
In view of this it could well be that in future the federal and cantonal legislators will consider sim-
plifying the relations between the municipality and its communal companies by revising the insti-
tutional structure of communal companies. For the purposes of this study, however, we will as-
sume that this organisational structure will remain and our further recommendations will concern
improvements only of the internal structure of Vodovod.

5.3 Management Assessment

5.3.1 Personnel and Personnel Training


Currently the Company has 66 employees with adequate qualification, as indicated in the follow-
ing table:
Table 5.1: Structure and key-qualifications of VODOVOD's staff

Each employee signs a contract with the Company which includes also his/her job description.
The salary structure and levels are recommended by the Utilities’ Association, a federal institution
in which Vodovod has a membership. The remuneration of the employees include net salary and
fringe benefits, e.g. for food, vacation and transportation to work as well as one-time payments
for special occasions. The total amount of these fringe benefits is around 25% of the net salary.
Vodovod does not have a specific training programme or plan. Requests for additional training
are identified and organised by each division manager. Usually the training is carried out by ex-
ternal experts for whom funds are budgeted on an annual basis.

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5.3.2 Accounting, Budgeting and Reporting


The Company’s accounting is structured in line with the International Accounting Standards as
required by the federal Law on Accounting and Audit which stipulates that the International Ac-
counting Standards and International Financial Reporting Standards are to be applied in all legal
entities.
The office of Vodovod is fully computerised with individual connection to internet. The Company
uses commercial accounting software offered by ''Infosys''. This software has separate modules
for the technical and financial departments and an extensive customers’ database. The current
information system allows recording and retrieving in a fast and efficient way reports on invento-
ry, energy consumption by water sources, cost breakdown, revenue, accounts receivable and
payable, consumers’ specifics, consumption and payment, etc. The Company’s website is very
well developed, constantly updated and used as a general platform for disseminating information
to the public.
Vodovod has a well-established practice of budgeting and reporting. They prepare a three-year
business plan on a revolving basis which contains detailed presentation of targeted production,
revenues and costs breakdown. The plan contains also scheduled investments needs for rehabil-
itation and expansion of the water supply system. Since cash from current operation is not suffi-
cient, the realisation of these investments depends mostly on availability of external (donors’) fi-
nancing. In addition to the three-year programme Vodovod has an annual operational and finan-
cial programme. All plans are communicated to and approved by the Supervisory Board and an-
nually by the Assembly.
The Company produces annual financial reports which by law have to be reviewed by an external
certified accountant before submitting them to the auditor and to the tax authorities. The heads of
the main divisions report to the Director the monthly results of the operational and financial per-
formance which are then sub mitted to the SB. Annual end-year results are reported to the As-
sembly and through it to the Municipal Council.
Procurement of equipment and material is carried out through tendering procedures approved by
the director and follows after a request by the company’s operational units.

5.3.3 Consumer Relationship Management (CRM)


Although Vodovod does not have a specifically dedicated staff for CRM our impression is that the
communication with the customers is well organised and satisfactory. As discussed previously
the water bills are produced electronically and contain detailed information on consumption, rates
and fees. Grievances are directed, depending on the subject, to either the technical department
in cases of supply problems or to the commercial department concerning billing and payment.
Both phone numbers are indicated on the water bill. The website of Vodovod regularly informs its
customers regarding planned and emergency repairs that may lead to temporary water supply in-
terruptions. There is also 24-hour emergency response service.
We understand that there are service contracts with each customer but some of these are quite
old and have not been recently updated. A review of such a standard contract reveals a need for
considerable improvement which will be addressed by the Consultant in the second stage of this
assignment within the framework of FOPIP.
A number of issues related to the efficiency of the technical and safety operation of the Company
have been discussed in other sections of this report and corresponding conclusions and recom-
mendations have been made. We will summarise them once again later and on this basis will
provide recommendations for short- and long-term improvements in the Final Report.

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5.3.4 Conclusion
The overall conclusion of this review is that Vodovod has a functional organisational internal
structure with well-designed and established budgeting and reporting practices. The computer
system allows timely and efficient information flows between the different departments and with
external stakeholders. The staff has adequate educational and practical qualifications but could
benefit in future from an improved training programme. The introduction of a Service Agreement
with the Municipality and the FOPIP will definitely contribute to further improvements in certain
areas such as accountability to the owner, increased financial and operational efficiency and
consumer relationship management.

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6. FINANCIAL PERFORMANCE

6.1 Tariffs and Fees


Tariffs for water sewage services are regulated by the Law on Communal Services (cantonal lev-
el), last revised in 2011.This law prescribes the costs allowed to be included in the tariff and the
tariff approval mechanism.
The Company is allowed to include the following costs in the tariff:

 Operation and maintenance


 Depreciation
 Salaries and wages

 Financial costs - interest and other costs related to loans


 Other (non-material expenses, etc.)
The Law also allows expenditures related to reconstruction and development of the system with-
out specifying definition or any other explanation regarding the nature of such costs.
The initiative for a change in tariff rests with the Company. Through its Director and with a written
justification for the requested increase, the Company has to submit an application to the Supervi-
sory Board. The latter then makes the final decision whether or not to proceed further with the
application and submit it to the Municipal Council which is the institution that approves the tariffs.
Current tariffs for water supply are correspondingly 1KM/m3 and 2KM/m3 for residential and legal
entities and 0.30KM/m3 and 0.40KM/m3 for sewage. They have not been changed since May
2007. As the graphs shows the residential water tariff has increased from 0.7KM/m3 to 1KM/m3
between 2004 and now while the wastewater tariff has not changed practically since August
2004.

Table 6.1: Past development of tarriffs

Water Tariff, KM/m3 Wastewater Tariff, KM/m3


2.50 0.45
0.40
2.00 0.35
0.30
1.50
0.25
0.20
1.00
0.15

0.50 0.10
0.05
0.00 0.00
2004 2005 2006 2007 2008 2009 2010 2011 2004 2005 2006 2007 2008 2009 2010 2011

Population Legal Entities Population Legal Entities

During the last few years the electricity price has been rising steadily thus leading to negative op-
erational income in 2010 and losses in 2011. Last year the Director of the Company submitted
request for tariff increase to the Supervisory Board, which was suspended by the latter.

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It is obvious that in the absence of an institution that serves as a qualified regulator the approval
and adjustment of water tariffs is seen more as a political affair rather than business necessity.
We understand that this situation is being recognised on federal level and therefore a new federal
law is under consideration. It is expected that it will lead to the establishment of a regulatory body
that will ultimately approve tariffs for water utilities and the municipal councils will only nominally
accept them. In case of non-acceptance the municipality will be required to subsidise the differ-
ence from its own budget. We have no further information on the status of progress of this new
law.
In addition to the tariff, water customers pay a monthly meter service fee which differs according
to meters and connecting pipes diameters. Thus the minimum meter fee is KM 1.25, the maxi-
mum KM 43.10. For projection purposes we will use an average value of 2KM per connection.
In 2008 two more water fees were introduced in accordance with the Federal Water Law – ‘Water
protection’ and ‘Water usage’ fees which are at the level of KM 0.04/m3 and KM 0.01/m3 respec-
tively. These fees are designed to protect national water resources and the revenue is divided
among the following institutions:
 40% to the relevant Water Agency;
 45% to the Canton; and
 15% to the Environmental Protection Fund.
The services for water supply and wastewater for all customers are subject to 17% VAT (water
fess are excluded).
One-time connection fee is charged when a new consumer is connected to the network; the
amount depends on the pipe diameter and water demand: usually it is about KM 600KM and it
could go as high as KM 1’000 for commercial/industrial consumers.

6.2 Financial Performance of the Company

6.2.1 Profit & Loss Statement (P&L)


This section analyses the financial performance of the Company based on its financial state-
ments as presented below:

Table 6.2: Profit and loss statement in KM


PROFIT AND LOSS STATEMENT, 2008-2011, in KM
2008 2009 2010 2011
Income from sales 4'404'484 3'149'561 3'034'694 3'342'331
Costs of goods sold 4'359'178 3'333'660 3'156'536 3'138'605
Net operating income 45'306 -184'099 -121'842 203'726

Financial Income 515 366 362 100


Other revenue 303'971 352'270 1'024'729 476'345

Financial expenses 100'621 76'372 73'648 261'399


Other costs 108'019 37'602 828'526 555'464

Profit before taxes 141'152 54'563 1'075 -136'692

Profit tax 10'586 6'695 877 0

Net profit 130'594 47'868 198 -136'692

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6.2.2 Revenue
The P&l Statement reports separately revenue from main activities that include: (i) sales of water
and charges for waste water, (ii) revenue from meter reading/maintenance, (iii) revenue from new
connections and (iv) services provided to third parties. Although the Company documents sepa-
rately revenue from water supply and sewage, in the P&L Statement it indicates only combined
revenue. The current level of corporate profit tax is 10%.
The review of the P&L Statement reveals constant revenue from main activities during the last
three years with slight increase in 2011 due to the commissioning of the sections of the new Lju-
bijankici water supply system. The services provided to third parties consist of relatively small
scale construction works and these tend to decrease for lack of demand.
The operating loss in 2010 has been compensated by a write-off of accumulated water fees pay-
able to the federal budget which was made possible by changes in the corresponding law.
The collection rate of Vodovod is reported to have been at the level of 94% at least since 2008,
thus being the highest in the country.

6.2.3 Operating Costs


The following table summarises the development of the operating costs for the last three years:

Table 6.3: Development of operating costs


Costs Breakdown, in KM 2009 % of total 2010 % of total 2011 % of total
Salaries, incl. social fund 1'405'843 42% 1'512'189 38% 1'491'403 39%
Eelectricity and fuel 614'536 18% 690'526 17% 734'708 19%
Materials 397'296 12% 203'176 5.0% 203'384 5.3%
Depreciation 616'129 18% 528'480 13% 506'846 13%
Financing costs 76'372 2% 73'647 2% 83'693 2%
Other 185'882 6% 206'450 5% 256'269 7%
Provisions for bad debt 37'602 1% 814'481 20% 555'463 14%
Total 3'333'660 100% 4'028'949 100% 3'831'766 100%

Electricity costs are at the level of 17-19% of the total operating costs but nominally they have
increased from KM 614’536 in 2009 to KM 734’708 in 2011, i.e. by 20% over 3 years. The first
obvious reason is the cancellation of the seasonal electricity tariff scheme in 2011. Between 2007
and 2010 the Company benefited from a winter/summer tariff scheme where the summer tariff
was by some 30% lower than the winter tariff. Since 2011 a uniform tariff was introduced which is
very close to the level of the previous winter tariff thus contributing to altogether higher total elec-
tricity costs.
It should be noted, however, that the different types of electricity tariffs (by voltage, day/time and
seasonal) have been fairly stagnant during the last four years as the follow graph illustrates:

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Table 6.4: Development of Daytime Electricity Tariff by Voltage and Season

0.3

0.25

0.2

0.15

0.1

0.05

0
2007 2008 2009 2010 2011

LV winter LV summer HV winter HV summer

This means that not really the tariff increase but rather electricity tariff restructuring has led to ris-
ing electricity costs for the company in 2011 (when the summer tariff was abolished).
It should immediately be stated that apart from unfavourable changes in electricity structure, the
total amount of consumed electricity has grown up as well (by 15% over the last 3 years). To a
certain extent this could be explained by the expansion of the water supply system with the Ljubi-
jankici section. On the other side, as the following table illustrates, the specific consumption of
electricity per cubic meter produced water has increased by 25% during the last 4 years. This in-
dicates falling technical operation efficiency and thus combined with the restructured electricity
tariffs will lead in future to significant increase in the share of electricity in the total operating
costs.

Table 6.5: Comparison of water produced to electricity consumption


2008 2009 2010 2011
Water Production, m3 4'453'835 4'079'581 4'092'406 4'230'645
Total electricity consumption, kWh 3'867'839 4'008'143 4'227'440 4'604'960
kWh/m3 0.87 0.98 1.03 1.09
Increase to previous year 13.1% 5.1% 5.4%
Increase in 2011 as comp. to 2008 25.34%

This short review leads to the conclusion that the substantial increase in the overall elec-
tricity costs of Vodovod might be driven more bythe increase of the total electricity con-
sumption and less by the electricity prices.
Recommendation: The issue regarding the electricity consumption needs further and detailed
analysis. The budget and time constraints of this assignment do not allow us to do it, but we will
recommend that Vodovod invests resources over the next 3-4 weeks into a detailed investigation
of the rising electricity consumption. This should include a thorough analysis of electricity con-
sumption by:

 seasons (for the past period),

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 voltage level,
 day and night,
 and, most important, by water supply sources (branches or wells)
Such analysis should reveal the reasons for rising total and specific consumption per cubic me-
ter, i.e. determining the impact of electricity tariff changes and falling operational efficiency, and
thus will facilitate undertaking corrective measures. It will be appreciated if the results are com-
municated to the Consultant who will on his side propose appropriate actions under the Financial
and Operation Performance Improvement Plan in the Final Report.
Salary costs have the biggest share, around 40% of the total costs, which is quite typical for wa-
ter companies with similar size and service area. The social fund payments constitute about 33-
34% of the total personnel expenditures.
The share of ‘Materials’ shows a significant fall from 12% in 2009 to 5% in the next two years,
thus suggesting inadequate and poorer maintenance and repair of the system. This might be one
of the reasons for the lower efficiency as measured by the specific consumption of electricity.
While ‘Financing’ and ‘Other’ costs remain on a constant level there is a dramatic increase in the
item ‘Provisions for bad debt’. This issue is discussed in detail further in this section.
Considering the above findings about the main cost drivers’ behaviour, it is not surprising that the
net profit of the Company has been decreasing during the last three years and in 2011 it has reg-
istered a loss of KM 136’692. Since the Municipality does not finance or subsidize the operation
of Vodovod, the losses are covered by the Company’s own capital.

6.2.4 Balance Sheet


The Balance Sheet of Vodovod presents a fairly clear picture of its capital structure:
Table 6.6: Balance sheet in KM
BALANCE SHEET, 2008-2011, in KM
2008 2009 2010 2011
ASSETS
Fixed Assets
Property, plant and equipment 14'391'229 14'365'652 13'920'806 13'548'092
Long-term accruals 42'226 42'226 42'225 32'956
Total fixed assets 14'433'455 14'407'878 13'963'031 13'581'048
Current Assets
Inventories 208'915 180'277 174'535 477'892
Receivables from sale 1'512'125 1'757'911 1'219'621 876'208
Other short-term receivables 25 1'066 391 65
Cash and cash equivalents 5'104 53'422 90'787 35'763
Total current assets 1'726'169 1'992'676 1'485'334 1'389'928
TOTAL ASSETS 16'159'624 16'400'554 15'448'365 14'970'976

LIABILITIES AND EQUITY


Capital 4'808'352 4'856'220 4'856'412 4'719'720
Registered share capital 4'820'191 4'820'191 4'820'191 4'820'191
Retained earnings 213'821 47'868 18'207 18'207
Accumulated deficit 225'660 11'839 136'692
Reserves 18'014 18'014
Long-term Liabilities 10'004'526 10'273'837 10'082'164 9'736'637
Loans 3'621'251 4'076'802 3'579'617 3'775'323
Long-term provisions and accruals 6'383'275 6'197'035 5'987'005 5'705'728
Other long-term liabilities 515'542 255'586
Short-term Liabilities 1'346'746 1'270'497 388'336 491'669
Short-term financial liabilities 0 0 2'344 132'735
Liabilities to suppliers 471'887 484'267 385'992 358'934
Accrued expenses and deferred income 874'859 786'230
Provisions 121'453 22'950
TOTAL LIABILITIES AND EQUITY 16'159'624 16'400'554 15'448'365 14'970'976

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6.2.5 Fixed Assets


The initial value of the total fixed assets of the company is reported to be almost KM 22 million.
With an accumulated depreciation of KM 8.4 million the Company has net fixed assets worth KM
13.5 million. As the following detailed list of assets shows, on average the system has not yet
reach half of its technical life:

Table 6.7: VODOVOD's fixed assets as of 31.12.2011 in KM


Accumulated
Account Asset Initial Value Net Value
Depreciation
21 Water supply systems 16,036,293.67 6,819.877.64 9.216.416.03
21701 Sedimentation basin 61,922.79 50,494.91 11,427.88
21100 Water Supply System Vignjevići 3,098,687.45 2,232,435.11 866,252,34
21101 Water Supply System Vignjevići 1,291,202.74 314,730.84 976.471,90
21102 Water Supply System Ostrožac 1,374.00 268.12 1,105.88
21200 Water Supply System Mutnik 3,180,017.77 1,868,492.95 1,311,524.82
21201 Water Supply System Mutnik 202,468.27 54,858.29 147,609.98
21300 Water Supply System Tahirovići 1,472,763.01 252,755.18 1,220,007.83
21301 Water Supply System Tahirovići I 5,659,126.91 1,344,042.86 4,315,084.05
21302 Water Supply System Tahirovići II 87,906.00 17,031.99 70,874.01
21303 Water Supply System Ćoralići 62,701.78 56,529.12 6,172.66
21304 Water Supply System Liskovac 99,202.48 19,220.63 79,981.85
21500 Water Supply System Pajića Potok 53,878.29 24,790.15 29,088.14
21501 Water Supply System Pajića Potok 85,600.00 10,128.79 75,471.21
21600 Water Supply System Stovrela 442,573.16 403,791.06 38,782.10
21700 Sewerage 236,869.02 170,307.64 66,561.38
22 Water supply equipment 430,830.57 217,872.39 212,958.18
23 Office furniture 1,198.31 435.43 762.88
24 Vehicles 73,725.41 24,664.16 49,061.25
26 Computer equipment 16,824.70 8,555.29 8,269.41
27 Other equipment 39,264.91 12,153.95 27,110.96
28 Construction facilities 307,438.16 100,757.21 206,680.95

6.2.6 Accounts Receivable


After the split in 2003 of the previous municipal company, Vodovod ‘inherited’ accounts receiva-
ble at the value of KM 815’546 which increased over the years and in 2009 reached KM 1.76 mil-
lion. The federal and cantonal legislation does not address the issue of writing off bad debt – this
decision is exclusively within the powers of the Supervisory Board. The latter allowed Vodovod
only in 2010 to start writing off accounts receivable which were uncollectible and in 2010 and
2011 the Company wrote-off through direct method the amounts of KM 796’327 and KM 528’803
respectively thus coming back to the starting level in 2003, i.e. KM 876’208.
More than half of the accumulated accounts receivable, KM 453’925, is due by the Federal Minis-
try of Defence. We understand that Vodovod has reached an agreement with the Ministry of De-
fence which has issued a Promissory Note for the amount due with maturity date in 2017.
With a consistent collection rate of 94% the annual amount of new accounts receivable is rela-
tively low. Most of the debtors are legal entities, often the same ones every year.

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The law allows the Company to apply two methods for collection of bad debt:
 Court decision
 Disconnection of water supply
The Company uses quite often the first approach for both residential and legal customers. By law
Vodovod has to wait one year for the residential and three years for the legal entities before un-
dertaking this action. During the last few years the number of court proceedings has increased
from 95 in 2009 to 796 in 2011 covering an outstanding amount of over KM 440’000.
Based on the detailed information we received from Vodovod, it seems that the effort and related
costs are not worth the final results. The procedures take very long time, several years on aver-
age; the decisions of the court are not usually enforced; if at the end seizure of delinquent cus-
tomer property is to be executed, the latter reaches a deal with Company for re-scheduling the
debt, etc. There are cases when the court decides that the debt cannot objectively be paid by the
debtor and this gives grounds for Vodovod to proceed with write-off.
Vodovod reports that although the collection rate is high, some households still fail to pay their
bills within the stipulated 15-days period. After 3 or 4 months the Company sends one or more
warnings and if within a year the payment is still outstanding, it takes the case to court.
The Company seldom applies disconnection to both residential and legal consumers.
We understand that with the support of the municipality, some administrative measures have
been recently introduced. The Law on Communal Affairs requires that registration of new vehi-
cles is conditional upon a check for outstanding water bills. No information has been provided on
the success of this measure.

6.2.7 Accounts Payable


The split of the municipal services in 2003 transferred to Vodovod ledgers debt to the electricity
company at the level KM 1.1 million (including interest). At the beginning the Company was re-
paying it, then offered an offset against the account receivable from the Ministry of Defence (both
are government institutions), which was not accepted and finally addressed the court. This didi
not resolve the problem either. In April 2011 the two sides agreed on a rescheduling of the debt
which should be re-paid in the course of four years. At the end of 2011 the outstanding obliga-
tions to the electricity company are around KM 400’000.
Vodovod has no other significant accounts payable.

6.2.8 Loans
In 2003 The World Bank lent to the federal Ministry of Finance interest-free SDR loan of about
3.5 million for 20 years, out of which 10 years grace period. The Ministry of Finance further on-
lent this loan to Vodovod with 2% interest and only 8 years grace period. The proceeds of the
loan were used for construction of Ljubijankici water system, which is to be fully operational in
2012. In 2011 interest payments were about KM 70’000 but in addition Vodovod had to cover
negative exchange rate differences of about KM 177’700. The repayment of the principal will be
in equal annual instalments of KM 300’000 and will start in 2012.

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6.3 Current Affordability


In this section we evaluate the affordability of the population to pay for water supply and
wastewater at the present moment, i.e. at current tariffs and current income levels. In the next
stage of the project, when the financial analysis produces the new tariffs required to cover the in-
vestment costs of the short-term investments, we will re-evaluate the affordability of the popula-
tion to pay these new tariffs.
Ability to pay reflects the share of household income that must be devoted to procuring the ser-
vices for water supply and sanitation. Although there is no universally recognized benchmark for
communal services affordability, the allocation of 4-5 per cent of household expenditures for wa-
ter and sewage services is generally regarded as an acceptable international threshold. The
EBRD has set 5% of the total household expenditures as the highest affordability level for wa-
ter/wastewater payments.
As discussed earlier, the statistical data on household income/expenditures and individual sala-
ries is practically non-existent. Under such circumstance we propose as a reference point some
of the results of a comprehensive Household Budget Survey 2007, Office of Statistics, Federation
of BiH. (We understand that this Survey has been repeated in 2011 but the results will be official-
ly released in about two months from now.)
The 2007 Household Budget Survey has estimated the following household monthly expendi-
tures:

Table 6.8: Average monthly expenditure category, 2007 in KM

We have deliberately opted not to adjust the above table for inflation considering the following: (i)
the water tariff has not changed since 2007; (ii) this will yield more conservative results because
if we inflate the rest of the expenditures the water bill share will be even lower.
Based on the consumption data provided in this report the monthly household bill is calculated
under the following assumptions:
 Average household size – 3.8 persons
 Average daily water consumption – 165 l/c/d (estimated by Vodovod)
 Average monthly household water consumption – 18.8 m3
 Monthly household bill for water, including connection fee and water fees – KM 21.75
 Monthly household bill for water and sewage, including connection fee and water fees – KM
27.4
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The share of these bills in the total household expenditures of KM 1’541 would be:
 Only for water supply 1.41%
 For water and sanitation 1.78%
We can conclude that the water supply and sanitation expenditures at present are quite below
the internationally accepted threshold and thus do not give any grounds for concerns. In the next
stage of the project will continue with the analysis of the affordability in view of the future invest-
ment programme and its impact on the water/wastewater bills.

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7. ENVIRONMENTAL AND SOCIAL AUDIT

7.1 INTRODUCTION
The present Report objective is to assess Cazin Wastewater Project’s (CWWP) compliance with
the new EBRD Environmental and Social Policy published on May 2008 (EBRD, 2008).
The EBRD Environmental and Social Policy define specific Performance Requirements (PR) for
key areas of environmental and social issues and impacts. The following list indicates the scope
of the assessment:

PR 1: Environmental and Social Appraisal and Management. The client’s responsibilities in the
process of appraising, managing and monitoring environmental and social issues associated with
project were outlined; a Feasibility Study is underway with a focus on the priority investments,
and the compliance with National legislative requirements, EU requirements and the EBRD PRs
was assessed;

PR 2: Labour and Working Conditions. The company employee management was reviewed;

PR 3: Pollution Prevention and Abatement. The potential environmental impacts associated to


the project and project compliance to this PR was verified;

PR 4: Community Health, Safety and Security. The main social impacts associated to the project
and project compliance to this PR was verified;

PR 5: Land Acquisition, Involuntary Resettlement and Economic Displacement. Potential land


acquisition needs for the Project were reviewed together with the potential for economic dis-
placement as a result of the Project;

PR 6: Biodiversity Conservation and Sustainable Natural Resource Management. Cazin area un-
der the project influence was evaluated against impacts to biodiversity;

PR 7: Indigenous Peoples. Not applicable to the project;

PR 8: Cultural Heritage. The Cazin area under the project influence was evaluated against im-
pacts to cultural heritage; potential adverse impacts on cultural heritage were evaluated and rele-
vant PR compliance was verified;

PR 9: Financial Intermediaries. Not applicable to the project; and

PR 10: Information Disclosure and Stakeholder Engagement. A Draft Stakeholders Engagement


Plan will be developed within the assignment, specifying also the proposed grievance mecha-
nism.

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In the following sections, the main findings of the due diligence are reported for each individual
PR.
Compliance with the EBRD PRs is provided in tables where the proposed activities are compared
against the requirements of each specific PR. Compliance has been defined through a coded as-
sessment, as follows:
NOT COMPLIANT (to be addressed in the ESAP with short timescales specified);
PARTIALLY COMPLIANT (to be addressed in the ESAP);
COMPLIANT
For each of the compliance findings, the tables also provide recommendations / comments as
guidance for achieving compliance.
Identified gaps will be addressed through the Environmental and Social Action Plan (ESAP),
which contains mitigation and performance improvement measures and actions that address the
identified social and environmental issues/gaps. The mitigation measures are actions designed to
ensure that the Project will operate in compliance with relevant local laws and regulations, as well
as EBRD’s Environmental and Social Policy (2008) in all relevant stages of the Project. The
ESAP focuses on avoidance of identified environmental and social impacts where possible, or on
the mitigation measures to minimize or reduce possible impact to acceptable levels.
A Stakeholder Engagement Plan (SEP) will be developed on the basis of the EBRD requirements
in order to define the type and scope of project-specific information that will be made available to
the public.

7.2 PR 1 – ENVIRONMENTAL AND SOCIAL APPRAISAL AND MANAGEMENT


The basic client requirements for an environmental and social management system are defined
in PR 1. PR 1 outlines the client’s responsibilities in the process of appraising, managing and
monitoring environmental and social issues associated with projects proposed for EBRD financ-
ing.
The key findings for PR 1 were as follows:

7.2.1 Social and Environmental Management System


The Company is a municipally owned company with 62 employees. The core activity of the Com-
pany is the water and wastewater management for the service area of Cazin. The company op-
erates thought its 3 main sectors: Financial sector, Sector for legal and general affairs and Tech-
nical sector. The Company has no written HSE/Social Policy, does not hold any quali-
ty/environmental certification (e.g. International Standard Organization [ISO] 14001, ISO 9001 or
the Occupational Health and Safety Assessment Series [OHSAS] 18001) and no HSE
Plan/Manual is in place. However, the Company is functioning based on its internal regulation
system: the Statue, Rulebook on Occupational Safety (adopted in 2004), Rulebook on Fire Pro-
tection (adopted in 2004) and General Act on Maintaining, Use and Monitoring of Water Facilities
and Response in Case of Breakdown or Accident (adopted in 2010), Rulebook on Personal Pro-
tection Equipment (2004). In addition, the Client as a public company has to adhere to the set of
legislation prescribed by the relevant authorities. The lack of a comprehensive HSE Management
Plan at Corporate level has repercussions on the global HSE performance of the Company. Alt-
hough, in terms of drinking water sampling and testing, the Company is compliant with national
and EU legislation, during the ESDD, some environmental issues related to wastewater man-
agement have been revealed: wastewater management is not in compliance with EU standards
(i.e. direct sewage discharge on surface receptor without any treatment).

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7.2.2 Environmental and Social Appraisal


The Company has not yet obtained any of the permits, since the Project is still in its early stage.
However, due to the project dimension and potential impacts, the permitting process differs for
the construction of wastewater collector (WWC) and wastewater treatment plant (WWTP). For
the construction of WWC discharged into the WWTP, the Environmental Permit is not obligatory
in the process of issuing Urban Consent. The construction of WWTP is subject to obligatory Envi-
ronmental Impact Assessment and environmental permitting prior to obtaining Urban Consent. In
the process of environmental permitting, a Preliminary Water Consent needs to be obtained. In
2006, in the scope of Conceptual Design of the Sewerage Network and Wastewater Treatment
Plant of the Cazin Municipality, the Preliminary EIA (Pre EIA) was developed. This Pre EIA as-
sessed the Project potential environmental impacts; however, the social component was not in-
cluded. The impacts not assessed in the Pre EIA will be evaluated in the Environmental and So-
cial Review Summary (ESRS) Report developed as part of this assignment. The corrective
measures designed to address the impacts identified in the ESRS will be provided in the Envi-
ronmental and Social Action Plan (ESAP). The implementation of Pre EIA findings supplemented
with the provisions of ESAP will enable the Project to meet both the EBRD and the EU require-
ments.

7.2.3 Environmental and Social Action Plan


Certain environmental issues were assessed by the Pre EIA. This covers Project’s construction
and operation phase. The Pre EIA has determined that the Project will have significant long-term
(permanent) positive environmental and social impact. A specific ESAP supplementing the Pre
EIA will be developed as part of this assignment.

7.2.4 Training
The Company provides some training for employees. From time to time, the Company sends
some of the employees to workshops and trainings related to environmental protection issues,
organized by a third party. However, no specific training matrix has been developed by the Com-
pany either for general HSE issues (i.e. corporate level) or for the Project.

7.2.5 Managing Contractors


Tender for the Project Construction will be issued by the Company. Project Supervision will be
also assigned trough a dedicated Tender. Since the project is still in an early stage, Tender doc-
umentation is not under the preparation yet. For the proposed project it will be necessary to work
with contractors. Thus, it will be very important to assure that all the social and environmental re-
quirements are respected by all contractors. The requirements and standards that the Contractor
needs to fulfill (including HSE and social requirements) needs to be included in the Contract doc-
umentation.

7.2.6 Performance Monitoring and Review


Currently, no formal monitoring system is in place to assure that the environmental and social
standards are respected. Therefore, there is no clear description of the frequency and type of re-
ports to be prepared, in this respect. The Client will establish and implement monitoring proce-
dures to measure compliance with environmental and social requirements, as well as implemen-
tation of the ESAP and Contractor monitoring provisions.
The consultants found that the Company is mainly partially complying with EBRDs requirements
and that there is room for improvements in order to improve the overall performance of the com-
pany both regarding the management of environmental and social aspects.

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7.3 PR 2 – LABOUR AND WORKING CONDITIONS


PR 2 addresses Client’s responsibility to offer good working conditions for its employees, in terms
of workers’ rights, including freedom of association and right to collective bargaining, safe and
healthy work environment, etc. By doing so, the Company creates tangible benefits, such as en-
hancement of the efficiency and productivity of its operations. Conversely, failure to establish and
foster a sound worker/management relationship can undermine worker commitment and reten-
tion, jeopardise a project and damage the client’s reputation. Compliance was evaluated based
on the relevant sections of PR 2.
The Public Utility Company „Vodovod“ Cazin currently employs 62 employees. The Company's
structure in terms of employment is according to its needs and appropriate to its size, while there
are still work positions open but not filled. The Client has established set of human resources pol-
icies, procedures and standards communicated to all employees. The relation between the Com-
pany and employees, in terms of employment, is defined by laws, collective agreement as well as
the contract and is in compliance with EBRD requirements.
The main internal documents regulating human resources are: Statute PUC „Vodovod“ Cazin,
Employment Rulebook, Regulations on the means and equipment for personal protection of
workers, etc.
They are organized in workers organization with voluntary membership. No cases of forced la-
bour are reported within the Company. Also, there are no identified cases of discrimination (e.g.
gender, race, nationality, ethnic origin, religion or belief, disability, age or sexual orientation). The
company does not employ minors.
The key findings for PR 2 were as follows:

7.3.1 Occupational Health and Safety (OHS)


The Company has no register of work-related accidents and sickens, but they do keep track rec-
ord at workers files and also report state at collective health insurance and health center.
The Company’s employees are trained on H&S, more precisely in the fields of occupational safe-
ty and fire protection, which are required by law. Each job position has prescribed protective
equipment in accordance with the type of activities that need to be performed by the employee.
Monitoring of use for the protective equipment by workers is not being implemented. There are
no written emergency procedures or any kind of training programme in case of accidents.

7.3.2 Grievance mechanism


The Company provides grievance mechanism for workers to raise reasonable workplace con-
cerns, in accordance to local legislation. Each employee has the right to submit his/her complaint
on any issue to the competent department within Company. Employees know whom to contact
due to instructions provided by legal remedy. For settling worker’s complaints internally, all work-
ers are able to raise oral or written complaint to either their supervisor or to the Company’s direc-
tor. However, the Company doesn’t have in place the internal grievance procedure to guide the
internal grievance process prior to employing legal remedies.

7.3.3 Non-Employee Workers


Contractors are hired in accordance with the Law on Public Procurement. The Law prescribes the
minimum requirements that must be met and documented by contractors (these include proof
that contractors are reputable and legitimate).

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However, the Law does not require the contracting authority (the Company) to require from the
contractors any documents related to work or employment issues with the exception of proof that
the contractor has registered all its employees at the Pension and Disability Fund, as well as the
Health Insurance Fund, and that the contractor promptly pays all the social security contributions
for the employees. Monitoring of contractors is entrusted to a third party. Specific provisions to
address labour, OHS and grievance mechanism requirements shall be included in the Tender
documents and Contracts with contractors (addressed by ESAP).

7.4 PR 3 – POLLUTION PREVENTION AND ABATEMENT


PR 3 addresses the client’s responsibility to identify and to avoid or minimise the risks and ad-
verse impacts to environment that may arise from project activities.
The key findings for PR 3 were as follows:

7.4.1 Compliance with EU and applicable National Law


On Company’s request, sampling and testing of potable water is carried out by the Institute for
Public Health of Una-Sana Canton, twice per month. During each sampling event, a total of 10 to
12 samples are collected at points of interest to the Company, both raw (water sources) and
treated water (“hotspots” - sources which supply schools, restaurants, cafes etc.) and analysed
for all parameters requested by the local law. Analytical results meet both national legislation and
EU Drinking Water Directive/WHO. In particular, the analytical results provided by the Client refer
to 2010 and 2011. The tested samples are mainly within the limit values defined by regulations in
force. Occasionally, however, isolated samples showed an increased content of organic matter
registered, as well as ammonia, coliforms, coliforms of fecal origin and increased levels of turbidi-
ty. This occurred mostly in the summer months – June through September, and most usually at
Ljubijankići elementary school, which, as the Company has stated, is supplied from a private wa-
ter source which is not under the Company’s competence.
The Company is also responsible for the collection and treatment of wastewater. Actually no
wastewater treatment is being performed in the central municipal system, and untreated water is
directly discharged into the Mutnica River and its tributaries through several outlets. Only the cen-
ter of Cazin has a central sewage collector, which runs for approx. 400 m and discharges
wastewaters to the nearest watercourse. The rest of the municipality either has very old and
damaged wastewater piping, or uses septic tanks which do not meet national or EU legislation
and are not serviced accordingly by authorized personnel. Therefore the Company is not able to
meet EU requirements for its management of wastewater at this time, but Project implementation
will ensure compliance with EBRD requests and national and EU legislation on wastewater man-
agement.

7.4.2 Pollution prevention, resource conservation and energy efficiency


The Company is monitoring the energy and natural resources consumption. Energy consumption
significantly participates in Company’s operational costs. The share of energy consumption in
2010 amounted to over 20% in overall costs of core activities. However, there is currently no
management plan to improve to maintain or improve the energy efficiency of the on-going water
supply and wastewater treatment. Certain measures for the mitigation of soil impacts, air pollu-
tion, and noise are treated in the Pre EIA. Other impacts not assessed in the Pre EIA will be
evaluated in the Environmental and Social Review Summary (ESRS) Report developed as part of
this assignment.

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7.4.3 Wastes
The Company generates small quantities of waste, mainly regular household refuse that accumu-
lates at the Company’s offices and recyclables – paper. All waste generated by the Company is
collected and managed, in accordance with the agreement between the Company and the local
solid waste company PUC “Čistoća” - legitimate enterprise licensed by the relevant regulatory
agency. Currently, there is no waste separation at source, however the Company plans to adopt
procedures concerning recycling. Minor quantities of waste generated from pipeline maintenance
(metal pipes) are sold as secondary raw materials.

7.4.4 Hazardous substances and materials:


Generally, the Company produces a very small amount of hazardous waste. Although there is
some national legislation on hazardous waste, majority of regulations still needs to be adopted.
Hazardous materials were identified in connection with the asbestos cement water supply pipes
and PCB containing oils in depth pumps. Since no major pipe replacement currently takes place
or is planned in the near future, no asbestos wastes are generated. PCB containing oils from
depth pumps are serviced and disposed of by a third party. Major vehicle maintenance is ser-
viced also by third parties, mostly minor local companies, in their garages.
The Company uses sodium hypochlorite and chlorine gas for water disinfection, which (referring
to latter) poses certain risks regarding overdosing and health hazards. Sodium hypochlorite and
chlorine gas tanks are purchased locally from a certified third party company, which disposes of
the empty containers. Currently, the Company stores its sodium hypochlorite tanks in front of the
Company’s premises, in the open, which is not in line with the guidelines for sodium hypochlorite
storage. Chlorine gas used in Tahirovici well field is stored onsite at the pump station, in the area
reserved for storage.
At the moment, there are no specific written procedures on chlorine management (internal guide-
books, etc.). However, the Company has a General Act on Maintaining, Use and Monitoring of
Water Facilities and Response in Case of Breakdown or Accident which lists chlorine as a toxic
material and emphasises dangers of chlorine explosion. However, a part of this Act that covers
the response procedures in case of overdosing, spill and fire hazards that is taken from NIOSH –
USA, in English language and most likely incomprehensible to a certain number of employees.

7.4.5 Emergency preparedness and response


Besides the General Act on Maintaining, Use and Monitoring of Water Facilities and Response in
Case of Breakdown or Accident, the Company has no internal guidebooks or written procedures
on emergency preparedness. General Act does provide some information about the activities on
water management facility in case of major emergencies (earthquakes, power shortages, etc.)
such as public informing, replacement water supply and public authority informing; however, this
needs to be updated.

7.5 PR 4 – COMMUNITY HEALTH, SAFETY AND SECURITY


PR 4 addresses the client’s responsibility to identify and to avoid or minimise the risks and ad-
verse impacts to community health, safety and security that may arise from project activities.
The key findings for PR 4 were as follows:

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7.5.1 Potential Impacts on Community Health and Safety


No risk assessment has been done by the Company so far. At present, Rulebook on Occupa-
tional Safety and Rulebook on Fire Protection are used by the Company, as well as acci-
dent/incidents forms in case of accident. The Company does not analyse the causes of occupa-
tional accidents; the accidents are only reported on Company protocol.
No extensive study on the effect of the WWTP on the community has been done yet. It is ex-
pected that at the stage of the WWTP operation, there will be odour impact on nearby population.
During the construction work, there is a possibility of safety risk situations. The potential impacts
of the Project on community health and safety are partially identified in the Pre EIA (noise pollu-
tion in the neighbourhood, dust from construction work and increased traffic). Impacts not as-
sessed in the Pre EIA will be evaluated in the Environmental and Social Review Summary
(ESRS) Report developed as part of this assignment.

7.5.2 Infrastructure and Equipment Safety


The construction activities will temporary disrupt local traffic and pedestrian movement. Advance
warning on road closure should be given to the public and alternative passages for the pedestri-
ans and traffic should be provided. Particular attention should be given to public safety by in-
stalling safety fences and warning signs at all critical work areas. Transportation Plan for moving
equipment on public roads and other forms of infrastructure and also including community safety
measures should be developed by the Contractor.

7.5.3 Emergency preparedness and response


No emergency preparedness policies have been issued by the Company concerning accident
hazards and no emergency preparedness exercises have been conducted with the local commu-
nity representatives so far. A specific Emergency Preparedness and Response Plan including re-
sponsibilities, procedures, communication, training, and liaison with the local Authorities should
be developed for both the Project (Contractor responsibility to be included in the Tender docu-
ments) and the Company level (Company responsibility).

7.6 PR 5 – LAND ACQUISITION, INVOLUNTARY RESETTLEMENT AND ECO-


NOMIC DISPLACEMENT
This section provides comments on the baseline characterization and impact analysis of land ac-
quisition and involuntary resettlement in Project-affected areas. Compliance was evaluated with
respect to EBRD PR 5.
Feasible alternatives for sewage construction and the possible locations of wastewater treatment
plant are considered by the project, taking into account economic feasibility and least impact on
communities and environment. The Project itself is designed to have a positive impact on the en-
vironment.
The institution in charge for administering the expropriation, in behalf of the Company is the Mu-
nicipality of Cazin. The resettlement is not foreseen by the project. Temporary land acquisition
and establishing the right to access (the right of way, incomplete expropriation) within the trajec-
tory of the sewage line will be set in place during construction and later operation of the infra-
structure. The Municipality has adopted the decision on public interest for the land acquisition
purpose.
Permanent land acquisition will be required at the location of the treatment plan. However the re-
settlement is not envisaged and potential locations do not hold any households.

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During the consultation process with the client during the feasibility study preparation several lo-
cations had been considered for the WWTP location. The location on the left side of River Mut-
nica, next to the local road leading to the settlement Mutnik is selected as the WWTP location
due to the following conditions:
 The location meets the needs in terms of size of land available;
 The selected area is substantially isolated, two sides of the location are bounded with
trees, and one side and with the river Mutnica on the other;
 The selected area is substantially neglected and unusable for agricultural purposes, cov-
ered with low vegetation (e.g. shrubs), and it is of general consideration that the land
owners will be interested to sell the land under favorable conditions
 It covers substantially a lesser number of land plats (17) in comparison to other areas
and therefore it is expected that the land acquisition would be easier and with lesser im-
pacts.
2
The size of the available land for WWTP construction is 103 156 m .
Negotiations regarding the settlements should not pose substantial difficulties. Given the status
of the land and its current use, no economic displacement is expected. Affected land plots are
mostly owned by private owners. One of the 17 plats is public property.
Expropriation study is under preparation. According to the FBiH Law on Expropriation, the client
will have the right to expropriate the land that is of public interest under market value. Prior to the
expropriation process, the client will try to negotiate the voluntary sale-purchase agreements with
the landowners. In case of not reaching agreement, the land will be expropriated from the owner.
The landowner has a right under the FBiH Law to appeal on the Decision of the Expropriation.
The Municipality prefers to accelerate the expropriation process in order not to cause any delays
to the construction process. Therefore, it prefers to adjust the projects to the use of public land,
where possible, and negotiate the settlement to reach an agreement without involving the court.
In previous cases of land acquisition the Municipality managed to negotiate the agreements out-
side the court, with only few exemptions. If the Municipality was not able to agree on the com-
pensation with the landowners, the case was brought to court.
During the due diligence phase, no potential impacts on livelihoods or economic displacement is
identified within the project area. The initial point of the collector is placed narrowly in the city ar-
ea with present businesses, but is outside the project scope.
The key issues for PR 5 were as follows:

7.6.1 Consultation
The Municipality is in charge for the expropriation and will carry out the consultations with affect-
ed parties in accordance with local legal requirements. The FBiH Law on expropriation provides
the framework for informing/consulting the owner and stakeholders. In addition, the consultation
process for the project will be guided by the Stakeholder Engagement Plan (SEP).

7.6.2 Grievance mechanism


According to FBiH Law, an appeal against the Decision on Expropriation can be submitted to the
FBIH Administration of Geodesy and Legal Ownership Affairs (Article 19). The Project will estab-
lish a grievance mechanism (within Stakeholder Engagement Plan (SEP) that need to be made
available to all affected stakeholders.

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7.6.3 Resettlement planning and implementation


According to FBiH Law, an appeal against the Decision on Expropriation can be submitted to the
FBIH Administration of Geodesy and Legal Ownership Affairs (Article 19). The Project will estab-
lish a grievance mechanism (within SEP) that needs to be made available to all affected stake-
holders. This requirement will be addressed in ESAP.

7.7 PR 6 – BIODIVERISTY CONSERVATION


Project implementation will result in improvement of quality parameters of the wastewater dis-
charged into the natural water bodies. The project does not impact any protected site or biologi-
cally sensitive area. No Natura 2000 sites are in the near proximity of the WWTP construction ar-
ea. The closest protected area is the National Park Una, which is located south-east from Cazin.
The distance between Cazin and Ripač, the settlement closest to the northernmost point of the
National Park Una, is 22 km.
Given that the water stream Mutnica is within the project scope and is currently used for fisheries
and managed by local professional association, any changes in the regulation of water stream
should be evaluated against this use.

7.8 PR 7 – INDIGENOUS PEOPLES


Not applicable.

7.9 PR 8 – CULTURAL HERITAGE


The objectives of this PR include conservation of cultural heritage and its protection from adverse
impact of project activities.
It is envisaged that the Project will have no impact on cultural heritage. However, if the contrac-
tors, during the construction phase, unexpectedly encounter anything suggesting the possibility
of finding objects and sites of cultural/archaeological significance, it is necessary to immediately
suspend work and inform relevant competent authorities.
Recommendation for the introduction of a „Chance Find Procedure“ will be specified in the ESAP.
Its goal is providing instructions on how to behave in situations of a chance find, including re-
strictions/modifications to the execution of the site construction activities.

7.10 PR 9 – FINANCIAL INTERMEDIARIES


Not applicable.

7.11 PR10 – INFORMATION DISCLOSURE AND STAKEHOLDER ENGAGEMENT


PR 10 deals with the identification of people and communities potentially affected by the project
and other interested parties and with the engagement of a process of disclosure of information
and meaningful consultations on potential environmental and social issues.
A Stakeholder Engagement Plan (SEP) has been developed on the basis of the EBRD require-
ments. The Project stakeholders will be identified and included in the SEP Also the list of local
communities who are the project beneficiaries will be provided.
It is expected that the project will have mainly positive long-term impacts to the affected commu-
nities. The client has identified several stakeholders, including company users, employees, local
NGOs. Vulnerable groups have been identified by the Client. The list of vulnerable household is
readily available and compiled based on their vulnerable status with the public service for the

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vulnerable persons and on the individual assessment of Company's field workers in charge for
sales. The vulnerable status is mainly related to their incomes. Stakeholders and vulnerable
groups will be treated in SEP.
The activities on information disclosure and consultations with regards to the Project have been
carried out by the Municipality (through its website and stakeholder consultations). Given its in-
volvement in the Project, the Municipality, as well as the Client, is responsible to implement SEP.
The Project grievance mechanism is provided in the SEP.

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8. LONG-TERM INVESTMENT PROGRAMME

8.1 Service Objectives


The Consultant proposes the following main operational objectives which shall be achieved in
the water supply and wastewater sectors with the future investment measures. All proposed long-
term investment measures shall contribute to achieving these goals.
 Set fair and affordable tariffs for good services

 Reduce the rate for non-revenue water to 30%


 Reduce general water wastage
 Reduce energy inefficiencies
 Ensure good and stable water quality in receiving water bodies according to regulations
 Ensure good and stable drinking water quality from source to the consumers
 Increase stability of supply (uninterrupted supply and sufficient pressure)

 Secure an adequate waste water collection and treatment system


 Secure an adequate drinking water quantity for the whole municipality in the long term

 Increase managerial, operational and technical capacities and increase safety of workers

8.2 Investment Strategies


The ultimate goal of the proposed investments is to support the sanitisation of the Municipality of
Cazin. This would allow in the first place protecting water resources and improving conditions in
the field of public health.
Furthermore, the proposed measures are accompanied by interventions in the water supply sec-
tor in order to improve the effectiveness through the reduction of NRW and the improvement of
the general water quality supplied to the consumers. This also implies urgent repairs and re-
placements that are not necessarily part of the regular renewal budget.
This aims at the overall enhancement of the water supply system that would help creating sav-
ings and additional revenues. Adjusted tariffs are an urgent requisite to finance, beside the en-
visaged savings, the new sewerage system including WWTPs. It needs to be borne in mind, that
up to present, nearly no waste water infrastructure had been in place. The envisaged improve-
ment of this system will create considerable costs through the investment as well as through
O&M-costs.
It will be vital for the project to prove that:
 Savings in the water supply sector will help financing the new infrastructure regarding
sewerage
 and, tariff adaptions are feasible and affordable
 and that the population is willing to support this project through private funds that are
commonly collected by assigned local committees

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8.2.1 Water Supply


In light of the preceding deliberations, it seems most reasonable to follow a longer term compre-
hensive rehabilitation and improvement strategy. This strategy should not only include infrastruc-
ture rehabilitation components, but also contribute to organisational efficiency and commercial vi-
ability improvements.
The Long Term Investment Programme (LTIP) has been drafted under these premises and shall
serve as a roadmap to achieving the overall service objectives and sustainability of operations.

8.2.2 Potable Water Demand and Loss Projections


The determination of the future water demand, including the loss projections, for 2030, is pre-
sented below:
3
Total quantity of water produced in 2010: 4’092’406 m
Number of inhabitants supplied in 2010 (97.5% of 64’000): 62’400
Water demand per capita per day in 2010,
incl. agriculture, commerce, industry,
(water losses of around 52% are included): 179 l/capita/day
Number of inhabitants supplied in 2030 (annual increase in population of <1%): 74’600
Assumption: 150 l/cap.*d for domestic use plus 50 l/cap.*d
for industry/institutions/commerce in urban area or
50 l/cap.*d for agriculture in rural areas
(water losses of 30% are included) 200 l/capita/day
3
Total Annual Water Demand in 2030: 5’445’800 m
3
The current water production capacities of around 320 l/s (= 10’091’520 m /year) are sufficient in
absolute terms. However, it should be investigated whether optimal operation in terms of security
of the supply and energy effectiveness is guaranteed.

8.2.3 Waste Water Collection and Treatment


As indicated in previous chapters, there are different numbers regarding population figures, the
baseline data is based on the operational data from VODOVOD. Currently, there are about 5,700
households with an average of 4.2 persons in the urban catchment area. This corresponds to
approximately 24,000 residents.
The industrial sectors, compared with the pre-war time, massively collapsed and comprise only a
few small manufacturing and processing plants. Generally, the Consultant assumes, that not
more than 20% of the total load is deriving from this sort of businesses, including future planning.
The population growth is estimated at 0.6% per year. The commercial and industrial development
is adopted at the same growth rate.

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Table 8.1: Development of population and connection rate in catchment area of WWTP1

Year Population in Project Connection Rate (% per Connected Population and


Area (thousands) year) Industries (thousands)
2015 29 30 10
2020 30 65 19
2025 30.5 70 26
2030 31 77 29
2035 32 85 33

The estimation of the lower catchment area is based on information from the report "Final design
for the section I of the main sewer (2007, the Department of Water Resources Sarajevo) and Fi-
nal design for the section II of the main sewer (2008, the Department of Water Resources Sara-
jevo) ". For the project period to 2035 a connected population and industrial figure of 17,000 PE
is assumed.

8.2.4 Wastewater Projections


Cazin sewage system
In making the projection for future needs an assumption has been made towards the period up to
2035. The connection rate will increase from about 10 to >80% as a result of connections, new-
lyimplemented sewerage network, construction and network extensions.
This will entail in increasing the number of connections from the current level of 7,600 inhabitants
equivalent to a value of about 30,000 by 2035. This will require an increase in the length of the
sewerage network from the 1.8 km tertiary branches and 2.0 km main sewer planned to be com-
pleted until the end of the year 2013 to a total length of 96 km.
The wastewater projections are as follows:
1. Assumption: 100% connection rate of budgetary connections in the long term
2. Achieved: 80% connection rate for residential premises by 2035

3. Assumption: 100% connection rate for commercial entities in the long term

Independent Sewerage systems U2, K1, G3, and G4


There are no existing sewerage networks respectively WWTPs in systems U2, K1, G3, and G4
and the construction of new system corresponds to a total length of 94 km including 4 new
WWTPs that would have to be constructed.
As a rule, wastewater production develops proportionally to the water consumption. Currently,
only the households of apartment buildings are connected to the sewer system, while private sin-
gle houses are disposing of their wastewater via septic tanks.
According to the Company records, 58% of the households which are connected to the water
supply are also connected to the sewer system (mainly in the City area).
For the design of the WWTP, a staged increase in the sewer connection rate to 75% and later to
90% of the residential population should be assumed. Per capita wastewater production for de-
sign purposes should be set at approx. at 150 lcd, plus industrial wastewater production, which is
generally being assumed to be 20% of the total emission.

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8.3 Proposed Measures in the Long Term Investment Plan

8.3.1 Water Supply


The rate for Non-Revenue Water is estimated to be around 52%. This means that more than half
of the water produced is not billed. It includes physical as well as administrative losses through
leaks (pipes, valves hydrants, house connections), wastage (open taps, fountains), illegal draw-
offs, consumed but not metered water and so on. The main task of the Company is to tackle the
ineffective water management, which requires combined technical and capacity building
measures. The following tables outline the measures proposed for the long-term investment plan.

No. Description

WS01 District Management Programme:


A suitable step to overcome the unsatisfactory situation regarding Non-Revenue Water
is the implementation of a district management programme, which includes the reha-
bilitation of the network of one district after another in a systematic manner. It compris-
es the following tasks:

- Preparation of visual information (drawings, schemes, etc.) on the distribution net-


work (including secondary and tertiary) and connection with customer database.
The setup of a digital network information system shall be initiated and utilized by
all departments of the Company. The update of the data is a continuous process,
which shall be an integrated part of the Company’s operation.
- Division of the 4 principle systems of VIGNJEVICI, MUTNIK, TAHIROVICI and
LJUBIJANKICI in hydraulically favourable subzones (districts) to implement
measures for effective district management in a systematic way.
- Integration of data about billing, consumption, customers, etc. in the analysis of
district performance. Calculation of water balances per district. Preparation of data
sheets per district with all relevant data for analysis and monitoring of progress.
- Procurement of equipment and connecting material for measurements (pressure,
flow). Provision of training for staff to use it. The initial training should be conducted
by a senior expert. It is also necessary to procure certain stock of spare parts and
pipe material for repair of leaks and pipeline sections.
- Identification and registration of unregistered/new customers. Installation of house
connections for new customers.
- Design and construction of new manholes as needed to enable water network
management and provide locations for adequate measurements, in particular dis-
trict water meters.
- Replacement of old and worn out pipelines on the basis of the pipe repair statistics.
- Implementation of a calibration, repair and replacement programme for domestic
water meters.
- Verification and replacement of flow meters as needed at reservoirs, pumping and
booster pump stations and at points where mains enter into certain supply zones.

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No. Description

WS01 Benefits of the District Management Programme:


(conti- Including but not limited to the following:
nued)
 Network Water Balance: The establishment of districts will provide the Company
with the required tools to conduct a district water balance. This means using the
data logged and retrieved from the district and customer water meters, the Com-
pany can verify key district performance aspects, which indicate technical and ad-
ministrative efficiency of the Company from water delivery to revenue collection,
such as:
- drinking water inflow to the district
- drinking water consumed by registered customers (billing)
- drinking water not consumed by registered customers (losses)
- drinking water paid by registered customers (revenue water)

 Network Mapping, Asset Database Management: The Company will (re)-apply


skills in recording the water supply installations, customer locations, and interpret-
ing data to guide future operational and procurement practices.

WS02 Master Plan for the Water Supply System:


Design of a master plan for the overall water supply in the Municipality of Cazin.It shall
define the development and the management policy of the water supply in the prede-
fined municipal area. The plan presents the long term needs for water infrastructure
and the investment costs. The need for developing a master plan for water supply is
defined in the Strategic Plan for Water and Environmental Protection of the Municipality
of Cazin.

WS03 Energy Saving Programme:


Design and implementation of an energy saving programme. This requires the analysis
of power consumption, pressure management and the efficiency grades of pumps in-
stalled. The verification of the current and future hydraulic capacity requirements by
means of a hydraulic network model constituent an integrated part.

WS04 Pipeline Replacement and Renewal Programme:


Determination of pipelines for replacement and renewal on the basis of a detailed anal-
ysis of the water supply network. This refers to old and worn out pipelines, on which
leakage occurs regularly, and to under-dimensioned pipelines.
Given the fact that lifespan for pipelines is around 50 - 70 years, renewal means that
1.5 - 2% of the total asset value of the network needs to be reinvested on an annual
basis.

WS05 Water Quality Improvements:


Improvements of water quality facilities on the basis of a separate assessment. It shall
be ensured that state-of-the-art equipment is provided for automatic chlorination in the
pumping stations or reservoirs (chlorine alarm, sprinkler, ventilation, air conditioning).
Option: Measures may be required to protect some of the sources against occasionally
occurring events of high turbidity in the raw water.

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No. Description

WS06 Improvement of Procedures related to Revenue Collection:


The proposed measures are restricted to the revenue, billing and collection transaction
cycle, which is seen as crucial for improvement of billing and collection performance
and reduction of Non-Revenue Water. Measures, which shall be designed in appropri-
ate, reasonable, cost-effective and comprehensive manner, include but are not limited
to the following areas:
- Internal control activities (to provide adequate assurance that authorized transac-
tions are processed completely, accurately, and in a timely manner).
- Written policies and procedures (to ensure that authorizing and executing transac-
tions and other operating steps are only done by persons acting within the scope of
their authority)
- Job description (to authorize personnel to perform tasks as well as be kept ac-
countable for the undertaken activities)
- Assessment for segregation of duties and proposal of remedy action (to determine
the adequacy of segregation of duties among those responsible for various reve-
nue, billing and cash transactions; e.g. is function of water meter reading separated
from collection)
- Tailored solution for Billing & Accounting System based on recent international best
practises (to benefit from increased transparency of financial figures and to comply
with international standards for all financial reports)

WS07 Customer Relationship Management:


Improvement of customer services shall build up open, transparent and fair relationship
to customers. The Company shall be aware of the importance of customer care and
performing customer oriented services as part of their daily commercial activities. The
company shall start to develop skills to adequately and satisfactorily respond to cus-
tomers’ need and inquiries.

WS08 Automatic Control System (SCADA):


The installation of a SCADA system for the whole water supply system of Cazin shall
help to monitor the operation in a more cost effective way. Equipment installed for dis-
trict network management (bulk water meters, pressure sensors, etc.) shall be ade-
quately selected, so that it can be integrated in the automatic control system.

The long-term investment plan consists of measures, which will have sustainable impact on the
performance of the Company. It is important that proposed measures become an integrated part
of the Company’s strategy and that they are implemented conscientiously and duly by their staff

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8.3.2 Wastewater Collection


Wastewater Collection – Cazin sewerage system
The Consultant proposes that the most feasible long-term investment for the Cazin sewerage
would be to secure the availability of a reliably working sewer system and to develop the
wastewater drainage in a way that both leakages and operating costs are minimised.
Therefore, the following components are envisaged (either comprised in the LTIP or extracted to
the PIP):
1. Cazin City including the Mutnik branch
2. Downstream Cazin including side branches
3. Independent sewerage systems in four other communities

8.3.3 Wastewater Treatment Plants


Treatment requirements
The statutory requirements in BiH (reference to directive) to the discharge of treated wastewater
are very close to the EU directives. Especially to be mentioned are the requirements with regard
to nutrient removal for sensitive waters. Recipient of treated wastewater is the river Mutnica,
which flows to the river Korana, and finally into the Danube and the Black Sea.
According to the EU definition, the Black Sea is classified as a sensitive area so that nutrient re-
moval is required for treatment plants above 10’000 pe.
According to these regulatory requirements, the effluent of the WWTP must comply with the
standard discharge limits as defined in the following table.

Table 8.2: Standard Discharge Limits According to BiH Reglementation


Parameter Unit Maximum Concen- Minimum percentage of load reduction
trations

Total suspended solids mg/l 35 90%

Biological oxygen demand (BOD5) mgO2/l 25 70 -90%

Chemical oxygen demand (COD) mgO2/l 125 75%

Total phosphorus (Ptot) mgPtot/l 2 80%

Total nitrogen (Ntot) mgNtot/l 15 70 – 80%

Since, river Mutnica is currently not defined as bathing waters, and therefore, no measures for
water disinfection are required, retrofitting of the facilities is, however, possible at any time (Chlo-
rination or UV).
The connection of the main sewer to the WWTP naturally occurs in the valley .Because of the
economic scale, a single sewage treatment plant at the end of the main sewer in the area near
the confluence of the river Mutnica in the river Korana would be logical.
Subsequently, the following main components were identified:
1. Sanitation of Cazin City including the Mutnik branch, including WWTP to be implemented in
two stages (WWTP 1a and 1b)
2. Further development of the sanitation system towards Korana river including WWTP 2 and the
connection of additional branches

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3. Sanitation of independent systems throughout the Municipality by constructing separate sys-


tems (as far as technically and financially feasible) and decentralised WWTPs
This general concept allows for the following overall planning for the WWTPs:

Table 8.3:LTIP and PIP regarding WWTPs


Description PIP LTIP
WWTP 1a 50% capacity of WWTP 1 X
WWTP 1b 50% capacity of WWTP 1 X
WWTP 2 Whole Plant X

Under these premises, this allows for the following assumptions:

Table 8.4:Basic design of WWTPs


Year 2015 2035
WWTP 1 (“Cazin”) 14’00 PE (1. Phase) 28’000 PE (2. Phase)
WWTP 2 (“Korana”) 17’000 PE

Thus, the following loads are estimated:

Table 8.5:Specific loads per population equivalent


Description Specific Unit Quantity
Loading Factors
Spec. Wastewater production L/pe,d 150
Drainage water l/s 50% of wastewater
Organic load (BOD5) gO2/pe,d 60
Total Suspended Solids gTSS/pe,d 70
Kjehldal-Nitrogen load gN/pe,d 11
Phosphorus load gP/pe,d 2.5

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Table 8.6:Loads for WWTP 1


Description Unit Quantity (2021) Quantity (2035)
Wastewater Qw m3/d 1‘800 4‘950
Drainage Water (50% of wastewater) Qd m3/d 900 2‘475
Dry Weather Flow m3/d 2‘700 7‘425
Peak Flow (16h-peak) m3/h 150 413
l/s 42 115
Wet Weather Flow (2*Qw+Qd) Qmax l/s 73 201
Biological Oxygen Demand kgBOD5/d 720 1‘980
Chemical Oxygen Demand kgCOD/d 1‘440 3‘960
Total Suspended Solids kgTSS/d 840 2‘310
Total Kjeldahl Nitrogen kgN/d 132 363
Total Phosphorus kgP/d 30 83

Table 8.7: Loads for WWTP 2


Description Unit Quantity (2035)
3
Wastewater Qw m /d 2‘550
Drainage Water (50% of wastewater) Qd m3/d 1‘275
Dry Weather Flow m3/d 3‘825
3
Peak Flow (16h-peak) m /h 213
l/s 59
Wet Weather Flow (2*Qw+Qd) Qmax l/s 103

Biological Oxygen Demand kgBOD5/d 1‘020


Chemical Oxygen Demand kgCOD/d 2‘040
Total Suspended Solids kgTSS/d 1‘190
Total Kjeldahl Nitrogen kgN/d 187
Total Phosphorus kgP/d 43

Description of potential treatment processes


A typical WWTP is composed of a chain of different processes. The number and type of process-
es varies in function of the influent quality of the wastewater and the effluent quality that should
be achieved.Table 8.8 summarizes the most important processes for the different types of treat-
ment usually used.

Table 8.8:Basic Types of Wastewater Treatment

Type of Treatment Unit Processes Removed Water Constituents


Mechanical treatment Screening coarse solids
grit removal grit, sand, fat, oil
primary sedimentation solids that settle easily

Biological treatment activated sludge process, BOD5, COD, ammonium, total nitrogen,
attached growth processes phosphorus, biodegradable micropollu-
tants,

Chemical treatment precipitation dissolved phosphorous

Advanced treatment filtration fine solids


adsorption organic compounds, heavy metals
disinfection microorganisms

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The primary objective of the mechanical treatment is to remove coarse solids and grit that might
disturb the proper functioning of the downstream processes.
A further component of the mechanical treatment is the primary sedimentation. The primary sed-
imentation typically eliminates about one third of BOD5 and COD (without chemical precipitation).
Since primary sludge is highly reactive and tends to produce strong odor emissions, primary sed-
imentation should only be considered if anaerobic digestion is foreseen.
The biological treatment is usually the most important part of a WWTP. It has the following task:
 Reduction of the biological and chemical oxygen demand (BOD5 and COD) through the degrada-
tion of solid and dissolved organic material
 Oxidation of ammonium to nitrate (nitrification)
 Removal of total nitrogen (denitrification)
 Degradation of organic chemical pollutants
 Reduction of the concentration of microorganisms
The most widely used process for biological treatment is the so-called “activated-sludge process”.
In the most basic form, the activated-sludge process consists of an aeration tank and a second-
ary clarifier. In the aeration tank, bacteria are cultivated by providing oxygen. In the presence of
oxygen, bacteria can use the pollutants as food for the production of energy and cell mass. As a
result, the pollutants are converted into carbon dioxide, water and biomass. The cultivated bacte-
ria are present in the aeration tank in the form of sludge flocs.

To retain the bacteria in the activated-sludge process, the secondary clarifier separates the treat-
ed water from the sludge flocs. In the form of return activated-sludge (RAS), the bacteria are
brought back to the aeration tank. To avoid that the concentration of bacteria in the aeration
tanks exceeds the target value, a certain percentage of the sludge must be removed from the
process. This sludge is called waste activated-sludge (WAS).

Figure 8.1:Activated-Sludge Process

Secondary Clarifier

Aeration Tank
Influent
Effluent

Return Activated-Sludge

Waste Activated-Sludge

The activated-sludge process can also remove nitrogen, if the aeration is stopped from time to
time or if an anoxic compartment is included. The discontinuation of aeration results in the for-
mation of anoxic conditions (nitrate is present, but no oxygen). Under anoxic conditions, bacteria
use nitrate instead of oxygen to degrade organic pollutants. This process results in the produc-
tion of molecular nitrogen that is released into the atmosphere.

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Various configurations of activated-sludge processes exist in function of the water pollutants to


be treated. For Cazin, an activated-sludge process with nitrification and denitrification is required.
The most widespread configurations for denitrification include:
 intermittent denitrification (single aeration tank, the aeration is temporarily switched off to create
anoxic conditions that results in denitrification)
 pre-anoxic denitrification (the denitrification takes place in a separate compartement upstream of
the aeration tank)
 sequencing batch reactor (SBR) with anoxic phases (biological treatment and sedimentation are
carried out in the same tank by running the processes in sequence). There are also alternatives
such as ABR that resemble a mix of SBR and continuous activated sludge systems.
A special form of activated-sludge treatment is the Membrane Bio Reactor (MBR). This technolo-
gy relies on microfiltration or ultrafiltration membranes to separate the activated sludge from the
treated water. The effluent of this process is of excellent quality in terms of total suspended solids
and microorganisms. Further, the required footprint for this process is smaller than for a conven-
tional activated sludge process. However, investment and operation costs are high.
As alternative to activated-sludge processes, biofilm processes can be used for biological treat-
ment. In a biofilm process, bacteria grow on a carrier material. This technology achieves a higher
biomass per tank volume than activated-sludge processes for which bacteria grow in free sus-
pension (sludge floc). Consequently, biofilm processes require a smaller footprint. Two of the
most wide spread biofilm processes are Biofilters and Moving Beds. Table 8.9compares the ad-
vantages and disadvantages of different process configurations.

Table 8.9:Comparison of possible process configurations for biological treatment

Possible Variants Advantages Disadvantages Suitability for


Cazin
Extendend Aeration simple technology, sludge large footprint high
(Oxidation Ditch) stabilization

Preanoxic Denitrificati- standard technology, low no sludge stabilization high


on ammonium and nitrite
emissions

Sequencing Batch no secondary clarifiers, additional pumping station high


Reactor (SBR) high denitrification,

Moving Bed small footprint high investment costs low

Biofilter small footprint high investment costs, low


high energy consumption

Membrane Bio Reactor excellent effluent quality, high investment costs, low
(MBR) small footprint complex technology, high
energy consumption

Chemical treatment is typically applied to precipitate dissolved phosphorus. Chemicals used for
this purpose (coagulants) include iron chloride, iron sulphate, alum or polyaluminium chloride.
The coagulant can be dosed into the primary sedimentation or the aeration tanks of the biological
treatment.
Alternatively, phosphorus can be removed using biological processes. However, biological phos-
phorus removal processes are relatively sophisticated and need a very good process under-
standing. Furthermore, the required treatment target cannot be achieved by biological phospho-
rus removal alone. Therefore, biological phosphorus removal has not been considered in the
studied variants.

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Because of the demands on the cleaning performance and the available space it is assumed that
for the following estimates for both wastewater treatment plants a Pre-anoxic Denitrification as a
biological process level will be used.
Description of possible processes for the sludge treatment
The activated-sludge process produces considerable amounts of sludge that must be treated and
disposed properly. Independent of the type of disposal, the sludge should be stabilized. Stabiliza-
tion means that little biodegradable material is left in the sludge. As a consequence, stabilized
sludge does not emit strong odours. There are different ways, how sewage sludge can be stabi-
lized. The most important processes are compared in the following Table.

Table 8.10:Comparison of Sludge Stabilization Processes

Sludge Stabilization Pro- Advantages Disadvantages Suitability for


cess Cazin
stabilization by extend- simple process large tank volumes high
ed aeration (SA > 25 d)

aerobic digestion smaller tank volumes for energy intensive, re- low
biological treatment quires separate tanks,
more complicated
process than extended
aeration, risk of odor
emissions

mesophilic anaerobic energy production, good relatively complex high


digestion at about 35°C dewatering of sludge process, high safety
requirements (explo-
sion protection)

chemical stabilization can be applied for agricul- only temporary stabili- low
with lime tural use zation, increased
sludge amount, un-
suitable for disposal in
landfill

Composting valuable product for agri- disposal only in agri- low


culture culture, risk of odor
emissions

Constructed wetlands Simple process Large basin volumes high

Stabilization by extended aeration means that the activated sludge is kept relatively long in the
biological treatment so that very little biodegradable material is left when it is extracted from the
1
process as WAS. According to ATV , a biological treatment with nitrogen removal requires a min-
imum sludge age (SA) of 25 days to produce stabilized sludge.
For aerobic digestion, WAS is not stabilized in the biological treatment itself, but in separate aer-
ated tanks. Since this process is energy intensive and more complicated than extended aeration,
it is not considered as an option for Cazin.
The preferred stabilization for WAS with a shorter SA is anaerobic digestion. As anaerobic deg-
radation is generally much slower than aerobic degradation, the minimum temperature for anaer-
obic digestion is about 35°C (to speed up the biological reactions). The big advantage of anaero-
bic digestion is that it produces biogas (a mix between methane and carbon dioxide) that can be

1
ATV-DVWK-A 131 (2000): Sizing of single stage activated sludge plants.

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burnt in a cogeneration plant or transformed to natural gas. The waste heat from cogeneration
can be used to heat the anaerobic digester.
Since chemical stabilization is often only temporary, requires a large amount of lime, significantly
increases the sludge amount and makes only sense for the ultimate use in agriculture, this option
was not included in the investigated options.
Composting is an interesting option, if the sludge is fully used in agriculture. As this is unlikely to
be the case for Cazin (see below), composting was not considered.
Constructed wetlands provide non-stabilized sludge over a period of up to 10 years to drain with
the help of reeds and also largely to mineralize (stabilizing).
Subsequently, the sludge can be used as a fertilizer in agriculture or disposed of in land-fills.

Sludge disposal
Sludge disposal is an important issue for every WWTP. Ideally, sludge disposal should be:
 cost efficient
 environmentally safe (no pollution of soils, groundwater, surface waters)

 sustainable (optimal use of energy and phosphate content)


 include minimization of odours
Since BiH has very few operating WWTPs, the sludge disposal paths are not well established.
Also, legislation with respect to treatment and land application of sludge is missing. In the follow-
ing, the sludge disposal options for Cazin WWTP are briefly described for the current situation
and for the long-term future.

Fertilisation:
Due to its nutrient content, stabilized sludge can be used as fertiliser in agriculture. The sludge
can be applied in liquid (in the proximity of the plant), dewatered or dried form. In many EU coun-
tries, land application of sludge is an important disposal path, in particular for smaller WWTPs.
Potential problems associated with land application of sewage sludge include:
 enrichment of heavy metals in agricultural soils

 hygienic concerns with respect to the crops grown on the treated fields
 potential for groundwater contamination (in particular in karstic areas)
If the maximum concentrations specified for metals in industrial wastewater discharged to the
public sewer system are enforced, the metal concentrations in the sludge produced by Cazin
WWTP should be in the normal range.
For the safe use of sewage sludge in agriculture, clear rules must be established, defining the
type of crop for which sewage sludge may be applied. Currently, the EU legislation does not re-
quire any type of sanitation/pathogen reduction for sewage sludge so that stabilized sludge can
in principal be used in agriculture without further treatment.
Since Cazin is in a karstic area, there is eventually little scope for the application of sludge.
Overall, it can be concluded that the potential of agricultural use for sludge will be limited in the
case of Cazin.

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Disposal in Landfill:
The municipal waste of Cazin is disposed at Mezdre -Vlaski Dol Landfill Municipality of Bosan-
ska Krupa. This landfill is not sanitized and therefore not suitable for the disposal of sludge. Other
suitable landfill sites in the surrounding area are currently not available.

Incineration:
Incineration will reduce the sludge volume to a minimum and completely destroy its organic mat-
ter content. The most widespread options for sludge incineration include:
 cement burning kiln

 coal-fired power plant


 municipal waste incinerator
 dedicated sewage sludge incineration plant
Depending on the application, the sludge to be incinerated must achieve a minimum dry solids
content. Often, the required dry solids content can only be reached by a costly drying process in
a special drying facility.
For Cazin WWTP, the installation of a separate sludge drying facility and a dedicated sludge in-
cineration plant would be uneconomical for the size of the WWTP. Therefore, incineration is not
an option in the short-term.
On the national or regional level, BiH should urgently develop a sludge disposal concept to cope
with the rapidly rising sludge amounts that will be produced in the near future by the planned
WWTPs. Within the framework of such studies, the regional options for sludge incineration must
be evaluated. The total sludge amount of a region is more likely to be high enough to find innova-
tive solutions that guarantee efficient sludge disposal and may create win-win situations for public
utilities and private companies that operate incinerators. The incineration of sludge will save
commercial companies fuel costs and allow them to offset their carbon dioxide emissions by us-
ing non-fossil fuel. Eventually, some part of the drying can be accomplished using waste heat of
the incinerators. This will lower the drying requirements for the WWTPs.
A sludge drying technology that attracts more and more interest is solar drying. This technology
uses the principal of greenhouses to dry dewatered sewage sludge, where solar radiation is used
for heat production. During winter time, the heat supply can be increased with waste heat from
cogeneration or heat recovery from wastewater.

Conclusions for sludge treatment at Cazin WWTP:


Because of the distinction between short and long term infrastructure investments (PIP and LTIP)
there showsa significant different number of the connected persons of the WWTP over this time
period. In addition, national and regional sludge disposal plans will have a strong influence on the
way of disposal of the sludge from the two WWTPs of Cazin over the next few years. The aim,
therefore, is for the medium-term, to have a flexible solution for the sludge disposal, on which the
sludge treatment is orientated. The following actions are therefore proposed:

PIP: For WWTP 1a is in a first step constructed wetlands proposed. This method allows on one
hand to stabilize the sludge in a simple and low-investment way and reduce the volume. In addi-
tion this allows the sludge over the next 10 years to be buffered on-site. In parallel, this period of
time allows to develop appropriate disposal concepts on regional and national levels, that would
advise specify clear disposal routes in future.

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LTIP: With the construction of WWTP 2, the implementation of WWTP 1b and the significantly
higher amount of sludge, the anaerobic digestion on-site of WWTP 1 for both systems seems to
be a realistic option. The sludge from the WWTP 2 would have to be thickened and transported
over a distance of about 8km to WWTP 1. That would allow for a system that can produce ther-
mal and electrical energy by biogas. Furthermore, it would allow for reducing and stabilizing the
amount of sludge significantly. The product from the digestion is suitable for all conventional dis-
posal methods (landfill, incineration, fertilizer for agriculture). After all, the existing constructed
wetlands can be re-used for other purposes.
To keep all options open for the disposal of the excess sludge, the Consultant proposes to re-
serve some space of the constructed wetlands for the later installation of a solar sludge drying
facility. If there will be an opportunity in the future to incinerate a portion of the produced sludge
in the region, the solar drying facility will allow for the required dry solids content in an efficient
and sustainable way. In the long-term, sludge incineration should be preferred over the disposal
in a landfill.

8.3.4 Considerations about the Use of Energy and Avoidance of Green-House-Gases


Anaerobic digestion is a feature that can only be envisaged from approximately 2021 onwards. In
that sense, this option is only comprised in the LTIP and does not have any influence on the pro-
posed PIP (constructed wetlands for the processing of WWTP sludge).
However, implementing the anaerobic digestion from approx..2021, would yield in the production
of biogas that can be used in a combined cycle. Taking the increase of connected PEs by 2035
excluding WWTP2 (“Korana” with an additional 15-17’000PEs), a saving of electrical energy of
approximately 500,000 kWh/a can be achieved. Calculating an average electricity tariff of 0.16
KM/kWh, savings of 80,000 KM/a would thus result. The reduction in heat consumption is not in-
cluded, as the demand for caloric energy is determined by the digestive system. Therefore, the
warming of the digesters is usually provided through the process it selves
Experience shows that an average WWTP of the envisaged size would cover about 40% -50% of
the electricity demand, and about 100% of the required thermal energy.This would roughly result
in an autark process. However, this is a seasonal pattern. Most thermal energy is actually used in
cold seasons when heat could be sold to third parties. In warm seasons, the sale of thermal en-
ergy poses much greater challenges (ref. district heating).
With regard to the production or avoidance of green-house-gases (GHGs), no clear quantification
during the PIP stage can be made. For the PIP, only the stabilization in wetlands is proposed due
to economical reasons. From 2021 onwards, anaerobic digestion would be considered in order to
decrease the energy consumption of the treatment process. A rough estimate shows that by con-
necting the envisaged 28.000 PEs, using co-generation in a combined cycle, approx. 263 toCO2
could be saved compared to the proposed wetlands “Korana WWTP” not included. If “Korana”
would be included later-on (LTIP), the sale of excess energy becomes feasible, with regard to
electricity as well as thermal energy (if suitable consumers, particularly for low-caloric heat in
warm seasons, are available).

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8.3.5 O&M Equipment and Improvements


The Consultant has included a component that would have to be financed in order to assure op-
eration and maintenance of the newly built sewerage systems. This will be included in the LTIP,
but still being labelled with a high priority. One should still keep in mind that the equipment is only
used after a considerable part of the proposed sewerage system is built. Key elements of the
proposed equipment are:

 high pressure sewer flushing truck


 vacuum truck
 excavator
 general purpose truck
 portable flow metering equipment for electrical efficiency monitoring
 PE-pipes welding set
 and other

8.4 Preliminary Long List of Project


Based on the findings presented in the preceding sections, and the discussions with representa-
tives of the City and the Company, the Consultant has proposed a draft long list of future invest-
ment projects.

8.4.1 Water Supply


On the water supply side, proposed major investment components in the long list up to 2027
relate to the Implementation of the long-term plan according to chapter 8.6 (WS-01 - WS-08).
The Company shall focus their investments in the water supply infrastructure on improvements of
the existing system and reduce investments in new systems. Local schemes not operated cur-
rently by the Company shall also be operated in future by external entities.

8.4.2 Waste Water Collection and Treatment


Wastewater Collection – Cazin sewerage system
The following Tables reflect the needs for investment throughout the Cazin Municipality with the
long-term goal to connect approx. 80% of the population and industries to a working sewerage
system including final treatment in WWTPs.

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The Tables are split into different catchments in order to enable prioritisation and subsequent
formulation of the PIP.
Table 8.11: Investments for the downstream sewer

Main Sewer Cazin WWTP 1 to Korana incl. Side Branches


Average Price
Pipe Diam- (including man- Total Price
Section Name eter holes) Length (VAT excluded)
Ø €/m' m' €
1a-as tertiary, 2a,
3a, 4a, 6a, 7a, 8a,
9a, 10a DN 300 193 42,900 8'279'700
Main Sewer DN 400 220 3,500 770'000
Main Sewer DN500 255 3,100 790'500
Total: 9,645,400

Table 8.12: Investment for main sewers “Cazin-City”

Cazin City and Mutnik Branch connected to WWTP


Average Price
Pipe Diam- (including man- Total Price
Section Name eter holes) Length (VAT excluded)
Ø €/m' m' €
5a (Mutnik) DN 300 193.00 9,419 1'817'867
Main Sewer DN 400 220.00 1,861 409'442
Main Sewer DN 500 255.00 2,775 707'650
Main Sewer DN 600 280.00 3,271 915'880
Main Sewer DN 700 300.00 1,200 360'000
Total: 4,045,852
The Main Sewer refers to the section from Cazin town to WWTP 1

Table 8.13: Investment for the tertiary network in Cazin City

Cazin City, Tertiary Network and Sec. Network Peri-Urban


Average Price
Pipe Diam- (including man- Total Price
Section Name eter holes) Length (VAT excluded)
Ø €/m' m' €
Network City DN 300 193 13,216 2'550'688
Sec. Network peri-
DN 300 193 14,545 2’807’185
urban
Total: 5’357’873

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Table 8.14: Costs for independent communities for sewerage network and WWTPs

Decentralised Communal Systems; Sewerage and WWTPs


Section Popula- Pipe Di- Average Price Length Total Price WWTP WWTP Excl.
Name tion ameter (including (VAT excluded) Unit Price VAT)
manholes)
ES Ø €/m' m' € €/eq €
U2 7,574 DN 300 193.00 42,405.00 8,184,165.00 350.00 2,217,600.00
K1 3,712 DN 300 193.00 14,105.00 2,722,265.00 400.00 1,237,200.00
G3 881 DN 300 193.00 4,694.00 905,942.00 450.00 330,300.00
G4 5,869 DN 300 193.00 32,809.00 6,332,137.00 350.00 1,711,500.00
Total: 18,144,509.00 5,496,600.00

8.5 Prioritisation of Investments


The prioritisation follows the principles given in the ToR and result in the proposed PIP:
- Least cost investments at the highest possible efficiency
- And the least cost measures to recover some of the cost
This has led the consultant in close consultation with the Municipality and VODOVOD to the fol-
lowing priority measures:
 Connect as much of Cazin Municipality to a WWTP by possibly separate system

 The WWTP will be implemented in the outskirts of Cazin City in 2 steps according to the
connection rate
 The Mutnik branch (secondary system) will also be connected to it at the same time

 Water supply in Mutnik will be at the same time be improved by rehabilitating parts of the
supply system (recurrent investments to achieve cost savings and gain more revenues)
 Priority measures should also be taken to decrease illegal connections in this region with-
in a district management programme (DMP) and been extended to other notorious dis-
tricts
 Water conditions is to be improved on a high priority level
These measures represent an integrated package referring not only to a least cost approach but
also to a unique and required mix of effective and technically efficient measures.
This approach is expressively underlined by the below shown calculation of specific costs per
connected inhabitant. It becomes very obvious that sanitising the City comes at the least cost
while connecting approximately 50% of the whole population of the Cazin Municipality (including
the Mutnik branch).
The downstream component (“Korana River” incl. side branches) are significantly higher in spe-
cific costs and it remains to be seen whether such expenditures would be feasible at all in the
long term.
Since so far, waste water management was missing by far and wide, the corresponding costs will
have to be partly financed by the water supply system. This will have to be achieved by cost sav-
ings in terms of reduction of non-revenue water and savings in the energy consumption.

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Table 8.3: Specific, approximated costs for the main project components (refer to detailed cost
estimates above)

Sub-Project Waste Investment Costs Cost per Connected Connected eq


Water Sector Eq [€/eq] (estimate)

Tertiary network
City incl.main sewer
16,000,000 € 570 28,000
and WWTP 1a and
1b (incl. Mutnik)
LTIP (downstream
main sewer incl.
14,400,000 € 850 17,000
WWTP 2 but excl.
tertiary networks)
LTIP-U2, K1, G3, G4-
incl. Tertiary net- 23,640,000 € 1570 15,100
work and 4 WWTP

The above Table clearly shows the obvious. The more people equivalents are connected to a
specific length of sewerage, the cheaper is the cost for each connection. Therefore, connecting
the maximum households within the city area provides maximum sanitation effectiveness at least
cost.
It needs to be mentioned, that both, neither the LTIP “downstream” nor the decentralised
schemes include any cost for tertiary networks. It can safely be assumed that the specific cost
would actually be higher than stated in the Table, once the projects would be implemented. On
the other hand, for the City the whole Mutnik branch was included but adds only a fraction of the
City’s population. This specific value is thus proportionally lower.

For the record


The calculation for WWTP 1a/1b and WWTP is based on the following assumptions:
WWTP1a WWTP1b WWTP 2
specific Costs €/pe 250 specific Costs €/pe 350 specific Costs €/pe 250
Piling €/phase 500'000 Piling €/phase 500'000 Piling €/phase 500'000
PE built 14'000 PE built 14'000 PE built 17'000
Costs 4'000'000 Costs 5'400'000 Costs 4'750'000

The higher specific cost for WWTP 1b is due to the envisaged fermentation for all of the planned
WWTPs.

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8.6 Final LTIP


The following measures to improve the waste water collection and treatment system for the Cazin
Municipality have been identified:

Table 8.15:Long List of Investment Projects Wastewater Collection and Treatment


No. Item Priority Amount
(million
€)
WW-01 Construction of WWTP 1a (1st phase Cazin City) High 4.0
WW-02 Construction of WWTP 1b (2nd phase Cazin City), conditional to WWTP 1a High 5.4
WW-03 Construction of WWTP 2 (“Korana River”) Medium 4.75
WW-01 Main sewer Cazin City and Mutnik branch High 4,05
WW-02 Tertiary network and peri-urban secondary network – Cazin City High 5.4
WW-03 Main sewer, secondary branches downstream to Korana River Medium 9.65
WW-04 Independent systems, main sewer, secondary branches and tertiary net- Low to 18.14
works – U2, K1, G3, G4 Medium
WW-05 Construction ofindependent new wastewater treatment plants - U2, K1, G3, Low to 5.50
G4 Medium

Table 8.24:Long List of Investment Projects in O&M Sewerage


No. Item Priority Amount
(million
€)
O&M Equipment
OM-01 Cistern Trucks equipped with high pressure flushing pump-2, ICB–2, Trucks- High 0.590
2, Vans-2, Pick-up–1, Car–1, Drainage pumps–2, PE-pipes welding set-1

Table 8.25:Long List of Investment Projects Water Supply


No. Item Priority Amount
(million
Euro)
WS-01 District Management Programme (DMP): High 0.3 per
Input needed (expertise, resources, hardware, etc.): year (as
Internal team of Company (working group) dealing to 80% with issues relat- of 2013)
ed to DMP. External support by senior expert. Procurement of equipment
and pipe material for analysis and repair works on the water network and for
all other activities.
WS-02 Master Plan: High 0.1
Input needed (expertise, resources, hardware, etc.):
Consultant for preparation of Master Plan considering all technical, financial
and economic aspects of the Municipality of Cazin.

WS-03 Energy Saving Programme: High 0.4


Input needed (expertise, resources, hardware, etc.):
Consultant for assessment of water supply system with regard to energy
consumption. Means for implementation of recommended measures.

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No. Item Priority Amount


(million
Euro)
WS-04 Pipeline Replacement and Renewal Programme: Medium 0.3 per
Input needed (expertise, resources, hardware, etc.): year (as
Consultant for planning of renewal concept of the distribution network. In- of 2013)
vestments in the renewal of the water supply system need to be budgeted on
an annual basis.

WS-05 Water Quality Improvements: Medium 0.4


Input needed (expertise, resources, hardware, etc.):
Consultant for verification and design of sustainable disinfection systems and
effective protection of water sources across entire water supply area, includ-
ing monitoring concept. Investments on the basis of the assessment.

Option: Design and construction of sand filters at specific sources to protect Low 0.8
against turbidity.

WS-06 Improvement of Procedures related to Revenue Collection: Medium 0.4


Input needed (expertise, resources, hardware, etc.):
Consultant and internal auditor to propose internal organisational measures
related to revenue, billing and collection transaction cycle.

WS-07 Customer Relationship Management: Medium 0.1


Input needed (expertise, resources, hardware, etc.):
Consultant and top management for development of customer relationship
strategy and improvement of communication with customers.

WS-08 Automatic Control System (SCADA): Medium 0.8


Input needed (expertise, resources, hardware, etc.):
Consultant for planning and design of automatic control system for entire
water supply area, including all key facilities. Data transfer via radio or other
suitable systems where available (cables, etc.). Investments on the basis of
the design and cost estimate.

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VOLUME 2: FEASIBILITY STUDY

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9. PRIORITY INVESTMENT PROGRAMME (PIP)

9.1 General Approach


The PIP shall according to the ToR be implemented in the years 2012 to 2015, having the
facilities and infrastructure available at the beginning of 2016. As the Consultant outlined in
Chapter 8 “LTIP”, there needs to be an emphasis on the waste water sector, accompanied
by measures in the water supply sector.
The LTIP in itself sketches out the long-term investment that envisages an all-encompassing
adaption of the water related infrastructure in the long run. From this long-list measures are
to be evaluated and be proposed in the PIP.
The most important criteria are:
 Best effectiveness and the least cost
 The total investment of all proposed measures has to suffice the intended loan- and
grant arrangements and be affordable within the financial analysis that has been includ-
ed in this report
 The proposed measures should best pursue financial and operational sustainability of
VODOVOD and its customers
 The measures should be complementary among water supply and waste water man-
agement in order to increase service performance and financial viability of VODOVOD
 A lower number of different measures allows for easier “packaging” and potentially
shortens planning, tendering and approval processes. This is a vital factor for the timely
implementation within a rather challenging project schedule.
The structure of housings and settlements in Cazin Municipality is on one hand a great chal-
lenge to infrastructure development, due to the scattered settlement structure. But it also of-
fers the chance to concentrate on the urban area of Cazin City while achieving maximum ef-
fectiveness at least cost.
The Consultant has identified this priority area together with the Mutnik branch which hosts
the main well field of the City. By tackling these priorities, synergies can be achieved in both
sectors and, in addition, a replicable standard for future projectscan be established.
One more aspect was, to define a phased approach that allows for enough time to tackle the
hot spots but also offers a solid basis for further developments by donor funded initiatives in
the future. This has led to the conclusion that the WWTP 1 is to be split into 2 phases,
whereas WWTP1a is realised within the PIP and should become operational in 2016.
WWTP1b is included in the LTIP, but is closely linked to the implementation of WWTP1a in
order to suffice the capacity needs of the future waste water producers to be connected.

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9.2 Investment Envelope


To date, the following provisional funding is anticipated according to the ToR:

Table 9.1: Proposed donor inputs according to ToR


EBRD EC SIDA ORIO Local WBIF Total

TC Supervision 0.5 0.5

WWTP 2.0 2.0 4.0

Sewage network 3.5 3.5

Main collector 2.0 2.0

TC FS 0.3 0.3

TC design 0.4 0.4

VAT 2.0 2.0

Total 4.0 2.0 2.0 2.0 2.0 0.7 12.7

From the above funding scheme, it can be concluded that around 10 mio Euro would be
available for investments. Unofficially, it became known that EC has withdrawn their 2 mio
Euro grant.
However in this report, the Consultant took an iterative approach and tested the 10 mio Euro
(regardless of this so far unofficial information) against affordability criteria using EBRD’s fi-
nancial model and directives. Using relatively conservative assumptions, the proposed in-
vestment frame has been found affordable (5% threshold on house hold income and other
benchmarks).

9.3 Proposed PIP Investment Costs


Figure 9.1: Project area out-lining City catchment and Mutnik branch (5a)

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According to the general approach and prioritisation criteria, the following measures are pro-
posed to be included in the PIP:
1. Tertiary Network within the City of Cazin
The tertiary network within the City was so far never included in any planning. Without
this network structure, the project could not be completed in time as people would have
to be forced to pay for their own connections over rather long distances. The tertiary
network will ensure that the most customers can be connected within the shortest pos-
sible time.
2. Main sewer line towards WWTP 1
This main sewer line will generally follow the riverbed of the Mutnica and allow in future
to connect further secondary sewer lines (side branches). This main sewer line ultimate-
ly leads into the inlet pumping station of WWTP 1.
3. 50% of the Mutnik secondary network (Mutnik branch 5a)
The LTIP states the cost for the whole Mutnik secondary sewer line which is approx. 9
to 10 km long. For the purpose of protecting the Mutnik well field, it is sufficient to build
the first 50% of the total length. With this measure, a major part of infiltrating waste wa-
ter can be eliminated from the area.
4. Replacement of broken (corroded) water mains out of the Mutnik well field
The Mutnik well field shows the highest rates for unaccounted for water within the whole
Municipality (ca. 60%). It was communicated by VODOVOD that heavily corroded water
mains play a strong role in this. Furthermore, it cannot be excluded that under low pres-
sure conditions also waste water infiltrates. The replacement of these mains is urgent
and cannot easily be afforded through the regular budget.

Table 9.2: Proposed PIP including investment cost

No. Item Mio


Euro
PWS-03 Pipeline Replacement and Renewal Program in Mutnik: 0.50
Input needed (expertise, resources, hardware, etc.):
Planning of renewal concept of the distribution network. Invest-
ments in the renewal of the water supply system need to be budg-
eted on an annual basis.

PWW-01 Main Sewer City and Mutnik Branch 3.30


Supply and laying pipes in urban and rural areas (residential) Main
sewer and Mutnik branch

PWW-02 Tertiary Network City 2.55


Supply and laying pipes – Tertiary network – Cazin town

PWW-03 Construction WWTP 17’000eq 4.00


Construct new wastewater treatment plant WWTP 1a

Total Investment waste water collection and treatment, rehabilita- 10.35


tion water mains Mutnik

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9.4 Associated Costs

VAT VAT to be paid on the investment cost, approximately 2

Land Cost for land acquisition and compensation in case the land 0.5
does not fully belong to the Municipality

Total Estimated associated costs 2.5

9.5 Location for the WWTP 1

9.5.1 Background
During the elaboration of the Feasibility Study, several locations for WWTP 1 were proposed
by the Municipality. The latest location was chosen because of the fact that most of the land
is owned by the Municipality. It is hoped, that by this fact the cost for land acquisition can be
reduced and potential conflicts with private owners be avoided. However, the land lays today
in an area that is regularly flooded. This would mean that investment costs for piling and
back-filling could become higher than anticipated.

9.5.2 Location of the WWTP Cazin


Figure 9.1: New location of WWTP 1 according to the Municipality

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In the wider area of the LC Pjanici on the location Rajak, the Municipality of Cazin selected
two potential locations for the construction of the central waste water treatment plant (WWTP
1a and 1b). The selected locations (Zone 1 and Zone 2) are placed immediately near the riv-
er Mutnica and the highway Cazin – Bihac (see the map in the appendix).
Upstream from the proposed locations, the basin of the River Mutnica is regulated while in its
proximity the River Mutnica meanders and floods the area south of the mentioned highway
(location in the Zone 2). Zone 1 is located in the flooding area. The basin of the River Mut-
nica in this area is mainly covered with dense vegetation. Due to the relatively low slope and
dense vegetation Mutnica is meandering typically and during the occurrence of high levels,
the water overflows pre-dominantly over the near agricultural lands.
The flooding patterns are more pronounced during the coincidence of high water levelsin
River Korana and River Mutnica. Flooding would then typically last for around 1-2 days. The
overflow of flood water over the fields happens often, which causes the soil to be “eternally”
wet (saturated by surface and ground water).
Flooding protection had been studied previously as well as hydraulics. Flow analysis and the
flooding areas have been defined for the high water occurrence of the rank 1/20, 1/100 and
1/500 years. The duration of floods greatly depends on the level of high water of the River
Korana to which flows the River Mutnica respectively the time coincidence of high waters in
both watercourses. Hydraulic calculations of the characteristic high waters have been made
through the program package DUFLOW.

9.5.3 Flooding Data


For the characteristic high water of the possibility of occurrence 1/20, 1/100 and 1/500 the
calculation of the high water level has been made and the calculation of the flooding zone
sizes. During that more cross sections of the natural watercourse on the subject section
have been used. The values of the flooded areas are given in the following table:

Table 9.2: Technical data regarding flooding

Probability of occurrence Flooded area (ha)


1/20 256
1/100 295
1/500 362

Characteristics Zone 1 Zone 2


Flooding area No Yes
Proximity of residential building (less than 100 m) Yes No
Proximity of industrial/economic buildings No No
Proximity of the highway 10 m 150 m

9.5.4 Engineering Costs versus “Cheaper Land”-Acquisition


During the elaboration of the FS an evolution of different locations for the WWTP 1 (1a and
1b) took place. From the very first proposed location within the economic zone covering the
defunct airstrip, several other locations downstream Mutnica were proposed by the Munici-
pality. The most likey locations are shown in Figure 9.1.

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The main motivation for further evaluation had been:


 More lucrative use of potentially “useful” land (economic zone)

 Distance and potential conflicts to residents


 Price and ownership
The Municipality aimed at ear-marking public land that could be provided at lowest cost and
would provide least potential resistance from residents. However, it has clearly to be said
that the presented options are not definite and no formal decision, to the best of the Consult-
ant’s knowledge, has been made yet.
The more down-stream the location would be, the more flooding has to be anticipated. Gen-
erally, that would go with a decreased acquisition cost and a minimised risk for potential con-
flicts involving residents.
It is further anticipated, based on the experience in Bihac (network and WWTP under con-
struction), that in all proposed locations piling would be required, either to prevent tanks from
floating but mainly due to the properties of the underground. Therefore, there would be not
much difference in engineering costs in either of the sites, particularly, since flooding is also
reported up-streams (interviews with residents), although not documented in the study men-
tioned above (ref. 9.5.3). Furthermore, the Municipality anticipates to regulate Mutnica along
its entire course which will help preventing floods in the proposed locations.
Whatever actions will be taken, flooding is a question of frequency and all proposed sites will
have to be evaluated against this event. In that case, the proposed locations would all have
to be secured against those occurrences. Therefore, construction costs for piling and back-
filling should not differ significantly from one to another proposed location. Land acquisition
would, however, differ to a greater scale the more downstream WWTP 1 would be built.
From an engineering point of view, there is, at least for the moment, not much difference
whether the plant will be built further down or upstream. This statement is not definite and
should be supported by further investigations during the preliminary design.
In the essence, it is unlikely that the cost will significantly be influenced among the proposed
sites. Variations are mainly to be expected by:
 Acquisition cost,

 and, backfilling in order to elevate the plant’s buildings above flood levels
Piling is likely to be required at all sites and has respectively been included in the projected
costs.

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10. FINANCIAL AND ECONOMIC ANALYSIS

10.1 Objectives of the Financial Analysis


The implementation of the Short Term Investment Programme (STIP) proposed within the
framework of this assignment, will require substantial financial funds. These will be provided
by an EBRD loan and by grants from several donors. This chapter analyses in detail all fi-
nancial aspects of the STIP implementation on the basis of a specifically developed financial
model. It has to be underlined that the financial model considers neither the costs nor the
benefits of the Long Term Investment Programme (LTIP).
The proposed financial model serves as a ‘tool’ for finalising the financing strategy for the
STIP by taking into consideration the required tariff increase, affordability constraints and
ensuring financial sustainability of the company over a period of 15 years. When developing
projections for a future period the assumptions made have a decisive impact on the results.
Therefore, one of the main purposes of the financial model is to analyse how the results are
influenced by varying key assumptions, thus identifying the critical factors that determine the
future development of the business, a process known as sensitivity analysis.
The main purpose of the financial model is to calculate the future tariffs for water and
wastewater which will guarantee the financial sustainability of Vodovod and will allow the
company to meet its financial obligations towards EBRD.
The approach used in developing the model is based on defining the required revenue and
on its basis the tariffs. The logical build-up of the model includes the following steps:
 Developing projections of the demand for water supply and wastewater collection
 Estimating the O&M costs, depreciation of new assets and debt service

 On the basis of the above, estimating the required revenue and the required tariff on
an annual basis

 Development of the financial statements of the company using the defined and ad-
justed tariffs
Once the model is established we will proceed with the sensitivity analysis by varying key
assumptions. The results will be presented in the form of scenarios among which we will
designate the most realistic one as a Base Case. It has to be noted however, that the pro-
posed scenario will reflect the Consultant’s best knowledge and may not necessarily be tak-
en over by the decision makers. Since the water supply is responsibility of the local authori-
ties who ultimately decide and approve the water and sewage tariffs, the latter are often in-
fluenced by political and social factors which cannot be accommodated by the model except
through the affordability analysis. Therefore we will provide a range of scenarios among
which the city and Vodovod will ultimately select the one which serves best all stakeholders.

10.2 Structure of the Financial Model


The proposed financial model is a simple, user-friendly utility model, represented by a set of
inter-linked excel tables which do not contain any complicated modelling. Despite its simplici-
ty, operating the model requires average to advanced knowledge of excel and some experi-
ence in basic modelling.
The tariff model is developed for 15 years in nominal terms, i.e. accounting for inflation.
However, if the inflation assumptions are put to zero, the results will be expressed in real
(constant) terms, i.e. excluding the impact of inflation.

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The following figure illustrates the structure of the tariff model:

Figure 10.1: Structure of the Financial Model

All inputs and assumptions are organised in two sheets and all changes to those should be
made only in these sheets. Since the tables are inter-linked the changes are considered in
all other sheets where the inputs/assumptions appear. The inputs inserted by hand are indi-
cated in blue colour.

10.3 Main Inputs and Assumption to the Financial Model

10.3.1 Macroeconomic Assumptions (in Sheet ‘Infl’)


We have used the EBRD forecast for the international and domestic inflation.
Since different prices do not always change with the same rate as the general inflation, we
have made certain assumptions for the electricity cost, labour costs and other costs. In order
to be on the conservative side, we have assumed that the electricity and other costs lag be-
hind the general inflation by 1%.
For the labour costs projections we have used EBRD’s forecast for the annual growth of the
salaries in Bosnia and Herzegovina reduced by 3%. This approach was approved by Vodo-
vod and the City and is more in line with the recent years modest salary growth in Cazin.
Since the value of the national currency, KM, is fixed to the Euro, we have assumed the ex-
change rate of 1.96KM/€ for the whole period.
All other inputs and assumptions are organised in the Sheet ‘Ass’. Once again we indicate
that all changes in the inputs and assumptions have to be made only in these two sheets.

10.3.2 STIP Investment


The following table summarises the cost of the different components of STIP over the three
years implementation period:

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Table 10.1: Short-Term Investment Programme


STIP INVESTMENTS, in 1000€ Total 2013 2014 2015
Annual allocation, in %
Main sewer City and Mutnik Branch (1) 3'802 40% 30% 30%
Tertiary network City 2'551 40% 30% 30%
WWTP 4'000 30% 40% 30%
Total investments, in 1000 € 10'353 3'741 3'506 3'106
(1) Including the replacement of w ater main

10.3.3 Demand for Water and Wastewater Collection


The forecast of the demand for future services is one of the key elements in the financial
model and therefore deserves a more detailed explanation and justification.
The main problem in estimating the water demand in Cazin stems from two facts: inaccurate
official data on population (the last census was more than 20 years ago), and a considerable
labour migration in the neighbouring countries (around 13’000 people) whose water con-
sumption pattern is not clear, e.g. some of these people come back every weekend, others –
once a year. For this reason we could not apply the classical approach which is based on
projected population growth and individual water consumption per capita per day.
We have opted instead for using available data from Vodovod consumer database which we
find objective and reliable, i.e. the total household water consumption and the number of
household connections. On this basis we have calculated average water consumption per
connection and per day and have applied assumed growth to the daily consumption and to
the number of connections. The main orientation in this exercise is the Vodovod own projec-
tions of residential and non-residential water consumption until 2028 which was provided to
us. Thus our growth assumptions aim at achieving total water sales very close to the Vodo-
vod’s estimate. This approach has been agreed upon with Vodovod.
Projections of water consumption
We have assumed that the households’ average water consumption will grow at the rate of
1.15% until the end of the period while the number of households will increase by 0.20%
every year. Only for 2013 and 2014 we have assumed a total amount as estimated by Vodo-
vod in order to bring our projections in line with the Company’s one in the long term.
The projections of water consumption of the legal entities follow a similar approach. By as-
suming that the average consumption per legal entity will grow at the rate of 0.9% per year
and the number of legal entities connected to water supply will increase by 0.5%, we have
arrived at total water consumption close to the one projected by Vodovod.

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Projections of wastewater collection


We assume that the growth of the average households’ wastewater collection will be the
same as for water consumption, i.e. 1.15% per year and connection. After the expansion of
the main sewer and the tertiary network we expect that some additional 1’600 households
will be connected to the canalisation system.
It should be noted that the model shows average wastewater collection slightly higher than
the average water consumption. While normally it is the other way round, in Cazin we have
somewhat untypical situation where only the centre of the city is connected to the sewage.
These households apparently tend to use more water than the average for the whole munic-
ipality and this explains the higher average per connection wastewater collection.
Currently only 56% of the legal entities are connected to the sewage. After the short-term
investment programme the number of connected legal entities will grow by maximum 200.
The annual growth for the average wastewater per connection is assumed to be the same as
for water supply: 0.5% growth of connection number and 0.9% annual growth of wastewater
discharge.
The following table summarizes the demand for water consumption and wastewater dis-
charge used in the financial model:
Table 10.2: Projections of Water Consumption and Wastewater Collection
WATER CONSUMPTION, m3 2012 2013 2014 2015 2016 2020 2027
Population 1'925'000 1'935'000 2'000'000 2'023'000 2'046'265 2'142'029 2'320'526
Vodovod's projections 1'935'000 2'000'000 2'025'000 2'050'000 2'150'000 2'300'000
Legal entities 200'000 201'800 203'616 205'449 207'298 214'862 228'769
Vodovod's projections 191'000 200'000 200'000 200'000 210'000 220'000
Total water consumption 2'125'000 2'136'800 2'203'616 2'228'449 2'253'562 2'356'891 2'549'296
Total Vodovod's projections 2'126'000 2'200'000 2'225'000 2'250'000 2'360'000 2'520'000

WASTEWATER DISCHARGE, m3
Population 204'113 206'460 208'835 332'203 424'173 444'024 481'025
Legal entities 103'794 105'252 106'730 108'229 152'955 160'828 175'628
Total wastewater discharge 307'907 311'712 315'565 440'432 577'128 604'852 656'653

The own water consumption of Vodovod is assumed to remain at the level of 5’000m3 per
year.

10.3.4 Water Balance


The estimate of the required water production is built up on the basis of the projected de-
mand. The most important element in this is the level of water losses. We assume that Vod-
ovod will launch a rigorous programme for reducing commercial and technical losses in par-
allel with the investment programme and thus can reduce the level of losses to 45% until
2015 and to 40% after 2017. The projected water balance is illustrated by the following
graph and table:

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Figure 10.2: Projections of Water Balance

5'000'000
4'500'000
4'000'000
3'500'000
3'000'000
2'500'000
2'000'000
1'500'000
1'000'000
500'000
0
2012 2013 2014 2015 2016 2020 2027

Water production Water losses Water sold

Table 10.3:Projections of Water Balance


WATER SUPPLY, m3 2012 2013 2014 2015 2016 2020 2027
Water production 4'367'717 4'391'943 4'529'120 4'056'725 4'102'386 3'933'151 4'253'826
Own consumption of water 5'000 5'000 5'000 5'000 5'000 5'000 5'000
Water for Distribution Network 4'362'717 4'386'943 4'524'120 4'051'725 4'097'386 3'928'151 4'248'826
Water losses 2'237'717 2'250'143 2'320'503 1'823'276 1'843'824 1'571'260 1'699'530
% of water losses 51% 51% 51% 45% 45% 40% 40%
Water sold 2'125'000 2'136'800 2'203'616 2'228'449 2'253'562 2'356'891 2'549'296
WASTEWATER, m3
Water discharge 307'907 311'712 315'565 440'432 577'128 604'852 656'653

10.3.5 Operating Costs


At present Vodovod does not report separately O&M costs for water supply and wastewater
since the latter are negligibly small – less than 5% of total. However, with the construction of
the WWTP and the expansion of the sewage network the separation of costs by sector will
be necessary.
We have assumed that all current O&M costs will be attributed to the water supply sector
while the O&M cost of the WWTP and the expanded sewage network will form the basis for
the wastewater tariff.
Water Supply
As a basis for the water supply O&M projections we have used the actual figures for the first
half of 2012 multiplied by two.
We have assumed that as a result of the implementation of FOPIP the specific consumption
of electricity per m3 water produced will decrease by 5% from 2016 onwards.
Vodovod purchases electricity at three different voltage levels at different prices. In addition,
there are winter and summer electricity tariffs. In order to simplify the projections, we have
calculated an average price of electricity at the level of 0.16KM/kWh which we use in the
model.
The item ‘Other costs’ includes all other costs except salaries and electricity. In 2010 and
2011 Vodovod wrote-off large amounts of old accounts receivable which have reduced con-
siderably the latter and therefore for the future we have included much smaller amount for
bad debt.
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The interest on the WB loan from the Ljubijankici water supply branch is attributed to the wa-
ter supply costs.
The following table shows the basis for the water supply O&M projections:
Table 10.4: Water Supply Costs Inputs
Water Supply, in KM 2012
Salary, incl. Social fund 1'500'000
Electricity 750'000
Other costs 650'000
Depreciation 500'000
Financing costs 72'000
Total water supply 3'472'000

Wastewater
The O&M costs for wastewater include costs for the operation of the WWTP and the ex-
panded sewage network. They are estimated as per cent of the investment cost in the follow-
ing way:
0.5% of main sewer and tertiary network investment cost
0.5% of the investment costs of civil works for the WWTP
1.5% of the investment costs of the WWTP electromechanical equipment
Thus the total O&M costs for the canalisation network and the WWTP (after adding a small
reserve) amounts to 140’000KM per year.
We have assumed that the total new staff for the operation of the WWTP and the sewage
network will be 13 people with an average gross salary in 2012 of 1667KM. Salary costs are
inflated in the same way as described previously in this section.
The electricity cost is estimated on the basis of specific consumption of electricity per m3 of
treated wastewater, which is 0.43kWh/m3, and the total volume of wastewater. We apply the
same electricity average tariff of 0.16KM/kWh.

Table 10.5: Wastewater Supply Costs Inputs


Wastewater Collection, in KM, prices of 2012
Salary (8+5 persons with 1667 KM/month) 260'000
Electricity 42'231
Other costs 140'000
Depreciation 380'000
Total sewage 822'231

10.3.6 Depreciation
Depreciation costs are indicated separately for the existing and the new assets. The rates for
the new assets have been coordinated with Vodovod and correspond to the nationally ap-
proved rates.
The depreciation of the existing assets is considered as a total annual amount according to
Vodovod data and is attributed to the water supply tariff.

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The depreciation of the new assets is calculated in the model and is attributed entirely to the
wastewater tariff.

10.3.7 Financing
The short-term investment programme will be financed through debt and grants as indicated
in the following table:

Table 10.6: Financing Plan for STIP


FINANCING PLAN, in 1000 € Total 2013 2014 2015
EBRD Loan to Municipality
Main sewer City and Mutnik Branch (1) 3'802 1'521 1'141 1'141
Total EBRD financing 3'802 1'521 1'141 1'141

Grants
EC 2'000 800 600 600
SIDA 2'000 600 800 600
ORIO 2'000 600 800 600
Shortage of financing 551 220 165 165
Total financing sources 10'353 3'741 3'506 3'106

ORIO O&M Grant since 2016 1'427


(1) Including the replacement of w ater main

The information on the capital grants is according to the Terms of Reference. Currently there
is a shortage of financing in the amount of €550’000. This could be covered either by local
sources or through the tariff.
We understand that the Dutch Facility for Infrastructure Development (ORIO) has committed
to provide a grant over a 10 year period for covering part of the O&M costs of the WWTP
once it is commissioned.
The following table summarises the terms of the EBRD loan to the city which will be on-lent
to Vodovod:

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Table 10.7: Debt Financing Assumptions


DEBT FINANCING
Loan Terms to Municipality
Repayment (years, incl grace period) 15
Grace period (years) 3
6 months Euribor 1.5%
Addition 1.0%
Total interest rate 2.5%
Upfront fee 1.0%
Commitment fee 0.5%

Although the current rate of the 6-month Euribor is much lower, we have chosen its value as
of the start of 2012 which is in line with our conservative approach. In the sensitivity analysis
we will evaluate the impact of a lower base interest rate.

10.3.8 Other Assumptions


The base year in the model is 2012. All investment costs are indicated in 2012 prices. The
investment costs presented in Euro have not been inflated.

10.4 Explanation of the Financial Model


As mentioned earlier, the financial model is built in a transparent and simple way to allow
easy understanding of the assumptions and workings. One additional reason for this ap-
proach is that we would like to allow for Vodovod staff to understand it and eventually use it
as a reporting tool during the project implementation or for budgeting and analytical purpos-
es in the future.
The main objective of the financial model is to calculate full cost recovery tariffs for water and
wastewater during and after the implementation of the short-term investment programme-
which will ensure a sustainable financial performance of Vodovod over the next 15 years.
The main principle adhered to in the tariff calculation process is that the tariffs should reflect
the costs incurred for providing the services of water supply and wastewater treatment. This
approach prevents cross subsidies between the main core activities of Vodovod: water sup-
ply and wastewater collection and treatment.
Although currently Vodovod charges separate tariffs for water supply and canalisation, it
does not report separately the corresponding costs. The financial model introduces this sep-
aration of costs by activity sector and bases the new wastewater tariff on the operating and
financial costs of the expanded canalisation network and the new WWTP.
The model also calculates a water tariff which covers the full costs related to water produc-
tion and distribution. As mentioned previously in the report, the current water tariff has not
been increased since 2007 and lags very much behind the rising operating costs, mainly
electricity costs. This explains the financial losses of Vodovod in 2011 and most probably in
2012 as well.
The model is developed on the basis of ‘Required Revenue’ approach in the following steps:
 Estimating the future demand of water supply and wastewater discharges (Sheet
‘AssDem’)

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 Water production based on demand and assumed decreasing water losses (Sheet
‘WatBal’)
 Total operating costs (Sheet ‘O&M Costs’)
 Depreciation of new assets (Sheet ‘Depr’)
 Calculation of debt service (Sheet ‘ Debt’)

 Estimation of the required revenue for each year and on its basis the required annu-
al tariff in current terms (i.e. accounting for inflation) (Sheet ‘Tariff’)
The required revenue is built up by including the following cost components:

Table 10.8: Assumed Cost Components


REQUIRED REVENUE FOR WATER REQUIRED REVENUE FOR WASTEWATER
Operating and maintenance costs Operating and maintenance costs
Depreciation of existing assets Depreciation of new assets
Interest charges on WB loan Interest charges on EBRD loan
Less: Revenue from connection fee Less: O&M Grant
Less: Other revene Total Required Revenue
Less: Revenue from previous grants
Total Required Revenue

Once we derive the required total revenue on an annual basis and by sector we divide it by
the projected amount of water sold, respectively wastewater collected, in order to receive the
required tariff for each year in current terms. Thus the model allows calculation of average
water and wastewater tariffs i.e. equal for all consumer categories. Using one tariff only
will contribute to eliminating the current cross-subsidies as a result of which the population
benefits from a lower tariff at the cost of the other consumer group.
If, however, this will not be acceptable for any of the stakeholders, it will be easy to design
different consumer categories’ tariffs following the approach currently used by Vodovod. In
this case it would be important to achieve the total required revenue as calculated by the
financial model.

10.5 Required Tariffs

10.5.1 Base Case


The financial model, as described above, yields the tariffs for water and wastewater which
are required to ensure a sustainable financial performance of Vodovod. The following table
illustrates the development of the water tariff in current (considering inflation) and constant
(excluding inflation) terms and the respective increase in %:

Table 10.9: Water Supply Tariff Projections


WATER SUPPLY 2012 2013 2014 2015 2016 2017 2018 2019 2020
Water tariff (current terms) 1.09 1.30 1.30 1.28 1.29 1.29 1.32 1.35 1.38
Annual increase, % 18.89% 0.14% -1.57% 0.84% 0.10% 2.17% 2.19% 2.21%
Water tariff (constant terms) 1.09 1.27 1.24 1.19 1.17 1.13 1.12 1.11 1.11
Annual increase/decrease, % 15.99% -2.30% -3.97% -2.09% -2.81% -0.81% -0.79% -0.77%

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Since the current water tariff has not been increased during the last 5 years, it does not
cover anymore the full operation and financing costs of Vodovod and the latter incurs losses.
To rectify this situation, we will suggest increasing the water tariff already in 2013 by
some 20%. After this increase the water tariff will grow slowly only due to inflation impact
while in constant terms it will slightly decrease due to improved operational efficiency.

The wastewater tariff, which at the moment is somewhat symbolic and is not related to
costs of canalisation services, will undergo considerable changes as indicated by the table
below:
Table 10.10: Water Supply Tariff Projections
WASTEWATER SUPPLY 2012 2013 2014 2015 2016 2017 2018 2019 2020
W/W tariff (current terms) 0.30 0.32 0.58 0.78 1.54 1.53 1.51 1.50 1.48
Annual increase, % 8.01% 79.18% 34.01% 98.30% -1.10% -1.04% -0.97% -0.89%
W/W tariff (constant terms) 0.30 0.32 0.55 0.72 1.39 1.34 1.28 1.23 1.19
Annual increase/decrease, % 5.38% 74.81% 30.74% 92.52% -3.98% -3.92% -3.85% -3.78%

For the purposes of the projections, we have assumed that parts of the sewage network will
be ‘operational’ before the end of the 3-year implementation period, although only from ac-
counting viewpoint. In real life the sewage network will be used only after its full completion
and the commissioning of the WWTP. Since we start already in 2014 depreciating those
parts of the network which are completed, the calculations indicate that in this year we have
to start increasing, or actually charging the ‘new’ wastewater tariff. The latter reaches its
highest level in 2016 when the servicing of the loan commences and gradually decreases
with the decreasing interest rate.
Since the annual increases during the implementation period are uneven and very steep, we
would propose somewhat more gradual schedule for the tariff adjustment, which could be for
example as follows:

Table 10.11: Proposed Increases of Wastewater Tariff


PROPOSED W/W TARIFF INCREASE
2012 2013 2014 2015 2016
% per year 100% 50% 30% 30%
W/W Tariff, KM/m3 0.30 0.60 0.90 1.17 1.52

The issue of raising the tariffs from the very start of the project has been discussed during
the kick-off meeting with EBRD in May 2012 in Sarajevo. The Bank has suggested that this
is included as ‘Condition Precedent’ in the Loan Agreement. We have followed this recom-
mendation in our financial model and believe that the proposed annual increases starting
from 2013 could be used in the Loan Agreement.

10.5.2 Tariff Scenarios


As an alternative to the Base Case we propose to consider the option in which the cost of
the investment programme, aimed at reducing the environmental impact of untreated dis-
charges, is spread somewhat fairly between all residents in the Cazin municipality. The un-
derlying logic is that in most of the cases the households which are not connected to the
sewage system pollute environment due to the low quality of their septic tanks. On the basis
of this assumption we allocate the financial burden to these households through a charge,

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provisionally called ‘Pollution Charge’. The revenue from this Pollution Charge is subtracted
from the required revenue for wastewater and thus the wastewater tariff decreases.
We have developed several scenarios for the option Pollution Charge with varying its level
from 2 KM per month and per connection to 4 KM.
The following graph illustrates how the Base Case wastewater tariff changes as a result of
introducing different levels of Pollution Charge:

Figure 10.3: Comparison of Base Case and Scenarios Wastewater Tariffs

1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2016 2017 2018 2019 2020

W/W tariff (curr.terms), KM/m3 W/W tariff with 2 KM PC


W/W tariff with 3 KM PC W/W tariff with 4 KM PC

(PC = Pollution Charge)

10.6 Affordability
In evaluating the affordability levels the Consultant encountered serious difficulties which did
not allow using the standard EBRD methodology. These difficulties relate solely to lack of of-
ficial as well as unofficial statistical data on population, household income and remittances
from abroad.
Alternatively we could use the household expenditures approach, for which there are some
available studies with adequate information; however EBRD has expressed certain reserva-
tions against this approach and therefore we have not followed it.
Under these circumstances we have opted for an unconventional methodology in which we
use the scant available information to the best possible extent and in a quite conservative
way.
The assessment of the affordability level is based on the following inputs:
 We evaluate the affordability for 2016 when the wastewater tariff is on its highest
level both in current and constant terms
 The only available data on income is from 2009 and it includes: (i) an average salary
in Cazin municipality of 668 KM per month and (ii) average pension of 311 KM per
month. The average salary in the period 2012-2016 has been inflated with the esca-

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lation rate applied to the personnel costs in the financial model. For the past years
2009-2011 we have applied EBRD estimates for the salary growth in Bosnia. The
average pension has been escalated with the general domestic inflation rate.
 As stated in the Mid-Term Report, we have calculated that there are on average
1.28 bread earners per household
 By dividing the total water consumption for 2011 by the number of the total popula-
tion in Cazin municipality, as reported by the City administration, we calculate an av-
erage consumption of 84.4 l/c/d. This individual consumption has been increased for
the period 2012-2016 by the assumed growth of 1.15% from the demand projec-
tions.
Further we define two cases for which we will evaluate the affordability, both of which may
be viewed as extreme:

 Case 1: a 4.5-person household which may have total income either from 1.28
bread-earners or just from one bread earner with average salary. The currently re-
ported average number of persons in a household is 3.7 with a downward trend. We
believe that by assuming 4.5 person per household, we are quite on the safe side.
The average monthly consumption of this household in 2016 would be 11.9m3.
 Case 2: a family of 2 retired people which may have either two average pensions or
only one average pension. Their total household water consumption per month in
2016 would be 5.3 m3
 For both cases we have considered that they may be connected to the sewage or
they may have only water consumption
The following table summarizes the inputs and assumptions described above:

Table 10.12: Affordability Evaluation Details

2009 2010 2011 2012 2013 2014 2015 2016

Average salary increase 4.1% 6.6% 2.9% 3.6% 3.6% 3.6% 4.1%
General domestic inflation 2.1% 3.7% 2.8% 2.5% 2.5% 2.5% 3.0%

Household (HH) income


Average number of bread earners per HH 1.28 1.28 1.28 1.28 1.28 1.28 1.28 1.28
Nominal average salary, KM/month 668 695 741 763 790 819 848 883
Average pension, KM/month 311 318 329 338 347 356 365 375
Average HH income
With average salary (1.28 or 1 bread earners) 976 1'012 1'048 1'086 1'130
With 2 average pensions 677 694 711 729 751

Average consumption in 2012 per person per day, l/c l/c/d 84 85 86 87 88

4.5-persons household's water consumption


Daily average consumption per 4.5-person family, l/c/d 380 384 389 393 398
Monthly average consumption per connection, m3 11.4 11.5 11.7 11.8 11.9
Wastewater consumption, m3/month 11.4 11.5 11.7 11.8 11.9

Retired people household's water consumption


Daily average consumption per 2-person family, l/c/d 169 171 173 175 177
Monthly average consumption per connection, m3 5.1 5.1 5.2 5.2 5.3
Wastewater consumption, m3/month 5.1 5.1 5.2 5.2 5.3

The total household bill for water and wastewater is calculated with the help of the following
tables (Note that total amount is different under each scenario and case):

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Table 10.13: Supporting Table for Affordability Evaluation


Water/wastewater bills for a 4.5-person family WS/WW WS
Water bill in 2016 15 15
Connection fee 2 2
Pollution fee 0
Wastewater bill in 2016 18
VAT 17% 6 3
Total bill in 2016 42 17

Water/wastewater bills for a 2-person family WS/WW WS


Water bill in 2016 7 7
Connection fee 2 2
Pollution fee 0
Wastewater bill in 2016 8
VAT 17% 3 2
Total bill in 2016 20 10

(WS = water supply; WW = wastewater, HH = household)


The table on the following page summarizes the results of the affordability levels for the dif-
ferent tariff scenarios:

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Table 10.14: Summary of Tariffs and Affordability Levels

Pollution Charge for HH not


Scenario 2016 Tariffs in Current Terms Affordability
Connected to Sewage

Water Wastewater 1.28 BE per HH 1 BE per HH Retired


KM/m3 KM/m3 Aver.salary Aver. Salary 2 Aver. Pensions 1 Aver. pension

Base Case No Pollution Charge 1.29 1.54


HH with water and canalisation 3.71% 5.58% 2.65% 5.31%
HH with water supply only 1.54% 2.32% 1.38% 2.76%

Scenario 1 2 KM/month/connection 1.29 1.02


HH with water and canalisation 3.07% 4.62% 2.22% 4.45%
HH with water supply only 1.72% 2.59% 1.69% 3.38%

Scenario 2 3 KM/month/connection 1.29 0.76


HH with water and canalisation 2.75% 4.13% 2.01% 4.02%
HH with water supply only 1.81% 2.72% 1.85% 3.69%

Scenario 3 4 KM/month/connection 1.29 0.50


HH with water and canalisation 2.42% 3.65% 1.79% 3.59%
HH with water supply only 1.90% 2.85% 2.00% 4.01%
BE = Bread Earner
HH = Household

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Analysis of the Tariff Scenarios


In general the comparison reveals that in almost all scenarios the affordability level is below
the threshold of 5%. In the Base Case the most vulnerable groups – large families with one
bread earner and retired people with one average pension will exceed the threshold of 5%
and this will require some social support mechanism. As discussed in Section 2.6 Social
Services, the social infrastructure for providing aid to certain households in Cazin is in place
and would be in the position to support vulnerable consumers.
In all other scenarios the affordability of the proposed tariffs is within acceptable limits.
Therefore the decision on the final tariff mechanism will be determined by social and political
factors.

10.7 Sensitivity Analysis


The sensitivity analysis reveals the impact of different inputs and assumptions on the key re-
sults of the financial model, in our case the tariffs. The following tables indicate how the tar-
iffs from the Base Case change when we vary the following assumptions:

Table 10.15: Sensitivity Analysis for Wastewater Tariff


Wastewater Tariff, KM/m3 Base Case Sensitivity Case % Change

Investment cost > by 10% 1.54 1.66 7.6%

Investment cost > by 20% 1.54 1.78 15.2%

Total operating costs > by 10% 1.54 1.62 5.1%

Financing - Euribor 0.7% 1.54 1.43 -7.1%

Wastewater, m3 < by 10% 1.54 1.71 10.6%

Without ORIO O&M grant 1.54 2.03 31.3%

The following conclusions could be drawn:


 The wastewater tariff is more sensitive to changes in investment costs than changes
in operating cost
 Lower Euribor affects the tariff positively
 A 10% decrease of wastewater collected brings about the same order of magnitude
increase in the tariff
 The O&M grant proposed by ORIO is essential for the project since its absence
would increase the tariff by 31%

The water tariff is equally sensitive to changes in the volumes sold as the wastewater. Pos-
sible increases in O&M costs affect it more though since these costs represent a higher por-
tion of the total costs as compared to wastewater where the financing cost and depreciation
are much higher.

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Table 10.16: Sensitivity Analysis for Water Tariff


Water Tariff, KM/m3 Base Case Sensitivity Case % Change

Water consumption, m3 < by 10% 1.29 1.44 11.6%

Total operating costs > by 10% 1.29 1.40 8.5%

10.8 Financial Performance of Vodovod


The following tables show the financial statements of Vodovod. They illustrate a stable finan-
cial performance of the company throughout the period under investigation.
This is not surprising because by using the required revenue approach in the financial analy-
sis, we calculate the required annual tariff in such a way that it ensures satisfactory financial
results for the whole project period.
Here just a few comments:

 We understand that by law Vodovod is not allowed to plan a profit. Therefore in our
projections net profit is zero. In real life of course profit or loss will occur and will be
treated according to the current legislation.
 The Debt Service Coverage Ratio indicated below the Cash Flow table is on a satis-
factory level, sufficiently above the minimum threshold of 1.2 required by the Bank.

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Table 10.17: Income Statement, in KM


2012 2013 2014 2015 2016 2017 2018 2019 2020

Revenue from sales - water 2'325'000 2'779'590 2'870'547 2'857'279 2'913'873 2'949'777 3'047'624 3'149'358 3'255'129
Residential 2'106'176 2'517'085 2'605'306 2'593'856 2'645'836 2'679'046 2'768'540 2'861'606 2'958'381
Other 218'824 262'505 265'241 263'423 268'038 270'731 279'084 287'752 296'748
Revenue from sales - wastewater 92'372 101'009 183'223 342'701 890'491 891'049 892'216 894'016 896'472
Residential 61'234 66'902 121'253 258'487 654'487 654'705 655'369 656'496 658'103
Other 31'138 34'106 61'970 84'213 236'004 236'344 236'847 237'520 238'368

Revenue from connection fee 396'168 397'025 397'883 398'744 399'607 400'472 401'338 402'207 403'078

Other revenue 200000 203'000 206'045 209'136 213'318 217'585 221'936 226'375 230'903

Revenue from grant 150'000 150'000 150'000 150'000 150'000 150'000 150'000 150'000 150'000

O&M Grant 279'002 279'002 279'002 279'002 279'002

Total revenue 3'163'540 3'630'624 3'807'698 3'957'859 4'846'292 4'887'885 4'992'117 5'100'958 5'214'584

Operating cost water 2'900'000 2'963'615 3'064'475 3'061'159 3'128'799 3'175'834 3'284'899 3'397'940 3'515'110
Operating cost wastewater 0 0 0 0 492'510 509'188 526'476 544'395 562'972

Depreciation existing assets 500'000 500'000 500'000 500'000 500'000 500'000 500'000 500'000 500'000
Depreciation new assets 0 0 171'261 342'701 491'600 491'600 491'600 491'600 491'600

Interest charges on WB loans 72'000 66'000 60'000 54'000 48'000 42'000 36'000 30'000 24'000
Interest charges on EBRD loan 0 101'009 11'961 0 185'384 169'263 153'143 137'023 120'902

Total expenditures 3'472'000 3'630'624 3'807'698 3'957'859 4'846'292 4'887'885 4'992'117 5'100'958 5'214'584

Net profit before tax -308'460 0 0 0 0 0 0 0 0

Income tax 10% 0 0 0 0 0 0 0 0 0

Net profit after tax -308'460 0 0 0 0 0 0 0 0

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Table 10.18: Balance Sheet, in KM


2012 2013 2014 2015 2016 2017 2018 2019 2020
Fixed assets
Existing assets
Gross book value 21'921'774 21'921'774 21'921'774 21'921'774 21'921'774 21'921'774 21'921'774 21'921'774 21'921'774
Annual depreciation 500'000 500'000 500'000 500'000 500'000 500'000 500'000 500'000 500'000
Accumulated depreciation 8'840'726 9'340'726 9'840'726 10'340'726 10'840'726 11'340'726 11'840'726 12'340'726 12'840'726
Net fixed assets in operation 13'081'048 12'581'048 12'081'048 11'581'048 11'081'048 10'581'048 10'081'048 9'581'048 9'081'048
New assets
Work in progress 0 7'354'013 9'971'411 11'581'365
Fixed assets in operation 4'342'481 8'968'422 20'549'787 20'549'787 20'549'787 20'549'787 20'549'787
Annual depreciation 171'261 342'701 491'600 491'600 491'600 491'600 491'600
Accumulated depreciation 171'261 513'962 1'005'562 1'497'161 1'988'761 2'480'361 2'971'960
Net fixed assets in operation 4'171'219 8'454'460 19'544'226 19'052'626 18'561'027 18'069'427 17'577'827
Total net fixed assets 13'081'048 19'935'061 26'223'679 31'616'873 30'625'274 29'633'674 28'642'075 27'650'475 26'658'875

Current assets
Accounts receivable 253'083 290'450 304'616 316'629 387'703 391'031 399'369 408'077 417'167
Cash & Bank 405'959 584'455 959'257 1'504'961 1'569'517 1'617'135 1'666'007 1'714'970 1'764'029
Other Current Assets 477957 477957 477957 477957 477957 477957 477957 477957 477957
Total Current Assets 1'136'999 1'352'861 1'741'830 2'299'547 2'435'177 2'486'123 2'543'333 2'601'004 2'659'153

TOTAL ASSETS 14'218'047 21'287'922 27'965'509 33'916'421 33'060'451 32'119'797 31'185'407 30'251'479 29'318'028

Liabilities
Current Liabilities (% of expenditures) 347'200 363'062 380'770 395'786 484'629 488'788 499'212 510'096 521'458
Other current liabilities 453'859 453'859 453'859 453'859 453'859 453'859 453'859 453'859 453'859
Existing long-term loan 3'300'000 3'000'000 2'700'000 2'400'000 2'100'000 1'800'000 1'500'000 1'200'000 900'000
EBRD loan 0 3'011'532 5'345'470 7'737'755 7'092'942 6'448'129 5'803'317 5'158'504 4'513'691
Equity
Owners equity contribution 4'820'191 4'820'191 4'820'191 4'820'191 4'820'191 4'820'191 4'820'191 4'820'191 4'820'191
Accumul.Profit -408'931 -408'931 -408'931 -408'931 -408'931 -408'931 -408'931 -408'931 -408'931
Grants 5'705'728 10'048'209 14'674'150 18'517'760 18'517'760 18'517'760 18'517'760 18'517'760 18'517'760

TOTAL LIABILITIES AND EQUITY 14'218'047 21'287'922 27'965'509 33'916'421 33'060'451 32'119'797 31'185'407 30'251'479 29'318'028
Check 0 0 0 0 0 0 0 0 0

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Table 10.19: Cash Flow, in KM

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Sources of Funds
Internal Sources
Net profit before interest 167'009 71'961 54'000 233'384 211'263 189'143 167'023 144'902 122'782 100'662
Depreciation 500'000 671'261 842'701 991'600 991'600 991'600 991'600 991'600 991'600 991'600
Total Internal Sources 667'009 743'223 896'701 1'224'983 1'202'863 1'180'743 1'158'622 1'136'502 1'114'382 1'092'261

External Sources
EBRD Loan 3'011'532 2'333'937 2'392'286 0 0 0 0 0 0 0
Donors 4'342'481 4'625'942 3'843'610
Total External Sources 7'354'013 6'959'879 6'235'895 0 0 0 0 0 0 0
Total Sources 8'021'022 7'703'102 7'132'596 1'224'983 1'202'863 1'180'743 1'158'622 1'136'502 1'114'382 1'092'261
Requirements of Funds
Capital Expenditure (Investment) 7'354'013 6'959'879 6'235'895 0 0 0 0 0 0 0
Debt service WB loan
Principal repayment 300'000 300'000 300'000 300'000 300'000 300'000 300'000 300'000 300'000 300'000
Interest payment 66'000 60'000 54'000 48'000 42'000 36'000 30'000 24'000 18'000 12'000
Debt service EBRD loan
Principal repayment 0 0 0 644'813 644'813 644'813 644'813 644'813 644'813 644'813
Interest payment 101'009 11'961 0 185'384 169'263 153'143 137'023 120'902 104'782 88'662
Total Requirements of Funds 7'821'022 7'331'840 6'589'895 1'178'197 1'156'076 1'133'956 1'111'836 1'089'715 1'067'595 1'045'475

Increase in Working Capital 200'000 371'261 542'701 46'787 46'787 46'787 46'787 46'787 46'787 46'787
Less: Increase in net current asset other than cash-21'504 3'541 3'003 17'769 832 2'085 2'177 2'273 2'372 2'475
Increase in Cash 178'496 374'803 545'704 64'555 47'619 48'871 48'964 49'059 49'159 49'262
Accumulated Cash (Cash&Bank account) 548'692 923'494 1'469'198 1'533'754 1'581'372 1'630'244 1'679'207 1'728'266 1'777'425 1'826'687
Accum. cash in % of annual revenue 15.1% 24.3% 37.1% 31.6% 32.4% 32.7% 32.9% 33.1% 33.3% 33.5%

Debt Service Coverage Ratio 1.42 1.43 1.43 1.48 1.48 1.49 1.49

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10.9 Economic Analysis


This chapter considers the economic justification for undertaking the proposed Short Term
Investment Programme of Cazin Vodovod, as a part of the outlined Long Term Investment
Programme.
The Short Term Investment Program will be implemented in the period 2013-2015.
Main areas of investments of the Investment Program are:
 Design and construction of WWTP 1
 Main sewer line towards WWTP 1, including replacement of broken (corroded) water
mains out of the Mutnik well field
 Tertiary Network within the City of Cazin
The main objective of the project is to improve environmental protection through proper col-
lection and treatment of the waste discharges. This will result in considerable prevention of
the contamination of the ground waters in the main well field providing drinking water to the
town of Cazin.
The economic evaluation takes into consideration only the impact of the Short Term Invest-
ment Program.
The basis for establishing project economic viability is the comparison of the “With project”
scenario against the “Without project” scenario. The “With project” option is represented by
the implementation of the proposed Investment Program. The without project scenario is
taken as the existing supply situation.
The implementation of the proposed program will provide the following economic benefits:
 Savings from reduction of water losses and O&M costs
 Health benefits resulting from improvement of drinking water’s quality

 Avoided capital and operating costs of construction of a new water treatment plant
which will have to be built if no measures in water treatment are undertaken
The economic evaluation is carried out for the technical life of the project, i.e. 25 years. De-
tails are provided in Sheet EIRR in the financial model. The following table illustrates these
results:

Table 10-20: Economic Evaluation


KM
Financial year NPV 2013 2014 2015 2016 2017
Investment Capex -7'316'834 -6'856'706 -6'074'374 0 0
Total project costs -17'629'320 -7'316'834 -6'856'706 -6'074'374 0 0

Benefits
O&M costs saving 1'646'193 0 0 83'456 118'900 175'419
Water losses savings 5'323'434 0 0 329'411 333'124 566'142
Health benefits (savings from avoided health expenditure) 12'536'509 0 0 0 1'466'873 1'466'873
Avoided investment cost of water treatment plant 5'538'455 3'084'519 3'084'519 0 0 0
Avoided O&M costs of water treatment plant 6'750'747 0 0 721'898 721'898 721'898
Total economic benefit 3'084'519 3'084'519 1'051'310 2'521'895 2'754'913
Net benefit -4'232'314 -3'772'187 -5'023'064 2'521'895 2'754'913
Benefit/Cost ratio 1.8
EIRR 25 years 17.45%

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The evaluation proves that the benefits of the proposed Short Term Investment Program
from the viewpoint of local economy and society are considerable and justify the planned in-
vestment. The EIRR of the project over its technical lifetime is over 17.45% while the benefit-
cost ratio is 1.8. The Investment Program is therefore considered to satisfy financial and
economic analysis

10.10 Objectives of the Financial Analysis


The implementation of the Short Term Investment Programme (STIP) proposed within the
framework of this assignment, will require substantial financial funds. These will be provided
by an EBRD loan and by grants from several donors. This chapter analyses in detail all fi-
nancial aspects of the STIP implementation on the basis of a specifically developed financial
model. It has to be underlined that the financial model considers neither the costs nor the
benefits of the Long Term Investment Programme (LTIP).
The proposed financial model serves as a ‘tool’ for finalising the financing strategy for the
STIP by taking into consideration the required tariff increase, affordability constraints and
ensuring financial sustainability of the company over a period of 15 years. When developing
projections for a future period the assumptions made have a decisive impact on the results.
Therefore, one of the main purposes of the financial model is to analyse how the results are
influenced by varying key assumptions, thus identifying the critical factors that determine the
future development of the business, a process known as sensitivity analysis.
The main purpose of the financial model is to calculate the future tariffs for water and
wastewater which will guarantee the financial sustainability of Vodovod and will allow the
company to meet its financial obligations towards EBRD.
The approach used in developing the model is based on defining the required revenue and
on its basis the tariffs. The logical build-up of the model includes the following steps:
 Developing projections of the demand for water supply and wastewater collection

 Estimating the O&M costs, depreciation of new assets and debt service
 On the basis of the above, estimating the required revenue and the required tariff on
an annual basis
 Development of the financial statements of the company using the defined and ad-
justed tariffs
Once the model is established we will proceed with the sensitivity analysis by varying key
assumptions. The results will be presented in the form of scenarios among which we will
designate the most realistic one as a Base Case. It has to be noted however, that the pro-
posed scenario will reflect the Consultant’s best knowledge and may not necessarily be tak-
en over by the decision makers. Since the water supply is responsibility of the local authori-
ties who ultimately decide and approve the water and sewage tariffs, the latter are often in-
fluenced by political and social factors which cannot be accommodated by the model except
through the affordability analysis. Therefore we will provide a range of scenarios among
which the city and Vodovod will ultimately select the one which serves best all stakeholders.

10.11 Structure of the Financial Model


The proposed financial model is a simple, user-friendly utility model, represented by a set of
inter-linked excel tables which do not contain any complicated modelling. Despite its simplici-
ty, operating the model requires average to advanced knowledge of excel and some experi-
ence in basic modelling.

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The tariff model is developed for 15 years in nominal terms, i.e. accounting for inflation.
However, if the inflation assumptions are put to zero, the results will be expressed in real
(constant) terms, i.e. excluding the impact of inflation.
The following figure illustrates the structure of the tariff model:

Figure 10.1: Structure of the Financial Model

All inputs and assumptions are organised in two sheets and all changes to those should be
made only in these sheets. Since the tables are inter-linked the changes are considered in
all other sheets where the inputs/assumptions appear. The inputs inserted by hand are indi-
cated in blue colour.

10.12 Main Inputs and Assumption to the Financial Model

10.12.1 Macroeconomic Assumptions (in Sheet ‘Infl’)


We have used the EBRD forecast for the international and domestic inflation.
Since different prices do not always change with the same rate as the general inflation, we
have made certain assumptions for the electricity cost, labour costs and other costs. In order
to be on the conservative side, we have assumed that the electricity and other costs lag be-
hind the general inflation by 1%.
For the labour costs projections we have used EBRD’s forecast for the annual growth of the
salaries in Bosnia and Herzegovina reduced by 3%. This approach was approved by Vodo-
vod and the City and is more in line with the recent years modest salary growth in Cazin.
Since the value of the national currency, KM, is fixed to the Euro, we have assumed the ex-
change rate of 1.96KM/€ for the whole period.
All other inputs and assumptions are organised in the Sheet ‘Ass’. Once again we indicate
that all changes in the inputs and assumptions have to be made only in these two sheets.

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10.12.2 STIP Investment


The following table summarises the cost of the different components of STIP over the three
years implementation period:

Table 10.1: Short-Term Investment Programme


STIP INVESTMENTS, in 1000€ Total 2013 2014 2015
Annual allocation, in %
Main sewer City and Mutnik Branch (1) 3'802 40% 30% 30%
Tertiary network City 2'551 40% 30% 30%
WWTP 4'000 30% 40% 30%
Total investments, in 1000 € 10'353 3'741 3'506 3'106
(1) Including the replacement of w ater main

10.12.3 Demand for Water and Wastewater Collection


The forecast of the demand for future services is one of the key elements in the financial
model and therefore deserves a more detailed explanation and justification.
The main problem in estimating the water demand in Cazin stems from two facts: inaccurate
official data on population (the last census was more than 20 years ago), and a considerable
labour migration in the neighbouring countries (around 13’000 people) whose water con-
sumption pattern is not clear, e.g. some of these people come back every weekend, others –
once a year. For this reason we could not apply the classical approach which is based on
projected population growth and individual water consumption per capita per day.
We have opted instead for using available data from Vodovod consumer database which we
find objective and reliable, i.e. the total household water consumption and the number of
household connections. On this basis we have calculated average water consumption per
connection and per day and have applied assumed growth to the daily consumption and to
the number of connections. The main orientation in this exercise is the Vodovod own projec-
tions of residential and non-residential water consumption until 2028 which was provided to
us. Thus our growth assumptions aim at achieving total water sales very close to the Vodo-
vod’s estimate. This approach has been agreed upon with Vodovod.
Projections of water consumption
We have assumed that the households’ average water consumption will grow at the rate of
1.15% until the end of the period while the number of households will increase by 0.20%
every year. Only for 2013 and 2014 we have assumed a total amount as estimated by Vodo-
vod in order to bring our projections in line with the Company’s one in the long term.

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The projections of water consumption of the legal entities follow a similar approach. By as-
suming that the average consumption per legal entity will grow at the rate of 0.9% per year
and the number of legal entities connected to water supply will increase by 0.5%, we have
arrived at total water consumption close to the one projected by Vodovod.
Projections of wastewater collection
We assume that the growth of the average households’ wastewater collection will be the
same as for water consumption, i.e. 1.15% per year and connection. After the expansion of
the main sewer and the tertiary network we expect that some additional 1’600 households
will be connected to the canalisation system.
It should be noted that the model shows average wastewater collection slightly higher than
the average water consumption. While normally it is the other way round, in Cazin we have
somewhat untypical situation where only the centre of the city is connected to the sewage.
These households apparently tend to use more water than the average for the whole munic-
ipality and this explains the higher average per connection wastewater collection.
Currently only 56% of the legal entities are connected to the sewage. After the short-term
investment programme the number of connected legal entities will grow by maximum 200.
The annual growth for the average wastewater per connection is assumed to be the same as
for water supply: 0.5% growth of connection number and 0.9% annual growth of wastewater
discharge.
The following table summarizes the demand for water consumption and wastewater dis-
charge used in the financial model:
Table 10.2: Projections of Water Consumption and Wastewater Collection
WATER CONSUMPTION, m3 2012 2013 2014 2015 2016 2020 2027
Population 1'925'000 1'935'000 2'000'000 2'023'000 2'046'265 2'142'029 2'320'526
Vodovod's projections 1'935'000 2'000'000 2'025'000 2'050'000 2'150'000 2'300'000
Legal entities 200'000 201'800 203'616 205'449 207'298 214'862 228'769
Vodovod's projections 191'000 200'000 200'000 200'000 210'000 220'000
Total water consumption 2'125'000 2'136'800 2'203'616 2'228'449 2'253'562 2'356'891 2'549'296
Total Vodovod's projections 2'126'000 2'200'000 2'225'000 2'250'000 2'360'000 2'520'000

WASTEWATER DISCHARGE, m3
Population 204'113 206'460 208'835 332'203 424'173 444'024 481'025
Legal entities 103'794 105'252 106'730 108'229 152'955 160'828 175'628
Total wastewater discharge 307'907 311'712 315'565 440'432 577'128 604'852 656'653

The own water consumption of Vodovod is assumed to remain at the level of 5’000m3 per
year.

10.12.4 Water Balance


The estimate of the required water production is built up on the basis of the projected de-
mand. The most important element in this is the level of water losses. We assume that Vod-
ovod will launch a rigorous programme for reducing commercial and technical losses in par-
allel with the investment programme and thus can reduce the level of losses to 45% until
2015 and to 40% after 2017. The projected water balance is illustrated by the following
graph and table:

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Figure 10.2: Projections of Water Balance

5'000'000
4'500'000
4'000'000
3'500'000
3'000'000
2'500'000
2'000'000
1'500'000
1'000'000
500'000
0
2012 2013 2014 2015 2016 2020 2027

Water production Water losses Water sold

Table 10.3:Projections of Water Balance


WATER SUPPLY, m3 2012 2013 2014 2015 2016 2020 2027
Water production 4'367'717 4'391'943 4'529'120 4'056'725 4'102'386 3'933'151 4'253'826
Own consumption of water 5'000 5'000 5'000 5'000 5'000 5'000 5'000
Water for Distribution Network 4'362'717 4'386'943 4'524'120 4'051'725 4'097'386 3'928'151 4'248'826
Water losses 2'237'717 2'250'143 2'320'503 1'823'276 1'843'824 1'571'260 1'699'530
% of water losses 51% 51% 51% 45% 45% 40% 40%
Water sold 2'125'000 2'136'800 2'203'616 2'228'449 2'253'562 2'356'891 2'549'296
WASTEWATER, m3
Water discharge 307'907 311'712 315'565 440'432 577'128 604'852 656'653

10.12.5 Operating Costs


At present Vodovod does not report separately O&M costs for water supply and wastewater
since the latter are negligibly small – less than 5% of total. However, with the construction of
the WWTP and the expansion of the sewage network the separation of costs by sector will
be necessary.
We have assumed that all current O&M costs will be attributed to the water supply sector
while the O&M cost of the WWTP and the expanded sewage network will form the basis for
the wastewater tariff.
Water Supply
As a basis for the water supply O&M projections we have used the actual figures for the first
half of 2012 multiplied by two.
We have assumed that as a result of the implementation of FOPIP the specific consumption
of electricity per m3 water produced will decrease by 5% from 2016 onwards.
Vodovod purchases electricity at three different voltage levels at different prices. In addition,
there are winter and summer electricity tariffs. In order to simplify the projections, we have
calculated an average price of electricity at the level of 0.16KM/kWh which we use in the
model.
The item ‘Other costs’ includes all other costs except salaries and electricity. In 2010 and
2011 Vodovod wrote-off large amounts of old accounts receivable which have reduced con-
siderably the latter and therefore for the future we have included much smaller amount for
bad debt.
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The interest on the WB loan from the Ljubijankici water supply branch is attributed to the wa-
ter supply costs.
The following table shows the basis for the water supply O&M projections:
Table 10.4: Water Supply Costs Inputs
Water Supply, in KM 2012
Salary, incl. Social fund 1'500'000
Electricity 750'000
Other costs 650'000
Depreciation 500'000
Financing costs 72'000
Total water supply 3'472'000

Wastewater
The O&M costs for wastewater include costs for the operation of the WWTP and the ex-
panded sewage network. They are estimated as per cent of the investment cost in the follow-
ing way:
0.5% of main sewer and tertiary network investment cost
0.5% of the investment costs of civil works for the WWTP
1.5% of the investment costs of the WWTP electromechanical equipment
Thus the total O&M costs for the canalisation network and the WWTP (after adding a small
reserve) amounts to 140’000KM per year.
We have assumed that the total new staff for the operation of the WWTP and the sewage
network will be 13 people with an average gross salary in 2012 of 1667KM. Salary costs are
inflated in the same way as described previously in this section.
The electricity cost is estimated on the basis of specific consumption of electricity per m3 of
treated wastewater, which is 0.43kWh/m3, and the total volume of wastewater. We apply the
same electricity average tariff of 0.16KM/kWh.

Table 10.5: Wastewater Supply Costs Inputs


Wastewater Collection, in KM, prices of 2012
Salary (8+5 persons with 1667 KM/month) 260'000
Electricity 42'231
Other costs 140'000
Depreciation 380'000
Total sewage 822'231

10.12.6 Depreciation
Depreciation costs are indicated separately for the existing and the new assets. The rates for
the new assets have been coordinated with Vodovod and correspond to the nationally ap-
proved rates.
The depreciation of the existing assets is considered as a total annual amount according to
Vodovod data and is attributed to the water supply tariff.

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The depreciation of the new assets is calculated in the model and is attributed entirely to the
wastewater tariff.

10.12.7 Financing
The short-term investment programme will be financed through debt and grants as indicated
in the following table:

Table 10.6: Financing Plan for STIP


FINANCING PLAN, in 1000 € Total 2013 2014 2015
EBRD Loan to Municipality
Main sewer City and Mutnik Branch (1) 3'802 1'521 1'141 1'141
Total EBRD financing 3'802 1'521 1'141 1'141

Grants
EC 2'000 800 600 600
SIDA 2'000 600 800 600
ORIO 2'000 600 800 600
Shortage of financing 551 220 165 165
Total financing sources 10'353 3'741 3'506 3'106

ORIO O&M Grant since 2016 1'427


(1) Including the replacement of w ater main

The information on the capital grants is according to the Terms of Reference. Currently there
is a shortage of financing in the amount of €550’000. This could be covered either by local
sources or through the tariff.
We understand that the Dutch Facility for Infrastructure Development (ORIO) has committed
to provide a grant over a 10 year period for covering part of the O&M costs of the WWTP
once it is commissioned.
The following table summarises the terms of the EBRD loan to the city which will be on-lent
to Vodovod:

Table 10.7: Debt Financing Assumptions


DEBT FINANCING
Loan Terms to Municipality
Repayment (years, incl grace period) 15
Grace period (years) 3
6 months Euribor 1.5%
Addition 1.0%
Total interest rate 2.5%
Upfront fee 1.0%
Commitment fee 0.5%

Although the current rate of the 6-month Euribor is much lower, we have chosen its value as
of the start of 2012 which is in line with our conservative approach. In the sensitivity analysis
we will evaluate the impact of a lower base interest rate.

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10.12.8 Other Assumptions


The base year in the model is 2012. All investment costs are indicated in 2012 prices. The
investment costs presented in Euro have not been inflated.

10.13 Explanation of the Financial Model


As mentioned earlier, the financial model is built in a transparent and simple way to allow
easy understanding of the assumptions and workings. One additional reason for this ap-
proach is that we would like to allow for Vodovod staff to understand it and eventually use it
as a reporting tool during the project implementation or for budgeting and analytical purpos-
es in the future.
The main objective of the financial model is to calculate full cost recovery tariffs for water and
wastewater during and after the implementation of the short-term investment programme
which will ensure a sustainable financial performance of Vodovod over the next 15 years.
The main principle adhered to in the tariff calculation process is that the tariffs should reflect
the costs incurred for providing the services of water supply and wastewater treatment. This
approach prevents cross subsidies between the main core activities of Vodovod: water sup-
ply and wastewater collection and treatment.
Although currently Vodovod charges separate tariffs for water supply and canalisation, it
does not report separately the corresponding costs. The financial model introduces this sep-
aration of costs by activity sector and bases the new wastewater tariff on the operating and
financial costs of the expanded canalisation network and the new WWTP.
The model also calculates a water tariff which covers the full costs related to water produc-
tion and distribution. As mentioned previously in the report, the current water tariff has not
been increased since 2007 and lags very much behind the rising operating costs, mainly
electricity costs. This explains the financial losses of Vodovod in 2011 and most probably in
2012 as well.
The model is developed on the basis of ‘Required Revenue’ approach in the following steps:
 Estimating the future demand of water supply and wastewater discharges (Sheet
‘AssDem’)
 Water production based on demand and assumed decreasing water losses (Sheet
‘WatBal’)
 Total operating costs (Sheet ‘O&M Costs’)
 Depreciation of new assets (Sheet ‘Depr’)

 Calculation of debt service (Sheet ‘ Debt’)

 Estimation of the required revenue for each year and on its basis the required annu-
al tariff in current terms (i.e. accounting for inflation) (Sheet ‘Tariff’)
The required revenue is built up by including the following cost components:

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Table 10.8: Assumed Cost Components


REQUIRED REVENUE FOR WATER REQUIRED REVENUE FOR WASTEWATER
Operating and maintenance costs Operating and maintenance costs
Depreciation of existing assets Depreciation of new assets
Interest charges on WB loan Interest charges on EBRD loan
Less: Revenue from connection fee Less: O&M Grant
Less: Other revene Total Required Revenue
Less: Revenue from previous grants
Total Required Revenue

Once we derive the required total revenue on an annual basis and by sector we divide it by
the projected amount of water sold, respectively wastewater collected, in order to receive the
required tariff for each year in current terms. Thus the model allows calculation of average
water and wastewater tariffs i.e. equal for all consumer categories. Using one tariff only
will contribute to eliminating the current cross-subsidies as a result of which the population
benefits from a lower tariff at the cost of the other consumer group.
If, however, this will not be acceptable for any of the stakeholders, it will be easy to design
different consumer categories’ tariffs following the approach currently used by Vodovod. In
this case it would be important to achieve the total required revenue as calculated by the
financial model.

10.14 Required Tariffs

10.14.1 Base Case


The financial model, as described above, yields the tariffs for water and wastewater which
are required to ensure a sustainable financial performance of Vodovod. The following table
illustrates the development of the water tariff in current (considering inflation) and constant
(excluding inflation) terms and the respective increase in %:

Table 10.9: Water Supply Tariff Projections


WATER SUPPLY 2012 2013 2014 2015 2016 2017 2018 2019 2020
Water tariff (current terms) 1.09 1.30 1.30 1.28 1.29 1.29 1.32 1.35 1.38
Annual increase, % 18.89% 0.14% -1.57% 0.84% 0.10% 2.17% 2.19% 2.21%
Water tariff (constant terms) 1.09 1.27 1.24 1.19 1.17 1.13 1.12 1.11 1.11
Annual increase/decrease, % 15.99% -2.30% -3.97% -2.09% -2.81% -0.81% -0.79% -0.77%

Since the current water tariff has not been increased during the last 5 years, it does not
cover anymore the full operation and financing costs of Vodovod and the latter incurs losses.
To rectify this situation, we will suggest increasing the water tariff already in 2013 by
some 20%. After this increase the water tariff will grow slowly only due to inflation impact
while in constant terms it will slightly decrease due to improved operational efficiency.

The wastewater tariff, which at the moment is somewhat symbolic and is not related to
costs of canalisation services, will undergo considerable changes as indicated by the table
below:

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Table 10.10: Water Supply Tariff Projections


WASTEWATER SUPPLY 2012 2013 2014 2015 2016 2017 2018 2019 2020
W/W tariff (current terms) 0.30 0.32 0.58 0.78 1.54 1.53 1.51 1.50 1.48
Annual increase, % 8.01% 79.18% 34.01% 98.30% -1.10% -1.04% -0.97% -0.89%
W/W tariff (constant terms) 0.30 0.32 0.55 0.72 1.39 1.34 1.28 1.23 1.19
Annual increase/decrease, % 5.38% 74.81% 30.74% 92.52% -3.98% -3.92% -3.85% -3.78%

For the purposes of the projections, we have assumed that parts of the sewage network will
be ‘operational’ before the end of the 3-year implementation period, although only from ac-
counting viewpoint. In real life the sewage network will be used only after its full completion
and the commissioning of the WWTP. Since we start already in 2014 depreciating those
parts of the network which are completed, the calculations indicate that in this year we have
to start increasing, or actually charging the ‘new’ wastewater tariff. The latter reaches its
highest level in 2016 when the servicing of the loan commences and gradually decreases
with the decreasing interest rate.
Since the annual increases during the implementation period are uneven and very steep, we
would propose somewhat more gradual schedule for the tariff adjustment, which could be for
example as follows:

Table 10.11: Proposed Increases of Wastewater Tariff


PROPOSED W/W TARIFF INCREASE
2012 2013 2014 2015 2016
% per year 100% 50% 30% 30%
W/W Tariff, KM/m3 0.30 0.60 0.90 1.17 1.52

The issue of raising the tariffs from the very start of the project has been discussed during
the kick-off meeting with EBRD in May 2012 in Sarajevo. The Bank has suggested that this
is included as ‘Condition Precedent’ in the Loan Agreement. We have followed this recom-
mendation in our financial model and believe that the proposed annual increases starting
from 2013 could be used in the Loan Agreement.

10.14.2 Tariff Scenarios


As an alternative to the Base Case we propose to consider the option in which the cost of
the investment programme, aimed at reducing the environmental impact of untreated dis-
charges, is spread somewhat fairly between all residents in the Cazin municipality. The un-
derlying logic is that in most of the cases the households which are not connected to the
sewage system pollute environment due to the low quality of their septic tanks. On the basis
of this assumption we allocate the financial burden to these households through a charge,
provisionally called ‘Pollution Charge’. The revenue from this Pollution Charge is subtracted
from the required revenue for wastewater and thus the wastewater tariff decreases.
We have developed several scenarios for the option Pollution Charge with varying its level
from 2 KM per month and per connection to 4 KM.
The following graph illustrates how the Base Case wastewater tariff changes as a result of
introducing different levels of Pollution Charge:

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Figure 10.3: Comparison of Base Case and Scenarios Wastewater Tariffs

1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2016 2017 2018 2019 2020

W/W tariff (curr.terms), KM/m3 W/W tariff with 2 KM PC


W/W tariff with 3 KM PC W/W tariff with 4 KM PC

(PC = Pollution Charge)

10.15 Affordability
In evaluating the affordability levels the Consultant encountered serious difficulties which did
not allow using the standard EBRD methodology. These difficulties relate solely to lack of of-
ficial as well as unofficial statistical data on population, household income and remittances
from abroad.
Alternatively we could use the household expenditures approach, for which there are some
available studies with adequate information; however EBRD has expressed certain reserva-
tions against this approach and therefore we have not followed it.
Under these circumstances we have opted for an unconventional methodology in which we
use the scant available information to the best possible extent and in a quite conservative
way.
The assessment of the affordability level is based on the following inputs:
 We evaluate the affordability for 2016 when the wastewater tariff is on its highest
level both in current and constant terms
 The only available data on income is from 2009 and it includes: (i) an average salary
in Cazin municipality of 668 KM per month and (ii) average pension of 311 KM per
month. The average salary in the period 2012-2016 has been inflated with the esca-
lation rate applied to the personnel costs in the financial model. For the past years
2009-2011 we have applied EBRD estimates for the salary growth in Bosnia. The
average pension has been escalated with the general domestic inflation rate.
 As stated in the Mid-Term Report, we have calculated that there are on average
1.28 bread earners per household

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 By dividing the total water consumption for 2011 by the number of the total popula-
tion in Cazin municipality, as reported by the City administration, we calculate an av-
erage consumption of 84.4 l/c/d. This individual consumption has been increased for
the period 2012-2016 by the assumed growth of 1.15% from the demand projec-
tions.
Further we define two cases for which we will evaluate the affordability, both of which may
be viewed as extreme:
 Case 1: a 4.5-person household which may have total income either from 1.28
bread-earners or just from one bread earner with average salary. The currently re-
ported average number of persons in a household is 3.7 with a downward trend. We
believe that by assuming 4.5 person per household, we are quite on the safe side.
3
The average monthly consumption of this household in 2016 would be 11.9m .

 Case 2: a family of 2 retired people which may have either two average pensions or
only one average pension. Their total household water consumption per month in
3
2016 would be 5.3 m
 For both cases we have considered that they may be connected to the sewage or
they may have only water consumption
The following table summarizes the inputs and assumptions described above:

Table 10.12: Affordability Evaluation Details

2009 2010 2011 2012 2013 2014 2015 2016

Average salary increase 4.1% 6.6% 2.9% 3.6% 3.6% 3.6% 4.1%
General domestic inflation 2.1% 3.7% 2.8% 2.5% 2.5% 2.5% 3.0%

Household (HH) income


Average number of bread earners per HH 1.28 1.28 1.28 1.28 1.28 1.28 1.28 1.28
Nominal average salary, KM/month 668 695 741 763 790 819 848 883
Average pension, KM/month 311 318 329 338 347 356 365 375
Average HH income
With average salary (1.28 or 1 bread earners) 976 1'012 1'048 1'086 1'130
With 2 average pensions 677 694 711 729 751

Average consumption in 2012 per person per day, l/c l/c/d 84 85 86 87 88

4.5-persons household's water consumption


Daily average consumption per 4.5-person family, l/c/d 380 384 389 393 398
Monthly average consumption per connection, m3 11.4 11.5 11.7 11.8 11.9
Wastewater consumption, m3/month 11.4 11.5 11.7 11.8 11.9

Retired people household's water consumption


Daily average consumption per 2-person family, l/c/d 169 171 173 175 177
Monthly average consumption per connection, m3 5.1 5.1 5.2 5.2 5.3
Wastewater consumption, m3/month 5.1 5.1 5.2 5.2 5.3

The total household bill for water and wastewater is calculated with the help of the following
tables (Note that total amount is different under each scenario and case):

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Table 10.13: Supporting Table for Affordability Evaluation


Water/wastewater bills for a 4.5-person family WS/WW WS
Water bill in 2016 15 15
Connection fee 2 2
Pollution fee 0
Wastewater bill in 2016 18
VAT 17% 6 3
Total bill in 2016 42 17

Water/wastewater bills for a 2-person family WS/WW WS


Water bill in 2016 7 7
Connection fee 2 2
Pollution fee 0
Wastewater bill in 2016 8
VAT 17% 3 2
Total bill in 2016 20 10

(WS = water supply; WW = wastewater, HH = household)


The table on the following page summarizes the results of the affordability levels for the dif-
ferent tariff scenarios:

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Table 10.14: Summary of Tariffs and Affordability Levels

Pollution Charge for HH not


Scenario 2016 Tariffs in Current Terms Affordability
Connected to Sewage

Water Wastewater 1.28 BE per HH 1 BE per HH Retired


KM/m3 KM/m3 Aver.salary Aver. Salary 2 Aver. Pensions 1 Aver. pension

Base Case No Pollution Charge 1.29 1.54


HH with water and canalisation 3.71% 5.58% 2.65% 5.31%
HH with water supply only 1.54% 2.32% 1.38% 2.76%

Scenario 1 2 KM/month/connection 1.29 1.02


HH with water and canalisation 3.07% 4.62% 2.22% 4.45%
HH with water supply only 1.72% 2.59% 1.69% 3.38%

Scenario 2 3 KM/month/connection 1.29 0.76


HH with water and canalisation 2.75% 4.13% 2.01% 4.02%
HH with water supply only 1.81% 2.72% 1.85% 3.69%

Scenario 3 4 KM/month/connection 1.29 0.50


HH with water and canalisation 2.42% 3.65% 1.79% 3.59%
HH with water supply only 1.90% 2.85% 2.00% 4.01%
BE = Bread Earner
HH = Household

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Analysis of the Tariff Scenarios


In general the comparison reveals that in almost all scenarios the affordability level is below
the threshold of 5%. In the Base Case the most vulnerable groups – large families with one
bread earner and retired people with one average pension will exceed the threshold of 5%
and this will require some social support mechanism. As discussed in Section 2.6 Social
Services, the social infrastructure for providing aid to certain households in Cazin is in place
and would be in the position to support vulnerable consumers.
In all other scenarios the affordability of the proposed tariffs is within acceptable limits.
Therefore the decision on the final tariff mechanism will be determined by social and political
factors.

10.16 Sensitivity Analysis


The sensitivity analysis reveals the impact of different inputs and assumptions on the key re-
sults of the financial model, in our case the tariffs. The following tables indicate how the tar-
iffs from the Base Case change when we vary the following assumptions:

Table 10.15: Sensitivity Analysis for Wastewater Tariff


Wastewater Tariff, KM/m3 Base Case Sensitivity Case % Change

Investment cost > by 10% 1.54 1.66 7.6%

Investment cost > by 20% 1.54 1.78 15.2%

Total operating costs > by 10% 1.54 1.62 5.1%

Financing - Euribor 0.7% 1.54 1.43 -7.1%

Wastewater, m3 < by 10% 1.54 1.71 10.6%

Without ORIO O&M grant 1.54 2.03 31.3%

The following conclusions could be drawn:


 The wastewater tariff is more sensitive to changes in investment costs than changes
in operating cost
 Lower Euribor affects the tariff positively
 A 10% decrease of wastewater collected brings about the same order of magnitude
increase in the tariff
 The O&M grant proposed by ORIO is essential for the project since its absence
would increase the tariff by 31%

The water tariff is equally sensitive to changes in the volumes sold as the wastewater. Pos-
sible increases in O&M costs affect it more though since these costs represent a higher por-
tion of the total costs as compared to wastewater where the financing cost and depreciation
are much higher.

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Table 10.16: Sensitivity Analysis for Water Tariff


Water Tariff, KM/m3 Base Case Sensitivity Case % Change

Water consumption, m3 < by 10% 1.29 1.44 11.6%

Total operating costs > by 10% 1.29 1.40 8.5%

10.17 Financial Performance of Vodovod


The following tables show the financial statements of Vodovod. They illustrate a stable finan-
cial performance of the company throughout the period under investigation.
This is not surprising because by using the required revenue approach in the financial analy-
sis, we calculate the required annual tariff in such a way that it ensures satisfactory financial
results for the whole project period.
Here just a few comments:
 We understand that by law Vodovod is not allowed to plan a profit. Therefore in our
projections net profit is zero. In real life of course profit or loss will occur and will be
treated according to the current legislation.
 The Debt Service Coverage Ratio indicated below the Cash Flow table is on a satis-
factory level, sufficiently above the minimum threshold of 1.2 required by the Bank.

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Table 10.17: Income Statement, in KM


2012 2013 2014 2015 2016 2017 2018 2019 2020

Revenue from sales - water 2'325'000 2'779'590 2'870'547 2'857'279 2'913'873 2'949'777 3'047'624 3'149'358 3'255'129
Residential 2'106'176 2'517'085 2'605'306 2'593'856 2'645'836 2'679'046 2'768'540 2'861'606 2'958'381
Other 218'824 262'505 265'241 263'423 268'038 270'731 279'084 287'752 296'748
Revenue from sales - wastewater 92'372 101'009 183'223 342'701 890'491 891'049 892'216 894'016 896'472
Residential 61'234 66'902 121'253 258'487 654'487 654'705 655'369 656'496 658'103
Other 31'138 34'106 61'970 84'213 236'004 236'344 236'847 237'520 238'368

Revenue from connection fee 396'168 397'025 397'883 398'744 399'607 400'472 401'338 402'207 403'078

Other revenue 200000 203'000 206'045 209'136 213'318 217'585 221'936 226'375 230'903

Revenue from grant 150'000 150'000 150'000 150'000 150'000 150'000 150'000 150'000 150'000

O&M Grant 279'002 279'002 279'002 279'002 279'002

Total revenue 3'163'540 3'630'624 3'807'698 3'957'859 4'846'292 4'887'885 4'992'117 5'100'958 5'214'584

Operating cost water 2'900'000 2'963'615 3'064'475 3'061'159 3'128'799 3'175'834 3'284'899 3'397'940 3'515'110
Operating cost wastewater 0 0 0 0 492'510 509'188 526'476 544'395 562'972

Depreciation existing assets 500'000 500'000 500'000 500'000 500'000 500'000 500'000 500'000 500'000
Depreciation new assets 0 0 171'261 342'701 491'600 491'600 491'600 491'600 491'600

Interest charges on WB loans 72'000 66'000 60'000 54'000 48'000 42'000 36'000 30'000 24'000
Interest charges on EBRD loan 0 101'009 11'961 0 185'384 169'263 153'143 137'023 120'902

Total expenditures 3'472'000 3'630'624 3'807'698 3'957'859 4'846'292 4'887'885 4'992'117 5'100'958 5'214'584

Net profit before tax -308'460 0 0 0 0 0 0 0 0

Income tax 10% 0 0 0 0 0 0 0 0 0

Net profit after tax -308'460 0 0 0 0 0 0 0 0

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Table 10.18: Balance Sheet, in KM


2012 2013 2014 2015 2016 2017 2018 2019 2020
Fixed assets
Existing assets
Gross book value 21'921'774 21'921'774 21'921'774 21'921'774 21'921'774 21'921'774 21'921'774 21'921'774 21'921'774
Annual depreciation 500'000 500'000 500'000 500'000 500'000 500'000 500'000 500'000 500'000
Accumulated depreciation 8'840'726 9'340'726 9'840'726 10'340'726 10'840'726 11'340'726 11'840'726 12'340'726 12'840'726
Net fixed assets in operation 13'081'048 12'581'048 12'081'048 11'581'048 11'081'048 10'581'048 10'081'048 9'581'048 9'081'048
New assets
Work in progress 0 7'354'013 9'971'411 11'581'365
Fixed assets in operation 4'342'481 8'968'422 20'549'787 20'549'787 20'549'787 20'549'787 20'549'787
Annual depreciation 171'261 342'701 491'600 491'600 491'600 491'600 491'600
Accumulated depreciation 171'261 513'962 1'005'562 1'497'161 1'988'761 2'480'361 2'971'960
Net fixed assets in operation 4'171'219 8'454'460 19'544'226 19'052'626 18'561'027 18'069'427 17'577'827
Total net fixed assets 13'081'048 19'935'061 26'223'679 31'616'873 30'625'274 29'633'674 28'642'075 27'650'475 26'658'875

Current assets
Accounts receivable 253'083 290'450 304'616 316'629 387'703 391'031 399'369 408'077 417'167
Cash & Bank 405'959 584'455 959'257 1'504'961 1'569'517 1'617'135 1'666'007 1'714'970 1'764'029
Other Current Assets 477957 477957 477957 477957 477957 477957 477957 477957 477957
Total Current Assets 1'136'999 1'352'861 1'741'830 2'299'547 2'435'177 2'486'123 2'543'333 2'601'004 2'659'153

TOTAL ASSETS 14'218'047 21'287'922 27'965'509 33'916'421 33'060'451 32'119'797 31'185'407 30'251'479 29'318'028

Liabilities
Current Liabilities (% of expenditures) 347'200 363'062 380'770 395'786 484'629 488'788 499'212 510'096 521'458
Other current liabilities 453'859 453'859 453'859 453'859 453'859 453'859 453'859 453'859 453'859
Existing long-term loan 3'300'000 3'000'000 2'700'000 2'400'000 2'100'000 1'800'000 1'500'000 1'200'000 900'000
EBRD loan 0 3'011'532 5'345'470 7'737'755 7'092'942 6'448'129 5'803'317 5'158'504 4'513'691
Equity
Owners equity contribution 4'820'191 4'820'191 4'820'191 4'820'191 4'820'191 4'820'191 4'820'191 4'820'191 4'820'191
Accumul.Profit -408'931 -408'931 -408'931 -408'931 -408'931 -408'931 -408'931 -408'931 -408'931
Grants 5'705'728 10'048'209 14'674'150 18'517'760 18'517'760 18'517'760 18'517'760 18'517'760 18'517'760

TOTAL LIABILITIES AND EQUITY 14'218'047 21'287'922 27'965'509 33'916'421 33'060'451 32'119'797 31'185'407 30'251'479 29'318'028
Check 0 0 0 0 0 0 0 0 0

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Table 10.19: Cash Flow, in KM


2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Sources of Funds
Internal Sources
Net profit before interest 167'009 71'961 54'000 233'384 211'263 189'143 167'023 144'902 122'782 100'662
Depreciation 500'000 671'261 842'701 991'600 991'600 991'600 991'600 991'600 991'600 991'600
Total Internal Sources 667'009 743'223 896'701 1'224'983 1'202'863 1'180'743 1'158'622 1'136'502 1'114'382 1'092'261

External Sources
EBRD Loan 3'011'532 2'333'937 2'392'286 0 0 0 0 0 0 0
Donors 4'342'481 4'625'942 3'843'610
Total External Sources 7'354'013 6'959'879 6'235'895 0 0 0 0 0 0 0
Total Sources 8'021'022 7'703'102 7'132'596 1'224'983 1'202'863 1'180'743 1'158'622 1'136'502 1'114'382 1'092'261
Requirements of Funds
Capital Expenditure (Investment) 7'354'013 6'959'879 6'235'895 0 0 0 0 0 0 0
Debt service WB loan
Principal repayment 300'000 300'000 300'000 300'000 300'000 300'000 300'000 300'000 300'000 300'000
Interest payment 66'000 60'000 54'000 48'000 42'000 36'000 30'000 24'000 18'000 12'000
Debt service EBRD loan
Principal repayment 0 0 0 644'813 644'813 644'813 644'813 644'813 644'813 644'813
Interest payment 101'009 11'961 0 185'384 169'263 153'143 137'023 120'902 104'782 88'662
Total Requirements of Funds 7'821'022 7'331'840 6'589'895 1'178'197 1'156'076 1'133'956 1'111'836 1'089'715 1'067'595 1'045'475

Increase in Working Capital 200'000 371'261 542'701 46'787 46'787 46'787 46'787 46'787 46'787 46'787
Less: Increase in net current asset other than cash-21'504 3'541 3'003 17'769 832 2'085 2'177 2'273 2'372 2'475
Increase in Cash 178'496 374'803 545'704 64'555 47'619 48'871 48'964 49'059 49'159 49'262
Accumulated Cash (Cash&Bank account) 548'692 923'494 1'469'198 1'533'754 1'581'372 1'630'244 1'679'207 1'728'266 1'777'425 1'826'687
Accum. cash in % of annual revenue 15.1% 24.3% 37.1% 31.6% 32.4% 32.7% 32.9% 33.1% 33.3% 33.5%

Debt Service Coverage Ratio 1.42 1.43 1.43 1.48 1.48 1.49 1.49

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10.18 Economic Analysis


This chapter considers the economic justification for undertaking the proposed Short Term
Investment Programme of Cazin Vodovod, as a part of the outlined Long Term Investment
Programme.
The Short Term Investment Program will be implemented in the period 2013-2015.
Main areas of investments of the Investment Program are:
 Design and construction of WWTP 1

 Main sewer line towards WWTP 1, including replacement of broken (corroded) water
mains out of the Mutnik well field
 Tertiary Network within the City of Cazin
The main objective of the project is to improve environmental protection through proper col-
lection and treatment of the waste discharges. This will result in considerable prevention of
the contamination of the ground waters in the main well field providing drinking water to the
town of Cazin.
The economic evaluation takes into consideration only the impact of the Short Term Invest-
ment Program.
The basis for establishing project economic viability is the comparison of the “With project”
scenario against the “Without project” scenario. The “With project” option is represented by
the implementation of the proposed Investment Program. The without project scenario is
taken as the existing supply situation.
The implementation of the proposed program will provide the following economic benefits:
 Savings from reduction of water losses and O&M costs

 Health benefits resulting from improvement of drinking water’s quality

 Avoided capital and operating costs of construction of a new water treatment plant
which will have to be built if no measures in water treatment are undertaken
The economic evaluation is carried out for the technical life of the project, i.e. 25 years. De-
tails are provided in Sheet EIRR in the financial model. The following table illustrates these
results:
Table 10-20: Economic Evaluation
KM
Financial year NPV 2013 2014 2015 2016 2017
Investment Capex -7'316'834 -6'856'706 -6'074'374 0 0
Total project costs -17'629'320 -7'316'834 -6'856'706 -6'074'374 0 0

Benefits
O&M costs saving 1'646'193 0 0 83'456 118'900 175'419
Water losses savings 5'323'434 0 0 329'411 333'124 566'142
Health benefits (savings from avoided health expenditure) 12'536'509 0 0 0 1'466'873 1'466'873
Avoided investment cost of water treatment plant 5'538'455 3'084'519 3'084'519 0 0 0
Avoided O&M costs of water treatment plant 6'750'747 0 0 721'898 721'898 721'898
Total economic benefit 3'084'519 3'084'519 1'051'310 2'521'895 2'754'913
Net benefit -4'232'314 -3'772'187 -5'023'064 2'521'895 2'754'913
Benefit/Cost ratio 1.8
EIRR 25 years 17.45%

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The evaluation proves that the benefits of the proposed Short Term Investment Program
from the viewpoint of local economy and society are considerable and justify the planned in-
vestment. The EIRR of the project over its technical lifetime is over 17.45% while the benefit-
cost ratio is 1.8. The Investment Program is therefore considered to satisfy project procure-
ment and implementation plan

10.19 General Provisions


For the implementation of the Project, a series of measures are required:
 Institutional arrangements:
- Strengthening Public Utility (personnel and personnel training),
- Ensuring Financing of the system including fee collection and payment considera-
tions,
- Loan financing,
- Consideration of modifications to the existing waste water system for the whole mu-
nicipality, taking a more decentralized approach,

 • Decision on the Procurement Plan


 • Defining of the Public Utility further tasks
- Operation of waste water system,
- Operation of the WWTP,
- Others,
 Modification of contractual arrangements between Public Utility and Municipality
One of the first activities of the Public Utility VODOVOD is to tender for a Consultant (Imple-
mentation Consultant), which is supporting all further activities. To do that, there are two op-
tions:
 Either Public Utility is implementing that with own means or

 VODOVOD is engaging a Consultant who is doing tendering and evaluation process of


the involved contractors.

10.20 Implementation Plan for Cazin Wastewater Project


The implementation plan starts with the finalization of the Feasibility Study.
The wastewater system (main collector with secondary and tertiary network) is expected to
start operation in 2016. At that time, the WWTP needs to be operational. The site of the
WWTP is Rajak, Pjanici.
Before the implementation phase starts, it is necessary to finalize the project Preparatory
Phase and to engage the Preparatory Phase Consultant (PPC). These consultant services
are dedicated to the preparation of the Preliminary and Primary Design, including Environ-
mental Assessment Study for the construction of the wastewater system (main collector with
secondary and tertiary network) and the WWTP. These project documents are required for
the investor to obtain different authorisations and permits requested by the Spatial Planning

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law and the respective Construction Law of Federation of B&H. In addition, the PPC will
have to prepare tender and bidding documents for the next project phase.

It is to be noted that the project schedule does not provide for any reserves. This means, that
the WWTP will have to be operational latest by the end of 2015. The Consultant regards this
as a serious challenge and will later in this text comment on it.
The implementation plan covers also preparation and implementation of the necessary train-
ing activities for the project implementation (see implementation schedule for activities of AM
Consultant).
Details are presented in the implementation plan attached on the next 2 pages.

10.21 Procurement Strategy


The plan is based on the proposal that design and tendering for the construction of the
wastewater system and the WWTP be implemented at the same time, due to the schedule of
the PIP. It is further proposed to considera minimum number of contractors in order to re-
duce management time as well as allocating clear responsibilities.
For the design and tendering of the wastewater system a FIDIC Red Book procedure is pro-
posed, whereas the Yellow Book approach for the WWTP would be preferable and in addi-
tion allows bidders to present optional designs.
In order to plan and implement this project in a timely and professional manner, it is therefore
proposed to consider the engagement of a:
 Implementation consultant

 and a Capacity Building (Accompanying Measures) Consultant to assist the Public Utili-
ty VODOVOD in implementing the project regarding administrative and financial mat-
ters.

10.21.1 Implementation Consultant (IC)


The Implementation Consultant (IC) services comprise technical planning and support to the
implementation organisation on preparation of tender documents, tendering and supervision
of construction for wastewater system and WWTP. Furthermore support for commissioning
as well as supervision in the first operation period is task of the IC.

On the following pages, a tentative time schedule for the project activities is presented (Fig-
ure 11.1)

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The tasks comprise:


a) Review and update of the on-going planning process:
Review the wastewater management concept elements and revision of the preliminary de-
sign of the wastewater system and the WWTP.
b) Technical implementation planning
The technical implementation planning in this project is related to the:
 Detailed design (FIDIC red book) of the wastewater system,
 Functional design (FIDIC yellow book) of the WWTP, including design of connections to
water supply, electricity, gas and telephone network as well as access road, reception
area with all facilities, etc.
Generally, the above measures are referred to as wastewater system, WWTP and associat-
ed measures.
c) Preparation of tender documents, evaluation of bids, and participation in negotiating
the contracts for construction works.
d) Supervision of construction
The supervision of the construction works shall cover:

 design review,
 site supervision,
 participation at testing,

 participation at commissioning,
 participation during hand over,

 operation supervision for at least one year,


 the activity shall be carried out for all facilities mentioned in Item b). It shall assure the
technical and environmental quality of the measures according to standards, identified
in the technical specifications as well as in line with B&H standards.
e) Preparation of M&O Tender Documents (Optional)
The IC Consultant shall also assist in the selection of contractor/s to operate the constructed
facilities, in case this option will be selected.

10.21.2 Capacity Building (Accompanying Measures) Consultant


Capacity building (CB) measures accompanying the investments (so-called „Accompanying
Measures“ or „AM“) will be provided to holistically address all key wastewater issues, con-
straints and methods for improvement of wastewater management systems in the Municipali-
ty of Cazin.
The actual work under the AM Contract will be targeted at those areas that require the most
attention for strengthening, adjustment and upgrading the wastewater system overall.

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The AM Consultant aims to improve wastewater system throughout the project area by sup-
porting local authorities with up-scaling and institutional development within 5 broad areas:
 Organizational Enhancement,
 Financial Management,
 Regulatory Development,

 Community Awareness Raising,


 Multi-thematic Training Programme.
The AM Consultant is expected to provide capacity building to the implementing organization
as well as to the municipalities in the project area to an estimated 100 individuals. All key in-
dividuals will be explicitly identified (name, affiliation, skills inventory) before the capacity
building starts.
The AM Consultant shall review existing studies, validate the assumptions on needs in
wastewater system in the target area, and perform further inquiries as necessary to update
the latest situation. The AM Consultant will liaise with the implementation organization as
well as the municipalities to establish a framework through which capacity development in
response to local needs can best be defined and delivered. The AM Consultant will prepare
measures and training plan which will be the basis for the further activities during project im-
plementation.
According to the project needs, the Accompanying Measures Consultant will provide support
to Public Utility and Municipality in the following sectors:
a) Wastewater from Industrial and Commercial companies, including
 Preparation and implementation of municipal regulations for industrial wastewater con-
trol, and
 The establishment and operation of the unit responsible for industrial wastewater control
on the level of municipality.
b) Exploitation and disposal of sludge
 Preparation and implementation of sludge use and disposal concept,
c) Commercial management and tariff set-up, including
 Further development and implementation of the tariff system based on real costs,
 Cost calculation, billing and collection rate.
d) Relationship with customers and awareness raising, including
 Preparation and implementation of public relation concept for public utility,
 Preparation and implementation of contracts with customers.
e) Service contract (agreement) between municipality and public utility
 Definition and agreement of performance indicator of public utility,
 Definition and agreement of progressive tariff system,
 Preparation and adoption of service (concession) contract (agreement),

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The AM Consultant shall seek partnerships with appropriate domestic educational bodies,
technology centres and training entities to assure maximum transfer of locally adapted
knowledge to the beneficiaries of the capacity building programme.

10.21.3 Public Awareness Programme


Wastewater management is a publicly sensitive sector all over the world. Whereas the public
is acknowledging the cost for drinking water supplied, it is in many parts not commonly ac-
cepted that waste water would create similar cost and these would have to be financed
through tariffs. In this sense, the stakeholder engagement plays a vital role in getting the
consumers on board and ensuring financial viability in the waste water infrastructure.
The public awareness programme is as follows:
a) First step:
 Presentation of the results of the feasibility study to all parties concerned as well as to
the public (during this project),
b) Further steps:

 Further investigations of the WWTP and presentation of the results to the public (during
WWTP construction),

 Information of any accidents or other incidents,


 Information on monitoring results.
Monitoring results shall be collected and presented at least once a year.

10.21.4 Time Constraints


It will be very difficult to conduct the implementation of the Cazin Waste Water Project re-
spectively its Priority Investment Programme during the period of 3 years (2013 – 2015). It
has been planned to construct the sewage system in accordance to the Contract model by
the Red FIDIC Book and the WWTP in accordance to the Yellow FIDIC Book.
One part of the study-project documentation which can be used for the construction of the
sewage system exists, while the same does not exist for the WWTP at all and it is necessary
to prepare it from scratch.
The time of at least 12 months is necessary for the completion of the missing documentation,
or conservatively one year. For the construction and furnishing of the structures of the waste
water drainage and treatment system there are only two years envisaged which is insuffi-
cient for the very demanding system as the one in the Cazin Municipality. In addition, the
weather conditions in the B&H allow the construction of the infrastructural objects during the
period of maximum 8 months on the level of the calendar year. During the winter period the
performance of works is reduced to the minimum.

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In addition to the limitations which regard the technical feasibility of the project, the additional
time requirements respectively the limitations will appear firstly due to the need of auditing
the Project Documentation (Final Design for the sewage network, Primary Design for the
WWTP) and then also due to the issue of different approvals and permits in accordance to
the existing laws on spatial planning, construction and environmental protection (Urban, En-
vironmental, Water and Construction etc.) and additional approvals for the connections to the
specific infrastructure (electricity, water supply, telecommunications, road etc.).
In accordance to the above stated and including the experiences obtained during the past 5
years in the implementation of similar projects in B&H, the implementation period of the Pri-
ority Investment Plan (PIP) for the Cazin Waste Water Project is necessary to be extended
from 3 to 5 years.
The consequences regarding grace period of the loan need to be addressed during the loan
negotiations. Also, the affordability assessment within this report has not taken this con-
straint into consideration.

Figure 11.2: Block diagram showing timely constraints

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11. ENVIRONMENTAL AND SOCIAL ANALYSIS

11.1 Scope of work


The scope of this Environmental and Social Review Summary (ESRS) is to provide a con-
cise, comprehensive, stand – alone report presenting the potential environmental, social,
health and safety impacts on both the workers and the community, as well as the benefits
and risks associated with the Project during construction, operation and maintenance, with
regard to compliance with BiH national laws and EU legislation.
The assessed environmental impacts of the project will have to be addressed through a
number of mitigation measures covering all relevant aspects of environmental, health and
safety issues. Potential community concerns will have to be addressed on a timely basis via
community engagement and active grievance mechanisms during the Project implementa-
tion.
Overall, it has been evaluated that, due to its nature, the Project will have mainly positive
long-term environmental and social impacts such as cleaner water environment and mini-
mized risks to human health.

11.2 Report organization


This ESRS is divided into the following reporting components:

 presents the project objectives, scope and report organization;


 gives a brief overview of the current situation of PUC “Vodovod” with regards to its’ exist-
ing operation and infrastructure;
 provides an overview of national laws applicable to the Project and their status of com-
pliance with EU legislation;
 lays out a brief description of the proposed Project including its involvement in a wider
development programme;
 analyses the environmental, health and safety impacts associated with the proposed
Project during construction and operation phases;
 provides details on prevention and/or mitigation measures to be implemented in accord-
ance with good construction practices, which will ensure environmental soundness of
this Project including community engagement.

11.2.1 Current Situation


The Municipality of Cazin is located in the north – west part of Bosnia and Herzegovina, in
2
Una – Sana Canton, bordering the Republic of Croatia. Its area is approx. 356 km and by
estimation, it numbers 70 000 inhabitants, which, by Bosnian and Herzegovinian standards,
makes it a densely populated municipality. The estimated population of the municipal centre
is 12 000 inhabitants, while the rest of the population lives in suburban and rural areas.

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11.2.2 Public Utility Company “Vodovod”


The Company is a municipally owned limited liability company with 62 employees. Its scope
of work is water supply and wastewater collection for the area of Cazin Municipality.
According to the Company’s data, the Company supplies water to a total of 16 287 consum-
ers (both private persons and legal entities) located in the urban area and 54 surrounding
settlements. The situation with wastewater collection is not as good, with only a 10% popula-
tion and 23% commercial connectivity to the sewage network.
Although payment rate is high, some consumers still fail to pay their bills regularly. The tariffs
3
(EUR/m ) are listed below, and it should be noted that the Company has had no tariff ad-
justment in the last three years (the last price increase was in 2007):

Table 11.16: Tariffs for water supply and sewage in Cazin Municipality

2009 2010 2011


Water Sewerage Water Sewerage Water Sewerage
Households (private per-
0.50 0.15 0.50 0.15 0.50 0.15
sons)
Companies (legal entities) 1.00 0.20 1.00 0.20 1.00 0.20

In addition to the above listed tariffs, the Company charges a monthly fee for maintenance of
water measuring devices in a range of 0.8 to 22 EUR equivalent, based on the profile of the
device.

11.2.3 Water supply system


As stated earlier, the Company supplies 15 400 private persons (households) and 887 legal
entities with potable water, which represents 95% of the entire Municipality population. The
remaining 5% are supplied by small, privately owned sources and pipelines which are not
under the Company’s jurisdiction.
Raw water is supplied from six water sources (Vignjevići, Mutnik, Tahirovići, Ljubijankići, Pa-
jića Potok, Stovrela and Pećigrad) via gravitation and pumping with a combined yield of 300
– 330 L/s.
Chemical and bacteriological water quality tests of the urban water supply system are con-
ducted on Company’s request by the Institute for Public Health of Una-Sana Canton, twice
per month. During each sampling event, 10 to 12 samples are collected, both from raw water
sources and treated water supplied to consumers and analyzed for all parameters requested
by local legislation. Analytical results meet both national legislation and EU Drinking Water
Directive/WHO. However, occasionally isolated samples show raised levels of organic mat-
ter, ammonia and coliforms.
According to the Company data, non – revenue water for the last three years of operation
(2009, 2010 and 2011) amounted to over 51% of water supplied to the system.

11.2.4 Wastewater collection system


The wastewater collection system in the Municipality is underdeveloped, as it didn’t advance
at the same rate as the water supply system. Only 10% of the overall population (including
the commercial sector) are connected to the sewage system. The majority of the population
and companies (estimated at approximately 60%) use septic tanks which are not managed

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by the Company and whose wastewaters are directly discharged into the ground. The re-
maining 29% of the households do not have septic tanks and they discharge their
wastewaters directly to the nearest watercourses.
The existing wastewater collection system is approximately 8 000 m long, made of concrete
pipes with diameters of Ø200 – 600 mm. It is of combined type (simultaneously collects both
wastewaters and rain).
The central collector is 400 m long and is confined to the very urban area of Cazin.
Wastewater collected by it is discharged directly into Čajin Potok through several outlets.
The rest of the constructed collection system is practically nonexistent due to its severe
damage and age.
No wastewater treatment is undertaken because the Municipality does not have a WWTP,
and no data exists if any of the industrial facilities perform any pre-treatment of their
wastewaters. However, it is estimated that the industry contributes less than 10% of total
wastewater discharge.
The main recipient of wastewaters in the urban area of the Municipality is Čajin Stream
which is a Mutnik River tributary which, in turn belongs to the Danube catchment area. Other
settlements discharge their wastewaters to numerous streams closest to them.

11.3 Legal Framework


The national legal framework regarding this Project can be divided into laws and/or regula-
tions regarding the environmental aspect of the project, legal framework regarding occupa-
tional health and safety and laws and/or regulations pertaining to land acquisition and expro-
priation. Where national legislation is not applicable or is nonexistent, corresponding EU
regulations should be regarded.

11.3.1 Environmental Legislation and Permitting Process


The list of relevant environmental laws and bylaws is given below:
 Law on Waters of FBiH (Official Gazette of FBiH, no. 70/06);
 Water Law of Una – Sana Canton (Official Gazette of USC, no. 4/11)
 Decree on Conditions for Discharge of Wastewater into Natural Recipients and Public
Sewer Systems (Official Gazette of FBiH ", No. 6/12);
 Regulation on Hazardous and Harmful Substances in Waters (Official Gazette of FBiH,
no.43/07);
 Regulation on Drinking Water Health Safety (Official Gazette of BiH, no. 40/10);
 Regulation on Facilities Subject to Obligatory EIAand Facilities Which May be Construct-
ed and Operated Only with a Valid Environmental Permit (Official Gazette of FBiH, no.
19/04);
 Regulation on Environmental Permitting for Facilities and Plants and Other Planned Activ-
ities Which May Significantly Affect the Environment (Official Gazette of Una- Sana Can-
ton, no. 18/07);
 Law on Waste Management of USC (Official Gazette of USC, no. 4/12)
 Regulation on Animal Waste and Other Non-hazardous Materials of Natural Origin Which
Can Be Used for Agricultural Purposes (Official Gazette of FBiH, no. 8/08);
 Regulation on Determining Maximum Permitted Quantities of Harmful and Dangerous
Materials In Soil And Methods of Analysis (Official Gazette of FBiH, no. 72/09);
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 Regulation on Waste Categories with Lists (Official Gazette of FBiH, no. 9/05);
 Law on Air Protection of FBiH (Official Gazette of FBiH, no. 33/03, 4/10);
 Regulation on Emission Limits of Pollutants into the Air (Official Gazette of FBiH, no.
12/05);
 Regulation on Limit Values of Air Quality (Official Gazette of FBiH, no. 12/05);
 Regulation on Permitted Limits of Sound and Noise Intensity (Official Gazette of SRBiH,
no. 46/89);
 IFC EHS Guidelines: Noise Management, April 2007;
 Water Framework Directive 2000/60/EC;
 The New Groundwater Directive 2006/118/EC;
 The Urban Wastewater Treatment Directive 91/271/EEC;
 Directive on Using Sewage Sludge in Agriculture 86/278/EEC;
 WHO Guidelines for Drinking-water Quality, 2006;
 Directive on Waste 2008/98/EC
Projects which require an Environmental Impact Assessment may not be issued an Urban
Planning Consent or Construction Permit unless an Environmental Permit is obtained. In
FBiH, the EIA procedure is regulated by the Law on Environmental Protection (Official Ga-
zette of FBiH, no. 33/03 and 38/09) and the Regulation on Facilities Subject to Obligatory
EIA and Facilities Which May be Constructed and Operated Only with a Valid Environmental
Permit (Official Gazette of FBiH, no. 19/04). The latter gives thresholds on facilities which are
under the jurisdiction of Federal Ministry of Environment and Tourism (FMET). Wastewater
treatment plants which treat over 50 000 PE are subject to environmental impact assess-
ment and the Environmental Permit is issued by the Federal Ministry. Plants and facilities for
which an environmental impact assessment is not required, as well as for plants and facilities
below the thresholds identified in FBiH regulation, the Environmental Permit is issued by the
competent cantonal ministry. Therefore, wastewater treatment plants < 50 000 PE are sub-
ject to cantonal regulations. Una – Sana Canton has its own Regulation on environmental
permitting for facilities, plants and other planned activities which may significantly affect the
environment (Official Gazette of Una- Sana Canton, no. 18/07 According to this regulation,
all plants and facilities subject to environmental permitting, must submit the Application for
issuance of the Environmental Permit to Ministry of Construction, Physical Planning and En-
vironment of Una-Sana Canton. The cantonal regulation also defines the content of the Ap-
plication which is in line with Annex IV of EU EIA Directive. The law also defines the content
of the Application which is in line with Annex IV of EU EIA Directive. Since this WWTP is en-
visaged to have 28 000 PE (14 000 in the first phase + 14 000 in the second phase), it will
be treated by this regulation and therefore under the jurisdiction of Ministry of Construction,
Physical Planning and Environment of Una-Sana Canton.
With regard to compliance of BiH law with EU standards, the following can be said:
 Transposition of the Water Framework Directive (2000/60/EC) to national legislation is
very advanced, as 90% of it has been transposed through the Law on Waters (Official
Gazette of FBiH, no. 70/06). The Decree on Conditions for Discharge of Wastewater into
Natural Recipients and Public Sewer Systems (Official Gazette of FBiH ", No. 6/12) is in
accordance with provisions set out in the Urban Wastewater Treatment Directive
91/271/EEC;
 Transposition of the Directive on Waste 2008/98/EC to national law has been to some ex-
tent implemented through the Law on Waste Management (Official Gazette of FBiH, no.
33/03 and 72/09) and several others, but it is not known when full transposition of the re-

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maining requirements will occur. Current level of transposition is approximately 32%;


 Limit values in Directives 1999/30/EC and 2008/50/EC pertaining to pollutant levels in the
air compared to those set out in the Regulation on Limit Values of Air Quality (Official Ga-
zette of FBiH, no. 12/05) are somewhat stricter than in national law and they are not
transposed to FBiH legislation. Currently 60% of the Directive is transposed;
 The limit values set in the Regulation on permitted limits of sound and noise intensity (Of-
ficial Gazette of SRB&H, no. 46/89) are not in compliance with IFC EHS Guidelines on
Environmental Noise Management. This regulation is pre-war, but is still in use as no new
law on national level has been set up. However, Una – Sana Canton has a Draft Law on
Noise which is still in adoption procedure. It is in accordance with IFC EHS noise level
provisions and evaluation of noise levels is conducted according to International stand-
ards ISO 1996/1, ISO 1996/2 and ISO 1996/3 that are set as the requirement in Directive
2002/49/EC on the assessment and management of environmental noise. This Law is in
accordance with laws in force in other cantons that regulate protection from noise, for ex-
ample, the Canton Sarajevo Law on Noise (Official Gazette of Canton Sarajevo, no.
26/07) whose provisions regarding noise levels are in line with the IFC EHS regulations
regarding noise, and noise measuring and evaluation of noise levels is conducted accord-
ing to International standards ISO 1996/1, ISO 1996/2 and ISO 1996/3 that are set as the
requirement in Directive 2002/49/EC.

11.3.2 Occupational Health and Safety


The legal framework pertaining to occupational health and safety is listed below:

 Law on Occupational Safety (Official Gazette of SRBiH, no. 22/90);


 Law on Fire and Firemen Protection (Official Gazette of FBiH, no. 64/09).
It should be noted that there is no unique law at national/federal/cantonal level dealing with
health and safety issues at construction sites and during operation of various facilities. Law
on Urban Planning entails some construction issues, but cantonal level laws on construction
(construction is under the jurisdiction of Cantons) do not exist.

11.3.3 Land Acquisition and Expropriation


The law that covers all issues related to land acquisition and expropriation at the FBiH level
is given below:
 Federation of BiH Law on Expropriation (Official Gazette of FBiH, no.70/07).
The FBiH Law on expropriation provides the framework for informing/consulting the owner
and stakeholders:
 Article 23 states that, even before the decision on expropriation, all interested parties
must be invited for negotiations to determine the value of compensation;
 Article 25 states that after a proposal for expropriation has been submitted, the body car-
rying out the expropriation is obliged to inform the owner without delay;
 Article 27 states that the body in charge for expropriation is obliged to hear the owner in
regard to the expropriation facts, prior to issuing the Decision on Expropriation;

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 Article 11 states that in case of partial expropriation, the body in charge for expropriation
must inform the owner about his/her right to request full expropriation;
 Article 19 states that an appeal against the Decision on Expropriation can be submitted to
the FBIH Administration of Geodesy and Legal Ownership Affairs.

11.4 Description of the proposed project


The priority of this Project is to create a sustainable wastewater collection and treatment sys-
tem which will allow for improved water quality throughout the area. However, it will also be
necessary to improve the water supply system as well in order to achieve an overall sound
financial and sustainable system with decreased losses, both financial and water-wise which
will in turn revitalize this region in terms of economic development.
Following the principles defined in the ToR, the measures to achieve this goal should have
the following characteristics:
- Least cost investments at the highest possible efficiency
- The least cost measures to recover some of the cost
Therefore, the following measures have been identified as priority:

 Connect as much of Cazin Municipality to a WWTP by possibly separate system;

 The WWTP will be implemented in the outskirts of Cazin town in 2 steps according to
the connection rate;
 The Mutnik branch (secondary system) will also be connected to it at the same time;

 Water supply in Mutnik will be at the same time be improved by rehabilitating parts of
the supply system (recurrent investments to achieve cost savings and gain more rev-
enues);
 Priority measures should also be taken to decrease illegal connections in this region
within a district management programme (DMP) and been extended to other notori-
ous districts;
 Water conditions are to be improved at a high priority level.
This project will be undertaken in two phases, one of which falls under the PIP and is of im-
mediate interest: the construction of WWTP Phase I, construction of a primary collector and
connection of the Municipality via secondary and tertiary collectors, and the LTIP phase
which includes expansion of the collector network and construction of a second WWTP to
fulfil PE requirements in the long term. This concept is shown in the table below:

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Table 11.17: LTIP and PIP regarding WWTPs

Description PIP LTIP

WWTP 1a 50% capacity of WWTP 1 X


WWTP 1b 50% capacity of WWTP 1 X
WWTP 2 Whole Plant X

This table shows the phases in which the wastewater and water supply of Cazin would be
carried out, with its main components:
1. Sanitation of Cazin City including the Mutnik branch, including WWTP to be implemented
in two stages (WWTP 1a and 1b);
2. Further development of the sanitation system towards Korana river including WWTP 2
and the connection of additional branches;
3. Sanitation of independent systems throughout the Municipality by constructing separate
systems and WWTPs.

11.5 Environmental and Health and Safety Impact Analysis


The overall objective of the Project is to assist Cazin in its sustainable development of
wastewater infrastructure, which will, in addition, enable the Municipality to become compli-
ant with EU directives pertinent to urban wastewater and sludge treatment and contribute to
Bosnia and Herzegovina meeting the EU environmental acquis communautaire in the medi-
um to long term. Further, the Project will contribute to environmental protection, protection of
water resources, minimize the risks to public health and improve the quality of drinking water
through the implementation of sewage and wastewater treatment infrastructure in the Munic-
ipality. This will be achieved by: (i) increasing the number of population connected to the
sewage networks, and (ii) reducing the direct discharges of untreated wastewater by the
construction of a wastewater treatment plant (“WWTP”).
The project-affected people, in general, are expected to have positive attitude towards the
project given their need for better sewer system and therefore they considered it of high
common interest. The Project showed many positive impacts, some of which are listed be-
low:
Protection of ground water and sanitary protection of drinking water sources: Water
pollution by microorganisms, chemicals, industrial wastes and sewage harm living organisms
and deteriorate the water quality of rivers, making it inappropriate as habitat for aquatic flora
and fauna and unfit for its further use by humans. The construction of a sewerage network
and WWTP will improve conditions of the watercourses in the area, mainly Mutnica River
and its’ tributary Čajin Stream.
The main expected positive impacts are overall increased water quality due to wastewater
collection and treatment as well as minimization of risks of waterborne diseases which are
connected to poor wastewater management and low water quality. A major reduction in the
pollutant load discharged into Čajin Stream and Mutnica River will be achieved following the
commission of the WWTP as opposed to current discharge of untreated water into the near-
est watercourse. Currently, the load of wastewater in Mutnica River is the most pronounced
in the summer months, during dry season and low water levels. The key benefits of the Pro-

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ject will be reduction of pollutant discharges due to wider coverage by the sewage networks
and provision of a new WWTP. The national legislation, which is in line with EU Urban
Wastewater Treatment Directive, provides the discharge limits of the WWTP effluent that
must be satisfied before discharge to recipient. By implementing the PIP and satisfying the
prescribed conditions, it is expected that BOD5 will be reduced for approximately 264 tonnes
per annum, total nitrogen for approximately 38 tonnes per annum and total phosphorus for
about 10 tonnes per annum. Wastewater collection and treatment will ensure protection of
groundwater sources for drinking water by evacuating wastewaters from the water protection
zones.
Minimizing ecosystem deterioration: The ecosystem of the recipient river will be greatly
improved, as water will be treated prior to its discharge. The improved water quality of these
rivers will also have an indirect positive impact on species (amphibians, fish, etc.) and habi-
tats surrounding these rivers (i.e. floodplains).
Improvement of soil conditions and agricultural land use: A positive impact on soil quali-
ty may result if treated wastewater is reused in irrigation, thereby increasing soil fertility, re-
sulting in increased agricultural productivity and/or a reduction in the use of chemical fertilis-
er. However, wastewater must undergo further treatment (i.e. disinfection etc.) and be con-
tinuously monitored before use in agriculture.
Positive impacts of the wastewater collection system, including the WWTP are reflected in
the number decrease of septic tanks (increased number of households collected to the
wastewater collection system) from which wastewater and sludge were directly spilled on to
the ground.
Reduction of the water losses, energy efficiency improvements: The electricity cost is
estimated to be at around 20% of the total cost to the Company. The main cause lies in the
high number of pumping and booster stations which are needed for the transportation of
drinking water. These costs may be lowered significantly if technical and administrative loss-
es are addressed properly thus improving overall energy efficiency of the Company, as
pumping stations will not be as heavily burdened as they are now with old and leaky pipes
often of lower nominal pressure installed than required. Therefore, the replacement of water
supply pipelines will reduce the loss of water in the water supply system and therefore raise
the energy efficiency.
Additional environmental and social benefits arising from the project are:
 Minimizing the risks of occurrence of water borne diseases in the Municipality of Cazin;
 Aesthetics and ambient improvement of the entire area, especially along watercourses;
 Creation of better environment for economic growth;
 Increasing the standard of living in the municipality of Cazin.
Beside the environmental and social benefits, due to its nature, the proposed project might
have certain influence on the environment, primarily during the construction phase related to
the extension of the existing sewerage network, construction of a new secondary sewerage
network and construction of the WWTP as well as its operation later on.
The potential environmental impacts of the proposed project are presented and analyzed in
this Section with respect to the following aspects:

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 flora and fauna;


 water and groundwater;
 soil;
 air;
 noise;
 solid waste;
 cultural heritage and
 impacts on people.

11.5.1 Flora and fauna


CONSTRUCTION:
The most significant impacts of the proposed project on flora and fauna are expected during
the construction phase, i.e. during the installation of sewerage pipelines and construction of
the WWTP. Since the WWTP is located in the flooding area of Mutnica, some river regulation
works are expected to occur, mainly meander correction and flooding prevention which might
impact flood forests of alder and poplar trees in the area. The selected area for the construc-
tion WWTP is substantially neglected and unusable for agricultural purposes, covered with
low vegetation (e.g. shrubs). River regulation pertaining to WWTP construction may cause
impacts on the river ecosystem, mainly fish and otters living there, which can be mitigated
using good construction practices, i.e., construction of adequate cascades.
Excavation of the ground, which will cause violation of flora and fauna on local basis, will be
performed during the construction of wastewater pipelines. Since the pipeline route will most-
ly pass through populated areas and run along local roads, where the human-altered eco-
system already predominates, no negative impacts on flora and fauna are expected. In rural
areas, construction activities, such as earthmoving works, could have the potential to disturb
habitats along the sewage network. However, habitat disturbance, during pipe construction
or replacement, will occur within a narrow strip of the area (working corridor width 6 meters
in total).
There are no sensitive or protected natural areas in the Municipality of Cazin; therefore, no
such impacts are envisaged.
During construction, higher levels of dust production may temporarily disrupt vegetation
growth and health, and improper disposal of construction waste may also threaten the living
space of plants and animals.
In general, all impacts during the execution of construction works will be temporary, reversi-
ble and susceptible to moderation by means of adequate and good working practices.
OPERATION:
The sewerage pipeline will not have any significant impact on flora and fauna during its life-
time. Burst pipes are expected to be repaired accordingly and timely so spilled wastewater is
not expected to have major negative impacts on surrounding vegetation and animals.
The WWTP might attract a large number of insects due to its biological treatment. It is not
expected that it will have any significant impact on other vegetation and animal life during
normal operation.
The ecosystem of the recipient river will be greatly improved, as water will be treated prior to
its discharge. The improved water quality of these rivers will also have an indirect positive

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impact on species (amphibians, fish, etc.) and habitats surrounding these rivers (i.e. flood-
plains). However, it is necessary to consider adequate cascades for fish migration during the
river regulation process.

11.5.2 Water and groundwater


Water pollution by microorganisms, chemicals, industrial wastes and sewage harm organ-
isms and deteriorate the water quality of rivers, making it inappropriate habitat for aquatic flo-
ra and fauna and unfit for its further use by humans.
The construction of a sewerage network and WWTP will improve conditions of the water-
courses in the area, mainly Mutnica River and its’ tributary Čajin Stream, so there are many
more positive impacts on the water quality than negative ones.
CONSTRUCTION:
Negative impacts, short - term in character, which might occur during construction of the
WWTP and sewerage pipelines are mostly due to excavation works, with occurrences of en-
hanced erosion or sedimentation, carrying substrate from working areas into Mutnica and
other watercourses in the construction areas, resulting in water quality reduction. This can be
mitigated using good construction practices such as stockpiling excavated soil along the side
of trenches; protecting the stockpiles from dust and wind erosion, with the use of covers or
the application of water; and protecting stockpiles from vehicle movements. Where it is pos-
sible, existing roads will be used to move vehicles and equipment around the construction
area.
Construction of the crossing sites over the water courses will include excavation activities in
the river bed, possibly enhancing the erosion and precipitation of suspended materials in the
water body, if the rehabilitation of the river course back to the original conditions could not be
performed before the wet period of the year. However, the aforesaid impacts are of tempo-
rary and reversible nature and mostly arise after the termination of executed works. Mitiga-
tion measures proposed in the next section will serve not only for the reduction of negative
impacts, but also for the restitution of original conditions in the water courses.
During construction of WWTP, construction wastes might cause reduction of the surface wa-
ter quality as a result of uncontrolled disposal of excavated material in the river beds. There-
fore, all construction waste should be transported and disposed of at a legal landfill, by a li-
censed waste contractor, in accordance with national and EU legislation. Hazardous materi-
als should be handled appropriately and stored in designated areas, away from water-bodies
and drains.
Contamination of surface and groundwater might occur as a result of accidental release or
spilling of oils, fuels, grease and other pollutants pertaining to the mechanization and vehi-
cles. Special care should be taken to ensure spills are promptly contained and cleaned up
and vehicles and machinery properly maintained.
OPERATION:
Sewerage pipelines are not expected to have negative impacts on water quality in the opera-
tion phase, as the reason for their construction is collection of wastewater.
The main expected positive impacts are overall increased water quality due to wastewater
collection and treatment as well as minimization of risks of waterborne diseases which are
connected to poor wastewater management and low water quality. A major reduction in the

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pollutant load discharged into Čajin Stream and Mutnica River will be achieved following the
commission of the WWTP as opposed to current discharge of untreated water into the near-
est watercourse. Wastewater collection and treatment will ensure protection of groundwater
sources for drinking water by evacuating wastewaters from the water protection zones.
Decree on Conditions for Discharge of Wastewater into Natural Recipients and Public Sewer
Systems (Official Gazette of FBiH ", no. 6/12) stipulates that all wastewaters must undergo a
secondary treatment at the WWTP prior to its discharge into recipients, and must satisfy the
following parameters:
 BOD5 must be reduced minimally by 70 – 90 % (limit value is 25 mg/lO2);
 COD must be reduced minimally by 75% (limit value is 125 mg/lO2);
 Total suspended matter must be reduced minimally by 90% (limit value 35 mg/lO2);
 Total phosphorus (Ptot) be reduced minimally 80% (limit value is 2 mgPtot/l);
 Total nitrogen (Ntot) be reduced minimally70 - 80% (limit value is 15 mgNtot/l).
The limit values for the effluent discharge set out in this Decree are in line with EU Urban
Wastewater Treatment Directive 91/271 / EEC.
Due to inadequate operation of the WWTP, accidents, or uncontrolled influx of outside wa-
ters (for example, rainwater influx due to incorrect sewerage pipeline construction), incident
spills of wastewater which do not meet operation criteria may result in decrease of the recip-
ient quality. Adequate attention should be paid to inform downstream inhabitants of any ac-
cidental spills as well as intensified drinking water quality control should be ensured during
such accidents.

11.5.3 Soil
CONSTRUCTION:
Construction works related to the removal of superficial layer of humus, excavation of the
ground, as well as the presence of mechanization units and workers on the construction
sites will cause appearance of certain negative impacts on soil.
Mechanical impacts during excavation works which result from the presence of mechaniza-
tion units, vehicles and workers on the construction sites might be mitigated with good work-
ing practice. If proposed mitigation measures are properly implemented, impacts on land will
not be significant.
Execution of construction works on steep sloped terrains might cause erosion of the land
and removal of the erosion drift. Implementation of proper mitigation measures would mini-
mize impacts on the soil and environment in general.
Topsoil reutilization should be done using the best available procedures and techniques. Be-
fore construction works, the topsoil should be removed and stored beside the excavation site
or in locations that do not result in nuisance to the general public and properly protected to
avoid loss and/or degradation. After the construction works have been completed, the soil
should be replaced and pre-construction conditions reinstated. Adverse impacts may occur
as a result of delays in the reinstatement of the working area. Prolonged storage of topsoil
along trenches will lead to the impoverishment of the seed bank, and a reduction in the ger-
mination rate of seeds.
Possible soil contamination may occur resulting from uncontrolled waste disposal, from
wastewater disposal pertaining to the toilets from the construction sites and from oil spills

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pertaining to the mechanization and vehicles on site. These impacts may be mitigated using
good construction practices and proper mitigation measures of proper disposal of said pollu-
tants.
Spare soil (if not contaminated) and other inert waste that needs to be disposed of could be
used as cover or as reinstatement material at the local landfill site. In addition, non contami-
nated subsoil could also be used for the reinstatement of other construction sites. If fill mate-
rial is needed (e.g. sand, aggregate, etc.), it should be supplied from licensed quarries
and/or licensed subcontractors authorized to use approved quarries.
OPERATION:
Sludge
The impact of the WWTP on soil conditions during operation can have indirect effects on
public health and the environment. Sludge is an unavoidable by-product of biological
wastewater treatment plants, and can be handled in several ways (disposal at landfill, incin-
eration and agriculture use following its pre-treatment). Appropriate actions for safe disposal
or reuse of this sludge should be considered with due respect as they depend on several
factors (economic, proximity of sanitary landfill, agriculture development of the area, etc.).
Sludge reuse, when possible, is prescribed by the Decree on Conditions for Discharge of
Wastewater into Natural Recipients and Public Sewer Systems (Official Gazette of FBiH ",
no. 6/12). However, it must meet certain criteria which make it harmless to the environment,
which are prescribed by the “Regulation on Animal Waste and Other Non – hazardous Mate-
rials of Natural Origin Which May Be Used for Agricultural Purposes” (Official Gazette of
FBiH, no. 8/08). This should be considered accordingly during the development of any
sludge management procedures. The aim, therefore, is for the medium-term, to have a flexi-
ble solution for the sludge disposal, on which the sludge treatment is orientated. The follow-
ing actions are therefore proposed:
 PIP: WWTP 1a should have constructed wetlands, which will allow the sludge to be
buffered on-site over the next ten years. This means of sludge stabilization requires
a large basin volume, but is a simple process.
 LTIP: With the construction of WWTP 2, the implementation of WWTP 1b and the
significantly higher amount of sludge, the anaerobic digestion on-site of WWTP 1 for
both systems seems to be a realistic option. That would allow for a system that can
produce thermal and electrical energy by biogas. Furthermore, it would allow for re-
ducing and stabilizing the amount of sludge significantly. The product from the diges-
tion is suitable for all conventional disposal methods (landfill, incineration, fertilizer
for agriculture). After all, the existing constructed wetlands can be re-used for other
purposes.
It would be wise to reserve some space of the constructed wetlands for later installation of a
solar sludge drying facility.
Compared to conventional sludge drying beds, sludge stabilization method for WWTP 1a
stage that includes constructing wetlands has lower costs of maintenance, very low energy
consumption (only for pumping sludge into wetlands and reject water back to wastewater
treatment plant) and high levels of mineralization and dewatering of sludge due to natural
decontamination and water-extracting properties of plants used in these systems. However,
this method requires large basin volumes and does not represent a final sludge treatment.
The final sludge treatment needs to be addressed in line with concepts on national and re-

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gional level that would specify clear disposal routes in the future. In any case, the sludge res-
idue from wetlands needs to satisfy the requirements set in the Regulation on Animal Waste
and Other Non – hazardous Materials of Natural Origin Which May Be Used for Agricultural
Purposes (Official Gazette of FBiH, no. 8/08). The limit values set out in this regulation are in
line with EU Sewage Sludge Directive 86/278/EEC.
Other
Other potential adverse impacts on soil can also occur as a result of the improper handling of
other solid wastes, including grit/sand and debris from the screening stations, aerated grit
chamber, sedimentation tanks etc; and soil contamination from pollutants in wastewater (i.e.,
grease, excess nutrients and organic matter), causing poor soil productivity, harm to vegeta-
tion and unsightly conditions.
A potential positive impact on soil quality may result if treated wastewater is reused in irriga-
tion, thereby increasing soil fertility, resulting in increased agricultural productivity and/or a
reduction in the use of chemical fertiliser. However, wastewater must undergo further treat-
ment (i.e. disinfection etc.) and be continuously monitored before use in agriculture.
Positive impacts of the wastewater collection system, including the WWTP are reflected in
the number decrease of septic tanks (increased number of households collected to the
wastewater collection system) from which wastewater and sludge were directly spilled on to
the ground.
River regulation pertaining to construction of the WWTP will also have its positive impacts on
land use – intensifying agricultural activities and creating conditions for cultures which cannot
grow in flood areas, but only if the riverbed is kept in good condition throughout time.

11.5.4 Air
The Law on Air Protection (Official Gazette of FBiH, no. 33/03 and 4/10) regulates technical
conditions, measures for prevention or reduction of air emissions which are caused by hu-
man activities on the territory of FBiH. Furthermore, the Law implies planning strategy for air
quality protection, special emission sources, cadastre of emissions and air quality.
CONSTRUCTION:
During construction, the majority of air pollution is expected from earthmoving and pipe-
laying machinery; construction activities, such as excavation and backfilling of trenches; and
vehicles transporting materials, equipment and construction personnel to and from site. Dust
will be released into the atmosphere from excavation and earthmoving operations. The areas
expected to be affected will be within several hundred meters of the working area; however,
dust is not expected to represent a significant issue to local residents provided the proposed
mitigation measures such as dust suppression techniques (e.g. soil damping, truck covering,
etc.) are properly implemented. Such impacts will be short term and neither significant influ-
ence on local population nor pollutant emission above the values set by legislation in force is
not expected. Emissions from diesel engines will be kept to a minimum by ensuring regular
maintenance and use of high quality fuels as well as shutting equipment down when not in
use.
Therefore, the adverse impacts on air quality will be short term and are not considered signif-
icant.
OPERATION:

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During the WWTP lifecycle, emissions pertaining to its operation (biological treatment) are
unavoidable. Several emissions are expected, including greenhouse gasses and aerosols
which in the air have direct and indirect effects to the atmosphere, and they can also spread
viruses and bacteria to the surrounding environment. Bad odour and an increased quantity of
insects may occur if the WWTP is not operated according to projected parameters or due to
extremely high temperatures. The location of WWTP is planned in the area relatively distant
from the urban part of Cazin , with a small number of inhabitants in its vicinity. However, to
minimize the impacts of odour generation on nearby residents and the surrounding area, it is
necessary to undertake mitigation measures which include placing facilities which are the
main sources of odour/gas emissions in closed units or buildings; installation of gas and
odour control devices; and adherence to good housekeeping procedures, which lowers the
retention time of wastes in the facilities, as well as placement of a natural tree barrier to-
wards the road and inhabited areas.

11.5.5 Noise
CONSTRUCTION:
Increased noise level is expected during the execution of construction works as a result of
presence of people and vehicles and operation of mechanical units, such as compaction, ex-
cavation, drilling or mechanical digging.
Since the location of the activities is governed by the need to provide the sewage collection
and treatment system for the Municipality, it is unavoidable that some noisy works will be
undertaken in sensitive residential areas.
The FBiH and the EU have legislation in force regulating the levels of permissible noise from
mobile plants and machinery. These limits shall be respected in the course of any construc-
tion activities through the implementation of mitigation measures which include scheduling
construction activities so those which generate noise and vibration are operated separately
and during normal daytime periods; use of noise control devices, such as mufflers, silencers
etc.
Construction works will mostly be executed during the day, but depending on both the type
of work and the deadline for termination of the construction works, execution of some noc-
turnal activities cannot be excluded.
Sewerage pipe replacement and construction will also progress along the planned sewerage
network and, as a result, construction equipment would only be in close proximity to any giv-
en residence for a limited time. The noise impacts at any location would therefore be short-
term.
OPERATION:
Noise will be generated during operation of the WWTP. Potential noise sources include the
preliminary treatment facility, pumping station, compressor station, sedimentation tank (sec-
ondary) and biological treatment facility. Mitigation measures are proposed to minimize such
impacts, which include placing facilities or motors which emit high noise levels in closed
buildings or units; regular maintenance and inspection of all plant facilities; adopting good
housekeeping procedures and the use of noise control equipment, i.e. mufflers, enclosures
etc. The WWTP is located in a rural area away from densely populated areas. Therefore,
noise impacts associated with plant operation are not considered significant; however, resid-
ual noise impacts are recognized during plant operation.

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11.5.6 Solid waste


CONSTRUCTION:
During construction activities, the following solid materials will likely be generated either as
waste or for temporary storage pending their use for reinstatement:
 topsoil;
 subsurface soil;
 tarmac;
 concrete and
 asbestos pipes (applicable for reconstruction of water supply network in the LTIP).
Topsoil and subsoil that is re-used for reinstatement should be stored at suitable locations
that do not result in nuisance to the general public.
Spare soil (if not contaminated) and other inert waste that needs to be disposed of could be
used as cover or as reinstatement material at the local landfill site. In addition, non-
contaminated subsoil could also be used for the reinstatement of other construction sites.
In addition to inert materials, a certain amount of biodegradable waste (e.g. vegetation, tree
roots, etc.) will also be a by-product of the project activities. This type of material should be
disposed of at the local landfill.
Hazardous wastes associated with the project may include a wide variety of materials such
as oil contaminated material, solvents and similar. These materials should be segregated in
appropriate, dedicated and sealed containers placed under a roofed and protected area. Fur-
thermore, hazardous waste should be, when feasible, re-used and/or recycled (i.e. recycling
of waste oils) or handled and/or disposed of by licensed contractors. Non-hazardous waste
can be disposed in communal landfills and, if needed, should be previously treated and dis-
posed of according to EU regulations.
Although there is no state legislation on asbestos handling, some precautionary measures
should be taken(applicable for reconstruction of water supply network in the LTIP).Removal
of asbestos pipes will comply with all applicable state and federal regulations, including
those for construction standards, health and safety, emission standards for hazardous air
pollutants and transport and disposal of hazardous waste. Directive 2003/18/EC of the Euro-
pean Parliament and of the Council of 27 March 2003 amending Council Directive
83/477/EEC on the protection of workers from the risks related to exposure to asbestos at
3
work sets the highest permissible concentration of respirable dust to 0.1 fibre/cm .
Waste management in the FBiH is regulated by the Law on Waste Management (Official
Gazette of FBiH, no. 33/09, 72/09). Beside the law on federal level, in Una-Sana Canton, the
cantonal Law on Waste Management (Official Gazette of Una-Sana Canton, no. 4/12) is also
applicable and the Ministry of Construction, Physical Planning and Environment of Una-Sana
Canton is the competent authority for the Law enforcement.

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OPERATION:
During operation of the WWTP, wastes are expected to be generated from preliminary and
mechanical treatment operations (solids, sands and grease). These should be collected in
closed tanks and treated and disposed of by a licensed contractor. The municipal waste of
Cazin is disposed at Meždre -Vlaški Do Landfill in the Municipality of Bosanska Krupa. This
landfill is not sanitary and therefore not suitable for the disposal of hazardous waste or
sludge. Other suitable landfill sites in the surrounding area are currently not available. The
major waste occurring from the WWTP is sludge. Sludge management has been explained
in the section above.
Since BiH has very few operating WWTPs, the sludge disposal paths are not well estab-
lished. In the long-term, sludge incineration should be preferred over disposal at landfill site.
Potential hazardous wastes (oils from pumps, transformers, etc.) will have to be sealed and
handled by authorized operators of such waste.
Some solid waste (mainly pipes) may be expected to occur during regular pipe maintenance
and repair. They should be disposed of accordingly or recycled if possible.

11.5.7 Cultural heritage


It is envisaged that the Project will have no impact on cultural heritage. However, if the con-
tractors, during the construction phase, unexpectedly encounter anything suggesting the
possibility of finding objects and sites of cultural/archaeological significance, it is necessary
to immediately suspend work and inform relevant competent authorities.
Recommendation for the introduction of a „Chance Find Procedure“ is specified in the ESAP.
Its goal is providing instructions on how to behave in situations of a chance find, including
restrictions/modifications to the execution of the site construction activities.

11.5.8 Impacts on people


CONSTRUCTION:
During the construction phase, potential impacts of the project on people may include the fol-
lowing:
 traffic and local road disturbances;
 disturbances caused by the presence of noise and dust;
 health and safety aspects.

11.5.9 Traffic and local road disturbances


Traffic disturbances may occur mainly due to the transport of pipes and collectors, excavated
and backfilling material (sand, asphalt, etc.), mechanical and electrical equipment and con-
struction material of the WWTP.
Besides this, during the construction of linear objects (collectors and secondary network) it
may be required that specific streets are completely closed to pedestrians and vehicles in
urban areas. This measure will likely cause disturbance to local residents and cause a nui-
sance to the inhabited areas as a whole due to traffic overload of adjacent streets, rerouting
of traffic, etc. A decrease in traffic safety may also occur during this period.

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In order to mitigate these disturbances, it is necessary to phase the project and traffic man-
agement carefully and where possible construction traffic should be conducted during off -
peak traffic periods in order to ensure free flow of vehicles and pedestrians. During the
WWTP construction, construction traffic will have to be restricted to approved access roads.
Advance notice of any diversions should be given to the population, and adequate signs
should be placed.

11.5.10 Disturbances caused by the presence of noise and dust


During the construction phase, certain amounts of noise due to machinery operation are like-
ly to occur, but they are a normal part of construction and will be short – term. Dust arising
from construction activities is also unavoidable. These impacts have been described in other
sections. However, aforesaid impacts will occur mainly during construction phase, which has
a limited duration, while the same are not expected in the course of the operational phase.
During phase of WWTP operation bad odour and an increased quantity of insects may occur
if the WWTP is not operated according to projected parameters or due to extremely high
temperatures. This might have negative impacts on the population living in the vicinity of
WWTP. In order to minimize these impacts, it is necessary to undertake mitigation measures
proposed in the next chapter.

11.5.11 Health and safety aspects


Major number of the factors related to the health and safety aspects on the project area will
occur during construction works. Related risks are mostly connected with the emissions of
pollutants in air, water and on the land. During construction, workers will need to be supplied
with the necessary health and safety equipment to prevent accidents.
In addition, the traffic increase during construction activities may represent a risk for local
population in residential areas. Truck movement should be carefully planned and discussed
with local Authorities and population adequately informed prior to work commencement.
Particular attention should be finally given to public safety by installing safety fences and
warning signs at all critical work areas (e.g. open trenches, excavations, material and
equipment staging areas, etc.).
OPERATION:
During the operation phase of the Project, all impacts on people which may arise are caused
by the operation of the WWTP. Mainly, occurrences of noise arising and odour may pose a
nuisance to the surrounding areas as well as employees of the WWTP. It will be necessary
to use covers or adequate ventilation for odour generating equipment as well as place noise
generation equipment in closed units where possible. The employees will have appropriate
health and safety equipment to reduce these impacts. It will also be necessary to pay due at-
tention that high safety requirements are met at the WWTP due to anaerobic digesters in-
stalled in the long term.

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11.6 Mitigation Measures


The implementation of this Project will have long term positive impacts on the Municipality of
Cazin and the wider surrounding area, since during its operational phase, the inhabitants of
the area covered by the new sewer system will have their wastewaters collected and treated
prior to its discharge into watercourses of the area. Primarily, the greatest positive impact is
a significant increase of the water quality of the recipients: organic, nutrient and heavy metal
pollution arising from wastewaters will be treated at the WWTP as opposed to the current
practices of discharging untreated waters to the nearest watercourse. This will, in turn, have
a positive impact on groundwater which supplies potable water sources, thus decreasing the
chance for contracting water borne diseases. A big percent of the Municipality population will
switch from using septic tanks to the new sewer system, thus decreasing soil pollution. Since
the recipients are tributaries to major rivers downstream, an increase in their water quality is
expected, too. Positive effects of this Project may be either a direct consequence of its im-
plementation, or indirect consequences arisen from new service implementation and may be
divided into the following categories:
 Economic;
 Health;
 Environment and
 Ecologic.
Direct economic advantages of the sewer system project are opening of new jobs and im-
proved potable water supply services due to increased water quality, and indirect economic
advantages may be avoidance of construction and maintenance costs of septic tanks in
households. An indirect advantage is the increase of development potential of the area due
to the provision of a fundamental infrastructure for any industrial and commercial activity.
River regulation may lead to improved value of the surrounding land, thus making possible
its use for agricultural purposes.
A major direct health advantage of this project is the increase of water quality of the sur-
rounding area thus reducing water borne diseases of the wider area impacted by this project.
Indirect health advantages are reduction of health related expenditures arising from bad wa-
ter, as well as improved water quality in general.
Direct environmental advantages also arise from improved water quality and river regulation
which lead to improved aesthetic and ambient conditions throughout the area, and especially
near watercourses. The project implementation following EU environmental protection
standards will help reduce pollution of rivers and groundwater resources leading to the con-
servation of environmental heritages and habitats.
As previously mentioned, a direct ecologic advantage is the improvement of public use of
natural resources, leading to indirect advantages like protection of biodiversity, conservation
of natural resources and avoidance of the cost of unknown adverse effects.
However, some short term negative impacts mainly associated with construction activities
and some operation activities of the WWTP may arise and need the implementation of miti-
gation measures. These measures may be classified based on the timeline of their execution
as:
 Mitigation measures prior to the execution of construction works;
 Mitigation measures during the execution of construction works and
 Mitigation measures during the operational phase of the project.

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11.6.1 Mitigation measures prior to the execution of construction works


Mitigation measures to be implemented before the execution of construction works are main-
ly related to the acquisition of necessary permits and approvals, which include the following:
 environmental permits
 water permits, which serve to regulate environmental and water protection and
 approvals from the competent authority and public companies, like the competent utility
companies, telecommunication companies, state directorate for roads, etc.
For the construction of wastewater collector discharged into the WWTP, the Environmental
Permit is not obligatory in the process of issuing Urban Consent. However, the construction
of WWTP is subject to obligatory environmental permitting prior to obtaining Urban Consent.
In the process of environmental permitting, a Preliminary Water Consent needs to be ob-
tained. In line with provisions of Regulation on facilities subject to obligatory EIA and facilities
which may be constructed and operated only with a valid Environmental Permit (Official Ga-
zette of FBiH, no. 19/04) the Federal Ministry is issuing Environmental Permits for the con-
struction of WWTP above the 50.000 PE. The envisaged capacity of the first WWTP in Cazin
Municipality planned in the first phase of the Project is overall approx. 30’000 PE (14’000 PE
in PIP and approx. 45’000 in LTIP totally) and the second WWTP is planned for the second
phase (17.000 PE in LTIP). Since the capacities of planned WWTPs are below thresholds
set out in the FBiH Regulation, the Ministry of Construction, Physical Planning and Environ-
ment of Una-Sana Canton is the competent authority for issuing Environmental Permits for
the construction of both WWTPs.
All technical and other requirements defined in the mentioned permits and approvals must
be included in the documentation regarding investment background and technical features of
the project, i.e. in the future tender/contract documentation needed for the execution of con-
struction works.
Other pre construction mitigation measures are related to the adequate design and place-
ment of the WWTP in order to ensure its operation is of highest quality, and they include the
following:

 placement of the WWTP in an area not densely populated, with a green buffer zone
planned around it,
 the WWTP location should be flood - proof so all river regulation works are to be execut-
ed prior to WWTP construction,
 all facilities within the WWTP which generate high noise levels, or emit strong odours
should be placed in closed units where possible,
 closed unit facilities which generate air pollution should contain air treatment devices, and
the aeration chamber should be covered to prevent distribution of aerosols,
 open collectors to be avoided where possible,
 development of an emergency plan which will ensure minimal wastewater treatment dur-
ing accidents,
 reserve power supply to ensure that priority units keep running,
 use of corrosion resistant materials.

11.6.2 Mitigation measures during the execution of construction works


Mitigation measures during the execution of construction works are usually related to a good
working practice, which reduces negative influences on the water and land quality and noise

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level as well. Since the implementation of such measures is direct responsibility of the Con-
tractor, specific requirements for both execution of works and implementation of mitigation
measures ought to be included in the tender/contract documentation.

11.6.3 Materials supply and transport


Mitigation measures regarding materials supply and transport include the following:
 A Traffic Management Plan should be outlined detailing construction vehicles and ma-
chinery movement, use of alternate roads for the population during construction including
community safety measures. The Plan needs to be approved by the competent Authority;
 Construction materials should be supplied by existing quarries, material storehouses and
asphalt plants which operate in accordance with local regulations’ requirements;
 In order to avoid dust emission, trucks should be equipped with suitable covers while
transporting asphalt, stone and gravel or other dusty materials as well should be used.
Transportation of stone and gravel should be performed ensuring that the materials are
sufficiently damped. Speed limits for all types of construction vehicles need to be en-
forced: (i) Working corridor – 10 km/hour and (ii) Access roads – 30 km/hour;
 All sewage network materials (pipes) should be non-hazardous and modern (PVC).

11.6.4 Mitigation measures for the construction site


The following mitigation measures should be adopted for the construction site:
 Use of adequate machinery (e.g. tyred vehicles) and/or protection devices to prevent ex-
cessive compaction of the soil at sensitive sites. Furthermore, proper procedures for sep-
arate removal, manipulation, storage and exchange of humus and underlying fertile layers
should be used, while all the construction materials previously used should be removed;

 Vegetation clearance will be minimized. Any damaged trees or vegetation will be restored
following construction.
 Installation of temporary disposal sites for the construction material, and an area which
would serve for rinsing of concrete pumps and mixers (if used), as well as the area for
washing wheels with adequate purification treatment;
 Procurement of licenses and approvals for all the equipment, which should be in accord-
ance with the local legislation and if possible, with EU standards;
 Use of modern machinery and vehicles which fulfil environmental standards regarding
emission of gaseous pollutants (more complete combustion), usage of filters which serve
for the reduction of soot particles, provision and usage of fuels with an adequate chemical
composition (low content of sulphur);
 Use of modern machinery and vehicles, which have isolated noise sources (motors, ex-
haust system). This predominantly includes either acquisition of new machinery, or im-
plementation of measures which include application of additional sound isolation systems,
as well as continuous maintenance of the same. Besides the implementation of such
measures, machinery functioning in time range from 07:00am to 08:00pm (especially on
all sections of the route which are less than 60 m distant from the settlements and resi-
dential areas) is recommended;

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 Use of biodegradable lubricants and oils for proper functioning of change gears. Further-
more, the maintenance, filling and cleaning of devices will be performed outside construc-
tion site in a paved area adequately separated from surface waters. Moreover, all the
machinery should be parked in strictly designated areas. Specific protection measures for
the prevention of land contamination with oil, crude oil and its derivatives should be un-
dertaken on previously mentioned parking places. In a case of land contamination, due to
the accidental oil spills or as a result of some other incident, contaminated layer of the soil
should be removed and transported to the designated disposal site;
 Use of dirt, unpaved roads should be minimized;

 Used waters from the construction site should be collected by means of watertight septic
tanks and should be treated (right on construction site or on a distant location) before
their discharge to the recipient;
 Excavated materials will be stockpiled on the hill side of the trench. Exposed stockpiles of
excavated material will either be covered or watered to prevent dust and wind erosion.
stockpiles will be protected from vehicle movements.
 Every kind of temporary or permanent disposal site of waste materials beside river banks
should be strictly prohibited. All the excavated material, which will not be used in con-
struction procedures should be disposed at proper locations;
 Areas which are susceptible to erosion, should be protected with both stabilization agents
and plants which serve for the prevention of the same;
 Adequate support of construction pits; and adequate fencing of construction sites and site
admittance to be controlled to ensure access by authorized personnel only.

11.6.5 Mitigation measures during construction activities


During the construction activities, the following mitigation measures should be adopted:
 Vehicles operating inside river streams or on its banks should not be allowed, except in
cases where it cannot not be avoided due to the nature of particular structures;
 The bottom of the river bed and its inflows should be protected during the execution of
construction works in order to preserve existing hydrological corridors for unobstructed
communication of the species which originally live on the bottom of the river. Further nat-
ural restoration of the existing river banks should be guaranteed by repeated plantation of
adequate vegetation in the certain areas;
 Traffic control measures should comprise temporary lighting and proper signalling and/or
development of alternative traffic routes with due notices to the public;
 Stringent on-site pollution control measures will be applied to prevent soil and water con-
tamination from oil and fuel. Any spills will be contained and cleaned up. All vehicles will
carry absorbing pads.
 Refuelling should be performed in proper areas with maximum attention in order to avoid
spills. All the wrapping material for crude oils and its derivatives should be collected and
disposed of on licensed disposal sites. In case of accidents, i.e. oil and lubricant spills in
the environment, adequate emergency response actions (i.e. spill confine-
ment/containment) should be carried out;

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 Cleaning of the machines and vehicles is not allowed on the construction site;

 Before the execution of the earthworks, humus and fertile layers of the soil should be re-
moved and stored with adequate protection from the contamination for subsequent reuse.
After the construction works have been completed, the soil should be replaced and pre-
construction conditions reinstated;
 Any surplus excavated material will be disposed of by a licensed contractor.

 During construction works in areas containing other utility networks (electricity, telephone
lines, etc.), representatives of those utility providers should be present on site with under-
ground installation cadastres in order to minimise risks of their damage or destruction due
to excavation. In case of their damage, the contractor is obliged to undertake repairs.
 Dust suppression techniques (i.e. the application of water, spraying the site with water
mist) need to be performed when working in areas with dry soils or where activities gen-
erate airborne dust;
 Emissions from diesel engines will be kept to a minimum by ensuring regular mainte-
nance and use of high quality fuels as well as shutting equipment down when not in use;
 A strict duty of care will be enforced on project managers and contractors. Secure waste
storage sites will be established in defined areas away from watercourses and drains.
Uncontrolled burning and burial of waste will be prohibited. All waste material will be
transported and disposed of off-site by a licensed waste contractor. Hazardous wastes
(grease, oil contaminated material, solvents) will be collected in closed tanks and dis-
posed of by licensed contractors;

11.6.6 Mitigation measures during the operational phase of the project


Most mitigation measures which should be implemented during the operational phase are re-
lated to the proper functioning of the WWTP. These include monitoring and control of WWTP
processes. Certain mitigation measures are related to the sewage collection system and its
correct operation.
Mitigation measures to be undertaken in relation to the sewage collection system:
 On-going inspection and maintenance of the sewage system should be performed to
monitor leaks, pipe corrosion etc.;
 All sewers, collection channels and manholes should be kept watertight;

 Strict control of new sewage connections to ensure that no mixing of rain and
wastewaters occur.
WWTP related mitigation measures to be undertaken are as follows:
 Detailed mitigation measures for WWTP will be outlined in the Application for Environ-
mental Permit that needs to be developed in the process of environmental permitting;
 Occurrence of leaks will be minimized by ensuring a good standard of quality during pro-
ject design, preparation and construction
 Good project design need to ensure that facilities which are the main sources of
odour/gas emissions are placed in closed units or buildings; gas and odour control devic-
es need to be installed incl. a natural tree barrier towards the road and inhabited areas

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 Noise control equipment need to be used (i.e. mufflers, enclosures etc.)

 The recipient should be regularly monitored to ensure that water quality standards pre-
scribed by the Decree on Conditions for Discharge of Wastewater into Natural Recipients
and Public Sewer Systems (Official Gazette of FB&H ", no. 6/12)(based on the Law on
Waters – Official Gazette of FB&H, no. 70/06) are met;
 Good housekeeping procedures need to be adopted and implemented;

 Regular screening of incoming wastewater should be conducted in order to prevent


WWTP malfunction;
 Backwash wastewater should be recycled into the system and treated to prevent uncon-
trolled discharge into the recipient;
 All working zones and roads on the WWTP site should be regularly washed and cleaned,
and that water should be treated before discharge;
 Wastes arising from operation of the WWTP will be managed in line with Waste Man-
agement Plan that needs to be developed – wastes from screens should be collected in
closed tanks; sand and grease should be washed, collected and disposed of by licensed
contractor;
 Personnel of the WWTP should have periodical medical checks to ensure no negative
impacts arise from their employment at the WWTP;
 Materials management procedure should be established to minimise uncontrolled release
or spills of chemicals, fuel, flushing agents, etc.
 The sludge management needs to be in line with Sludge Management Plan that needs to
be developed during environmental permitting procedure. If constructed wetlands are
chosen as the final solution for sludge dewatering, then control systems which will moni-
tor sludge flow and dry matter content before it is directed into basins should be in place.
After the operation phase of the wetlands of minimum 8 years, sludge residue should be
tested prior to emptying the basins and must satisfy requirements for sludge which can be
used in agriculture in line with Regulation on Animal Waste and Other Non-hazardous
Materials of Natural Origin Which Can Be Used for Agricultural Purposes (Official Gazette
of FBiH, no. 8/08). These requirements must be incorporated in the Sludge Management
Plan.

11.7 MONITORING and reporting

11.7.1 Framework Monitoring Plan


The Client will establish and implement monitoring procedures to assess the project compli-
ance with environmental and social requirements. Framework Monitoring Plan is given be-
low. The Plan can be modified in line with provisions set in the Application for Environmental
Permit for WWTP that needs to be developed during the environmental permitting process.

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Table 12.18: Framework Monitoring Plan

Potential Envi-
Location of Time of monitoring /
Phase ronmental Im- Parameter to be monitored Method of monitoring
monitoring Responsibility
pacts

Once a month in the


dry season during
Measurement devic-
 Level of dust (amounts of construction, and
es
sediment particles and after complaints or
Degradation in air airborne particles) Working Visual inspection, due to replacement
Construction
quality area check vehicle and of construction
 Exhaust emissions from
equipment service equipment/
vehicles and equipment
history
Construction contrac-
tor
Noise limits defined by
national legislation and EU
legislation: Measurement devic- Every two months, or
es upon complaints from
Elevated noise  45 dB (A) and 55 dB by WWC Work-
Construction day and night ing corridor citizens /
levels
Construction contrac-
WWTP tor
 45 dB (A) and 55 dB by Measurement devic-
Working
day and night es
area
Regularly during
construction, as
appropriate.
Soil and water
Visual inspection, Amount and disposal
pollution from Waste generation and Working
Construction disposal records or records internal
construction management area
receipts from landfills reports will be made
waste
daily and monthly. /
Construction contrac-
tor

Collectors, During construction,


Soil and ground- as appropriate /
pipes and Test certificate;
Construction water pollution Water tightness
WWTP visual inspections Construction contrac-
from effluent leaks
facilities tor
Regularly during
Visual inspection, construction, daily or
Traffic disruptions and On site, upon complaints weekly as appropri-
Construction Traffic safety ate /
congestion around site from neighbours and
traffic participants Construction contrac-
tor
Daily during con-
On site, struction /
Construction Community safety Site admittance control Visual inspection
around site Construction contrac-
tor
Regularly during
Leaks/spills of construction, daily or
fuel, lubricants, weekly as appropri-
Leaks and spills of hazard- On site, ate /
Construction paints, solvents Visual inspection
ous substances around site
etc. to the envi- Construction contrac-
ronment tor

According to the
Operation sewage network
maintenance plan /
(for WWC, Corrosion resistance
Pollution of Company (Operator);
sewage Water tightness Pipelines and water tightness
groundwater
network and control For WWTP – WWTP
WWTP) maintenance crew

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Potential Envi-
Location of Time of monitoring /
Phase ronmental Im- Parameter to be monitored Method of monitoring
monitoring Responsibility
pacts

Operation According to the


(for WWC, Health Hazard Manhole Record bait con- sewage network
sewage Bait consumption maintenance plan /
from Rodents inspections sumption
network and Company (Operator)
WWTP)
Wastewater
Plant inlet:
 Total suspended sub-
stance (mg/l)
Plant outlet:
 pH, conductivity
 Total suspended solids Once a month in the
first year, following
 BOD5 (mg O2/l
commissioning. If the
 COD (mg O2/l) test results are satis-
 Total phosphorus con- factory (i.e. comply
Surface water centration (mg P/l) with relevant regula-
Operation Plant inlet
pollution from Laboratory testing tions on limit values
(WWTP)  Total oil and grease and outlet
effluent discharge for hazardous and
concentration (mg/l)
other substances in
 Mineral oil concentration wastewaters), testing
(mg/l) can be reduced to 4
 Anionic detergent times a year /
 Total phenols Company (Operator)
Limit values are set in the
Decree on Conditions for
Discharge of Wastewater
into Natural Recipients and
Public Sewer Systems
(Official Gazette of FBiH ",
No. 6/12)
Sludge
 Daily quantity of treated
sludge (m3/d)
 Daily sludge dry sub-
stance content (l/d)
 Total cadmium concen-
tration (mg Cd/kg D.S.)
 Total copper concentra-
tion (mg Cu/kg D.S.)
 Total nickel concentration Stabilized
(mg Ni/kg D.S.) and de-
watered
Environmental  Total lead concentration
sludge In line with provisions
contamination (mg Pb/kg D.S.)
Operation (Details will of Sludge Manage-
from hazardous  Total zinc concentration Laboratory testing ment Plan /
(WWTP) substances in be devel-
(mg Zn/kg D.S.)
sludge oped in Company (Operator)
 Total mercury concentra- Sludge
tion (mg Hg/kg D.S.) Management
 Total chrome concentra- Plan)
tion (mg Cr/kg D.S.)
Monitoring of sludge flow
and dry matter content
before application on reed
beds, ongoing computation
of loading rate.
After 8-10 years of sludge
stabilization in basins,
testing is required. Parame-
ters to be tested and their

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Potential Envi-
Location of Time of monitoring /
Phase ronmental Im- Parameter to be monitored Method of monitoring
monitoring Responsibility
pacts
limit values are set in the
Regulation on animal waste
and other non-hazardous
materials of natural origin
which can be used for
agricultural purposes (Offi-
cial Gazette of FBiH, no.
8/08)
 Wind direction and speed
(m/s)
 Air temperature (°C)
 Air humidity (%) Twice a year (con-
ducted during a 10
Operation Air pollution from  Precipitation (mm/min) Plant
Air quality meters day period, in cold
(WWTP) plant facilities  Ammonia (μg NH/m3) boundary and warm periods) /
 Hydrogen-sulphide (μg Company (Operator)
H2S/m3)
 Mercaptans (μg
C2H5SH/m3)
Noise level Twice a year (con-
Operation Noise emissions ducted during a 5 day
< 70 dB (A) day and night Plant Measurement devic-
from WWTP period) /
(WWTP) (the permissible level for boundary es
operation
industrial land use) Company (Operator)
Regularly during
Soil and water Visual inspection, operation /
Operation Waste generation and On site,
pollution from disposal records or Company (Operator),
(WWTP) management around site
operation waste receipts from landfills WWTP maintenance
crew
Regularly during
Leaks/spills of operation , daily or
fuel, lubricants, weekly as appropri-
Operation Leaks and spills of hazard- On site, Visual inspection;
paints, solvents ate /
(WWTP) ous substances around site accident reports
etc. to the envi- Company (Operator),
ronment WWTP maintenance
crew

Compliance with legal Daily /


Operation Workers health regulations and internal Visual inspection, Company (Operator),
On site
(WWTP) and safety procedures for safe material regular reports WWTP maintenance
handling crew

If the WWTP is to be decommissioned, monitoring of traffic safety, air quality, noise levels,
soil and water pollution form decommissioning waste, leaks and spills of lubricants, paints,
solvents etc. as well as landscape degradation, needs to be conducted regularly during de-
commissioning activities.

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11.7.2 Reporting
Monthly progress reports should be prepared by the Contract Supervisor and sent to Munici-
pality/Company HSE management for approval. ESAP and PR compliance implementation
issues should be explicitly included in the monthly Progress Reports. In addition, the respon-
sible HSE person should prepare periodic HSE progress reports and a summary should be
made publicly available according to PR10 and the SEP.
Prior to the commencement of the Project and during the construction works, the Contractors
will submit monthly information regarding the progress of works, which will be disclosed on
the Municipality website as well as at the LCOs.
The work schedule and its potential amendments will be submitted to the Local Community
Offices approximately two weeks prior to the commencement of the construction activities.
The schedule will provide information on the timing of commencement and finalization of the
works which may impact the affected groups (such as temporary access limitations, noise
and dust emissions).
The opportunity to raise grievances shall be provided to the public; contact details for dis-
closing information or allowing expressing concerns will be presented. The notification will be
disclosed on the Company website, on the bulletin boards, and at LCOs. Details on griev-
ance procedure are reported in the Stakeholders Engagement Plan developed as part of this
assignment.
In summary, the Contractor will:
 contact directly all parties in order to provide information on the construction works at
least two weeks prior to commencement of works, disclosing the schedule of works;
 monthly update the information on the progress of works (to be delivered to the Company
for online disclosure, and affected people); and
 dis-close information on any delays to affected persons.

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12. ENVIRONMENTAL AND SOCIAL PLANS

The detailed ESAP is comprised in Annex 2

12.1 The Purpose of the ESAP


Taking into account the findings of the environmental and social appraisal and the result of
consultations, the Environmental and Social Plan (ESAP) has been developed for the Pro-
ject. The ESAP contains mitigation and performance improvement measures and actions
that address the identified social and environmental issues/gaps. The mitigation measures
are actions designed to ensure that the Project will operate in compliance with relevant local
laws and regulations, as well as EBRD’s Environmental and Social Policy (2008) in all rele-
vant stages of the Project. The ESAP focuses on avoidance of identified environmental and
social impacts where possible, or on the mitigation measures to minimize or reduce possible
impact to acceptable levels.

12.2 Responsibilty for Implementation


The Client (Public Utility Company “Vodovod” d.o.o. Cazin) is responsible to implement
ESAP in accordance with the proposed measures and defined time schedule.
Specific personnel (including a direct responsible) in charge of HSE management and ESAP
implementation should be designated within the Company, and a HSE Plan should be de-
veloped, defining systems and procedures which will apply to the Project as well as to the
Company general activities.
The Client will ensure that employees with direct responsibility for activities relevant to the
Project’s or the Company’s social and environmental performance are adequately qualified
and trained so that they have the knowledge and skills necessary to perform their work.

12.3 Monitoring and Reporting Requirements


The Client will establish procedures to monitor and measure compliance with the environ-
mental and social provisions of the legal agreements including effective implementation of
the ESAP and improvements achieved over time against the baseline established during ap-
praisal. The procedure should be developed before the Project implementation.
Monthly progress reports should be prepared by the Contract Supervisor and sent to Munici-
pality/Company HSE management for approval. ESAP and PR compliance implementation
issues should be explicitly included in the monthly Progress Reports. In addition, the respon-
sible HSE person should prepare periodic HSE progress reports and a summary should be
made publicly available according to PR10 and the SEP.
As part of their regular reporting to the Bank, the Client will provide the EBRD with updates
on its progress in implementing the ESAP.

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12.4 Stakeholder Engagement Plan

12.4.1 Laws and Regulations


FBiH legislation
The Public Utility Company “Vodovod” d.o.o.Cazin establishes communication methods with
interested parties and stakeholders pursuant to the Law on Free Access to Information in the
Federation of Bosnia and Herzegovina ("Official Gazette of FBiH", number 32/01, hereinafter
referred to as LFAI).
The Company provides access to information to all stakeholders, as well as every natural
person or legal entity. In the framework of its capabilities, it is also undertakes all necessary
measures of providing assistance to natural persons or legal entities seeking to exercise
their rights. Exceptionally, access to information may be limited under certain circumstances,
by establishing an exception in each separate case, solely in the manner, situation and un-
der the conditions defined by the LFAI (such as the protection of the decision making pro-
cess of public authorities or the protection of privacy of a third person, etc).
In addition, the current environmental legislation of the Federation of Bosnia and Herze-
govina, particularly the Law on Environmental Protection ("Official Gazette of FBiH“, number
33/03 and 38/09) stipulates that every person and every organization must have adequate
access to information regarding the environment at the disposal of public authorities, includ-
ing information on hazardous materials and activities in their communities, and be enabled to
participate in the decision making process. Please see Annex E for Access to Information
Form.

EBRD policies
The provisions of EBRD Environmental and Social Policy (2008) and Public Information Poli-
cy (2008) for public consultations and access to information are fully taken into account to
prepare the Stakeholder Engagement Plan for the Project.
The EBRD Environmental and Social Policy cover the environmental and social dimensions
of sustainable development. EBRD considers stakeholder engagement as an essential part
of good business practices and corporate citizenship, and a way of improving the quality of
projects. In particular, effective community engagement is central to the successful man-
agement of risks and impacts on communities affected by projects, as well as central to
achieving enhanced community benefits.
According to the Policy, stakeholder engagement is an ongoing process involving:
(i) The client’s public disclosure of appropriate information so as to enable meaningful
consultation with stakeholders,
(ii) Meaningful consultation with potentially affected parties, and
(iii) A procedure or policy by which people can make comments or complaints. This pro-
cess should begin at the earliest stage of project planning and continue throughout
the life of the project.
The client’s public disclosure of appropriate information so as to enable meaningful consulta-
tion with stakeholders, meaningful consultation with potentially affected parties, and proce-
dure or policy by which people can make comments or complaints. This process should
begin at the earliest stage of project planning and continue throughout the life of the project.

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EBRD expects clients to identify and interact with their stakeholders on an ongoing basis,
and to engage with potentially affected communities through disclosure of information, con-
sultation, and informed participation.
The EBRD Public Information Policy sets out how the EBRD discloses information and con-
sults with its stakeholders so as to promote better awareness and understanding of its strat-
egies, policies and operations. The project documentation will be enclosed for public on the
EBRD website in accordance with this policy.

12.4.2 Summary of previous Stakeholder Engagement Activities


Although no public hearing on the topic of the Project was held, individual consultations were
held in the municipality. The information about the Project, were made available by the Mu-
nicipality at the website (www.opcinacazin.ba).
The Municipality has provided the possibility of scheduling meetings with the local communi-
ties and individuals prior to start of the operational works in order to consult and inform them
about the scope of works envisaged to take place at their communities and individual proper-
ties.
The project-affected people, in general, are expected to have positive attitude towards the
project given their need for better sewer system and therefore they considered it of high
common interest.Pre assessment was done for the project and it showed positive and nega-
tive impacts.
Some of the positive impacts are listed below:
 Protection of ground water and sanitary protection of drinking water sources;
 Quality and proper waste disposal from facilities;
 Improvement of general health and epidemiological situation in the municipality of
Cazin;
 Aesthetics and ambient improvement of the entire area, especially along water-
courses;
 Regulation of watercourses raises the use value of the area that is subject to flood-
ing under natural conditions;
 Creation of better environment for economic growth;
 Increasing the standard of life in the municipality of Cazin.
Potential negative impacts are:
 Sludge production;
 Unpleasant odour from the treatment plant;
 Noise;
 Increased traffic intensity during waste transport from the plant;
 Permanent loss of agricultural land at the location of the plant.

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12.4.3 Project Stakeholders and Tools for Communication


Identified stakeholders
Project stakeholders have been identified in order to address the consultation requirements.
These stakeholders need to be informed about the Project activities and consulted through-
out the entire project cycle.
They include persons or groups that are:

 Directly and/or indirectly affected by the Project;


 Have certain interests in the project and its activities;
 Have the ability to affect the Project itself and its final outcome.

Particular attention shall be paid to PAPs and vulnerable groups, especially to those who are
directly affected by Project activities. PAPs and vulnerable groups include individuals or
groups greatly affected by the Project and who have very little ability to influence the Project
while having in mind that vulnerable groups need to be informed and consulted in a specific
way, suited to their needs and vulnerability status.
Common practice of the Company in terms of informing the public of work to be performed in
their communities and individual properties is via the Company’s website
(www.vodovodcazin.com), local radio station RTV Cazin, numerous portals (www.cazin.net,
www.krajina.ba, and www.kip.ba, www.usk.ba), etc.

Please see Table 4.1. for identified stakeholders and proposed communication methods.

Table 13.1: Stakeholders and Proposed Communication Tools

Detailed Descrip-
Identified
tion of Identified Popula- Proposed Communication tools
No. Stakeholder Contact Relevant Issues
Stakeholder tion
Group
Groups
Municipality of
Cazin
Trg Prvog  Disclosure through the
predsjednika Municipality website
Predsjedništva 
(www.opcinacazin.ba)
Bosne i Hercego-  Delivering information by
Persons and vine, Alije Izetbe- Providing infor- 
post
Project Affect- households, busi- govića br.1 mation on construc-  Delivering relevant doc-
1. ed Persons nesses along the 77 220 Cazin tion and expropria- umentation to local
(PAPs) route of the new USK tion activities: communities on whose
pipeline Bosna i Hercego- territory expropriation is
vina carried out
E-mail:  Public meetings
info-  Individual meetings on a
desk@opcinacazin.ba need basis
Tel: +387 (0)37 515 300
Fax: +387 (0)37 514 314

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Detailed Descrip-
Identified
tion of Identified Popula- Proposed Communication tools
No. Stakeholder Contact Relevant Issues
Stakeholder tion
Group
Groups
 Disclosure through the
Municipality website
Population affected
(www.opcinacazin.ba)
by construction and
 Disclosure through local
by access re-
Local residents web portals
strictions, including Providing infor-
and businesses (www.cazin.net,
the people living mation to the public
in the project ca. 16 500 www.krajina.ba,
alongside the on construction
2. area
transportation
house-
activities:
www.kip.ba,
Users of new holds www.usk.ba)
routes; Population
water supply  Local media: RTV Cazin
who will benefit
 Posters in the LCOs
though the water
 Public meetings
supply.
 Individual meetings ona
need basis

 Disclosure through the


Municipality website
(www.opcinacazin.ba)
 Delivering information by
Elderly and ill per-
post
sons;
Persons with spe-
 Delivering relevant doc-
cial needs; House-
Providing infor- umentation to local
holds with very low
Affected vul- mation on expropria- community offices
3. nerable groups
or no income; Unknown
tion or construction
Single parent-
activities:  Proactively providing in-
headed house-
formation and assistance
holds; 

in understanding the de-
Ethnic minorities

livered information and
Refugees.
submitted documenta-
tion
 Individual meetings as
needed
Consultations with
Government relevant government  Contacts through internal
departments Municipality Cazin departments con- communication channels
4. involved in the Emergency re- N/A Annex F cerning Project activ- on the need basis
Project/Public sponse agencies ities:  Meetings on an as need-
institutions ed basis

Cazin,Čizmići
Ćoralići, D. Koprivna
Gnjilavac Providing infor-
Ljubijankići
mation on planned
Local Commu- Miostrah
Mutnik
construction works,  Contacts through internal
nities in the
Slatina consultations regard- communication channels
Project loca-
5. tion Stijena ing the prepared during project prepara-
N/A plans and documen-
Šturlić tion and implementation
Ostrožac tation, grievance  Public meetings
Polje management:
Pjanići
Pećigrad
Vrelo
Prošići
G. Koprivna

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Detailed Descrip-
Identified
tion of Identified Popula- Proposed Communication tools
No. Stakeholder Contact Relevant Issues
Stakeholder tion
Group
Groups
Liskovac
Krivaja
Majetići
Skokovi
Trž. Raštela

 Disclosure through the


Municipality website
(www.opcinacazin.ba)
Interested Providing infor-  Disclosure through local
NGOs on na- mation, communica- web portals
tional and local tion and consulta- (www.cazin.net,
6. level Annex A Annex A tion, grievance man- www.krajina.ba,
agement: www.kip.ba,
www.usk.ba)
 Local media: RTV Cazin
 Posters at the LCOs
 Public meetings
Company employ-
ees Grievance procedure,  Company workers: Inter-
Municipality Ca- code of conduct and nal bulletin board in the
zinemployees work safety and 
Company building,
Construction work- health regulations, grievance procedure for
Employees and
7. workers
ers 
and temporary N/A environmental pro- the employees
workers, Contrac- tection requirements  Contractors: Information
tors, Companies on contracts, bulletin
contracted to mon- board, training
itor and supervise
the works

12.4.4 Information Disclosure and Communications Programme


In order to adequately respond to the needs of different groups, communication and infor-
mation channels have been designed for all identified stakeholders in accordance with their
needs.
In addition to the existing information available on the official website, the Company intends
to disclose the following documentation regarding the Project:
 Project information sheet;
 Project description;
 Environmental and Social Review Summary;
 Summary of the Environmental and Social Action Plan (ESAP);
 Summary of the Project Implementation Monitoring Report;
 Stakeholder Engagement Plan (SEP);
 Summary of conclusions from the consultative meetings and public discussions held;
 Grievance form.
The foregoing documents will be disclosed and remain available. The Company, with
support of the Municipality, will carry out public consultations that will reflect upon the issues
of relevance to the Project. All interested stakeholders will be timely informed about the
exact time and place of venue by using the foreseen means of communications specified in
the SEP.

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The Company will also provide printed copies of the above-mentioned documents that will be
available in its office, the Municipality building (at the Information Centre), and the Local
Community Offices (LCO) – Please see Annex B for the list of affected communities. All
PAPs will be informed on the availability of these documents at the offices through local
radio and newspapers and project information sheets delivered and posted at the LCOs.
Access to information for identified vulnerable groups will be facilitated by the Company with
the support of Municipality as appropriate for each person/family according to their specific
needs and/or situation. Please see Table 4.1 for proposed communication tools with each
stakeholder group.
Information provided by the contractors
During the construction works, the contractors will submit monthly information regarding the
progress of works, which will be disclosed on the website of the Company and Muncipality.
The schedule of works and potential amendments to the schedule of works will be submitted
approximately two (2) weeks prior to the commencement of the construction works to the
LCOs as well as local radios for broadcasting. The schedules will provide information on the
schedule of commencement and finalization of the works which may impact the affected
groups (such as changes in road access, noise).
At the same time, the opportunity to raise grievances will be provided (grievance mechanism
in Chapter 7), and the contact information for disclosing information or allowing expressing
concern will be presented. The notification will be disclosed on the website, bulletin boards,
and LCOs.
In summary, the contractors will:
 Contact directly all parties in order to provide information on the construction works
at least two weeks prior to commencement of works, disclosing the schedule of
works;
 Monthly update the information on the progress of works (to be delivered to the
Company for online disclosure, and affected peoples via mail or personal contact);
 Disclose information on any delays to affected persons.

Formal request for information


In case the Company receives a formal request for access to information not related to in-
formation determined by the SEP, the Company will apply the provisions and procedures set
out by the LFAI and are explained below:
The formal request is submitted in written form in one of the official languages in the Federa-
2
tion of BiH . The request for access to information may be submitted personally to the proto-
col of the Company (with the receipt seal, date and signature), by registered mail, fax, or by
electronic mail.
In case the Company does not have the information requested, and in case it does not have
access to the information requested, it is obliged, within eight (8) days of receipt, to forward

2
The Company is entitled to receive and respond to formal enquiries in English language, and to submit information
and documents in English language.

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the request to the competent institution or legal entity. The Company is obliged to notify the
requester about the undertaken measure by issuing a Conclusion. Within fifteen (15) days
upon receiving the request, the Company is obliged to notify the requester whether he/she
3
has been granted access to the requested information .
In case the Company grants access to requested information completely or partially, it is
obliged to notify the requester by issuing a Decision. The Decision determines the possibility
of personal access and examination of information in the offices of the Company at a time
suitable for the requester and the Company personnel, or the possibility of delivering the in-
formation in written form to the requester if the document containing the information does not
exceed ten pages.
The official form for requesting access to information can be found in Annex E.

12.4.5 Schedule of Activities


Timetable
The first Project public meeting will take place prior to start of the project, while the exact
date and place of venue will be announced to the public at least two weeks in advance. All
information on the Project will be disclosed to the public prior to the first public meeting.
Prior to the commencement of the Project, stakeholders will be informed about the Project’s
scope and contact information which they can address for further information. They will be
informed about the availability of the publicly available information on the Municipality web-
site as well as at the LCOs. This way of informing will be carried out by using the Project In-
formation Sheet delivered to the local communities and placed on the bulletin boards of the
LCOs. Neighborhood meetings will take place on the need basis after the project effective-
ness until the completion of the Project.

Table 12.2: Timetable of main Consultation/Information Activities


Activity Expected Dates Responsibility
Company with support of Munic-
First Project public meeting Prior to the start of the project
ipality
Project information/documents
made available to the public at:
municipality website, Company’s Company with support of Munic-
Prior to the first meeting
office (hard copies), Municipality ipality
Information Center, and Local
Community Offices.
Placement of the project infor-
mation sheet on Municipality Company with support of Munic-
Prior to the start of the Project
website and LCOs bulletin ipality
boards

3
In case of exceptions and the need to examine the confidential commercial information or information of public in-
terest, the deadline may be prolonged, according to the LFAI. The requester must be notified of all actions and rea-
sons for prolonging the deadline.

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Activity Expected Dates Responsibility


Advance notification of the start
2 weeks Company and Contractors
of works
Regular neighborhood meetings On a need basis Company and Contractors
Contractors - Monthly progress During construction phase of the
Company and Contractors
reports project

12.4.6 Implementation Responsibilities


Company and Municipality are responsible for the implementation of the SEP during the
entire project cycle, including the grievance mechanism.
The Municipality will appoint a qualified person from the Social Protection Agency in Cazin to
act on behalf of the Company during the implementation of the information programme
intended for the identified vulnerable groups.
All contractors in charge of carrying out specific Project activities are obliged to implement
the SEP. The provisions of SEP implementation, including the grievance mechanism,
entrusted to contractors will be laid out in the tender documentation and contracts signed
with the contractor.
The Contractors must follow this grievance mechanism during the construction phase to
address grievances. Company and Municipality will be included in monitoring of Contractor’s
application of grievance mechanisms and involved in addressing the concerns.

12.4.7 Public Grievance Mechanism


Comments or concerns can be brought to the attention of the Company and Municipality
verbally or in writing (by post or e-mail) or by filling in a grievance form (see example in
Annex D of this document). The concerned person shall indicate in its communication if
he/she wishes his/her name to be kept confidential.
All grievances (written or verbal) will be put in a register and assigned a number, and
acknowledged within 7 days.
The Company shall assign the person from the Company's Sector for legal and general af-
fairsthat will be in charge of addressing public grievances. Revised receivedcomments and
concerneswill be forwarded to the Company Director who will propose measures for further
actions.The Municipality shall also define the person from the department in charge for
administeringcomplaints to address public grievances.
The Company and Municipality will make all reasonable efforts to address complaints upon
the acknowledgement of a grievance. If they are not able to address the issues raised by
immediate corrective action, a long-term corrective action will be identified. The complainant
will be informed of the proposed corrective action and of its follow-up within 25 days from the
acknowledgement of the grievance.
If the Company and Municipality were not able to address the particular issue raised through
the grievance mechanism or if an action was not required, they will provide a detailed
explanation/justification on why the issue was not addressed. The response will also contain
an explanation of how the person/organization that raised the complaint can proceed with
the grievance in case the outcome is not satisfactory. A separate grievance mechanism is
available for workers.

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All Contractors must follow this grievance mechanism, especially during the construction
phase to address grievances. The Company and Municipality monitor the Contractor’s
application of grievance mechanism and be involved in addressing the concerns through the
above-described process.
At all times, complainants are also able to seek legal remedies in accordance with the laws
and regulations of the FBiH.

12.4.8 Monitoring and Reporting


The results of the stakeholder engagement process will be included in the Project Monitoring
Reports, including:
 place and time of any public consultation meetings that have carried out (including
other types of engagement activities);
 issues and concerns raised during the consultative meetings;
 list of number and types of grievances raised in the reporting period and the number
of resolved and/or outstanding grievances; and
 information on how the issues raised during the meetings and through grievances
were taken into consideration by the organization in charge of the Project
implementation.
The Reports will also include a summary of implemented corrective measures meant to
address the grievances.
The Monitoring reports shall be prepared monthly during the construction phase and will be
made public on the Municipality website.

12.4.9 Various Information and Data


CONTACT INFORMATION
For grievances:
Semira Mujakić, Head of Commercial Service
Public Utility Company “Vodovod” d.o.o. Cazin (JKP “Vodovod” d.o.o. Cazin)
Izeta Nanića bb
77220 Cazin
BiH
E-mail: www.vodovodcazin.com
Tel: +387(0) 37 511-962
Fax: +387(0) 37 514-500

For general information on the Project and grievances related to land acquisition:
Municipality of Cazin
Trg Prvog predsjednika Predsjedništva Bosne i Hercegovine, Alije Izetbegovića br.1
77 220 Cazin
USK
Bosna i Hercegovina
E-mail: infodesk@opcinacazin.ba
Tel: +387 (0)37 515 300
Fax: +387 (0)37 514 314

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LIST OF LOCAL ASSOCIATIONS


No. Association Contact Person Phone Address Field of activity
Udruženjesportskihribolovaca
1. AšićMuhamed - NijazaBegićab.b. Sports
“Mutnica”
UdruženjeEkozeleni “Horlja- +387
2. SadikovićEldin TrgbranilacaBiH Ecology
va” (0)62396 371
+387 (0)37
3. CrvenikrižopćineCazin SamardžićRemzo Cazinskih brigade 12 Medical care
514 454
Udruženjemladih “CAZIN +387 (0)61
4. SivićEmina 1. mart 3 Youth activities
NET” 694 703
+387 (0)37
5. Lovačkodruštvo “Jelen” PjanićEsad Bošnjačkihšehidab.b. Sports
511 339
Udruženjemladih “Stari grad Muranović +387 (0)61
6. Ostrožacb.b. Youth activities
Ostrožac” Sabina 242 793

LIST OF AFFECTED LOCAL COMMUNITIES


Local Community Local Community President Phone Address
Cazin LjubijankićHamdija +387 (0)61 195 252 Cazinb.b.
Čizmići MujadžićSalih +387 (0)61 796 659 Čizmićib.b.
Ćoralići Hušić Samir +387 (0)61 767 419 Ćoralićib.b.
D. Koprivna OmerčevićVehabija +387 (0)61 144 223 D. Koprivnab.b.
Gnjilavac DurićIrfan +387 (0)61 165 610 Gnjilavacb.b.
Ljubijankići LjubijnkićIsmet +387 (0)61 144 231 Ljubijankićib.b.
Miostrah HandagićMujo +387 (0)61 359 612 Miostrahb.b.
Mutnik HarbašŠaćir +387 (0)61 861 103 Mutnikb.b.
Slatina Abdagić Samir +387 (0)61 849 600 Slatinab.b.
Stijena KaljikovićMirsad +387 (0)61 764 524 Stijenab.b.
Šturlić BećirevićRamiz +387 (0)61 461 193 Šturlićb.b.
Ostrožac BeširevićDževad +387 (0)61 412 851 Ostrožacb.b.
Polje RužnićSabid +387 (0)61 736 943 Poljeb.b.
Pjanići PjanićAsim +387 (0)61 580 773 Pjanićib.b.
Pećigrad MuhamedagićHasan +387 (0)61 167 631 Pećigradb.b.
Vrelo LiđanFadil +387 (0)61 457 523 Vrelob.b.
Prošići ProšićAlmir Prošićib.b.
G. Koprivna DurakovićMunir +387 (0)61 783 185 G. Koprivnab.b.
Liskovac MiskićAlaga +387 (0)61 706 679 Liskovacb.b.
Krivaja LulićFerid +387 (0)61 155 571 Krivajab.b.
Majetići ĆehajićHalil +387 (0)62 350 225 Majetićib.b.
Skokovi GabeljićElvir +387 (0)61 459 468 Skokovib.b.
Trž. Raštela NuhanovićMemaga +387 (0)61 608 757 Trž. Raštelab.b.

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FLOWCHART FOR PROCESSING GRIEVANCES

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PUBLIC GRIEVANCE FORM

Reference Number:
Full name

Contact information
 By Post: Please provide mailing address:
______________________________________________________________________________
Please mark how you wish to be
______________________________________________________________________________
contacted (mail, telephone, e-
_______________
mail).

 By Telephone: _______________________________________________

 By E-mail
Perefered language for
communication
 Bosnian / Serbian / Croatian
 English (if possible)

Description of Incident for Grievance What happened? Where did it happen? Who did it happen to? What is the
result of the problem?

Date of Incident / Grievance

 One-time incident/grievance (date ________________)


 Happened more than once (how many times? _____)
 On-going (currently experiencing problem)

What would you like to see happen?

Signature: _______________________________
Date: _______________________________
Please return this form to:

Public Utility Company “Vodovod” d.o.o. Cazin (JKP “Vodovod Cazin”)


Address: Izeta Nanića bb , 77220 Cazin, BiH
Telephone: +387(0) 37 511-962
Fax: +387(0) 37 514-500
E-mail: www.vodovodcazin.com

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ACCESS TO INFORMATION FORM

ACCESS TO INFORMATION REQUEST

_____________________________________________
Name and last name of requester
_____________________________________________
Address
_____________________________________________
Telephone/telefax/e-mail

Date ____________________

Public Utility Company “Vodovod” d.o.o. Cazin (JKP “Vodovod Cazin”)

Address: Izeta Nanića bb, 77220 Cazin, BiH


Telephone: +387(0) 37 511-962
Fax: +387(0) 37 514-500
E-mail: www.vodovodcazin.com

SUBJECT: ACCESS TO INFORMATION REQUEST


On the basis of the Law on Free Access to Information in FBiH, I request access to the following information:

____________________________________________________________________________________________________________________________
____
____________________________________________________________________________________________________________________________
____
____________________________________________________________________________________________________________________________
____
____________________________________________________________________________________________________________________________
____
____________________________________________________________________________________________________________________________
____
(Indicate precisely which information you are requesting and describe as precisely as possible).

Indicate in which manner would you like to access the information:


a. direct inspection,
b. duplication of the information,
c. delivery of information to the home address,
d. delivery of information electronically – by e-mail (if possible).

Requester
________________

Note: The first ten pages of duplication of material of standard format is free of charge, and all other requested information with a larger
number of pages shall be paid by the requester in advance.

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CONTACT INFORMATION OF GOVERNMENT DEPARTMENTS INVOLVED IN THE PRO-


JECT/PUBLIC INSTITUTIONS

Public institution Contact information


Alipašina 41 

71 000 Sarajevo
BosnaiHercegovina
Government of the Federation of BiH
Tel: +387 (0)33 212 986 


Fax: +387 (0)33 220 437

E-mail: info@fbihvlada.gov.ba
AlijeĐerzeleza 2
77 000 Bihać
Governement of Una-Sana Canton BosnaiHercegovina
Tel: +387 (0)37 227 784
Fax: +387 (0)37 227 803
TrgPrvogpredsjednikaPredsjedništvaBosneiHercegovine,
AlijeIzetbegovića 1
77 220 Cazin
Municipality Cazin BosnaiHercegovina
E-mail: infodesk@opcinacazin.ba
Tel: +387 (0)37 515 300
Fax: +387 (0)37 514 314
IndireKljanić 28
Health facility Cazin 77 220 Cazin
(Dom zdravlja) BosnaiHercegovina
Tel: +387 (0)37 514 111
505. viteške 38a
77 220 Cazin
Social Protection Agency Cazin
BosnaiHercegovina
(Centarzasocijalni rad)
Tel: +387 (0)37 514 439
+387 (0)37 512 103
Ulicažrtavasrebreničkog genocide
Firefighting Brigade Cazin 77 220 Cazin
(Vatrogasnidom) Bosna I Hercegovina
Tel: +387 (0)37 514 223

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13. FINANCIAL AND OPERATIONAL PERFORMANCE IMPROVE-


MENT PROGRAMME (FOPIP)

13.1 Introduction
The main objective of the FOPIP is to identify measures in priority areas to improve the
quality of water related services, and the financial and operational performance of the Com-
pany. Based on the results of the assessments from the chapters 4 to 6, priority areas were
identified. The Consultant also defined detailed performance indicator targets for the Com-
pany to address, which are used as guiding principles in the Public Service Agreement
(PSA) between the Company and the Municipality of Cazin. The following chapters provide
information about the proposed improvement measures and the related indicators.

13.2 Financial Performance Improvements and Indicators

13.2.1 General
The improvement of the financial performance of the Company means maximizing total rev-
3
enues per m water sold under consideration that the tariff structure is regulated by the local
authorities and minimizing the costs for operation and investments. Performance improve-
ments shall be focused on the following areas:
 Increase collection efficiency


3
Decrease operating costs per unit (KM/m )

 Achieve a sustainable proportion between costs of employees and total operation costs
The Company can achieve these goals if they introduce the practice of systematic monitor-
ing of several financial performance indicators. The analysis of the results should be used for
decision making targeted at applying appropriate measures for maintaining these indicators
at the right level.

13.2.2 Collection Rate


Definition:KM amount collected from consumers for provided services (excluding VAT), di-
vided by the total KM amount invoiced (excluding VAT).
The envisaged performance indicator targets are presented in the table below:
Indicator 2011 Target 2016 Target 2025
(%) (%) (%)
Collection Efficiency 94 96 98

Action Plan / Measures:


 The collection efficiency shall be calculated for the entire service area as well as sepa-
rately for each of the four main systems and the two subsystems. It allows more effective
tackling of the problematic areas
 Introduce penalties for late payment in per cent per day of total bills

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 Other measures include but are not limited to:


- Telephone call to first time defaulter – practice shows that in such cases personal
approach (by phone) could be quite effective
- Propose restructuring of debt or waiving accumulated interest on debt
- Propose writing-off part of a large and old debt if payment of the rest is made now
- Take individual approach to large and special customers
- Involve municipality if debtors are financed by local budget

13.2.3 Operating Costs per Unit


Definition:Operating cost for production of one m3 produced and treated water
Since this indicator is influenced by several internal factors, such as, water resources availa-
bility, type of system used for water supply, level of water treatment, etc. it is not possible to
propose benchmark level for it. It should be rather analysed over time and when increases
occur the Company should determine the factors for the change and undertake corrective
measures.
Action Plan / Measures:
 Implementation of the procedures related to revenue collection according to the LTIP
(WS06)
 Implementation of the energy saving programme according to the LTIP (WS03)
 Preparation of a master plan for the water supply system according to the LTIP (WS02)

 Installation of an automatic control system for the whole water supply system of Cazin to
monitor the operation in a cost effective way according to the LTIP (WS07)
 Application of effective material and resource management
 Selection of a cost-effective method for waste water treatment and sludge disposal

13.2.4 Structure of Operating Costs


Definition:The division of operating expenses by categories compared with total expenses
This indicator could be viewed as complementary to the previous one since it reveals the in-
dividual behaviour of each cost item. Again it is very difficult to prescribe uniform levels for
each cost component since they are company-specific. In general, for all water utilities of
similar size the labour costs and the electricity costs constitute the largest portions of the op-
eration expenses so their development over the years should be closely monitored, analysed
and when necessary, corrective measures should be developed.

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13.2.5 Other Ratios for Financial Statement Analysis


Debt service coverage ratio (DSCR)
Definition: DSCR is a typical liquidity ratio and indicates the capability of a company to meet
its financial obligations, i.e. the repayment of the principal and of the interest on the loans.
This is the first and most important indicator for any financing institution that considers fi-
nancing a project. DSCR is defined in the following way:
Net profit before interest plus depreciation / Total debt service
The required level of this indicator is usually determined by the financing bank. In general a
level of 1.2-1.5 and above is considered acceptable.

Current ratio (working capital ratio)


Definition: This ratio compares current assets to current liabilities.
It indicates the number of times current assets will pay off current liabilities. Usually a ratio of
2:1 is considered to be the ideal minimum but there could be exceptions. Sometimes organi-
sations with the “ideal” current ratio or more may have hidden financial problems. It is calcu-
lated in the following way:
Current assets / Current liabilities

Profit return on sales


Definition: Computed by dividing either net income (after taxes) or income from operations
(operating income) by sales, expressed in per cent.
The level of this ratio varies a lot from company to company but for a typical utility company
a 5-6% rate of return on sales could be appropriate.

Rate of return on assets


Definition: This is the net income (profit) divided by total assets.
It is often computed as net income divided by average assets (assets at year begin plus as-
sets at year end divided by 2) because net income is generated continually during the year.
The return on assets calculates the return on all capital from both creditors and owners un-
like the return on equity, which includes only owners’ capital. A level of 5% and more could
be acceptable for a water utility.

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13.3 Operational Performance Improvements and Indicators

13.3.1 General:
The improvement of the operational performance of the Company means that the most cost-
effective measures are planned and implemented with minimizing the resources and time
needed. Performance improvements shall be focused on the following areas:
 Decrease non-revenue water
 Increase proportion of customers with correct water meters

 Improve number of needed interventions on the water supply and sewerage networks.
(the number is expected to be gradually reduced if works on these networks are imple-
mented in a professional way).

13.3.2 Decrease Non-Revenue Water:


Performance Indicator:
The performance indicator for non-revenue water is defined as follows:
Non-revenue water is the difference between the amount of water produced and water in-
voiced divided by water produced, expressed as a percentage
The envisaged performance indicator targets are presented in the table below:
Indicator 2010 Target 1 (2015) Target 2 (2025)
(%) (%) (%)
Non-revenue water rate for:
- Vignjevici 52.1 50 33
- Mutnik 68.3 50 25
- Tahirovici 44.0 42 35
- Ljubijankici 21.9 21 20
- Stovrela 15.3 15 15
- Pajica Potok 29.6 29 25
- Entire Water Supply System: 51.8 47 30

Remark: The non-water revenue rate has been calculated for the entire service area as well
as separately for each of the four main systems and the two subsystems. It allows more ef-
fective directing of resources to areas with high non-revenue water.
Action Plan / Measures:
 Implementation of the district management programme according to the LTIP over an
unlimited period of time (WS01)
 Implementation of a pipeline replacement and renewal programme according to the LTIP
(WS04)
 Installation of an automatic control system for the whole water supply system of Cazin to
monitor the operation in a cost effective way according to the LTIP (WS07)

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13.3.3 Increase Proportion of Customers with correct Water Meters


Performance Indicator:
The performance indicator for the proportion of customers with correct water metersis de-
fined as follows:
Customers with correct water meters divided by registered customers, expressed in percent-
age
The envisaged performance indicator targets are presented in the table below:
Indicator 2011 Target 1 (2015) Target 2 (2025)
(%) (%) (%)
Percentage of customers with 90 100 100
correct water meters

Action Plan / Measures:


 Implementation of a calibration, repair and replacement programme for domestic water
meters in line with the programme of district management (WS01)
 Verification and replacement of bulk water meters as needed

13.3.4 Improve Number of needed Interventions on the Water Supply and Sewerage
Networks.
Performance Indicator:
The performance indicator for the number of interventionsis defined as follows:
Number of interventions on the water supply and sewerage networks
The envisaged performance indicator targets are presented in the table below:
Indicator 2011 Target 1 (2015) Target 2 (2025)
(No) (No) (No)
Number of Interventions for rec- 1’936* 1’700 1’000
orded Breaks and Leakages

*records only related to the water supply network

Action Plan / Measures:


 Implementation of the Consultant’s sewerage programme according to the PIP and LTIP
with the construction of the following components:
- Cazin City including the Mutnik branch
- Downstream Cazin including side branches
- Independent sewerage systems in four other communities
 Implementation of the district management programme for the water supply network
according to the LTIP over an unlimited period of time (WS01)
 Implementation of a pipeline replacement and renewal programme for the water supply
network according to the LTIP (WS04)

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13.4 Service Level Improvements and Indicators

13.4.1 General
The improvement of the service quality of the Company means on the one hand supplying
drinking water of impeccable quality during 24 hours as well as collection and treatment of
waste water but on the other hand it also means raising the awareness of the Company
about the importance of customer care and performing customer oriented services as part of
their commercial activities. Performance improvements shall be focused on the following ar-
eas:
 Decrease drinking water quality failures
 Ensure a good water supply without interruptions
 Increase coverage with wastewater services
 Increase percentage of positive feedbacks about customer satisfaction

 Improve the quality and accuracy of reporting

13.4.2 Decrease Water Quality Failures


Performance Indicator:
The performance indicator for water quality failures is defined as follows:
Total number of tests of treated water performed that are in non-compliance with standards
divided by total number of tests of treated water performed, expressed in percentage.
The envisaged performance indicator targets are presented in the table below:
Indicator 2011 Target 1 (2015) Target 2 (2025)
(%) (%) (%)
Water Quality Failures:
- Bacteriological quality 39* 10 0
- Chemical quality 7 2 0

* a few samples were related to untreated water

Action Plan / Measures:


 Implementation of water quality measures according to the LTIP (WS05)
 Enforcement of restrictions to activities in water protection zones

 Application of HACCP (Hazard Analysis of Critical Control Points) principles in the drink-
ing water supply
 Implementation of EBRD-wastewater project consisting of facilities for wastewater treat-
ment and collection
 Expand the service area for piped waste water collection and increase number of cus-
tomers benefiting from wastewater treatment services

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13.4.3 Ensure a good Water Supply without Interruptions


Performance Indicator:
The performance indicator for continuity of water supply is defined as follows:
The number of hours per day on average that water is supplied to customers in the service
area.
The envisaged performance indicator targets are presented in the table below:
Indicator 2011 Target 1 (2015) Target 2 (2025)
(h/day) (h/day) (h/day)
Continuity of Water Supply: 23.5* 24 24

*small areas with reductions and other ones with problems related to low pressure at peak demand

Action Plan / Measures:


 Implementation of the district management programme according to the LTIP over an
unlimited period of time (WS01)
 Implementation of a pipeline replacement and renewal programme according to the LTIP
(WS04)
 Preparation of a master plan for the water supply system according to the LTIP (WS02)

13.4.4 Increase Coverage with Wastewater Services:


Performance Indicator:
 The performance indicator for service coverage with wastewater is defined as follows:
Population with connection to a piped wastewater collection system divided by registered
population in the service area, expressed as percentage.
 Population with access to wastewater treatment services divided by registered
population in the service area, expressed as percentage.
The envisaged performance indicator targets are presented in the table below:
Indicator 2011 Target 1 (2015) Target 2 (2035)
(%) (%) (%)
Coverage with piped wastewater 12 ca. 25 ca. 70
system
Coverage with wastewater treat- 0 ca. 25 ca. 70
ment services

Action Plan / Measures:


 Implementation of EBRD-funded project components related to waste water collection
and sanitation according to PIP

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nd
Development of fund-raising scheme for implementation of 2 stage of project in 2035
according to LTIP

13.4.5 Increase Percentage of positive Feedbacks about Customer Satisfaction:


Performance Indicator:
The performance indicator for customer satisfaction is defined as follows:

The total number of positive feedbacks from surveys about customer satisfaction divided by
the total number of customers interviewed, expressed in percentage.
The envisaged performance indicator targets are presented in the table below:
Indicator 2011 Target 1 (2015) Target 2 (2025)
(%) (%) (%)
Customer Satisfaction: n. a. 75 85

Action Plan / Measures:


 Development of customer relationship management according to the LTIP (WS08)
 Provision of excellent services

13.4.6 Improve the Quality and Accuracy of Reporting


Performance Indicator:
The performance indicators for accuracy and quality of reporting are of qualitative nature and
defined as follows:
 Reporting on technical and operational matters
 Reporting on financial and administrative matters
 Reporting to Municipality and other public institutions according to legal requirements
and bilateral agreements

The envisaged performance indicator targets are presented in the table below:
Indicator 2011 Target 1 (2015) Target 2 (2025)
- Technical & Operational Matters moderate good good
- Financial & Administrative Matters good good good
- Obligatory Reporting n.a. good good

Action Plan / Measures:


 Development and standardization of structure to collect and process technical,
operational and financial data
 Development and standardization of tools for presentation and reporting of relevant
information

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ANNEX 1: E&S DETAILED GAP ANALYSIS

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Table 1 Review of the Project against PR1 – Environmental and Social Appraisal/Management

Requirement of EBRD PR1 Compliance Status (PIU, Integrated Quality Management System Implementation: Department)

Social and Environmental Management


System
PR1.2 The Bank requires clients to develop a PARTIALLY COMPLIANT
systematic approach, tailored to the nature of
THE COMPANY:The Company is a municipally owned company with 62 employees. The core activity of the Company is the
their activities or projects, to managing envi-
water and wastewater management for the service area of Cazin. The company operates thought its 3 main sectors: Finan-
ronmental and social risks and opportunities
cial sector, Sector for legal and general affairs and Technical sector. The organizational structure of the company is as fol-
that will enable the client to comply with the
lows:
Bank’s Environmental and Social Policy
throughout the life of the Bank’s involvement
with the project. Director

Sector of legal and


Financial sector Tehnical sector
general affairs
(17 + manager) (34 + manager)
(8 + manager)

Service of technical
Records and payment Production and
preparation and
Commercial service (2) service distibucion service
development
(12) (7)
(2)

Maintenance of water
Vehicle maintenance
Accountancy service supply and water waste
service
(3) netwok service
(3)
(22)

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The Company has no written HSE/Social Policy, does not hold any quality/environmental certification (e.g. International
Standard Organization [ISO] 14001, ISO 9001 or the Occupational Health and Safety Assessment Series [OHSAS] 18001)
and no HSE Plan/Manual is in place. However, the Company is functioning based on its internal regulation system: the Stat-
ue, Rulebook on Occupational Safety (adopted in 2004), Rulebook on Fire Protection (adopted in 2004) and General Act on
Maintaining, Use and Monitoring of Water Facilities and Response in Case of Breakdown or Accident (adopted in 2010),
Rulebook on Personal Protection Equipment (2004). In addition, the Client as a public company has to adhere to the set of
legislation prescribed by the relevant authorities.
The lack of a comprehensive HSE Management Plan at the Company’s level has repercussions on the global HSE perfor-
mance. Although, in terms of drinking water sampling and testing, the Company is compliant with national and EU legislation,
during the ESDD, some environmental issues related to wastewater management have been revealed: wastewater man-
agement is not in compliance with EU standards (i.e. direct sewage discharge on surface receptor without any treatment).
The aim of the project is to improve this condition and establish compliance with the EU standards.
The Company’s management will need to define its own HSE Policy, HSE Standards and Procedures in accordance to the
cited international standards. A specific programme to meet EU requirements in terms of wastewater management should be
developed and applied by the Company.
A specific reference to the contractor’s HSE-MS should be included in the Tender for the new wastewater system construc-
tion.
THE PROJECT: The feasibility study for the Project is being developed within this assignment, and shall be in compliance
with the EU and national requirements.
Compliance to be achieved via ESAP.

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Environmental and Social Appraisal


PR1.5 Through appraisal activities such as PARTIALLY COMPLIANT
risk assessment, auditing, or environmental
THE COMPANY: The Company has all the permits for water wells in its competence, except for Mutnik. Mutnik is water well
and social impact assessment, the client will
constructed in 1985, and the Company later took it over. The procedure of issuing Construction Permit and Water Permit is
consider in an integrated manner the potential
ongoing, however, due to procedural complications, this process is very slow.
environmental and social issues and impacts
associated with the proposed project. The THE PROJECT: According to the information provided by the Cazin Municipality, the EIA process is usually required to ob-
information gained will inform the EBRD’s own tain the Environmental Permit, which is an integral part of the Urban Consent for big construction projects. The Company has
due diligence related to the client and project not yet obtained any of the permits, since the Project is still in its early stage.
and will help to identify the applicable PRs and
However, due to the project dimension and potential impacts, the permitting process differs for the construction of
the appropriate measures to better manage
wastewater collector (WWC) and wastewater treatment plant (WWTP). For the construction of WWC discharged into the
risk and develop opportunities, in accordance
WWTP, the Environmental Permit is not obligatory in the process of issuing Urban Consent. The construction of WWTP is
with the applicable PRs.
subject to obligatory Environmental Impact Assessment and environmental permitting prior to obtaining Urban Consent. In
The appraisal process will be based on recent the process of environmental permitting, a Preliminary Water Consent needs to be obtained.
information, including:
In 2006, in the scope of Conceptual Design of the Sewerage Network and Wastewater Treatment Plant of the Cazin Munici-
pality, the Preliminary EIA (Pre EIA) was developed. This Pre EIA assessed the Project potential environmental impacts;
however, the social component was not included. No other appraisal activities have been conducted in the last years such as
risk assessment, audits, social impact assessments, etc.

The impacts not assessed in the Pre EIA will be evaluated in the Environmental and Social Review Summary (ESRS) Report
developed as part of this assignment. The corrective measures designed to address the impacts identified in the ESRS will
be provided in the Environmental and Social Action Plan (ESAP). The mitigation measures and actions included in the cited
documents will allow reaching a level of details appropriate to the scale of Project impacts. However, as a part of permitting
process, the construction of WWTP will require the development of EIA study.
The implementation of Pre EIA findings supplemented with the provisions of ESAP developed as a part of this Feasibility
Study will enable the Project to meet both the EBRD and the EU requirements. Therefore, Tender documentation should
include the mitigation measures reported in the Pre EIA as well as in the ESAP. It is expected that the Client will implement
the ESAP in accordance with the defined schedule, and with specifically assigned responsibilities for implementation, moni-
toring requirements and reporting.
Compliance to be achieved via ESAP.

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PR1.6 Environmental and social impacts and PARTIALLY COMPLIANT


issues will be appraised in the context of the
The main area of influence (AOI) issue for this Project is the wastewater management. Because of its nature, the Project has
project’s area of influence.
positive influence on the wider area of Cazin Municipality, since the environmental impacts that are currently present due to
inappropriate wastewater management, will be minimized.
The Project area of influence in the construction phase refers to the working corridor of pipeline construction with the width of
6 m, and the construction site for the WWTP. The location of disposal sites for waste, borrow pits, temporary construction
sites and worker’s camps (if applicable), which are part of the Project itself, is not yet defined. All sites for construction ser-
vice areas will be subject to the approval of the competent Authorities, but the increase of the area of influence of the Project
may cause to additional impacts not previously assessed.
Company’s HSE Policy, Standards and Procedures for the Project and its AOI should be developed in accordance to the
local and international standards (see PR 1.2).
The service areas (i.e. storage areas, temporary camps, parking areas, etc.), which contractors are going to use for project
development, will be subject to Local Administrations’ approval.
Compliance to be achieved via ESAP.

PR1.7 Environmental and social issues and COMPLIANT


impacts will also be analysed for the relevant
Environmental and Social Due Diligence is being preformed within this task.
stages of the project cycle.
The Pre EIA, developed in the scope of Conceptual Design of the Sewerage Network and Wastewater Treatment Plant of the
Cazin Municipality, assessed certain potential environmental impacts, however, social impacts were not evaluated.
Tender documentation should include the mitigation measures reported in the Pre EIA as well as in the ESAP developed as
a part of this assignment. It is expected that the Client will implement the ESAP in accordance with the defined schedule, and
with specifically assigned responsibilities for implementation, monitoring requirements and reporting.

PR1.8 – 1.13 Nature and level of detail of due COMPLIANT


diligence studies.
Nature and level of details of due diligence is appropriate to the size and scope of the project, its potential impacts and de-
fined project category.

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Environmental and Social Action Plan


(ESAP)
PR1.14. – 1.16 ESAP to be developed to ade- PARTIALLY COMPLIANT
quately address the environmental and social
Certain environmental issues were assessed by the Pre EIA. This covers Project’s construction and operation phase. The
appraisal findings.
Pre EIA has determined that the Project will have significant long-term (permanent) positive environmental and social impact.
Negative impacts that are likely to occur during construction, can be easily mitigated, however, certain negative impacts in
the phase of operation are associated with sludge production and odour.

A specific ESAP supplementing the Pre EIA will be developed as part of this assignment.
Tendering documentation should include the requirement to comply with mitigation measures reported in the Pre EIA and the
ESAP. It is expected that the Company will implement the ESAP in accordance with the defined schedule, and with specifi-
cally assigned responsibilities for implementation, monitoring requirements and reporting.
Compliance to be achieved via ESAP.

Organizational capacity and commitment


PR1.17. The client will need to establish, PARTIALLY COMPLIANT
maintain, and strengthen as necessary an
Organizational structure, roles and responsibilities aspects are addressed under PR 1.2 above.
organisational structure that defines roles,
responsibilities, and authority to implement the Rulebook on Occupational Safety stipulates the obligations of Health and Safety Officer: all activities related to control of the
ESAP and associated management system. application of occupational safety measures at the workplace and the auxiliary facilities. Even though the Client has adopted
HS procedures and rulebooks with assigned responsibilities for implementation (such as above), due to lack of human ca-
pacities, the Chief of Vehicle Maintenance Service is appointed for the carrying out HS activities within the company, by the
decision of the Director.
According to the requirements of PR1, Par. 17, specific personnel (including a direct responsible) in charge of HSE man-
agement and ESAP implementation should be designated within the Company, and an HSE Plan should be developed, de-
fining systems and procedures which will apply to the Project as well as to the Company general activities.
Compliance to be achieved via ESAP.

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PR1.18. The client will ensure that employees PARTIALLY COMPLIANT


with direct responsibility for activities relevant
The Company provides some training for employees. From time to time, the Company sends some of the employees to
to the project’s or the company’s social and
workshops and trainings related to environmental protection issues, organized by a third party. However, no specific train-
environmental performance are adequately
ing matrix has been developed by the Company either for general HSE issues (i.e. Corporate level) or for the Project.
qualified and trained so that they have the
knowledge and skills necessary to perform The Company should provide specific trainings for personnel (including managers) directly in charge of HSE and Social
their work. issues management and ESAP implementation. A specific reference to the Contractor’s training requirements should be
included in the Tenders for the Project construction. All workers in site should receive at least an induction course.
Compliance to be achieved via ESAP.

Managing contractors
PR1.19. It is the client’s responsibility to en- PARTIALLY COMPLIANT
sure that contractors working on project sites
THE COMPANY:Contractors are not involved in Company’s daily business; however, periodic activities, such as equipment
meet EBRD PRs. Effective contractor man-
maintenance and repair, are carried out by the contractors. In the tendering stage, the Company requires that the Contrac-
agement includes:
tor possesses special licences for conducting activities, especially when dealing with hazardous substances.
 assessing environmental and social risks
associated with contracts THE PROJECT: Tender for the Project Construction will be issued by the Company. Project Supervision will be also as-
 including relevant PRs/ESAP provisions to signed trough a dedicated Tender. Since the Project is still in an early stage, the Tender documentation is not under the
tender documents as appropriate, and preparation yet.
screen potential contractors’ capacity to For the proposed Project it will be necessary to work with contractors. Thus, it will be very important to assure that all the
meet the requirements social and environmental requirements are respected by all contractors. The requirements and standards that the Contrac-
 contractually requiring contractors to apply tor needs to fulfil (including HSE and social requirements) needs to be included in the Contract documentation.
these standards and include appropriate
non-compliance remedies Compliance to be achieved via ESAP.
 ensuring that contractors have knowledge
and skills to perform their project tasks in
accordance with the PRs and ESAP re-
quirements
 monitoring contractor compliance with the
above requirements
 in the case of sub-contracting, requiring
contractors to have similar arrangements
with their subcontractors.

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Performance monitoring and review


PR1.20-24 The client will establish procedures NOT COMPLIANT
to monitor and measure compliance with the
Currently, no formal monitoring system is in place to assure that the environmental and social standards are respected.
environmental and social provisions of the
Therefore, there is no clear description of the frequency and type of reports to be prepared, in this respect.
legal agreements including effective imple-
mentation of the ESAP and the PRs and im- The Client will establish and implement monitoring procedures to measure compliance with environmental and social re-
provements achieved over time against the quirements, as well as implementation of the ESAP and Contractor monitoring provisions.
baseline established during appraisal. Moni-
Monthly and weekly progress reports should be prepared by the Supervisor and sent to Municipality/Company HSE man-
toring will normally include recording infor-
agement for approval. ESAP and PR compliance implementation issues should be explicitly included in the weekly and
mation to track performan