1. PROJECT TITLE

Biomass and cogeneration district heating system

2. SECTOR

Energy sector

3. LOCATION

The municipality of Sokolac is located in the eastern part of the Republic of Srpska, about 40 kilometers from Sarajevo and Jahorina Olympic Centre. The Sarajevo-Belgrade highway is very close to the planned location. With the area of 689 km2, it is among the larger municipalities of the Republic of Srpska. It comprises 12 local communities and 95 settlements with about 12,607 inhabitants. It is noteworthy that the municipality has the features of a hilly and mountainous terrain, and that significant area of the municipality is covered by forest.

4. BRIEF PROJECT DESCRIPTION

Rehabilitation and expansion of the district heating network and installation of a cogeneration plant and a biomass-fired peak load boiler. Installation of a biomass-fired cogeneration plant with the organic Rankine cycle technology, of electricity production capacity of 1 МW and heat capacity of 4.1 МW. In terms of organization concerning the exploitation phase, it is noteworthy that the private partner will manage the entire system (district heating boiler room and network) during the term of contract. The private partner will maintain the system and directly collect the revenues generated by electricity sale. The public partner (the municipality or another party authorized by the municipality) will collect the payments made for heating services by all users. From the collected funds, the public partner will pay an agreed annual amount to the private partner. The final goal of the project is to provide better conditions for life and work of the district heating users, both existing and those to be covered by the district heating system.

5. PROJECT DETAILS

5.1 What type of project is it

This is a brownfield investment, financed under the public-private partnership model. The plant will replace the existing which is owned by the municipality (both location and existing capacities) and worth 230,081€.

5.2 Project status

Feasibility study was prepared in October 2015. A consortium including CMS ReichRohrwig Hainz d.o.o., CETEOR d.o.o. Sarajevo, and GreenMax Capital Advisors worked on its preparation. The European Bank for Reconstruction and Development (EBRD) financed the preparation of project documentation for this project which will be financed by means of a public-private partnership. The project is supported by all line ministries. On 30 December 2015, the Government of the Republic of Srpska approved the implementation of the Biomass and Cogeneration District Heating System project.

5.3 Reasons to invest in the project

In our commitment to this investment, we start from the fact that this is a project with inherent social and economic justification, which create conditions for maximum interest from both public and private sector for the establishment of a partner relation.
The aim of the public partner is to establish a functioning heating system to provide its users with the necessary level of reliability and comfort, at a reasonable price. In view of all risk factors which accompany each investment project, the desire of the private partner is to generate the expected earnings they believe will exceed those potentially generated by investing the same funds in other projects.
The project generates two revenues, i.e. revenue from district heating system users and revenue from electricity sale at feed-in tariff. Total project revenue varies depending on the extent of consumption and ranges from BAM 3 million per year to BAM 4.1 million per year. An analysis of cost-effectiveness of investing in this project indicates a high level of attractiveness bearing in mind a very high net present value (BAM 4.3 million for the concerned period of 15 years) and a relatively favorable internal rate of return (10.35%) with a discounted payback period of 10.5 years.

6. PROJECT FINANCING

6.1 Estimated project value in €

Project value is 7,771,636€.

6.2 Planned sources of financing

Public-private partnership.

6.3 Inputs by local partner

Preparation of project and tender documentation, worth 153,387€, location and existing capacities, worth 230,081€.

6.4 Inputs by investor

Some of the planned activities: steam pipeline 455,337€, heating substations 592,587€, heating pipeline 1,272,537€, heating plant equipment necessary for network operation 69,024€.

7. Has physical location for project implementation been identified

The planned location is the place of the existing heating plant (at the very center of the city), owned by Sokolac municipality. All infrastructure exists including electricity, water, sewerage, access roads.

8. Have the activities on project implementation already started

In addition to the feasibility study, also a draft PPP contact and tender documents were prepared, whereby all conditions have been created for the issue of a public call, i.e. initiation of a tendering procedure.

9. Project applicant and contact information

SOKOLAC MUNICIPALITY
Address: Glasinacka 13, 71350 Sokolac
Contact person: Mitar Przulj, Head of the Economy and Finance Department
Tel.: +387 66 271 572, +387 57 448 056
E-mail: mitar.przulj@opstinasokolac.net
Web: www.opstinasokolac.net