Belgrade Waste Treatment and Disposal PPP Project. Teaser

Transcription

1 Belgrade Waste Treatment and Disposal PPP Project Teaser January 2015

2 DISCLAIMER This document (hereafter referred to as the Teaser ) has been prepared by the International Finance Corporation ( IFC ) solely for the purpose of assisting prospective investors to preliminarily assess the opportunity ( Opportunity ) to invest in the Belgrade Waste Treatment and Disposal PPP Project ( Project ). As a recipient of the Teaser, you must read this section before considering the information set out or referred to in this Teaser. If you do not accept, agree or understand the provisions set out in this section, you must immediately return this Teaser and any other information supplied to you. The Teaser has been prepared by IFC on the basis of information supplied to IFC by the City of Belgrade ( CoB ) and other local public entities. The Teaser and anything contained in this Teaser does not, nor is intended to constitute or create (i) an offer capable of acceptance or solicitation of an offer to invest or participate in the Project, and/or (ii) any binding legal relationship or other duty or obligation enforceable in law by any prospective investor and other recipient of the Teaser under, or in connection with, its subject matter in respect of any of the IFC, CoB and other local public entities, in which regard none of IFC, CoB and other local public entities shall have any liability for any loss, cost and expense incurred by any prospective investor and other recipient of the Teaser under, or in connection with matters disclosed in it and/or the recipient s reliance on it. Furthermore, the Teaser contains information and data which is by its nature selective and indicative and which was available as of 5 January 2015 and is subject to updating, expansion, revision and amendment. Such information may involve significant elements of subjective judgment and analysis, which may or may not be correct. In particular, the Teaser does not contain or purport to contain all of the information that any prospective investor and other recipients of the Teaser may desire for the purpose of evaluating the Opportunity. The IFC, CoB and other public entities accepts no responsibility to notify any prospective investor or recipient if any information or data set out in this Teaser changes or is found to be inaccurate or incomplete nor to update the Teaser to reflect any changes, inaccuracies or incompleteness. In all cases, any prospective investor and other recipient of the Teaser should conduct their own investigation and analysis of the Opportunity and of the data set forth in the Teaser. Neither IFC, CoB and other local public entities, nor any of their other representatives or agents make any representation (expressed or implied) or warranties as to the accuracy or completeness of the data and information contained in the Teaser, and shall have no liability for the Teaser or for any other written or oral communication transmitted to the recipient in the course of the recipient s evaluation of the Opportunity. Neither IFC, CoB, and other local public entities will be liable to reimburse or compensate any prospective investor and other recipient of the Teaser for any losses, costs or expenses incurred by any prospective investor and other recipient of the Teaser in evaluating or acting upon the Teaser or otherwise in connection with the Opportunity as contemplated herein. The above provisions are governed by Serbian law. 2

3 HIGHLIGHTS PROJECT BACKGROUND To bring Belgrade s waste treatment and disposal practices in line with Serbian and EU regulations within the context of the country s EU accession negotiations, the City of Belgrade aims to develop greenfield waste treatment and disposal facilities. The City of Belgrade s overarching objective is to increase the diversion rate of waste that is being sent to the landfill, and to remediate the environmental threat posed by current unsuitable waste disposal practices. This Project shall be developed through a Public-Private Partnership (PPP) model, whereby the City will enter into a long-term agreement to design, build, finance, operate, maintenance and transfer the Project facilities (the Transaction ) with a private partner selected through international competitive tender. The Project concept is based on the strategy set in the Local Waste Management Plan of the City of Belgrade (the Plan ), which was adopted by the City Assembly in The Project scope includes the development and construction of new waste treatment and disposal facilities, including the construction of a new sanitary landfill for residual nonhazardous and inert waste, and the rehabilitation and aftercare of the existing landfill. For clarity, the Project scope shall not include waste collection and primary transportation. The City intends to conduct the competitive tender process for the Transaction in The International Finance Corporation has been appointed by the City as Exclusive Lead Transaction Advisor to assist with the structuring and implementation of the Transaction. IFC is supported by legal advisors from Hogan Lovells International LLP (UK) and Karanovic & Nikolic (Serbia), as well as technical advisors from Fichtner GmbH & Co. KG (Germany). TRANSACTION HIGHLIGHTS PARTICIPATE IN A HIGH PRIORITY TRANSACTION Efficient and sustainable waste management practices are high on the political agenda in Serbia, as driven by growing social awareness of environmental concerns, the need to transform waste into resource, and new European directives on waste management and diversion rates relevant for EU candidate countries. The newly elected Mayor of Belgrade has publicly placed the delivery of a well-structured, sustainable yet affordable Transaction, at the top of his agenda for strategic infrastructure development in Belgrade in For this purpose, the City administration has mobilized resources in the form of a dedicated project implementation unit in order to manage professionally and in a timely manner the preparation, tender and implementation of the Project. At the national level, because of its strategic importance in EU-accession negotiation on Chapter 27, the Project is also recognized as a priority for the country, and has received the support of the Prime Minister. While the Project has been discussed with various scopes for a number of years, there is now a consensus among all stakeholders on the pressing need for investment in adequate infrastructure that will improve the long-term waste management practices. IMPLEMENT A FIRST-OF-ITS-KIND PROJECT IN THE REGION The Project is a first in the country in terms of size of investment in the waste sector and envisaged PPP model. A number of preconditions exist to maximize the chances of success of this complex Transaction. This includes the already well documented, publicly debated and approved waste management strategy developed in the Plan, and the recruitment by the City of a team of expert advisors with international experience with similar transactions. As a result, the Transaction will be strategically structured to maximize the scope and quality of the infrastructure and service delivered by the private partner to the City, while making it sustainable for the City s budget, and affordable for households and other waste generators. While the project concept and scope is ambitious, its successful implementation will set a precedent in the region and provide a viable solution to a problem shared by many municipalities. 3

4 INVEST IN A STABLE MARKET WITH GROWTH POTENTIAL Serbia has made significant progress in creating a competitive environment for private sector investment in the country by demonstrating an increased commitment to sound regulatory reforms. This has been recognized by a number of blue-chip companies that have already invested in the country. Moreover, further reforms and liberalization are underway in various sectors, within the prospect of EU accession. Serbia is outperforming a number of its neighbors in the Western Balkans in terms of economic results, and while its socio-economic growth has suffered from the slowdown in the global and European economy in recent years, it is expected to recover a sound growth trend in the near future. Therefore the Project can become a platform to strengthen a local competence base for future growth in the country and in the region. From a political standpoint, the country has also demonstrated stability and sound governance in recent years, and the next elections are scheduled for

5 CONTEXT SOCIO-ECONOMIC BACKGROUND THE CITY OF BELGRADE Belgrade is the capital of the Republic of Serbia, and is its largest urban and economic center, with a population of 1.66 million as per the Statistical Office of the Republic of Serbia s 2011 census. Belgrade is situated in South-Eastern Europe, on the Balkan Peninsula, at the confluence of the Sava and Danube rivers. Belgrade s entire metropolitan territory as shown on figure 1 covers an area of 3,227km 2. The City of Belgrade has the status of a self-government unit, with fiscal responsibility for the regulation and maintenance of utility services, rights and obligations of utility users, scope and quality of utility services and supervision over the performance of these services. The City is administratively divided into seventeen municipalities. Fourteen of the seventeen municipalities that compose the City will participate in the Transaction. They are highlighted in red shades on figure 1. Map of Belgrade Municipalities Municipality Population (2011) Area (km 2 ) Figure 1: Belgrade municipalities 1 Voždovac 158, Vračar 56,333 3 Grocka 83, Zvezdara 151, Zemun 168, Mladenovac 53, Novi Beograd 214, Palilula 173, Rakovica 108, Savski venac 39, Sopot 20, Stari Grad 48,450 5 Surčin 43, Čukarica 181, Project 1,501,184 2,218 Barajevo 2 27, Lazarevac 2 58, Obrenovac 2 72, Belgrade 1,659,440 3,227 Annual amount of municipal waste produced in the Project area and the City of Belgrade total area is estimated at 618,000 and 662,000 tonnes respectively. 1 Statistical Office of Serbia 2 Not included in the scope of the Project 5

6 For 2014, the total GDP of the City of Belgrade was estimated to be RSD1,726 billion (~EUR14.23 billion), or RSD1,025,897 (~EUR8,461) per capita in real terms. The average monthly net salary in Belgrade in the first ten months of 2014 was RSD54,678 (~EUR455). In housing 23% of the country s total population, Belgrade contributes to over 40% of the country s GDP. Belgrade is considered a financial center of Southeast Europe, and is also home to numerous information technology hubs. CITY OF BELGRADE: KEY FACTS Population (2011 census) Territory GDP per capita (real) Average monthly salary (2014) Annual City budget (2015) Investments in Belgrade 3 (2012) 1.66 million ha 8,461 EUR 455 EUR 670 million EUR 2.37 billion EUR THE REPUBLIC OF SERBIA Serbia is classified as an upper-middle-income country. According to the Serbian Institute for Statistics, the Serbian economy grew in 2013 by 2.6% in real terms, but contracted in 2014 by 2%. The 2014 contraction is mainly attributable to the devastating floods which significantly negatively impacted the production of electricity due to the flooding of the largest coal mine in Serbia. The Economist Intelligence Unit estimates that Serbia is expected to return to a moderate growth of 1% in 2015 and to enter a stage of accelerated growth in the range of 3.6- in 2016 and Such growth shall be encouraged by Serbia s favorable investment environment, which is characterized by: Highly competitive tax environment: Corporate Income Tax of 10%, VAT of 20%, and Personal Income Tax of 10% Competitive costs of utilities and labor: Belgrade is ranked 4 th on the FT s rankings of major European cities, by cost effectiveness 4. Attractive Renewable Energy framework: Guaranteed off-take of up to 10MW of Renewable Energy at competitive Feed in Tariffs of EURc6.91 per kwh for energy from landfill gas and EURc8.60 per kwh for energy-from-waste derived fuel. Serbia is currently undergoing a process of extensive structural economic reform, with the objective to create and strengthen a more stable market economy, supported by efficient administration, reliable infrastructure and a trustworthy judiciary system, to be fully aligned with the regulatory and institutional framework of the European Union. The Government s most important reform currently being implemented with the support of the IMF, is a set of long-term fiscal consolidation measures with a defined objective to gradually eliminate budget deficits, and to stop growth in public debt (currently at ~70% of GDP) by 2017, in order to ensure the long-term sustainability of Serbia s fiscal position. In addition, a broad set of legislative improvements has been initiated with the objective of improving the investment environment, including amendments being made to the labor regulations, bankruptcy law, construction law, energy law, etc. 3 Total public and private investments on the territory of the City of Belgrade; Statistical Yearbook of the City of Belgrade. 4 European Cities and Regions of the Future

7 Encouraging indicators of the increasing attractiveness of Serbia as an investment destination have already been visible over the past few years: Foreign Direct Investment in 2014 exceeded 1.2 billion EUR. Serbia has had a total of 284 FDI projects implemented in the post crisis period, one of the highest FDI levels recorded in the region. 5 A total of 12,179 new jobs were created through FDI in 2013 alone 6. Serbia has the highest number of jobs created relative to the population in the world. 7 International companies such as Bosch, FIAT, Michelin, Johnson Electric, Lafarge, Holcim, Siemens, Gorenje, Panasonic, Telenor, Microsoft, Actavis, China Machinery Engineering Corporation, China Road and Bridge Corporation, Telekom Austria, Heineken, Viscofan, British American Tobacco, Delhaize, and STADA have all invested in Serbia. Serbia benefits from a stable political environment. The last general elections were held in 2014, and resulted in the Serbian Progressive Party ( SNS ) winning the majority of seats in the national parliament as well as in the City of Belgrade s parliament. The next municipal and national elections are scheduled for Serbia is rated BB-/B1/B+ by S&P, Moody s and Fitch respectively, which outperforms other former Yugoslavia republics, and compares well to neighboring country members of the EU. AN EU-MEMBERSHIP CANDIDATE COUNTRY In 2012, Serbia was granted EU candidate status, subsequently initiating the accession process with the European Commission in 2014, with the expectation to join the EU in approximately As part of the accession process, Serbia is working with the European Commission on its compliance with the 35 chapters constituting the Acquis Communautaire, by which the country must comply as a precedent to EU-accession. Screening of each of the thirty-five areas has been largely completed in 2014, and each chapter s implementation must now be open in One of the most challenging chapters identified to date is Chapter 27 on Environment; the application of which should be facilitated by the implementation of the Project. 5 EY s Attractiveness Survey EY s Attractiveness Survey IBM Global Location Trends 2014 Annual Report 7

8 CURRENT WASTE MANAGEMENT PRACTICES MUNICIPAL WASTE COLLECTION AND TRANSPORT The City has delegated the performance of the municipal waste collection and transportation to Public Utility Companies ( PUCs ) fully owned by the City. The largest of them, Gradska Čistoća ( GC ), collects and transports municipal waste from all eleven urban Belgrade municipalities, aggregately representing 85% of waste generated on the territory of Belgrade, as shown in the redshaded area on figure 2. Several smaller PUCs operate in the other six municipalities of the City. It is anticipated that all PUCs will be merged shortly into one single PUC. The waste collection system consists of a combination of on-street containers of different sizes and underground containers located in the most central areas of the City. At the moment, there is limited formal waste separation at source. Therefore the waste collected curb-side is generally mixed. The City has initiated the introduction of a two-bin waste collection system, to be initially implemented in the three most central municipalities in 2015, with planned expansion into other areas of the City in the second phase. Figure 2: Area covered by the waste collection services of GC There are several, but few, specialized collection points for special waste streams, referred to as green spots, leading to some form of recycling. The residual waste, largely in mixed content, is then transported directly to the disposal site. Besides being an exclusive provider of municipal waste collection and disposal for municipalities, GC offers waste collection and disposal services to large commercial entities and industries. PUC Zelenilo Beograd collects green waste as exclusive service provider to the City. 8

9 WASTE DISPOSAL GC manages and operates the only official landfill of Belgrade, known as Vinča. The landfill is located in the Belgrade municipality of Grocka on the right bank of the Danube river, about 15 km from downtown Belgrade, as shown in pink on figure 3. The site has been in operation since 1977, and occupies an area of 70 ha. The body of the landfill itself has an area of 45 ha and a depth/height of 5-50 m. Figure 3: Vinča landfill location The landfill is used for the disposal of waste collected on the territory of thirteen municipalities (the eleven municipalities served by GC, plus Barajevo and Grocka), together representing 90% of the waste generated in Belgrade. Presently, all non-hazardous waste, including bulky waste, a portion of industrial waste, construction and demolition (C&D) waste and treated medical waste are all disposed of at Vinča. The following figure shows the historic amounts of the main types of waste historically disposed of at the Vinča landfill, as recorded and measured by the weighbridge installed at the landfill entrance. It must be noted that the scope of the incoming waste in the Project will vary slightly from the historical use of the landfill due to the change in the number of municipalities that will use Vinča to dispose of their waste. thousand tonnes 1, Municipal Waste C&D Waste Tires, Metal, Other Total Figure 4: Vinča landfill historical waste amounts (thousand tonnes) The incoming waste is spread out and compressed at the landfill by compactors, and then covered with C&D waste. Upon exhaustion of the capacity at a specific area, the surface is cultivated and grass is planted thus minimizing active dumping surfaces. There is no treatment of waste carried out at the moment at the site. GC has signed contracts with private companies for the collection and sale of secondary raw materials with lessees who conduct the classification, treatment and buy-off of recyclables from the municipal waste 9

10 disposed at the landfill. There is no collection and exploitation of landfill gas. The leachate is collected and released without treatment together with the storm water through a canal into a natural swamp within the Danube riverbed. There is no spontaneous combustion at the landfill at present. WASTE CHARACTERISTICS In accordance with the Law on Waste Management, and the Decree on Waste Sampling Methodology, GC has been carrying out the quarterly sampling of municipal waste since The sampling has been carried out in a different municipality each quarter, and has included different types of residential space individual housing, collective housing (i.e. residential buildings), and rural housing. Samples were collected from waste containers, and every sample consisted of kg of waste. The results of the sampling conducted in November 2014 are shown on the following charts: Urban area, individual housing Plastic bags 6% Textile Plastic packaging waste 3% Aluminium cans 0% Diapers Leather 1% Hard plastic 2% Fine elements 11% Packaging and other metal 1% Other 15% Garden waste 20% Other biodegradable waste 15% Paper Composite materials 2% Cardboard 6% Glass 5% Urban area, collective housing Garden waste 5% Textile Diapers 5% Hard plastic 3% Fine elements 17% Leather 1% Plastic bags 6% Other 13% Other biodegradable waste 19% Paper 7% Glass Cardboard 5% Composite materials 3% Pack. and other metal 2% Aluminium cans Plastic packaging waste 0% 5% Rural area Garden waste 16% Hard plastic 2% Textile Diapers 5% Plastic bags Leather 2% Plastic packaging waste 3% Other 13% Fine elements 20% Aluminium cans 1% Other biodegradable waste 15% Paper 5% Cardboard Pack. and other metal 2% Glass 2% Composite materials 2% Figure 5: Morphological composition of communal waste sampling WASTE MANAGEMENT BILLING AND COLLECTION SYSTEM In exchange for the provision of waste management services, the revenues of GC are comprised of sales revenues, subsidies and grants from city authorities, and a small stream of other revenues. Sales revenues are generated from three major activity segments: waste collection, street cleaning and sweeping, and 10

11 other services (including recycling, septic tank cleaning, and arrangements with third parties). At present, GC receives no separate revenues for the provision of disposal services for household waste. GC bills directly its customers for waste collection services provided to non-residential customers; and other privately-contracted services provided to any type of customer. GC does not bill directly its customers for all other services. Charges for residential waste collection services are billed to households and small commercial entities and are collected by Infostan, a municipal services billing enterprise. Upon receipt of the payments, Infostan transfers the associated payment amounts to GC. In addition, the fixed fee for street cleaning and sweeping is paid by residents as part of the building land tax. The Infostan billing collection system includes eleven of Belgrade s municipalities 8, comprising over 80% of Belgrade s total population. The pricing policy in public utility companies is regulated by the Government through adopted legal regulations. The City of Belgrade has ultimate jurisdiction over confirming the tariff structure proposed by the PUC and payable by residential customers for the delivery of waste management services. 8 Grocka, Sopot, Lazarevac and Obrenovac have separate municipal utility billing systems. 11

12 THE TRANSACTION The City of Belgrade wishes to develop the waste treatment and disposal facilities through a long-term Public Private Partnership model. The scope of the Transaction will include the financing, design, construction, operation, maintenance and transfer of the Project facilities with the ultimate responsibility to deliver the service of environmentally-acceptable waste treatment and disposal. TRANSACTION SCOPE The obligation of the private partner under the Project contract is expected to include the development of the waste treatment and disposal infrastructure, as well as the provision of treatment and disposal services for municipal, C&D and green waste produced on the territory of the fourteen Belgrade municipalities shown in Figure 1 above. For clarity, the scope of the Project does not encompass any form of collection of waste, nor of its primary transportation. The Transaction is currently envisioned to include the following waste management activities: Remediation and aftercare of the existing landfill at Vinča and the construction, operation and maintenance of a greenfield landfill gas to electricity power plant. Construction, operation and maintenance of the municipal waste treatment facility. The existing Plan foresees the construction of an MBT plant with RDF production, coupled with an RDF-fired CHP plant. Construction, operation and maintenance of a new landfill for the disposal of residual nonhazardous and inert waste. Construction, operation and maintenance of a facility for the treatment of construction and demolition waste. Construction, operation and maintenance of a material recovery facility Facility for decomposition of bulky waste Construction, operation and maintenance of a composting plant for the treatment of green waste collected on the territory of the City of Belgrade. Construction, operation and maintenance of three transfer stations 9, and the transport of this waste to the processing site. Construction, operation and maintenance of fourteen specialized bring-in recycling yards. For additional detailed information regarding the waste management Plan, and the solution envisaged for the Project, please refer to the Plan, which can be downloaded from The Plan envisages a set of facilities and technologies that, based on the analysis conducted at the time, emerged as the best performing options given the specificities of Belgrade s waste management practices and challenges. However, the City is keen to ensure that the procurement process encourages the submission of a full range of technological solutions to be offered, that will be assessed against the range of technical, environmental and economic criteria to be specified in the tender procedure and contractual documents, with the principal aim being to deliver a sustainable, yet socially affordable, waste management solution for the City of Belgrade. SITE Most of the waste treatment facilities, with the exception of the composting plant for green waste, shall be developed at a designated location in the vicinity of the existing Vinča landfill. Currently, the existing landfill site is enclosed with a 2 meter-high chain link fence surrounded by agricultural land. An additional 9 One transfer station for the municipalities of Zemun, Surčin and Novi Beograd, one transfer station for the municipalities of Čukarica, Rakovica and Voždovac and one for the municipalities of Mladenovac and Sopot. Waste from other municipalities will be transported directly to the waste treatment and disposal center by PUCs. 12

13 65 ha is being added to the existing site for the purposes of ensuring the long-term sustainability of the Project. There is already a constructed administrative area on site having a total area of 1,350m2, and able to accommodate staff, equipment, workshops and warehouses. The site is connected to Belgrade-Smederevo s main municipal road by a paved access road, as well as traffic roads inside the landfill area. The site is connected to Belgrade s municipal water and sewerage system for sanitary water supply, and to the lowvoltage network of Belgrade s municipal electricity company through a 450 kw sub-station. There are no settlements within a 2 km radius of the landfill. The land expropriation procedure for the extension of the Vinča site has been initiated by the City and is planned for completion by June The sites for the transfer stations and the green waste composting facilities are currently being identified, and are planned to be situated on City-owned land. MARKET SOUNDING AND TENDER PROCESS The City of Belgrade is the contracting authority for the Project, and is authorized by the relevant legislation to prepare the Project, implement the public tender, and enter into the PPP agreement with the selected private partner. The tender documents will be drafted in accordance with the relevant procurement legislation of the Republic of Serbia, including the Law on PPPs and Concessions, and the Law on Public Procurement, as well as with the best EU and international standards and practices. The City has now invited interested companies with proven experience with building and operating similar infrastructure to forward their expressions of interest in the Project. Interested parties will also have the opportunity to participate in an investors conference to be held in Belgrade. The formal tender for the Transaction will be launched in The tender process will be implemented in accordance with the relevant procurement legislation of the Republic of Serbia, including the Law on PPPs and Concessions, and the Law on Public Procurement, as well as with EU standards and international best practices. The City intends to implement either a restricted procedure, or a competitive dialogue as defined under the applicable laws and regulations of the Republic of Serbia, and in either case, with a separate prequalification stage. The procurement process will be designed to encourage the submission of a full range of technological solutions to be assessed against the technical, environmental and economic criteria specified in the tender procedure and contractual documents. Indicative Timetable Expression of Interest, Transaction promotion and market sounding Q Request for Qualification Q Request for Proposals Q Contract Award and Execution Q

14 CONTACTS CITY OF BELGRADE Filip Abramović Director, Directorate for Solid Waste Management Secretariat for Environmental Protection IFC INFRASTRUCTURE ADVISORY SERVICES Nikola Mihajlović Investment Officer Adèle Paris Investment Officer