World Bank Document · 2017-11-04 · PROJECT PERFORMANCE AUDIT REPORT SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA SARAJEVO AIR POLLUTION CONTROL PROJECT (LOAN 1264-1-YU) PREFACE A loan

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 6231

PROJECT PERFORMANCE AUDIT REPORT

SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA

SARAJEVO AIR POLLUTION CONTROL PROJECT

(LOAN 1264-1-YU)

June 3, 1986

Operations Evaluation Department

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties, Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit - Dinar (D)

1976 - D18.00 = US$1.001982 - D64.00 = US$1.00

GLOSSARY OF ACRONYMS

BiR Republic of Bosnia and HercegovinaLNG Liquified Natural GasNGU Nafta Gas UnitSAR Staff Appraisal RepoitSGE Sarajevo Gas EnterpriseZAVOD Institute for Construction

THE WORLD SANK 0 'UIFICIAL USB ONLYWAshington. D.C. 20433

USA

00c of wirec-GOeWr1Oprkf valtion

June 3, 1986

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Performance Audit Report on the SocialistRepublic of Yugoslavia - Sarajevo Air PollutionControl Project (Loan 1264-1-YU)

Attached, for information, is a copy of a report entitled "ProjectPerformance Audit Report on the Socialist Republic of Yugoslavia - SarajevoAir Pollution Control Project (Loan 1264-1-YU)" prepared by the OperationsEvaluation Department.

Attachment

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

FOR OFFICIAL UE ONLY



SAMtJEVO AIR POLLUTION CONTROL PROJECT(LOAN 1264-1-YU)

TABLE OF CONTENTS

Page No.

Preface ........................................................ 1Basic Data Sheet .......................... 1Evaluation Sumffary ......................... v

PROJECT PERFORMANCE AUDIT MEMORANDUM

i. TPROerSUR ............................................ 2

The Project .............................................. 2Project Execution .................................... .. 2Time Overruns .......................................... 2Cout Overrunm .......................................... 2Institutional Performance ................. .............. 3Sales and Financial Results ................................ 2Sustalnability ....................... 3Econorlc Evaluation ..................... 3Bank Performance ...................... 3

II. CONCLUSIONS ................................................. 4

ATTACHMENT A: Commnts from NAFTAGAS Gas Unit ..................... 5

PROJECT COMPLETION REPORT

I* Introduction ......................... 6..................... 6II. Project Preparation and Appraisal .......................... 8III. Project Implementation and Cost ............................ 13IV. Operating Performance .................................... 17V. Financial Performance ..0..0............................... 19

VI. Inatitutional Performance and Development .................. 21VII. Bank Performance ................................ 23VIII. Project Justification ...................................... 24IX. Conclusions and Lessons Learned ............................ 26

ANNEXES

1 - Table 1 - Tariff History .................................... 27

Table 2 - Income Statements ...............................** 28Table 3 - Balance Sheets ..................................... 29

Table 4 - Cash Flov Statements ........................ 30

Ths doumet ha a ~estrcted disribution and may bO Und by rD1cp9ents n1 te 1 PuMm=of oflia tis. Is contents may mot otherwi be dickosed without World Sank author~W tion.

TABLE OF CONTENTS (Cont'd)

Pa** No.

CHARTS

1 - Project Implementation Schedule .............................. 312 - Review of S02 Emission and Fuel Used for Heating

in Sarajevo ........................ ,*******................ 323 - Sarajevo Gas Enterprise - Organization Chart **............... 33

MAP - IBRD 11460R (PCR)



SARAJEVO AIR POLLUTION CONTROL PROJECT(LOAN 1264-1-YU)

PREFACE

A loan of US$38 million, approved by the Bank in May 1976, was intvo parts (Loan 1264-1-YU and Loan 1264-2-YU), made to different borrowersfor separate components of the Sarajevo Air Pollution Control Project. Thisreport presents the results of a performance audit of the part of the projectfor which Loan 1264-1-YU for US$27 million was made to the Sarajevo GasEnterprise (SGE) to assist in financing extension of the national gas trans-mission main to Sarajevo and construction of a city-wide distribution system,with service mains, pressure regulating stations and ancillary facilities tosupply the city with natural gas. The loan to SGE did not become effectivefor twelve months, the time needed to finalize complex international agree-ments for gas supply (PCR, para. 2.17); project implementation took about twoand a half years longer than forecast, mainly because of delays caused bycongestion of projects in the city's streets; the loan closed, fully disburs-ed except for US$9,000, on April 26, 1983, though physical works continueduntil June 1983.

Loan 1264-2-YU for US$11 million was made to the Nafta_ Gas Unit(NGU) to assist with the financing of extension of NGU's gas transmissionsystem whien also was being financed under a previous Bank loan for theNaftagas Pipeline Project (Loan 916-YU of June 25, 1973). While the pipelineproject was not completed until 1985, the NGU part of the Sarajevo Air Pollu-tion Control Project was finished by the end of 1979. A separate reportcovers the project financed by Loan 916-YU and Loan 1264-2-YU.

This Project Performance Audit Report on Loan 1264-1-YU consists ofan Evaluation Summary and a Project Performance Audit Memorandum (PPAM), bothprepared by the Operations Evaluation Department (OED); and a Project Comple-tion Report (PCR) prepared in April 1984 by the Europe, Middle East and NorthAfrica Regional Office, based inter alia on the findings of a project comple-tion mission to Yugoslavia in March 1983. OED has reviewed the PCR, the Bankfiles, the legal documents, Appraisal and President's Reports and the tran-scripts of the meeting of the Executive Directors at which the loan wasapproved. An audit mission visited Yugoslavia in January 1986 and discussedthe project with officials of SGE and the City Assembly.

The audit finds the PCR to be comprehensive, frank and factual, andfinds no reason to disagree with its conclusions and findings.

Following OED procedures, copies of the draft PPAR were sent tothe Borrowers and the Government. Comments received from NAFTAGAS Gas Unithave been reproduced as Attachment A to the report.

PROJECT PERFORMANCE AUDIT BASIC DATA SHEET


SARAJIVO AIR POLLUTION CONTROL PROJECT(LOAN 1264-1-YU)

EY PROJECT DATA

Appraisal Actual or CurrentItem Egetation Estimate

Total Project Cost (US$ million) 5.25 68.3Overrun (%) 30.0

Loan Amount (US$ million) 27.0Dibursed -- 27.0Cancelled - /a

Date Physical Components Completed 6/30/81 12/31/82Proportion Completed by Above Date (1) 100 79%Proportion of Time Overrun (%) - 552SconomIc Rate of Return (Z) NONS 13.9%Financial Performance GoodInstitutional Performance Good

STAFF INPUTS (Man-weeks, per TRS)

FY73 FY74 FY75 FY76 FY77 FY78

Preparation/b 3.5 27.5 0.6 - - -

Appraisal/b - 3.0 141.6 7.5 -Negotiation - - - 52.6 - -Supervision 1.5 24.3 14.2

FY79 FY80 FY81 FY82 FY83 FY84 TOTAL

Preparation/b - - - - - - 31.6Appraisal/b - - - - - - 152.1Negotiation - - - - - - 52.6Supervision 11.0 11.2 1.5 5.0 12.4 1.6 82.7

/a An amount of US$9,000.00 was cancelled.7-b Believed to be overstated. It is suspected these headings also Include

work on companion project, La. 1263-YU, which was processed in tandemwith this one.

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CUMULATIVE DISBURSEMENTS(US$ Millions)

Fiscal AppraisalYear Estimate Actual

1977 3.0 0.11978 12.0 1.21979 20.0 10.51980 27.0 18.41981 21.21982 25.71983 27.0

OTHER PROJECT DATA

OriginalItem Plan Revisions Actual

First Mention in Files or Timetable - - 07/24/72Government's Application - - 01/01/73Negotiations 06/21/75 Various 07/21/75Board Approval 05/26/76Loan Agreement Date -16/08/76Effectiveness Date 12/31/76 03/31/77 05/31/77Closing Date 06/30/81 06/30/82/cBorrower Sarajevo Gas EnterpriseExecuting Agency Sarajevo Gas EnterpriseFiscal Year of Borrower January 1 - December 31Follow-on Project None

/c Final disbursement date was 03/18/83.

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MISSION DATA

Month/ No. of No. of Date ofItem Year Weeks Persons man-weeks /d Report

Identification 1/73 1 3 1.5 3/73Preparation 4/73 1 2 1.0 05/24/73Preappraisal 1/74 1 5 2.5 03/22/74

4/74 1 1 0.5 04/25/746/74 1 1 1.0 07/74

Appraisal 6/74 2/e 11/. 11.5 12/30/74(Issues Paper)

TOTAL 18.0

Supervision I 8/76 2 2 2.0 09/15/76Supervision II 7/77 1 1 0.5 08/05/77Supervision III 4/78 1 1 0.5 05/78Supervision IV 9/78 1 2 1.0 09/20/78Supervision V 3/79 1 1 0.5 03/30/79Supervision VI 11/79 1 2 1.0 12!21/79Supervision VII 5/80 1 1 1.0 05/29/80Supervision VIII 6/80 1 1 0.5 O.C/04/80Supervision IX 9/81 1 2 0.2 'J/20/81Supervision X 7/82 0.5 2 0.1 07/30/82Completion 3/83 0.2 2 4.0 --

TOTAL 11.3

COUNTRY EXCHANGE RATES

Name of Currency (Abbreviation) Dinar (D)Year:

Appraisal Year Average Exchange Rate: US$1 - 18.00Intervening Years Average US$1 - 25.46Completion Year Average US$1 - 54.00

/a Missions developed this project and Loan 1263-YU at the same time.Thus, 50% of the total mission time was allocated to this project.

/b Appraisal includes the following:June/July 1974 2 staff for 4 weeks a 8 man-weeks

1 consultant for 2 weeks - 2 man-weeks1 staff for 2 weeks W 2 man-weeks

September 1974 1 staff for 1 week = 1 man-weekNovember 1974 3 staff for 2 weeks = 6 man-weeksDecember 1974 1 staff for 2 weeks = 2 man-weeksJanuary 1976 update costs 2 staff for 1 week = 2 man-weeks

23 man-weeks

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EVALUATION SUMMARY

Introduction

1. Loan 1264-1-YlH for US$27 million helped to finance extension of thenatural gas trunk transmission main running through Serbia, to Sarajevo, toenable Sarajevo Gas Enterprise (SGE), to develop a new city-wide gas distri-bution system also constructed under the project (PPAM, para. 2).

The Project

ii. Besides the transmission main extension to Sarajevo with terminallooplines, the project included pressure regulating stations, distributionmains, provision for 10,000 service connections, conversion of about 300heating boiler stetions to gas, and a telemetering control system. It alsoincluded technical assistance and training for SGE which was a new body with-out prior experience (PCR, para. 2.11). Total cost (including capitalizedinterest of US$6.1 million) was estimated at US$58.6 million.

Objectives

iii. The objectives of the project were to abate ihe severe atmosphericpollution suffered by Sarajevo, by substituting natural gas for the lignitecoal used for heating, and eliminating the consequent frequent smogs blanket-ing the city, causing adverse health conditions. A companion project, Loan1263-YU1 /, addressed similar pollution problems in the field of water supplyand sewage disposal in Sarajevo (PPAM, para. 1).

Implementation and Experience

IV After initial procedural delays holding up effectiveness, the proj-ect suffered further slippage, mainly by reason of congestion of works underdifferent projects in the city streets, and execution took two and a halfyears longer than forecast, some works not being completed until June 1983.Lengths and quantities of mains laid were modified under various project

1/ Sarajevo Water Supply and Sewerage Project.

revisions, to achieve economies or to improve system flexibility and reliabi-lity (PCR, para. 3.03); in particular, fewer distribution mains were laidwithin the project time-frame (PPAM, para. 4).

v. Because of inflation during the extended project implementationperiod, final costs showed an increase of 67% over appraisal estimates, indinars, but only 30% in US$ terms (PPAM, para. 6).

vi. The physical works were competently constructed and are reported tobe functioning efficiently, though sales of gas have fallen considerablyshort of forecasts. SGE's financial position, nevertheless, is good, byvirtue of the regular tariff revisions, though service of foreign debt is aproblem (as in other sectors and projects) (PPAM, para. 9). The reducedsales, partly due to the slippage in project completion, are probably alsoattributable to the high cost of boiler conversion (PCR, para. 5.03). Airpollution and related morbidity statistics are reported to have declined(PCR, paras. 4,07-4.08).

Sustainability

vii. The benefits of the project appear to be sustainable for the fore-seeable future, and indeed should increase with continued conversion ofexisting boilers to gas (PPAM, para. 10).

Findings

viii. The audit agrees with the conclusions of the PCR, that the projectwas well conceived and executed, and appears to have achieved considerableprogress in reducing air pollution; and that the institutional development ofSGE has been commendable (PCR, para. 9.01).

PROJECT PERFORMANCE AUDIT MEMORANDUM



I. PROJECT SUMMARY

The Project

1. The Sarajevo Air Pollution Control Project (Loan 1264-1-YU, signedon June 8, 1976) was part of a two-pronged attack on environmental pollutionin the Sarajevo area. This project aimed at eliminating the dangerous wintersmogs prevalent each year, by providing comparatively pollution-free naturalgas in place of lignite coal for heating. The companion Bank loan (1263-YU)aimed at improving water supply and sewerage services and reducing river pol-lution.

2. Loan 1264-1-YU for US$27 millionli was designed %'.., finance exten-sion to Sarajevo of a major gas transmission main, supplying gas from sourcesin N. Yugoslavia and the U.S.S.R., together with the necessary distributionlooplines and mcins, pressure regulating stations, service connections andconversion of existing boilers to gas, with telecontrol and metering systemsP-d technical assistance to Sarajevo Gas Enterprise (SGE), the Borrower (PCR,para. 2.11). Total estimated cost of the project was US$5P.6 million (in-cluding US$6.1 million interest during construction) to which the Bank loanwould contribute US$27 million; so that Sank financing amounted to 46% ofcost--somewhat less than the foreign exchange component (55% of total cost).Remaining financing would cc . from local loans and grants, and from SGE'sown internal cash generation.

Project Execution

3. Because of procedural delays affecting contractual arrangements andguarantees, the loan took twelve months to become effective (PCR, para. 3.01)but SGB had endeavored to minimize the effects of this delay by engagingconsultants before Board presentation (PCR, para. 3.02).

1/ Loan 1264-1-YU was actually part of a two-part loan. Loan 1264-2-YU forUS$11 million was made to the Nafta Gas Unit (NGU), an autonomous Organ-ization of Associated Labor within the Naftagas Enterprise, to aLsistwith financing of an extension of NGU's gas transmission systen in theRepublic of Serbia (financed under Loan 916-YU) to Zvornik, just insidethe border of the Republic of Bosna i Hercegovina of which Sarajevo isthe capital (Loan Agreement; SAR; PCR, para. 1.02). A separate reportcovers Loans 916-YU and 1264-2-YU.

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4. As built, the project differed from the preliminary design in somerespects; by using heavy earth-moving equipment, it was possible to realignthe transmission main, saving 13km of pipeline; the distribution network wassupplied by a loopline from two directions, instead of one, each with anindependent pressure regulating station, thus increasing system flexibilityand reliability; and the quantity of distribution mains laid during the proj-ect period was considerably reduced (85kas against 160km estimated at apprai-sal2/ (PCR, para. 3.03). The physical works were competently executed andare efficiently operated.

Time Overruns

5. Project execution took about two and a half years longer than fore-cast, the main delay occurring in the distribution network, where work washeld up by congestion through other activities (laying of water mains andsewers, roadworks) in the narrow streets of the city (PCR, para. 3.05), andin delivery and installation of the telemetering system, where delay arosefrom design changes and location problems (PCR, para. 3.06). Physical workswere completed in June 1983, except for heating boiler conversion, which Is acontinuing activity.

Cost Overruns

6. Final p:oject cost came out at US$68.3 million, 30% more than theappraisal estimate; in terms of dinars, the overrun was 67% (Din 1583.6 mil-lion, against Din 945.7 million estimated, PCR, pars. 3.11). The mainincrease occurred in the distribution system (79% in US$), which is surpris-ing in view of the shortertength- of distribution mains actually laid; thePCR attributes the overrun to inflation during the extended project implemen-tation period (PCR, para. 3.12). The other principal cost increase arosewith the telemetering and control equipment; SGE blames the overrun (657% inUS$ terms) on simply bad estimating, though more sophisticated equipment mayin fact have been subsequently specified.

Institutional Performance

7. In spite of initial lack of experience, SGE undertook considerablestaff training, with the aid of consultants, and evolved an organizationalstructure which has met operational needs extremely well (PCR, paras. 6.02-6.04). The Sarajevo Institute for Construction performed well in initialproject preparation and later in coordinating all the contemporaneous workstaking place under the two Bank projects, as well as other city developments(PCR, para. 2.14). SGE at present operates the entire system with only 170employees, which is commendable.

Sales and Financial Results

8. Connections to the system and sales of gas have lagged behinda3praisal forecasts; sales in 1985 were only 45% of expectations (84 millionm , compared with 185 million m3 ), attributed partly to the three years'

2/ A further 43km have subsequently been installed.

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program slippage and partly to the high cost of converting heating plants togas, and difficulties in obtaining cheap credit for this. The City Assemblyhad undertaken to establish a revolving fund for gas conversion, but insteadrequested banks to offer credit; high interest rates have discouraged utili-zation of this service (PCR, para. 5.03).

9. The revenue covenant under the Loan Agreement now requires SGE tofix tariffs to produce net cash generation of 35% of average capital expendi-ture over three years (comprising one actual and two forecast years). SGBdoes not always succeed in complying exactly with this--budgeting two yearsahead with the inflation now existing must be somewhat conjectural-and inany case its capital requirements are now fairly modest; but accounts pub-lished since the PCR indicate that SGE manages to earn a surplus beforeinterest equivalent to about 9% - 10% on revalued net fixed assets, achievedby frequent revisions of the tariff. (Increases in purchased gas prices arepassed on to consumers within two weeks.) This is satisfactory. However,the cost of debt service on the Bank loan represents a constantly growingburden, with dinar depreciation, and consumes a growing proportion of theoperating surplus in interest payments alone.

Sustainability

10. Subject to the financial constraints, which could prejudice mainte-nance expenditures (though these will be small as yet), the project benefitsappear to be sustainable without difficulty for the foreseeable future, andindeed should increase as the rate of conversion of heating appliances to gasgathers momentum.

Economic Evaluation

11. The appraisal report did not attempt to quantify the project bene-fits, merely indicating the necessity for gas tariffs to approximate thelong-term marginal cost of supply. The PCR finds that this is in fact thecase (PCR, para. 8.03) and shows that gas heating remains cheaper than theother alternatives to lignite (PCR, para. 8.02). There is therefore anincentive for remaining consumers to convert to gas. No economic rate ofreturn was calculated for the project, either at appraisal or after projectcompletion.

Bank Performance

12. A* in the case of the Sarajevo Water Supply and Sewerage Project,appreciation has been expressed by local officials of the borrower, of theassistance and advice afforded by Bank missions. The PCR notes (para. 7.01)that SGE considers the Bank to have played a major role in project identifi-cation and preparation and in SGE's organizational development. Althoughtotal supervision by Bank staff averaged about 10 staff weeks per year, fieldsupervision was light, amounting on average to little more than one man-weekof mission time per year (Basic Data Sheets), confirming that this was areasonably problem-free project.

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II. CONCLUSIONS

13. The audit agrees generally with the PCR, that the project waswell-constructed and is efficiently operated, and appears to be steadilyachieving its objectives in reducing air pollution to safe levels. SE hasdeveloped into a well-run and effectf- ' irganised institution. The bene-fits of the project are clear and shotu be sustainable for the foreseeablefuture.

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ATTACHMENT A

COMMENTS FROM NAFTAGAS GAS UNIT

ZC2C DIST3421 JWS0123OEDD2REF : TCP1 ME1

JWS0123 JGV518 IN 20/02:12 OUT 20/02:1541462 SA GAS YU41462 SA GAS YU

YUGOSLAVIA, SARAJEVO, 19.5.1986. RBTLX.39/ML/986

THE WORLD BANKATT: OTTO MAISS, MANAGER

OPERATIONS EVALUATION DEPARTMENT

SUBJECT : PROJECT PERFORMANCE AUDIT REPORTAIR POLLUTION CONTROL PROJECT (LOAN 1264-1-YU)

IN REFERENCE TO THE DRAFT OF THE PROJECT PERFORMANCE AUDITREPORT, AIR POLLUTION CONTROL PROJECT (LOAN 1264-17) WEINFORM YOU THAT WE ENTIRELY STUDIED THE SAME AND HAVE NOTGOT ANY REMARKS, SO WE AGREE THAT YOU SEND IT TO THE FURTHERPROCEDURE OF CONSIDERATION AND ACCEPTANCE AND AFTER THATPLEASE ADVISE US ON ACCEPTANCE IN THE FINAL CONTENTS SO WECOULD GE1 INFORMATION ABOUT THE ATTITUDE AND OPINION OFTHE BANK'S EXECUTIVE DIRECTORS.

SARAJEVO GAS

SINCERELY YOURS

I. COLAKHODZIC, PRESIDENT OF THEMANAGING BOARD

41462 SA GAS YU

41462 SA GAS YU

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SARAJEVO AIR POLLUTION CONTROL PROJECT

LOAN 1264-1- YU


I. INTRODUCTION

Background Data

1.01 The project objective was to abate air pollution in the city ofSarajevo by providing pollution-free natural gas. The project consistedof gas transmission and distribution facilities for Sarajevo to be linkedto the gas transmission system of the Republic of Serbia. The projectwas estimated to cost US$74.9 million of which US$37.4 million (50%)would be the foreign component.

1.02 The gas transmission main from Zvornik to Sarajevo, constructedby the Sarajevo Gas Enterprise (SGE), is an extension of the transmissionmain from Batajnica to Zvornik, constructed by the Nafta Gas Unit (NGU).The latter main was originally included in a previous-Bank projectfinanced by Loan 916-YU of June 25, 1973, to NGU. However, due to costoverruns and related financial constraints, supplementary financing(Tranche II) was provided to assist NGU in completing the transmissionmain . The loan amount, US$38 million, was thus divided betweenSGE-US$27 million (Tranche I), and NGU-US$ll million (Tranche II), forParts I and II of the project respectively.

1.03 Part I of the Project was supervised by the EMENA Water SupplyDivision; Part II by the Energy Department. In this Completion Report,"the Project" refers to Part I, "the Loan" to Tranche I, and "theBorrower" to the Sarajevo Gas Enterprise (SGE).

Borrower

1.04 SGE is an organization of associated labor carrying out itsactivities with socially-owned resources under Yugoslav law. It wasestablished for the implementation of the project and for the operationof the gas supply and distribution systems. It is an autonomousenterprise but decisions on tariffs and investment programs are subjectto approval by the City Assembly.

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Bank Role in the Sector

1.05 Bank involvement in the water supply, sewerage and air pollrtionsectors in Yugoslavia was initiated in 1971 and has continued through theexecution of nine projects. In addition to substantial financialparticipation, the Bank has actively assisted the Borrnwers in projectdevelopment and implementation as well as in the establishment of newinstitutions and appropriate financial strategies. Lending in the sectorhas been in accordance with Bank country policy, focusing on theless-developed Republics, and on meeting basic needs through improvedhealth and environmental conditions.

Sources of Information for the Project Completion Report

1.06 This project completion report (PCR) is based ont (i) Bankproject preparation documents, President's and Staff Appraisal Reports;(ii) SGE report "Air Pollution Control Project in Sarajevo"; (Wi1)supervision reports; (iv) external audit reports; and (v) discussionswith Borrower's staff and the City Assembly of Sarajevo.

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II. PROJECT PREPARATION AND APPRAISAL

Project Origin

2.01 Sarajevo was experiencing severe air pollution attributedprimarily to the use of lignite for heating purposes combined withspecial climatic conditions causing air inversions. The population inthe center of Sarajevo was exposed to average winter concentration of80s (sulphur dioxide) of about 0.600 mg/m' which significantlyexceeded the level classified as acceptable under the Serbian standard(0.150 mg/m'). There was clear evidence that mortality rates fromcardio-respiratory diseases increased substantially with the occurrenceof high concentrations of S0 and soot. Sarajevo also suffered fromwater shortages and from water pollution through the discharge ofuntreated sewage effluents in the Miljaca River. The city authoritiesfully recognized the need for actions to be taken for the provision ofadequate water supply and for the reduction of air and water pollution.

2.02 The Bank's interest in the environmental problems of Sarajevobegan in 1972, and projects were simultaneously prepared for water supplyand sewage disposal and for air pollution reduction which ultimatelyresulted in two loans (1263-YU and 1264-YU).

Project Preparation

2.03 In 1967, the City Assembly had begun to take measures for thereduction of air pollution. Partly on the recommendation of a Bankmission, an international consulting firm was appointed in 1973 to studyalternatives for pollution reduction including the use of natural gas.

2.04 Concurrently a proposal was under preparation to expand naturalgas supply in the eastern part of Yugoslavia through importation from theUSSR, in addition to the development of local findings in the SocialistAutonomous Province of Vojvodina. The project, which materialised, waspartly financed by Loan 916-YU to NGU. As a further development and asan extension of the NGU system, the supply of natural gas to Sarajevo wasconsidered.

2.05 Based on the consultant report, the use of natural gas wasconcluded to be the least cost and most feasible solution for thereduction of air pollution in Sarajevo. The gas could then either beobtained from the Naftagas system or through imported liquified naturalgas (LNG). Natural gas would then primarily be used in high populationdensity areas. Two local consulting firms were subsequently engaged toprepare an engineering study for gas distribution within Sarajevo. Inorder to strengthen the local consultant capacity, a short term expertfrom British Gas was employed and paid for by the Bank. This studyprovided the basis for project appraisal.

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2.06 The City Assembly through its Department for Communal Activitieshad originally been responsible for project preparation and for theengagement of consultants. As the problems became more complex the needarose for the establishment of an overall coordinating body for theimplementation of infrastructure works and consequently by early 1975 the"Institute for Construction" (ZAVOD) was created. For the implementationof a natural gas project, ZAVOD investigated the need for requiredinstitutional framework and based on its recommendation the City Assemblyestablished the Sarajevo Gas Enterprise on May 8, 1975.

2.07 The processing of the project can be summarized as follows:

(i) the project was originally appraised in December1974 and was limited to the distribution systembased on the assumption of supply of LNG;however, during a Bank mission in March 1975 itwas decided to connect Sarajevo to the Naftagassystem and the project was subsequently expandedto include a gas transmission main,Zvornik-Sarajevo, and a main pressure regulatingstation; financing for these elements wasprovided by Tranche I of Loan 1264-YU; and

(ii) at the time of loan negotiation. October 1975, itbecame obvious that the Naftaga. project (Loan916-YU) faced serious financial difficulties. Inorder to enable timely completion of the Naftagasproject it was then agreed to include thefinancing of the gas transmission main betweenBatajnica and Zvornik as tranche II of Loan1264-YU; the two components would be executedconcurrently and duly coordinated.

2.08 The time between project identification and Board presentationwas about three years, which could be considered reasonable taking intoaccount the need for the evaluation of technically complicatedalternative solutions. The City Assembly, and later ZAVOD, performedwell in managing project preparation particularly when considering theirinitial inexperience in the gas industry. The execution of theconsultant assignments was satisfactory.

2.09 The Bank contribution to project preparation was substantial inthat it:

(i) was instrumental in the engagement of aconsulting firm for the evaluation ofalternative solutions on pollution reduction;

(ii) played a major role in the identification andformulation of the project;

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(iii) rendered appropriate advice on the establishmentof the institutional framework; and

(iv) recommended the introduction of proper costrecovery policies.

ProJect Obiectives

2.10 The major objective of the project was to reduce theconcentrations of S02 and soot, with the permissible pollution levelsunder the Serbian standard to be exceeded only during six days of theheating season. By 1981 the gas distribution system was projected tocover about 65% of the total heating demand for the 6 communes which thenformed the city of Sarajevo. The remaining part of the central City wasto be heated by briquettes since expansion of the gas system to thos'dispersed higher areas was not economically justified.

Project Description

2.11 The original project consisted of:

(i) a transmission main, from Zvornik to Sarajevo,about 130 km long, and 16" in diameter;

(ii) a main pressure regulating station with acapacity of 125,000 a' per hour;

(iii) a high pressure distribution loepline, about 20km long;

(iv) about 50 pressure regulating sub-stations;

(v) about 160 km of low pressure distribution mains;

(vi) about 10,000 service connections;

(vii) conversion to gas of about 300 existing boilerstations;

(viii) a telecontrol - telemetering system to monitorgas distribution; and

(ix) technical assistance for institutionaldevelopment, training and tariff study.

2.12 The project was expected to be completed by December 31, 1980,and the Naftagas component (Batajnica-Zvornik) by December 31, 1978.

2.13 The design of the Sarajevo gas transmission and distributionsystems was based on the following assumptions:

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(1) the main pressure regulating station and thedistribution system were designed for a peakhour demand of 125,000 a', which wasprojected to be the ultimate gas supply for thecity; and

(ii) the capacity of the transmission main wasdesigned for 125,000 m'/hour at a pressuredrop (Zvornik-Sarajevo) of about 32 bar.

Loan Covenants and Conditions for Effectiveness

2.14 A loan agreement (Loan 1264-1 YU) was entered into between theBant and SGE and a project coordination agreement between the Bank andthe city of Sarajevo. In the latter, ZAVOD was appointed to coordinateall works to be executed under this loan and for the water supply andsewerage project (Loan 1263-YU).

2.15 The loan covenants novered the following major subjects:

() SGE should employ consultants for finalengineering and construction supervision,institutional development, training, andpreparation of tariff proposals. Theseconsultants were employed; and

(ii) SGE should have its accounts and financialstatements audited and furnished to the Bankwithin six months of its year end (section6.02); set its tariffs and charges to meetcertain financial targets and submit annualupdated financial projections (section 6.04),limit debt to project purposes (section 6.05),pass on within one month increases in naturalgas prices (section 6.06), and employconsultants to prepare tariff proposals withinnine months of loan effectiveness (section6.07). These covenants were complied withexcept for Section 6.04 which is discussed inparagraph 5.02.

2.16 In the coordination agreement the City Assembly agreed toprovide additional funds for cost overruns as required, take appropriateactions for tariff increases, enact and enforce air quality regulationsand make arrangements for the establishment of a revolving fund tofinance the conversion to gas-fueleO appliances.

2.17 Special conditions for effectiveness included the followingactions to be taken to ensure reliable and sufficient gas supply toSarajevo:

-12-

(i) to make effective an agreement on the supply ofgas that had been entered into (December 1974)between the USSR Government and threeYugoslavian gas enterprises including Naftagas;this took place in March 1976;

(ii) Yugoslavian banks to guarantee loans to begiven by West - European banks to finance theconstruction of a gas transmission main throughHungary; guarantee agreements were entered intoin April 1977;

(iii) an agreement to be entered into betweenNaftagas and Energoinvest on the supply of gasto the Energoinvest aluminum factory at Zvornikand to Sarajevo; this was signed May 25, 1977;and,

(iv) an agreement to be entered into betweenEnergoinvest and SGE on the operation of thealuminum factory on a dual-fuel basis by usinggas during the non-heating season, and makinggas available for Sarajevo during the heatingseason; this was signed May 25, 1977.

2.18 The loan cfvenants and conditions for effectiveness adequatelycovered the requirements for project implementation and subsequentoperation.

-13-

III. PROJECT IMPLEMENTATION AND COST

Effectiveness and Start-Up

3.01 The Loan was declared effective on May 31, 1977, or twelvemonths after signature due to delays, caused entirely by third parti-s,in providing Bank Guarantees and completing contractual arrangements.

3.02 Althoug). appointment of consultants for engineering andconstruction supervision was a non-dated loan covenant, SGE actedexpeditiously and consultants were engaged before the Loan was presentedto the Board. The Bank assisted SE in the preparation of terms ofreference for the transmission main and for the distribution system, andcounseled SG8 to accept foreign participation where local experien;e waslacking. This resulted in two joint venture consultant contracts withthe foreign consultants having overall responsibility for design andconstruction supervision.

Revisions to the Scope of Work

3.03 The appraised project was based on a preliminary design whichutilized British practice and standards. The following revisions wereproposed, which were accepted by the Bank:

(a) the foreign contractor for the transmission mainproposed a realignment, enabling a reduction from130km (proposed) to 117km (installed), which wasmade possible by the use of its heavy earth-movingequipment; and

(b) for the distribution system, the consultant proposedconnecting the loopline to the transmission mainfrom two directions with the provision of two mainpressure regulating stations (instead of one); thisarrangement increased system reliability andflexibility.

A comparison of the distribution system (Map IBRD 11460R(PCR)) asappraised and as implemented is shown below:

Distribution SystcAs Appraised As Implemented

Loopline 20 km 67 kmDistribution Mains 160 km 85 kmTotal System Length 180 km 152 kmMain Pressure Regulating Stations 1-125,000 M'lHour 2-62,500 Ms/HourPressure Regulating Substations 50 Nos. 22 Nos.

-14-

IMlementation Schedule

3.04 A comparison between appraisal estimates and the actualimplementation of major project components is shown on Chart 1. Thetransmission main from Zvornik to Sarajevo was delayed by about one yearbecause of delays in design prepa:ation and in tendering and contractaward. However, the work was completed in late 1979 concurrently withthe main from Batajnica to Zvornik (Tranche II).

3.05 The execution of the distribution system took about two yearslonger than planned because of design and routing changes, and the needto coordinate the work with the laying of water and sewer mains as wellas road improvements. Also much of the work took place in narrow,congested areas, which slowed down construction progress, and increasedthe costs.

3.06 85% of the capacity of boiler stations has been converted togas. Conversion has beer slower than anticipated because of financialconstraints (para.5.07). The delivery and installation of thetelemetering system exceeded estimates by about two years due to designcharges and difficulties in deciding the location of the main controlstation.

3.07 The difficulties encountered in the execution of thedistribution system resulting from the coordination with other major Cityworks were not fully known.

Reorting

3.08 The reporting system consisted of quarterly and annual reportsutilizing the key indicators set forth in the Loan Agreement. Suchreports were submitted on a regular basis.

Procurement

3.09 SGE prepared the general portion of tender documents, while thetechnical part was prepared by consultants. Preparation was timely, andBank response took place within one month of document receipt. Tenderevaluation was performed by a SGE committee with consultant assistance,and was normally completed within three months for equipment and up tosix months for civil works. Prequalification was requested for thetransmission main: 22 of the 28 firms expressing interest were selectedas qualified, but only 3 submitted bids.

3.10 SGE entered into 487 contracts of which 462 were under LCB and25 under ICB. Foreign bidders were awarded 82 contracts, 57 of whichwere advertised locally, and local firms were awarded 405 contracts. Theaggregate value of foreign contracts was about equal to that of the localcontracts. The number of contracts was unusually high, which was mainlydue to the methodology for executing the distribution system L', butthis did not adversely affect project executiou or standard of work. Thecost for construction supervision amounted to US$1.1 million equivalent,

-15-

or about 2% of project cost, which is reasonable.

3.11 The following table compares the estimated and actual projectcosts in Dinar and U.S. Dollar equivalent, the latter at annual averageconversion rates:

Proiect Cost

IncreaseEstimated Actual Estimated Actual Decrease-Dinar Millions-- -US$ Millions-- -Din- -USJ-

Transmission Main 445.4 573.8 14.7 24.7 29 0Distribution System 324.4 745.8 18.0 32.2 130 79Pressure Regulating

Stations 32.6 54.0 1.8 2.3 66 28Telecontrol 13.3 122.0 0.7 5.3 817 657Conversion of Heating

Plants 49.4 23.4 2.8 1.0 (53) (64)Engineering Services 80.6 64.6 4.5 2.8 (20) (38)

Total 2&. LIMA M AZ

1/ Contracts were awarded on an annual basis and on a piecemeal approach.

3.12 The cost increase, 67% in local currency and 30% in U.S. Dollarequivalent, can be attributed to:

(i) significantly higher actual local inflationthan projected (cumulatively 310% versus 90%)which was partly due to the energy crises andattendant price explosion; and

(ii) the 18 months delay in project completion from1980 to 1982.

Disbursements and Financial Sources

3.13 Projected and actual Bank loan disbursements are shown in AnnexI, Table 1. The actual disbursement period was 6 years. In thedisbursement percentage a major change from appraisal estimates occurredin the civil works category in order to accommodate the foreign currencyrequirements under the contract for the transmission main which wasawarded to a foreign firm. The Bank loan represented 51% of the total

-16-

Project cost at appraisal which dropped to 42% of actual costs. Directforeign paymerts amounted to U.S.$18.8 million equivalent, correspondingto 702 of the Bank loan.

3.14 Project financing (para. 5.05) regarding the percentagecontributions from different sources remained fairly close to appraisalestimates which was a remarkable achievement, when considering the delayin implementation, the cost increases, the rapid devaluation of the Dinarafter June 1980, and the initiation of debt service payments concurrentwith the first full year of operations.

Performance of Consultants, Contractors, Suppliers and the Borrower

3.15 The consultants performed well, and the joint ventureassociations between foreign and local consultants resulted in asignificant transfer of know-how to Yugoslavia. The single foreign civilworks contractor completed its contract to SGE's satisfaction. Due tothe large volume of local civil works contractors, an evaluation of theirperformance is not possible, but SGE did find that maintaining at thesame time quality standards and construction schedule tended to createdifficulties. Equipment suppliers performed well and met initially allquality standards except in one case where the equipment was rejected andreturned. The 80E staff despite the initial lack of experience,performed very well overall.

-17-

IV. OPERATING PERFORMANCE

Introduction

4.01 The areas addressed in the evaluation of the operatingperformance are the following:

(i) the functioning of the gas supply anddistribution systems;

(ii) the utilization of existing system capacity; and

(iii) the reduction in air pollution levels andrelated health benefits.

Gas System Functioning

4.02 The gas system has been functioning since late 1980 andexperience gained so far has been favorable. Deficiencies have beenobserved in some stretches of the transmission main where protectionworks will have to be carried out against risks of earth sliding. Thedelivered gas has a higher moisture content than anticipated, which hasnecessitated the provision of additional condensation vessels. Thetransmission main will not reach its design capacity until thecommissioning of the compressor station at Zvornik (under the Naftagasproject) which is scheduled in a later phase. However, this would not,at present, restrict the utilization of the system.

4.03 The project provided for sufficient spare parts and operationaland maintenance equipment and no problems or difficulties have been orare envisaged to be encountered in operational matters. Throughtelemetering, most of the system control is automatic and the operationalstaff is small but competent.

Utilization of The Gas System

4.04 The gas distribution system covers 34 km', or 53% of the areacomprising the city of Sarajevo (the six communes). At the end of 1983,the city had an estimated population of 340,000 of which 220,000 (631)had access to the system, and about 178,000 (52%) had been connected.

4.05 Actual 1983 sales of 80.0 million m3 of gas represents 62% ofthe projected third year of operations. Heating was thus provided to36,000 flats (146,000 people) and to 7,500 individual homes (32,000people) for multiple uses, as well as to nearly all commercial andindustrial firms in the center City area. In view of the creditdifficulties (para. 5.03) this represents a major marketing achievementon the part of the SGE.

-1.8-

Air Pollution Reduction

4.06 Measurement of air pollution in Sarajevo has been carried outcontinuously since 1973, and although the methodology employed has beenmodified since appraisal, which makes a direct comparison difficult, itcan be concluded that the appraisal objectives on the reduction in airpollution would be fully achieved by about 1986.

4.07 Chart 2 shows the different energy sources in use and the actualand estimated reduction in 80S during the period 1973/74 to 1984/85.An analysis of the data would indicate:

(i) the use of lignite expressed as a percentage oftotal energy demand has decreased from 40% in1973 to 13% in 1982 and is expected to remainat that level for some years;

(ii) the emission of SOa has been reduced to about50% (1982) of corresponding emission in 1973;this is expected to be further reduced; and

(iii) the reduction in 80, emission through 1979,would mainly be attributed to the replacementof lignite by liquid fuel and thereafter to thereplacement of liquid fuel by gas.

4.08 The Institute for Health Protection has statistics for cardiorespiratory diseases and mortality rates evidencing a decrease infrequency, and expects further declines in the future.

-19-

V. FINANCIAL PERFORMANCE

Introduction

5.01 Sarajevo Gas Enterprise (SGE) has had a comparatively short anddemanding operational life span. Comparisons of appraisal forecasts withactual financial results are contained in Annex I Tables 2, 3 and 4.

Financial Performance

5.02 SGE has introdu^ced a two-part tariff system. Part I covers thecost of gas purchased for which the City Assembly authorized SGE tocharge the full cost to its consumers. Part II covers all SGE operating,debt service and other financial needs which is approved annually by theCity Assembly and for which a tariff structure has been establishedproviding for cross- subsidization between domestic andcommercial/industrial consumers.

5.03 The connection rate to the gas system has been lower thanprojected, which consequently has affected the sale of gas andnecessitated higher tariff levels than otherwise would have beenrequired. The major reason for this would be financial constraints. Theestimated cost of converting heating plants to use gas (Din.30.0 millionat appraisal) had grown 8 times to Din.250.0 million by 1978. Instead ofestablishing a revolving fund the City Assembly requested all banks togive priority credit, at the lowest legal rate, for gas conversion.These credit facilities were being utilized, but a noticeable declineoccurred with a s ,bsequent increase in the interest rate. Although theCity Assembly had enacted pollution control regulations, their strictenforcement presents a significant problem because of the financialimplications. The City Assembly planned to reinaugurate preferentialbank credits in 1984 when the Olympic demands are over in order toaccelerate small home owner connections and sales.

5.04 Despite delays in initiating operations and the fact that debthad to be serviced during project construction, SGE was able to generateinternal funds for its investment program. SGE generated 4.4% of theprogram during construction, and were it not for the untimely debtservice payments, they would have fully complied with the target of 11%.

Financing Plan

5.05 The period 1976-82 was characterized by rapidly increasingconstruction costs resulting from internal inflation far beyond appraisalestimate, and substantial currency devaluations from 1980 onwards.Despite competing demands from other concurrent projects, notably theSarajevo Water and Sewerage Project, Loan 1263-YU, urban renewal in thecity center, and the massive infrastructure requirements for the 1984Winter Olympics, the City helped balance the additional fundingrequirements through direct contributions and assistance in securingadditional bank loans.

-20-

5.06 Investments including capitalized interest totalling Dinar 1,860million (appraisal Dinar 1,107 million) were financed 22% from capitalcontributions (appraisal 13%), 481 from the Bank loan (appraisal 39%),30% by local loans (appraisal 33%) while internal cash generation wasapplied primarily to debt service, working capital, and loans to Naftagas.

Financial Covenants

5.07 The performance of the four financial covenants can be assessedas follows:

(a) The cost recovery covenant was appropriate to anenergy project, and ias supportive of SGE's tariffproposals to the Cit7 Assembly.

(b) The covenant requiring SGE to recover the costincreases in gas supply within one month wasinstrumental in the success of SGE's two-parttariff system.

(c) The covenant for the establishment of a revolvingfund, did not work out satisfactorily. Banksupervision missions were advised of the change inthe program, and reported the change to bejustified under the circumstances; and

() The debt limitation covenant did not come intoeffect since SGE did not take out any long-termloans except for project purposes, and thelong-term local lending sources used were thosespecified in the Loan Agreement.

5.08 Overall, the covenants played a valuable role in providingorientation for a financially successful project.

-21-

VI. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT

Institutional Objectives

6.01 The institutional objectives for the establishment anddevelopment of well functioning organizations for project coordinationand implementation and for works operation have been achieved.

Development of SGE

6.02 SGE employed an international consulting firm in accordance withthe Bank guidelines to propose an organizational structure, identifystaffing requirements and implement a training program. Its assignmentwas later extended to cover also a tariff study. The consultant's workwas completed satisfactorily in early 1979, except for the tariff studywhich was not implemented. Most of the consultant's organizationalproposals or recommendations were subsequently introduced.

6.03 Chart 3 shows the present organizational structure of SGE whichserves its purpose well. The development of its organization andstaffing has kept pace with project implementation and the increase ofrelated functions to be performed. The number of staff has increasedfrom 5 in 1975 to 157 at present. Staff are highly qualified andefficiently utilized.

6.04 Since experienced technical staff was initially not available,signiticant training has been undertaken both within and outside SGE.Recruitment has not presented any particular problem; turnover has beenlow and staff morale is high.

Training

6.05 The training activities consisted of the following main programs:

(1) 4 engineers were sent to Holland in 1978 to theDutch Gas Institute for an 8 month trainingcourse in subjects directly related to theexecution and operation of the gas project;

(ii) a Training Center was subsequently created inSarajevo in cooperation with Workers School andconducted by professional trainers; courseswere prepared in subjects relevant to gassupply and distribution and training has so farbeen imparted to 268 attendants for boilerhouses (non SGE staff), 21 attendants formaintenance of the distribution system and 12attendants for maintenance of domestic gasinstallations; and

-22-

(iii) in 1982, 80 was instrumental in establishing acourse in gas technique at the faculty ofMechanical Engineering at the University ofSarajevo.

The training undertaken is commendable.

Office Facilities

6.06 8G was to have office facilities in the Sarajevo Water andSewerage Enterprise (Vodovod) administrative building but because offinancial constraints the building will not initially be completed to itsproposed height and consequently no space can be allocated to SGB.Present facilities are adequate but the location of staff at fourdifferent places is inconvenient.

-23-

VII. BANK PERFORMANCE

7.01 The Bank established a good rapport and working relationshipwith both the Borrower (SGE) and the coordinating agency (ZAVOD). SGEconsiders the Bank to have played a major role in project identificationand preparation and in its organizational development and that the Banksupervision has been useful. SGE is appreciative of Bank support andadvice.

7.02 Bank staff, during project preparation, developed a methodologywhich led to the coordination of the efforts of 36 enterprises andinstitutions involved in the preparation of the project which maximizedthe input of those organizations while focussing on the specific needsfor external assistance.

-24-

VIII. PROJECT JUSTIFICATION

Background

8.01 The three main justifications for the implementation of theproject were:

(a) the project would through reduced air pollutionprovide improvements in general health andenvironmental conditions (paras. 4.06-4.08);

(b) the project would be the least-cost alternative formeeting acceptable air quality standards; and

(c) the project would provide through the extension ofa gas system a financially attractive heatingalternative.

Alternative Heating Costs

8.02 SGE staff developed data as shown below comparing the cost (inAugust 1982 prices) of heating an average size apartment (60M2) to21* centigrade.

Cost Per YearCurrent Current-Dinar- --

Gas 6,624 88.30Heating Oil 9,462 126.16Electricityl/ 7,818 104.24Lignite 3,678 49.04

The above data demonstrates that apart from lignite which is notacceptable from the pollution viewpoint, gas is the most economicalheating alternative and it is 18% and 43% less expensive than electricityand heating oil respectively; the latter differential will furtherincrease when a recently enacted federal tax on heating oil has beenapplied.

1/ The use of electricity for heating purposes represents about 13% oftotal heating demand (1983) and is expected to decrease because ofits limited availability.

-25-

Long-Term Averase Incremental Cost

8.03 The long-term average incremental cost of the gas suply at a15% discount rate was estimated at appraisal to be Din.2.58/M of gassold. The revised calculation is Din.4.17/M', or 651 higher than theappraisal estimate, because of an assumed delay from 1983 to 1987 forfull utilization of the system. The average tariff (in 1976 prices)collected by 8GE during 1982, about equaled the above long-term averageincremental cost, which is satisfactory.

Internal Financial Rate of Return (IRR)

8.04 The appraisal report did not provide an IRR since projectjustification was made on other bases. However, by using the dataavailable for the very limited operational life of SGE and currentforecasts for future system utilization, the IRR would be about 14,which is satisfactory.

-26-

IX. CONCLUSIONS AND LESSONS LEARNED

9.01 The following conclusions emerge:

(1) the project was technically well conceived, andimplemented a reasonable-cost solution amongacceptable alternatives;

(ii) the primary objective of satisfactory reductionof air pollution is likely to be substantiallyachieved by about 1986 with a gradual increasein the utilization of the gas system*

(iii) with the provision of satisfactory creditfacilities for conversion costs the projectprovides for a financially attractive heatingalternative; and

(iv) SGE as established and developed under theproject is functioning well, and its gas supplyand distribution facilities are well operatedand maintained;

*27 MU ITOUe -1 of 4

TUQQjIAVlA

SARAZVO GAS ENTRRISI

TARIF HISTOaY

ON DINAMISOLD)

PARt 1 PART I MUAL TARIFFCost of Gas All Other CostaSupplied Domestic Industrial Commercial Domestic Industrial Commaq

November 1980 6.25 8.00 11.00 12.00December 1980 6.25 8.00 11.00 12.00January 1981 7.69 Not in effect until 8.00 11.00 12.00February 1981 7.69 July 1981 8.00 11.00 12.00March 1981 7.69 8.00 11.00 12.00April 1981 8.86 8.00 11.00 12.00may 1981 8.86 8.00 11.00 12.00June 1981 8.86 8.00 11.00 12.00

July 1981 9.44 2.31 5.83 LI 7.45 11.75 15.27 16.89August 1981 9.44 2.31 5.83 V 7.45 11.75 15.27 16.89September 1981 9.44 2.31 5.83 1/ 7.45 11.75 15.27 16.89October 1981 8.96 2.31 6.18 7.45 11.27 15.14 16.41November 1981 8.96 2.31 6.18 7.45 11.27 15.14 16.41December 1981 8.96 2.31 6.18 7.45 11.27 15.14 16.41January 1982 8.77 2.31 6.18 7.45 11.08 14.95 16.22February 1982 8.77 2.31 6.18 7.45 11.08 14.95 16.22March 1982 8.77 2.31 6.18 7.45 11.08 14.95 16.22April 1982 9.37 2.31 6.18 7.45 11.68 15.55 16.82May 1982 9.37 2.31 6.18 7.45 11.68 15.55 16.82June 1982 9.43 2.31 6.18 7.45 11.74 15.61 16.88

July 1982 9.84 2.61 17 6.18 7.45 12.45 16.02 17.29August 1982 9.93 2.69 7.17 8.65 12.62 17.10 18.58September 1982 10.12 2.69 7.17 8.65 12.81 17.29 18.77October 1982 10.60 2.69 7.17 8.65 13.29 17.77 19.25November 1982 10.60 2.69 7.17 8.65 13.29 17.77 19.25December 1982 12.30 2.69 7.17 8.65 14.99 19.47 20.95January 1983 12.75 2.69 7.17 8.65 15.44 19.92 21.43February 1983 13.54 2.69 7.17 8.65 16.23 20.71 22.19March 1983 14.58 2.69 7.17 8.65 17.27 21.75 23.23

1/ These slight differences from the rest of the year represent computer program problems.

YUGOSLAVIA

SARAJEVO AIR POLLUTION COMT_ML PROJECT (LOAN 1264-YU)


SARAJEVO GAS ENTERPRISE (8M8)

INCOME STATUAENTS AS OF DECEMBER 31(Diaar Millions)

l1979 1980 1981 1982Appraisal Andited Appraisal Audited 1/ Appraisal Audited Appraisal Actual 21

Gas Sales (million =3) 60.0 Not 90.0 4.8 130.0 39.3 145.0 54.2Sales Price (Dinar/m3) 3.1 Operational 3.3 10.73 3.6 11.56 3.7 14.95Revenue

Sale of Gas 186.0 - 297.0 40.4 468.0 446.2 536.5 803.3Other Income 2.7 - 3.4 0.2 4.1 3.3 4.7 19.3Total Revenue 188.7 - 3 40.6 472.1 449.5 541.2 822.6

Operating Expenses

Gas Purchases 125.4 - 201.6 25.8 312.0 312.4 371.2 553.2Wages & Salaries 10.9 - 14.8 16.6 18.8 25.3 21.6 35.0Maintenance 4.2 - 4.9 1.2 6.2 3.2 9.5 5.7Insurance 5.0 - 5.9 0.1 6.4 2.7 6.8 3.9Contributions - - - 3.9 - 5.9 - -Ocher Expenditures 6.0 - 8.1 2-8 _10-3 3.8 11.9 10.6

Total Expenditures 151.5 - 235.3 30-4 3- 353-3 421.0 608.4Surplus Before Depreciation 37.2 - 65.1 (9.8) 118.4 96.2 120.2 214.2Depreciation 23.1 - 26.9 2-5 27.6 24.1 28.1 123.6Surplus Before Interest 14.1 - 38.2 (12.3) 90.8 72.1 92.1 90.6Interest - 68.3 40.0 66.2 85.9

Net Revenue 14.1 Not 38.2 (12.3) 22.5 32.1 25.9 4.7Operational

Operating Grats - City of Sarajevo - - 25.1 - -

Audited Net Revenue - - 12. - 32.1 - 4.7Rate of Return on Average Net Fixed Assets 3.6 - 4.5 - 9.9 4.9 10.1 3.4 M

1/ In 1980, due to operations initiating on December 28, 1979, the income statement was noted by the auditor, but was not audited.2/ Audited data was not available. Data used was from company records.

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YUGOSLAVIASARAJEVO AIR POLLUTION PROJECT (LOAN 1264-YU)

Project Compeion ReportProject implementation Schedule

Y~ 1976 4977 1978 1979 4980 4994 4982 4983

-D-- -- --- r - -- -- -- -- on - - - - -- *- - RmGuarler 2 3 4 1 2 3 14' 1 12 3 4 l 2 3 41 2 3 [4 4 2 314 1 2 3 4 1 1213 14

Tprlnd 1.im

zoor soe so Re-i- --

Planned f1*

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PlRned a a a uDisbt Gdd

Reanzed **l "" *l **" l • •l fl • • fl • •fl • f•l • -

Planned "" - - * -Reguao Stations

Re ~Pzd

Conversion of Heating Plant sRealed * -

Planned fNf l---f l f l f

Telemeby SysternRecuzed fl• - fl • • •l •f •-l-

Control & Admn~itafi blYd-- l

Building Realized f• • u ,•• • f •• fla fl• a

Legend: Designs & Prpoffon of Tender Documents

- -Supply, installation & Conswuction

Iv Planned

SReafl2ed

Tendering & ContrctAwarddWMa~Bnk244

- 32 - CHART 2

YUG~M*1SARAEVO AMR POLLUTION PROJECT (LOAN 1264-YU)

Pl~Øc CM ~pllo R~oRew ot $02 Emission and Fuel Used for H in Sara~o, In Pøod *om

1973/74 th~ough 1981/82 and Estimaflons up to 1984/85 Innr Cty Ama

7t

61

51 1$02

>1 -

1M

73/74 74775 75/176: 6/77. 77/78 787/79 79/80 80/81 81T/8 Wi 8-3 84/85

WaOW eæ*-24946

m 33 . CHART 3

YUGOLVIASARAJEVO AR P 3LLUTION PROJECT (LOAN 1264-YU)

Po comp n RSara~evo Gas Entps» - Organiaon Chat

Councl

Man~gim Boaud& Secial

TechGood 1x

-perOn Rnonc Admnb*~_Deaament Dopan Depmn

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ponoon don0~ C9 Am~

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Mah1963Wod Ban*-24947

기

IØRD l 146OR<PCR.'J~ 1983

YUGOSLAVIASARAJEVO

AIR POLLUTION CONTROL PROJECTGAS DISTRIBUTION SYSTEM

mofflo

7M

GAS TRANSMISSION MAIN (ZVORNIC -SARAJEVO)

MAIN PRESSURE REGULATING STATIONS

GAS DISTRIBUTION LOOP LINE

PRESSURE REGULATING SUS-STATIONS

AREAS, SERVED BY THE GAS DISTRIBUTION GRID

MAIN STREET NETWORK

RIVERS

CONTOURS IN METERS

INTERNATIONAL BOU*.t)ARIES

ý11ý-l- 1975 L~, -d,

3 4

KILOMETýRS

T?» w~ r4