75789 June 2012 PPIAF Assistance in Kosovo Technical Assistance for Kosovo’s Water and Sanitation Sector The conflict of the late 1990s left municipal water services in Kosovo in a critical situation. Among the most severely damaged areas were the towns of Gjakovë and Rahovec and the 56 surrounding villages, with a combined population of about 200,000. Before the conflict this area had satisfactory water services, as customers received continuous service and were billed on the basis of metered consumption. But the devastation of the infrastructure during the war, followed by the exodus of many capable employees and a lack of maintenance, took a heavy toll on the municipal water services. It is against this background that PPIAF support was sought in 2000 to assist with the preparation of private sector participation in the water supply services of the Gjakovë–Rahovec area of Kosovo. PPIAF supported a financial and institutional assessment, a review of options for private sector participation, and the preparation of detailed Terms of Reference and bidding documents for a two-year management contract. Under the proposed management contract, the private operator would take full control of operations, maintenance, and billing and collection in the area. It would also be in charge of an emergency repairs investment fund established through a World Bank grant, with responsibilities that would include identifying, selecting, contracting for, and supervising the civil works to be carried out. The contract had two main objectives: improve services for the customers, and establish a viable public utility capable of operating on its own by the end of the contract. The Gjakovë and Rahovec Water Supply Management Contract was signed in November 2001 with German private operator Gelsenwasser AG and started in January 2002. The goal of the project was to strenghen the regional water supply company of Gjakovë, Rahovec, and Lumbhardi in Kosovo. The management contract was performance based, with a $1 million fixed fee and a performance bonus based on the achievement of selected performance targets. The contract was initially for two years but was later extended for a third year, with the total cost reaching $2.1 million. During the three years of the management contract, the private operator achieved sizable improvements in the operational and financial performance of the utility including an increase in metered customers from 10% to 90% of the population and providing a 24-hour water supply to approximately 200,000 people. Results of PPIAF’s Activities in Kosovo’s Water and Sanitation Sector Category Outputs Enabling environment reform  Kosovo Emergency Water Supply and Sanitation Project: Analyses/assessments Analysis of the Institutional Framework and Company prepared Organization in the Gjakovë Sub-Region, 2001 Project cycle-related assistance  Terms of Reference and bidding documents for a two-year Transaction support management contract, 2001 1 Category Outcomes Project cycle-related assistance  Gjakovë and and Rahovec Water Supply Management Transactions facilitated Contract signed in November 2001 with private operator Gelsenwasser AG and started in January 2002 Capacity and awareness building Technical capacity enhanced  Technical capacity of the water utility enhanced, 2001 Category Impacts Increased number of people with  24-hour water supply to approximately 200,000 people, 2007 infrastructure services  Increase in metered customers from 10% to 90%, 2007 Technical Assistance for Kosovo’s Transport Sector In 2006 PPIAF supported the Ministry of Transport and Communication in assessing the viability of and options for private sector participation in Kosovo’s highway sector. The technical assistance provided inputs for developing a highways development strategy, with specific recommendations on policy, legislative, administrative, and institutional frameworks for facilitating public-private partnerships (PPPs). A stakeholder’s consultation workshop was held in May 2007 to review the report and gather feedback from various stakeholders. The consultants undertook a detailed review of the enabling framework for PPPs in Kosovo, assessed the priorities in the transport sector from available studies, and made recommendations as to the approach and suitability of private finance in the sector at the time. The study concluded that not all the conditions required for a successful PPP were apparent in Kosovo at the time, as the policy framework for PPPs was weak, and there was limited knowledge on PPPs in the institutions of the state, coupled with limited implementation capacity and an incomplete legal framework. The report recommended strengthening the institutional framework for PPPs and identified some priority sections on the road network that might be suitable for a potential pilot PPP project in the near future. One recommendation in view of limited viability of the highway projects and potential for tolling was to start with a pilot. The workshop provided a good opportunity to disseminate the study findings and deliberate on key recommendations. It helped the government officials understand the issues involved in introducing PPPs in highways development and thus manage their expectations. The activity has been instrumental in providing key inputs to the government on their proposed highways PPP program by pointing out key gaps in the policy, legal, and institutional frameworks that need to be addressed. Results of PPIAF’s Activities for Kosovo’s Transport Sector Category Outputs Enabling environment reform Analyses/assessments  Study to Assess the Viability and Options for Public-Private prepared Participation in the Highway Sector in Kosovo, May 2007 Workshops/seminars  Stakeholders consultation workshop in Kosovo, May 2007 2 Category Outcomes Enabling environment reform Institutions created or  Ministry of Transport and Communication strengthened, May strengthened 2007 Technical Assistance for Kosovo’s Energy Sector Kosovo, while not yet a member of the European Union, seeks to adapt its primary and secondary legislation toward that objective. Under Directive 2001/77/EC, each member state must prepare and seek to comply with national indicative targets for the share of electricity generated from renewable energy sources. In 2005 Kosovo’s Ministry of Energy and Mines issued a policy statement that adopted by the Assembly of Kosovo, encouraging the economic use of renewable energy sources and issuing indicative targets. PPIAF support was sought in 2008 to develop a practical framework of secondary legislation and regulations to encourage and facilitate the development of renewable energy sources. This framework would enable the Energy Regulatory Office to implement such policies to achieve national indicative targets for the share of electricity generated from renewable energy sources in effect under its Law on Energy. The technical support provided advice on: i) procedures and methodology for renewable energy pricing; ii) the regulatory framework for renewable energy support mechanisms; and iii) the institutional arrangements and administrative procedures for setting up a system for the issuance and usage of certificates of origin. The certificates of origin are issued by the Energy Regulatory Office to prove the usage of renewable energy resources or waste for the generation of electricity or the co �generation of heat and electricity. Following the PPIAF support, the Energy Regulatory Office passed amendments to key secondary legislation, rules, and procedures for incentivizing the development of renewable sources of energy. Results of PPIAF’s Activities in Kosovo’s Energy Sector Category Outputs Enabling environment reform  Preparation of a framework of secondary legislation and regulations for the development of Renewable Energy Sources Policies prepared or legal or (RES), 2009 regulatory changes  Procedures and methodology for renewable energy electricity recommended pricing, 2009  Development of a System of “Certificates of Origin ,� 2009 Category Outcomes Enabling environment reform  The Law on Energy 2004/8, Law on Electricity 2004/10, and Policies adopted, legislation Law on the Energy Regulator 2004/9 were amended, 2010 passed/amended, or regulations issued/revised  Adopted rule for issuing of “Certificates of Origin� in respect to electricity produced from renewable energy sources, 2010 3