Belgrade Waste-to-Energy PPP

Context

The project involved a saturated landfill in Vinca (suburb in Belgrade) and covered an area of 40 hectares near the Danube River. It involved the closure and subsequent remediation of the existing landfill and the construction of a new sanitary landfill, a plant for processing construction and demolition waste, a plant for leachate treatment, a landfill gas-to-energy facility, and a 103 MW waste-to-energy plant using municipal waste.

Stakeholders involved

• Public Partner: City of Belgrade
• Company: Beo Cista Energija (BCE), an SPV created by a consortium of SUEZ (France), Itochu (Japan), equity fund Marguerite II (Luxemburg)
• Facility operator: SUEZ 
• Lender: IFC is a member of the World Bank Group and uses capital and expertise to create markets and opportunities in developing countries. MIGA also provided non-commercial risk insurance to the private sector.
• Lender: European Bank for Reconstruction and Development (EBRD)
• Lender: Oesterreichische Entwicklungsbank (OeEB)

Problem

The landfill receives 90% of Belgrade’s waste. However, it did not meet EU standards. The landfill was impacting air quality in Belgrade and surrounding areas, frequently catching alight and polluting groundwaters and nearby agricultural areas before discharging untreated water to the Danube (1).

As noted by the IFC, this was the first time a large-scale environmental infrastructure PPP project had been undertaken in the region.

Innovation

Using a competitive dialogue with five pre-qualified bidders, the City of Belgrade - with the support of IFC acting as a PPP advisor - could offer a bankable DBFO contract bundling the remediation of the landfill (including the management of legacy pollution) with the development of revenue-generating greenfield assets.

The total funding received was USD350 million. Non-recourse loans were provided to BCE from the IFC, OeEB, and EBRD.

The IFC contribution included an A loan of USD84 million, a B loan of USD41 million, and a concessional loan of USD24 million from the Canada-IFC Blended Climate Finance Program.

MIGA guaranteed USD114 million for non-commercial risks (€97.3 m), which covered up to 90% of investor equity in BCE (2).

Timeline

Results and impact

• Serbia is an EU candidate, but before it can join, it must invest an estimated USD18 billion to meet environmental standards. The remediation of the Vinca landfill will contribute to the transformation of Serbia’s environmental infrastructure.
• The waste-to-energy facility will process up to 340,000 tonnes of municipal waste each year, or 66% of Belgrade’s total waste. It will operate as a combined heat and power (CHP) facility, powering approximately 30,000 households and delivering steam to the municipal district heating system.
• The recycling unit will treat 200,000 tonnes of construction and demolition waste.
• The leachate-controlled 7 million cubic meter capacity landfill is designed to prevent further contamination of the surrounding areas.
• The program will allow Belgrade to reduce its greenhouse gas emissions by 250,000 tonnes of CO2 per year, notably by curbing methane emissions from uncontrolled dumping.

Key lessons learnt

• IFC can act as a co-financier with other development banks to pioneer environmental infrastructure projects in emerging markets, such as Eastern Europe. IFC’s expertise and deal structuring can be used to attract global private sector consortiums to achieve environmental and social outcomes.
• Insurance agencies such as MIGA are important to securing institutional capital by protecting against non-commercial risks such as breach of contract and political risk.