Report Nova Varos

Report
Pre-Feasibility Studies on 4 Biomass plants for

District Heating Companies in Serbia
Client
Ministry of Mining and Energy

KfW Entwicklungsbank
Document title
Sub-report: Nova Varo
Document date
21.10.2015
Revision: 0
This report is an amendment to the previous studies prepared in

2014: Pre-Feasibility Studies on 15 Biomass CHP-plants for District
Heating Companies in Serbia
iC consulenten Ziviltechniker GesmbH

Schnbrunner Strasse 297, 1120 Vienna, Austria
T +43 1 521 69-0, F +43 1 521 69-180
office@ic-group.org, www.ic-group.org
FN 137252 t
EN ISO 9001
In association with
M:\52_CES\15187_KfW_Srb_4_DHC_HoB\5_Arbeit\Reports\151021_Report Nova Varos.docx

Pre-Feasibility Studies on 4 Biomass plants for District Heating Companies in Serbia iC consulenten
Sub-report: Nova Varo 21.10.2015
DOCUMENT CONTROL SHEET
PROJECT NUMBER: 52x15187 - Reference Number: 312-01-00603/2012-10
PREPARED BY: iC consulenten Ziviltechniker GesmbH

Felix Eckert
Schnbrunner Strasse 297, A-1120 Vienna, Austria
Tel: +43 1 521 69 - 267
Fax: +43 1 521 69 180
E-Mail: f.eckert@ic-group.org
PREPARED FOR: Ministry of Mining and Energy

Attn. Biljana Ramic
Reference Number: 312-01-00603/2012-10
Address: Kralja Milana Street 36, 11000 Belgrade, Serbia
Phone: +381-(0)11-3604518
Fax:
E-Mail: biljana.ramic@mre.gov.rs
PREPARED FOR: KfW Entwicklungsbank

Attn. Bodo Schmlling, Dept. LE a 3
Address: Palmengartenstr.5-9, 60325 Frankfurt am Main, Germany
Phone: + 49 69 7431-2307
Fax:
E-Mail: bodo.schmuelling@kfw.de
DATE: 21.10.2015
EDITOR: iC - ECKERT Felix, B. Brndle, M. Watzal, V. Milijic, P. Vasilijevic
Date Revision No. Editor Checked by Approved by Signature
21.10.2015 Rev. 0 DRAFT B.Brndle et al. Eckert Helbl

xxx Rev. 1
xxx Rev. 2
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CONTENT
1. Executive Summary .......................................................................................................... 1

1.1 Data Collection ........................................................................................................................... 1
1.2 The project ................................................................................................................................. 1
1.3 Recommendation ....................................................................................................................... 2
2. Introduction ..................................................................................................................... 2
3. Heat Market Analyses ....................................................................................................... 3
3.1 Toplanas production statistics................................................................................................... 3
3.2 Urban development ................................................................................................................... 5
3.3 Current total heat load ............................................................................................................... 5
3.4 Current annual load duration curve ........................................................................................... 6
3.5 The forecasts on the heat load and load duration ..................................................................... 8
3.6 Potential future heat demand .................................................................................................. 12
4. Technical Design Concepts .............................................................................................. 16
4.1 Current situation ...................................................................................................................... 16
4.1.1 Zebinovac ................................................................................................................................. 16
4.1.2 Sloboda ..................................................................................................................................... 17
4.1.3 Pota ......................................................................................................................................... 17
4.1.4 Branoevac ............................................................................................................................... 18
4.1.5 District heating network of Nova Varo ................................................................................... 19
4.1.6 Individual Sub-stations ............................................................................................................. 21
4.2 Discussion of different concepts .............................................................................................. 21
4.2.1 Green field solution (as proposed in the ToRs) ........................................................................ 22
4.2.2 Conversion of HS Pota and Sloboda (or Trikotaza) to biomass and keeping them separated
(according to ToRs) ................................................................................................................... 22
4.2.3 Connection of Pota and Sloboda and conversion of one of them to biomass (according to
ToRs) ......................................................................................................................................... 22
4.2.4 Conversion of Sloboda to biomass and connection of the network Sloboda with Pota and
Zebrinovac (additional project idea from the municipality) .................................................... 22
4.3 Preferred design concept ......................................................................................................... 22
4.3.1 Description of preferred HoB concept ..................................................................................... 22
4.3.2 Project site and storage area.................................................................................................... 25
4.3.3 Operating regime ..................................................................................................................... 29
4.3.4 Backup system .......................................................................................................................... 30
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4.3.5 On Site Biomass Logistic ........................................................................................................... 31

4.3.6 Branoevac ............................................................................................................................... 31
4.3.7 Environmental and social concerns.......................................................................................... 32
4.3.8 Complementary investments ................................................................................................... 32
5. Biomass procurement and valuation ............................................................................... 34
5.1 Supply of biomass and costs .................................................................................................... 35
5.2 Potential biomass suppliers ..................................................................................................... 38
5.3 Price evaluation of wood chip deliveries.................................................................................. 39
5.4 Key contract conditions for wood chips tendering .................................................................. 40
6. Cost estimate ................................................................................................................. 44
6.1 Investment costs ...................................................................................................................... 44
6.2 Complementary Investment Costs ........................................................................................... 45
6.3 Operation and maintenance costs ........................................................................................... 46
7. Preliminary Financial Analyses ........................................................................................ 46
7.1 Financial cost benefit analysis .................................................................................................. 46
7.2 Economic cost benefit analysis ................................................................................................ 49
7.2.1 Economic performance ............................................................................................................ 49
7.2.2 Levelized Unit Costs LUC ....................................................................................................... 49
7.3 Sensitivity Analysis ................................................................................................................... 51
7.4 Tariff structure.......................................................................................................................... 52
7.5 DHCs current financial situation and debt capacity ................................................................ 53
7.5.1 Projection of financial statements ........................................................................................... 54
7.5.2 Evaluation of debt capacity ...................................................................................................... 58
7.5.3 Projection of implementation of the HOB project in the Toplana ........................................... 58
7.6 Municipalities financial situation and debt capacity ............................................................... 61
8. Institutional Analyses ..................................................................................................... 61
8.1 Internal organisation and institutional capacity ...................................................................... 61
8.2 Staff capabilities and Institutional technical capacity .............................................................. 62
8.3 Future Training and Recruitment policy ................................................................................... 62
ANNEXE
Annex 1 Basic Characteristic table
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TABLES
Table 1: Technical and economical key figures ....................................................................................... 2

Table 2: Current heat generation facilities ........................................................................................... 16
Table 3: Key data of the DH network .................................................................................................... 17
Table 10: Main data of the boilers of the heating plant ....................................................................... 23
Table 11: Preconditions for the design of biomass HoBs ...................................................................... 23
Table 12: Key data of the biomass HoB................................................................................................. 23
Table 13: Key data of the fossil fired back-up boiler............................................................................. 31
Table 14: On site biomass logistic information ..................................................................................... 31
Table 15: Measures for the networks rehabilitation ............................................................................ 34
Table 16: Biomass equipment costs ...................................................................................................... 35
Table 17: Operational costs of wood chips procurement ..................................................................... 37
Table 18: Woody biomass buyers from Nova Varos municipality ........................................................ 38
Table 19: Wood chips producers in the area ........................................................................................ 38
Table 20: Sawmills from Nova Varos region ......................................................................................... 38
Table 21: Correction factors for wood chips prices .............................................................................. 42
Table 22: Key tendering conditions for wood chips supply .................................................................. 43
Table 23: Investment costs for the heating station .............................................................................. 44
Table 24: Investment costs for the connection pipelines ..................................................................... 45
Table 25: Complementary investment costs......................................................................................... 46
Table 26: Approach for operation and maintenance costs................................................................... 46
Table 27: Projection of operations and Net Cash Flows (NCF) Variant HOB...................................... 47
Table 28: Projection of operations and Net Cash Flows (NCF) Variant HOB...................................... 48
Table 29: Economic Evaluation Format Variant HOB ......................................................................... 50
Table 30: Levelized Unit Cost Format Variant HOB ............................................................................ 50
Table 31: Summary of results................................................................................................................ 51
Table 32: Sensitivities on individual values of parameters ................................................................... 52
Table 33: Tariff rates ............................................................................................................................. 53
Table 34: Profit and loss statements ..................................................................................................... 54
Table 35: Balance Sheets....................................................................................................................... 54
Table 36: Projected Profit and Loss Statements WITHOUT project scenario .................................... 55
Table 37: Projected Balance Sheets WITHOUT project scenario ....................................................... 56
Table 38: Projected Free Cash Flows WITHOUT project scenario ...................................................... 57
Table 39: Projected Profit and Loss Statement Toplana WITH the project ....................................... 59
Table 40: Projected Balance Sheet Toplana WITH the project .......................................................... 60
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FIGURES
Figure 1: Location of the 4 service areas................................................................................................. 4

Figure 2: Heat Production statistics of the last 3 years (according to toplanas data) ........................... 5
Figure 3: Installed capacities and maximum operating capacities ......................................................... 5
Figure 4: Connected square meters of the last 3 years .......................................................................... 6
Figure 5: Zebinovac - Current load duration curve ................................................................................. 7
Figure 6: Sloboda - Current load duration curve ..................................................................................... 7
Figure 7: Pota - Current load duration curve ......................................................................................... 8
Figure 8: Branoevac - Current load duration curve ............................................................................... 8
Figure 9: Zebinovac - Future load duration curve of the first year ......................................................... 9
Figure 10: Sloboda - Future load duration curve of the first year .......................................................... 9
Figure 11: Pota - Future load duration curve of the first year............................................................. 10
Figure 12: Branoevac - Future load duration curve of the first year ................................................... 10
Figure 13: Zebinovac - Future load duration curve at the end of the investigation period (year 20) .. 11
Figure 14: Sloboda - Future load duration curve at the end of the investigation period (year 20) ...... 11
Figure 15: Pota - Future load duration curve at the end of the investigation period (year 20) .......... 12
Figure 16: Branoevac - Future load duration curve at the end of the investigation period (year 20) 12
Figure 17: Zebinovac - Forecast on the networks heat demand.......................................................... 13
Figure 18: Sloboda - Forecast on the networks heat demand ............................................................. 14
Figure 19: Pota - Forecast on the networks heat demand ................................................................. 14
Figure 20: Branoevac - Forecast on the networks heat demand ....................................................... 15
Figure 21: Forecast on fuel demand of the whole DHC for the no project case................................... 16
Figure 22: Network plan ........................................................................................................................ 20
Figure 23: Height profile of the merged network ................................................................................. 21
Figure 24: Boiler capacities placed in the heat load curve of the first year .......................................... 24
Figure 25: Boilers capacities placed in the heat load curve at the end of the investigation period (year
20)............................................................................................................................................. 24
Figure 26: Forecast on fuel demands .................................................................................................... 25
Figure 27: Forecast on shares of heat generation by types of boilers .................................................. 25
Figure 28: Old coal storage (now with mazut storage tank) ................................................................. 26
Figure 29: Old coal storage ................................................................................................................... 27
Figure 30: Site for the biomass HOB plant ............................................................................................ 28
Figure 31: Boiler house Sloboda............................................................................................................ 28
Figure 32: Boiler house Sloboda............................................................................................................ 29
Figure 33: CO2 balance of the project ................................................................................................... 32
Figure 34: Expected price of wood chips .............................................................................................. 40
Figure 35: Fossil fuel price developments ............................................................................................. 47
Figure 36: Sensitivity of IRR on changes in key parameters.................................................................. 52
Figure 37: Organizational chart ............................................................................................................. 61
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ABBREVIATIONS:
BOT Build-Operate-Transfer scheme

CAPEX Capital Expenditures
CO2 Carbon dioxide
CHP Combined heat and power plant
CPI Consumer Price Index
DBOT Design-Build-Operate-Transfer scheme
DH District heating
DHC District heating company, Toplana
DHW Domestic Hot Water
DSCR Debt Service Coverage Ratio
EBITDA Earnings before interest, taxes, depreciation and amortization
EIRR Economic Internal Rate of Return
EE Energy efficiency
ERU Emission Reduction Unit
ESDD Environmental and Social Due Diligence
ESCO Energy service company
FSC Forest Stewardship Council
GHG greenhouse gas
HoB Heating only boiler
IHS Individual Heating Substation
IRR Internal Rate of Return
ktoe thousand tons of oil equivalent (=11.63 MWh)
LUC Levelized Unit Costs
LFO Light fuel oil
LPG Liquefied petroleum gas
MoME Ministry of Mining and Energy
MWh Megawatt hours
MWt Megawatt, thermal
NOx Nitrogen oxide
NPV Net Present Value
OPEX Operational Expenditures
PEFC Programme for the Endorsement of Forest Certification
PPP Public private partnership
RSD Serbian Dinar
SO2 Sulfur dioxide
SPV Special purpose vehicle (or special purpose entity SPE)
ToR Terms of reference
U-factor or U-value, is the overall heat transfer coefficient
VAT Value added tax
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1. EXECUTIVE SUMMARY
1.1 DATA COLLECTION
Economical and technical data of the last 3 years have been collected to elaborate a
baseline. Reliable data to be provided by the DHC is:
Yearly fuel consumption

Network length and pipe tables
Supplied square meters (connected area)
Boiler efficiencies (plausible values)
No measured figures have been available as there are no meters installed. The DH
system of is characterized by well dimensioned generating facilities all of them fuelled
with mazut. The network shows normal heat losses with high water leakages and a
moderate heat density. The DHC operates four independent networks which were
subject of the investigation. Other characteristics are:
no automatically controlled sub-stations

no heat meters
square meter based billing
1.2 THE PROJECT
The project is to substitute the fossil fired boilers by a biomass boiler on wood chips. The
existing fossil fuelled boilers act as back-up system. In the region there is more than
sufficient wood biomass available. The predicted site for the biomass boiler plant is the
existing boiler house Sloboda which is currently running on mazut. The plant can be
adopted for the implementation of a biomass boiler and biomass storage. The plant is
situated directly beside the heating network.
The biomass HoB heating station is characterized by:
Wood chips as main fuel to substitute mazut

Location of the biomass boiler in the existing boiler house Sloboda
2 connecting pipelines from Sloboda to Zebinovac respectively to Pota are
required
Key figure Value

Biomass HoB nominal heating capacity 3,8 MW
Fossil fuel back-up boilers nominal heating capacity 8,8 MW
Share of biomass HoB on total heat production 80%
Yearly CO2 savings compared to no project 2.400 tons
Mean yearly heat generation 8,6 GWh
Mean yearly biomass demand 8,8 GWh
Mean yearly mazut demand 1,4 GWh
CAPEX (in Mio. EUR) 2,07
Complementary investment costs (in Mio. EUR) 0,34
Financial IRR 4.9%
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NPV in Mio. EUR 0.4

LUC in RSD/KWh 0.06
EIRR 12.8%
Table 1: Technical and economical key figures
1.3 RECOMMENDATION
It was considered to implement a new heating station based on in the boiler house
Sloboda nearby the city centre. The nominal capacity of the wood chips boiler is 3,8 MW
to provide base load heat and keep the mazut boilers of the boiler houses Zebinovac and
Posta operational to serve as back-up boiler and to provide heat for peak load.
Currently mazut is relatively cheap but the forecasts do expect only an increase of the oil
price to the level before the economic crisis within the near future. Therefor the avoided
costs due to the substitution of mazut by biomass are relatively small and generate only
a moderate IRR for the investment project which is a precondition for the
implementation of this project. However a significant higher increase of the oil price in
new future would change the situation and would improve the viability of the project.
2. INTRODUCTION
The preparation of this study was assigned to the consultants by the Republic of Serbia
represented by the Ministry of Mining and Energy and the KfW Entwicklungsbank,
Germany.
This project forms part of the German Climate Technology Initiative (Deutsche
Klimatechnologieinitiative, DKTI) - a joint initiative by the German Federal Ministries of
Economic Cooperation and Development (BMZ) and Environment, Nature Conservation
and Nuclear Safety (BMU).
The project Promotion of Renewable Energies - Developing the Biomass Market in
Serbia" comprises a loan of up to EUR 100 m at a reduced interest rate along with a
grant of EUR 2 m for accompanying measures to be implemented by KfW
Entwicklungsbank as well as technical assistance of EUR 8 m to be implemented by GIZ.
The German Government committed the project with the overall volume of EUR 110 m
to the Serbian Government in late 2011.
Within this project for 15 district heating companies (DHC) pre-feasibility studies were
already prepared in 2013-2014 analysing biomass CHP projects and where not
appropriate also HoB projects. In the current stage additional 4 DHC were analysed
within a contract amendment but targeting on HoB projects only.
The project aims at facilitating the development of a market for biomass and supporting
the sustainable use of biomass in the generation of heat in Serbia.
The expected benefits of biomass utilisation for the generation of heat include
a) the reduction of fossil fuel consumption (mainly mazut and gas),
b) reducing overall CO2-emissions,
c) the improvement of overall energy efficiency,
d) reducing costs of heat production
e) the improvement of air quality
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f) the possibility of expanding the district heating systems and

g) job creation.
Data collection was characterized by sending questionnaires to the DHC to collect

economical and technical data of the last 3 years. During subsequent meetings with the
representatives of the DHCs the questionnaires were discussed and the existing
generating facilities have been visited to get an overview of the current and future
situation. Subsequently the missing data could be incorporated and was checked in
terms of plausibility. Based on this information within the heat market assessment the
current and future heat load duration curves were elaborated as basis for sizing of the
biomass HoB boiler plant and available options were analysed.
The proposed project was calculated in regards of fuel demand development, CAPEX,
and OPEX. For the assessment of the financial end economic profitability the project
case was compared with the no project case, which represents the development of
costs with the same heat sales but (fossil) fuel- and operating costs without the new
investment. Therefore the results of the financial modelling show if the savings
(=avoided costs) are sufficient to refinance the investment.
3. HEAT MARKET ANALYSES
3.1 TOPLANAS PRODUCTION STATISTICS
The DHC of Nova Varo operates 4 heating Mazut fired stations with 4 independent DH
networks.
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Figure 1: Location of the 4 service areas
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10.000 MWh
9.000 MWh
8.000 MWh
7.000 MWh
6.000 MWh
5.000 MWh Heat to consumers
4.000 MWh Network losses
3.000 MWh
2.000 MWh
1.000 MWh
0 MWh
2012 2013 2014
Figure 2: Heat Production statistics of the last 3 years (according to toplanas data)
No data has been provided for the years 2012 and 2013.
3.2 URBAN DEVELOPMENT
There are no plans to create new city districts in the near future.
3.3 CURRENT TOTAL HEAT LOAD
As no capacities are measured the maximum heat load can be estimated by the
statements of the plant operators. The maximum operating capacities differ from the
installed capacities. Both capacities for all 4 heating stations are illustrated in the chart
below.
7 MW
6 MW
5 MW
4 MW
installed
3 MW operated
2 MW
1 MW
0 MW
Zebinovac Sloboda Pota Branoevac
Figure 3: Installed capacities and maximum operating capacities
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It has to be considered, that the boiler house Sloboda is not operating an old coal boiler
anymore so this boiler house has a 200% redundancy of boilers and that the boiler
house Branoevac has a 100% redundancy of boilers.
The chart below shows the connected area. There was no data provided for the years
2012 and 2013.
60.000 m
50.000 m
40.000 m
Public
30.000 m
Commercial
20.000 m Private
10.000 m
0 m
2012 2013 2014
Figure 4: Connected square meters of the last 3 years
3.4 CURRENT ANNUAL LOAD DURATION CURVE
The current annual heat load curve is characterized by the operational regime. During
the night the DH system is shut down to be restarted in the next morning. Therefor the
heating period of 185 days or 4400 hours shows only 2775 operating hours.
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3.000 kW
2.500 kW
2.000 kW
1.500 kW
1.000 kW
500 kW
0 kW
Figure 5: Zebinovac - Current load duration curve
2.000 kW
1.800 kW
1.600 kW
1.400 kW
1.200 kW
1.000 kW
800 kW
600 kW
400 kW
200 kW
0 kW
Figure 6: Sloboda - Current load duration curve
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3.000 kW
2.500 kW
2.000 kW
1.500 kW
1.000 kW
500 kW
0 kW
Figure 7: Pota - Current load duration curve
900 kW
800 kW
700 kW
600 kW
500 kW
400 kW
300 kW
200 kW
100 kW
0 kW
Figure 8: Branoevac - Current load duration curve
3.5 THE FORECASTS ON THE HEAT LOAD AND LOAD DURATION
After the implementation of the new heating station and the introduction of the new
operating regime as described in chapter 4.4.3 the heat load curves will have a different
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shape. Because of the new operating regime (no shut offs during the nights) the total
heat consumed was considered to increase by 20%.
3.000 kW
2.500 kW
2.000 kW
1.500 kW
1.000 kW
500 kW
0 kW
Figure 9: Zebinovac - Future load duration curve of the first year
2.000 kW
1.800 kW
1.600 kW
1.400 kW
1.200 kW
1.000 kW
800 kW
600 kW
400 kW
200 kW
0 kW
Figure 10: Sloboda - Future load duration curve of the first year
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3.000 kW
2.500 kW
2.000 kW
1.500 kW
1.000 kW
500 kW
0 kW
Figure 11: Pota - Future load duration curve of the first year
900 kW
800 kW
700 kW
600 kW
500 kW
400 kW
300 kW
200 kW
100 kW
0 kW
Figure 12: Branoevac - Future load duration curve of the first year
Future energy efficiency measures on the buildings like thermal insulation for the
building envelope and new windows and doors have been considered by 1% less heating
energy and capacity per year. Therefor the heat capacity and heat demand will decrease
year by year which leads to a load duration curve as shown below.
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3.000 kW
2.500 kW
2.000 kW
1.500 kW
1.000 kW
500 kW
0 kW
Figure 13: Zebinovac - Future load duration curve at the end of the investigation period (year
20)
2.000 kW
1.800 kW
1.600 kW
1.400 kW
1.200 kW
1.000 kW
800 kW
600 kW
400 kW
200 kW
0 kW
Figure 14: Sloboda - Future load duration curve at the end of the investigation period (year 20)
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3.000 kW
2.500 kW
2.000 kW
1.500 kW
1.000 kW
500 kW
0 kW
Figure 15: Pota - Future load duration curve at the end of the investigation period (year 20)
900 kW
800 kW
700 kW
600 kW
500 kW
400 kW
300 kW
200 kW
100 kW
0 kW
Figure 16: Branoevac - Future load duration curve at the end of the investigation period (year
20)
3.6 POTENTIAL FUTURE HEAT DEMAND
All buildings in Nova Varo are characterized by:
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not being equipped with centralized warm water preparation systems and
not being equipped with centralized chillers and cold water distribution systems
for air conditioning.
Therefor no future potential for summer operation has been identified. The potential
future heat demand is characterized by:
connecting of approx. 20 family houses

effects on energy efficiency measures at buildings like insulation, new windows,
etc.
stabilization of network losses by replacement of pipes
The effect of the implementation of energy efficiency measures at the building has been
considered by a yearly decrease of heat demand and heating capacity of 1%. The aging
of the network has been considered by an increase of the heat losses by 2% per year.
4.000 MWh
Heat public & comm.
3.500 MWh Heat private
Network losses
3.000 MWh
2.500 MWh
2.000 MWh
1.500 MWh
1.000 MWh
500 MWh
0 MWh
2021
2022
2015
2016
2017
2018
2019
2020
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
Figure 17: Zebinovac - Forecast on the networks heat demand
The effect of new connections and the changeover to a continuous operating regime (no
shut-downs during the nights) can clearly be seen by the peak of the years 2017 and
2018. The effect of the replacement of the network pipes (complementary investments)
can be seen by the decrease of the network losses in the year 2018.
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2.500 MWh
Heat public & comm.
Heat private
2.000 MWh Network losses
1.500 MWh
1.000 MWh
500 MWh
0 MWh
2021
2022
2015
2016
2017
2018
2019
2020
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
Figure 18: Sloboda - Forecast on the networks heat demand
3.500 MWh
Heat public & comm.
Heat private
3.000 MWh
Network losses
2.500 MWh
2.000 MWh
1.500 MWh
1.000 MWh
500 MWh
0 MWh
2021
2022
2015
2016
2017
2018
2019
2020
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
Figure 19: Pota - Forecast on the networks heat demand
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900 MWh
Heat public & comm.
800 MWh Heat private
Network losses
700 MWh
600 MWh
500 MWh
400 MWh
300 MWh
200 MWh
100 MWh
0 MWh
2021
2022
2015
2016
2017
2018
2019
2020
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
Figure 20: Branoevac - Forecast on the networks heat demand
2018.
The chart below shows the fuel demand of the whole DHC for the no project case. It was
presumed that the new operating system will also be introduced for the no project case
to make this case comparable to the project case.
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14.000 MWh
Biomass Nat. gas
Coal Mazut
12.000 MWh
10.000 MWh
8.000 MWh
6.000 MWh
4.000 MWh
2.000 MWh
0 MWh
2023
2032
2015
2016
2017
2018
2019
2020
2021
2022
2024
2025
2026
2027
2028
2029
2030
2031
2033
2034
2035
2036
2037
Figure 21: Forecast on fuel demand of the whole DHC for the no project case
4. TECHNICAL DESIGN CONCEPTS
4.1 CURRENT SITUATION
4.1.1 Zebinovac
Heat generation
The heating plant is situated in the basement of a big residential building in the city
centre and comprises of 2 mazut fired warm water boilers.
Boiler Fuel Commissioning Installed capacity

Minel Termoremont Mazut 1988 1,7 MW
3,4 MW
TP 2V Mazut 1988 1,7 MW
Table 2: Current heat generation facilities
District Heating Network
The district heating network was erected in the year 1984 and up till now nearly no
pipes have been exchanged. On the first glance the network seems to be in good
conditions. But the low heat losses are only the result of a very high heat and capacity
density of the network
Network characteristic Figure Comments

Connected capacity 2,8 MW
Capacity density 4,5 kW/m good
Heat density 5,2 MWh/m good
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Heat losses 8% good

Water exchange rate 3/year (unlikely) good
Age of the network 31 years Very old!
Table 3: Key data of the DH network
4.1.2 Sloboda
Heat generation
The heating plant is situated in a big boiler house with direct connection to the national
road for future fuel deliveries. It consists of 4 mazut fired boilers all of the same type
and capacity. 3 boilers have been undergone a fuel switch from coal to mazut in 2006.
1 boiler remained on coal and is now out of operation.

Mazut 1981 2,0 MW
Minel Mazut 1981 2,0 MW
Termoremont Mazut 1981 2,0 MW 6,0 MW
TP 2V Coal 1981 Not
operational
The district heating network was erected in the year 1981 and up till now nearly no
pipes have been exchanged.

Connected capacity 5,3 MW Acc. to design standards
Heat losses 12% moderate
Water exchange rate 25/year Very high!
Age of the network 34 years Very old!
4.1.3 Pota
Heat generation
The heating plant is situated in the basement of a big residential building in the city
centre and comprises of mazut fired warm water boilers.
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imanovici
Mazut 2008 2,2 MW
Termoelektro
5,4 MW
EMO Celje Mazut 1989 1,6 MW
EMO Celje Mazut 1989 1,6 MW
Only during very cold winter days and during the morning peak all 3 boilers are nearly
under full load in operation at the same time.
The district heating network was erected in the year 1981. Up till now 78% of the pipes
have been exchanged. This network seems to be in good conditions.

Heat losses 10% moderate
Water exchange rate 0/year No data, 0 is unlikely
Age of the network section 1 34 years Very old!
Age of the network section 2 8 years good
Age of the network section 3.1 14 years moderate
Age of the network section 3.2 34 years Very old!
Age of the network section 4 34 years Very old!
4.1.4 Branoevac
Heat generation
The heating plant is situated in the basement of a big residential building and comprises
of 2 mazut fired warm water boilers. Only one boiler is in operation at the same time
while the other one is in stand-by mode. The boiler house and its equipment are in very
good condition.

MIP-800GF - uprija Mazut 2001 0,85 MW
1,7 MW
MIP-800GF - uprija Mazut 2001 0,85 MW
This very short district heating network was erected in the year 1991. It connects 3
residential buildings and up till now 1 pipe section has been exchanged.
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Heat losses 6% good
Water exchange rate 0/year good
Age of the network section 1 24 years moderate
Age of the network section 2 15 years good
4.1.5 District heating network of Nova Varo
The figure below shows the existing network in violet colour while the new connecting
pipelines between Sloboda and Zebinovac respectively Pota are marked with red
colour.
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Figure 22: Network plan
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In a more detailed study the height difference between the 3 boiler houses have to be
taken in consideration to prevent high static pressures in the DH system. It is
recommended to separate the second half of the connection somewhere between
Sloboda and Pota by means of a heat exchanger station. To demonstrate the height
differences a height profile is shown in the figure below.
Figure 23: Height profile of the merged network
4.1.6 Individual Sub-stations
Currently there are no individual sub-stations installed. The stub pipes from the heating
mains are led directly into the building without any heat exchangers, regulating valves or
control systems. There are no heat meters installed, billing is based on square meters.
4.2 DISCUSSION OF DIFFERENT CONCEPTS
The discussion about how to proceed was deeply influenced by the opinion of a
potential Slovenian investor who was involved by the Toplana prior to this study. This
investor proposed to convert Sloboda to wood chips and Branoevac to pellets but
keeping Branoevac separated. He was not willing to invest in, operate or own the
network, which should remain in the responsibility of the municipality. Therefor the
potential investor proposed to generate as much heat as possible with the heating
station of Sloboda to make the project profitable which is in general a reasonable
aproach.
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4.2.1 Green field solution (as proposed in the ToRs)
This solution is not preferred by the municipality because of the expected high CAPEX
and has definitely been cancelled.
4.2.2 Conversion of HS Pota and Sloboda (or Trikotaza) to biomass and keeping them
separated (according to ToRs)
Heating station Pota cannot be converted to biomass because of the small available
space and the surrounding residential buildings (noise problem). Therefore this solution
has been refused.
4.2.3 Connection of Pota and Sloboda and conversion of one of them to biomass (according
to ToRs)
As Pota cannot be converted to biomass and Sloboda is able to be converted to

biomass following solution has been discussed:
Heating station Sloboda will be converted to biomass and by keeping 2 of the mazut
boilers for reserve and stand-by. The oldest boilers will be demolished and replaced by a
biomass boiler on wood chips. The networks of Sloboda and Pota will be connected by
a pipeline. The boiler station of Pota will be decommissioned.
4.2.4 Conversion of Sloboda to biomass and connection of the network Sloboda with Pota
and Zebrinovac (additional project idea from the municipality)
The connecting pipeline is 400 m long and will enable to connect 20 family houses and 2
residential blocks to the network. Zebrinovac is located 940 m asl and the highest point
of the network is the Gymnazium with 995 m asl. The 2 networks (east and west) may be
separated by heat exchangers at Sloboda to prevent high static pressures in the
pipelines, otherwise there will be a static pressure difference of 5,5 bars which has to be
investigated regarding allowable pressures of individual sub stations with indirect
system.
To benefit from the economy of scale effect benefiting from higher connected load and
because of the above mentioned influence of the potential Slovenian investor and as
this solution is to be the most promising one, this solution has been agreed between the
municipality and the consultant for further investigations within the study.
4.3 PREFERRED DESIGN CONCEPT
4.3.1 Description of preferred HoB concept
The preferred concept is the conversion of Sloboda to biomass and connection of the
network Sloboda with Pota and Zebrinovac. The peak load of the merged network
amounts 7,4 MW. This concept consists of a biomass boiler on wood chips to provide
heat for the base load or more than 85% of total heat demand. The remaining mazut
boilers in the boiler houses of Zebinovac and Pota are kept operational in stand-by
mode and for the provision of heat for peak load.
Type of boiler Fuel nom. capacity
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Base load boiler on biomass Wood chips 3,8 MW

Mazut fired backup boiler at Pota Mazut 2,2 MW
Mazut fired backup boiler at Zebinovac Mazut 1,7 MW
Mazut fired backup boiler at Zebinovac Mazut 1,7 MW
Total back up capacity Mazut 8,8 MW
Table 10: Main data of the boilers of the heating plant
The design of the biomass boiler is based on following preconditions:
Minimum continuous load 25%

Time for revision works Summer
(no summer operation)
Boilers mean efficiency 85%
Table 11: Preconditions for the design of biomass HoBs
Nominal thermal capacity 3,80 MW

Fuel capacity 4,47 MW
Type of fuel Woody biomass:
90% wood chips
Max. 10% saw dust
Yearly fuel demand Up to 9,40 GWh or
3 360 tons or
13 430 piled m
Type of boiler Smoke tube type
warm water boiler
Firing system grate
Table 12: Key data of the biomass HoB
The figures below show the biomass boiler and the gas fired peak and stand-by boiler
placed in the load duration curve of the merged network (without Branoevac). As the
biomass boiler cannot be continuously operated below 25% of its nominal load, this
boiler is operated about 75% of the whole heating season.
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8.000 kW
Biomass boiler
--
7.000 kW
Mazut boiler
6.000 kW
5.000 kW
4.000 kW
3.000 kW
2.000 kW
1.000 kW
0 kW
Figure 24: Boiler capacities placed in the heat load curve of the first year
8.000 kW
Biomass boiler
7.000 kW --
Mazut boiler
6.000 kW
5.000 kW
4.000 kW
3.000 kW
2.000 kW
1.000 kW
0 kW
Figure 25: Boilers capacities placed in the heat load curve at the end of the investigation period
(year 20)
The figure below shows the future fuel demands. The effect of energy efficiency
measures can clearly be seen by the decrease of the fuel demand.
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12.000 MWh
Biomass
Nat. gas
10.000 MWh
Coal
Mazut
8.000 MWh
6.000 MWh
4.000 MWh
2.000 MWh
0 MWh
2033
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2034
2035
2036
2037
Figure 26: Forecast on fuel demands
The figure below shoes the future heat production by boilers. When the new heating
station goes into operation about 87% of the total heat production is provided by the
biomass boiler all over the investigation period of 20 years.
10.000 MWh
Biomass boiler
9.000 MWh Gas boiler
8.000 MWh Coal Boiler
Mazut boiler
7.000 MWh
6.000 MWh
5.000 MWh
4.000 MWh
3.000 MWh
2.000 MWh
1.000 MWh
0 MWh
2033
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2034
2035
2036
2037
Figure 27: Forecast on shares of heat generation by types of boilers
4.3.2 Project site and storage area
The biomass boiler can be placed in the existing boiler house of Sloboda. After removal
of the 2 oldest mazut boilers there is sufficient space for the new biomass boiler. The
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neighbouring building which was originally used for industrial purposes and now is
owned by the municipality - will be demolished and used as biomass storage with
surrounding walls on 3 sides and a roof, equipped with a walking floor to convey the
biomass to the firing system of the biomass boiler.
It is not possible to use the old coal storage for the storage of biomass.
The storage capacity is not big enough to store biomass for a period of 14 days,
which is necessary to keep the biomass boiler operational over the Christmas
and New Years holydays.
A much stronger argument is that biomass with a water content as wood chips
normally show must not be stored in closed rooms. Because of the water
content microbes may start a biological degradation process which produces
heat inside the pile of biomass. The temperature in the pile is high enough for
self-ignition of the fuel. In this case it is absolutely necessary to spread the
glowing/burning pile of biomass on a plain yard by means of a wheel loader to
distinguish the fire with the help of the local fire fighters. This procedure is not
possible when biomass is stored in a closed room like the old coal storage of the
boiler house.
Figure 28: Old coal storage (now with mazut storage tank)
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Figure 29: Old coal storage
The photos above show quite good that the old coal storage has not sufficient height
(approx. 2,5 m) for the operation of a wheel loader.
The trucks to deliver biomass to the boiler house will arrive directly from the main
national road and will not generate additional noise or dust which may disturb the
neighbouring residential building.
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Figure 30: Site for the biomass HOB plant
Figure 31: Boiler house Sloboda
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Figure 32: Boiler house Sloboda
4.3.3 Operating regime
The operating regime is characterized by two main issues:
Temperature regime of 115C for the supply flow and 80C for the return flow
System shut-down during the night
The temperature regime describes the temperatures of supply flow and return flow. The
supply flow should not exceed 110C otherwise the DH system would be subject to the
European pressure equipment directive (PED). Plants which are subject to the PED are
more expensive and have to undergo periodically tests to ensure the safety of the
technology. Also the staff members have to be of higher qualification, the plant operator
must be a qualified operator for steam generators.
The temperature difference between supply and return flow should be as high as
possible to decrease the volume flow of the circulating water in the system. By this
measure the circulating pumps will have the lowest possible electricity demand.
It is quite common in all Serbian DH companies to operate district heating systems only
during the day from 6 to 22 o clock. In the night the system is shut down to restart it in
the early morning. Only during very cold nights the system is operated continuously.
This operating regime leads to a cold system to be restarted in the morning. It is well
known that every cold start shortens the lifetime of thermal plants as well as of district
heating networks because of the periodically occurring thermal stress. Also the buildings
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are cooled down during the night and have a higher heat demand in the morning to
reheat the cold walls.
So the strategy should be to operate the system continuously all over the heating
period. Biomass HoBs show the availability to be operated in the so called fire bed
preserving mode, which means all the system is kept warm and can be restarted in the
morning with a warm start. The network is kept warm by minimum operation of the
fossil boiler. The operation during the night will also increase the heat sales as the
customers will enjoy the increase of comfort of consuming heat also during the night on
a decreased in-house temperature level.
Following operating regime is recommended:
80C to max. 105C for the supply flow and 60C for the return flow
Continuous operation throughout the whole heating period without any shut-
downs during the nights
The above described temperature regime can only be maintained with means of
automatically controlled sub-stations in every building.
As no heat is needed in the summer time because of no centralized warm water

preparation and air conditioning, the HoB plant is operated only during the heating
period. Maintenance works will be carried out in the summer time.
Whenever the heat load of the network is lower than the minimum continuous capacity
of the biomass HoB, then the boiler has to be switched off and the heat at such low
network loads has to be generated by the fossil fired HoBs. This is why the biomass
boiler is operated only 75% of the whole heating period.
The operating mode is heat demand driven.
4.3.4 Backup system
As Nova Varos is not connected to the natural gas grid, the existing mazut boilers of the
boiler houses Zebinovac and Pota will be used as back-up boilers. The total capacity of
the boilers is 8,8 MW which is sufficient to provide heat for the whole networks heat
demand in case of unplanned outages of the biomass boiler and heat for peak load.
Mazut fired backup boiler at Pota 2,2 MW

Mazut fired backup boiler at Zebinovac 1,7 MW
Mazut fired backup boiler at Zebinovac 1,7 MW
Total thermal back-up capacity 8,8 MW
Fuel capacity 10,35 MW
Type of fuel Mazut
Yearly fuel demand Up to 1,6 GWh or
140 tons
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Type of boiler Smoke tube type

warm water boiler
Firing system Low Nox LFO burner
Table 13: Key data of the fossil fired back-up boiler
4.3.5 On Site Biomass Logistic
Wood chips will be delivered by semitrailers or side-dump truck on site. The semitrailers
have a transportation capacity of 90 piled cubic meters or max. 22 tons and are
equipped with a moving floor for unloading. They unload the wood chips on the fuel
yard while a wheel loader puts the fuel to the foreseen storage place or into the storage
building. The fuel is piled up to max. 3-4 m to prevent self-ignition and can be stored
outside or in a storage building. When the fuel is stored outside, only a layer of 25 cm
will become wet in the case of rain or snow, however here a simple shed which is closed
on 3 sides suitable to pile wood chips up to 3-4 m height is considered on the location of
the current industrial building. One side has to remain open for manipulation with the
wheel loader.
The on-site biomass storage has a capacity of 2 weeks demand to ensure the heat
production during the Christmas and New Year holydays.
Frequency of transport traffic 1-2 semitrailers per day

Storage capacity 2 150 m
Storage area 715 m
Table 14: On site biomass logistic information
4.3.6 Branoevac
The managers of the DHC are currently discussing a fuel changeover for Branoevac
from mazut to wood pellets. The consultants visited the site of Branoevac and
summarize their impression as follows:
The boiler house of Branoevac is situated in a big residential building.
The 2 boilers on mazut are in very good conditions (commissioning in 2001).
There is enough place in the boiler house for the implementation of a 1 MW
pellets boiler including a pellets storage with sufficient capacity.
So from the technical point of view it is possible and feasible to realize a fuel changeover
from mazut to pellets. The price for mazut is currently very low and amounts 30/MWh
while the price for pellets currently amounts 40/MWh and is higher than mazut.
Therefor a changeover cannot be economical reasonable at the moment. Only when the
price for mazut is significant higher than the price of pellets a fuel changeover can be
considered.
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4.3.7 Environmental and social concerns
The calculation of CO2 savings considers the replacement of mazut or gas for heating by
biomass. The combustion of biomass releases the same amount of CO2 like the plant has
absorbed during its growth. Therefor biomass is defined to be a CO2 neutral fuel.
The combustion of 1 MWh of natural gas releases 207 kg CO2.

The combustion of 1 MWh of Mazut releases 280 kg CO2
3.500 tons
3.000 tons
2.500 tons
no project
2.000 tons
with BM-HoB
1.500 tons
1.000 tons
500 tons
0 tons
2017
2022
2027
2015
2016
2018
2019
2020
2021
2023
2024
2025
2026
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
Figure 33: CO2 balance of the project
The implementation of the biomass HoB project will save about 2.500 tons of CO2 per
year compared to the no project case. The flue gases of the biomass plant will not affect
the air quality of the city as filter systems (e.g. electrostatic precipitators) will minimize
the particulate emissions.
As the boiler house and storage building is situated between the main road and the
central road in the city centre, the design of biomass logistic area has to consider a noise
protection wall towards the central road (which can also be the rear wall of the biomass
storage building to prevent noise emissions from the biomass manipulation with the
wheel loader in the city centre. For the combustion noise the implementation of
silencers in the flue gas pipe is standard.
4.3.8 Complementary investments
Complementary investments are necessary if urgent from a technical point of view or

highly profitable.
Parts of the networks of Nova Varo are more than 30 years old and need to be replaced
to keep the system operational. The tables below will give an overview of necessary
complementary investments.
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M1 Zebinovac, ukupno 10 TP DN length year measure

M1_1_1 Lamela A1,A2,B i C (sever-jug) 1984 exchange
M1A_1_1 80 85 m 1984 exchange
M1B_1_1 100 78 m 1984 exchange
M1B_2_1 80 24 m 1984 exchange
M1B_3_1 80 48 m 1984 exchange
M1C Staro polje 1,2,3 (do sahte ispred
100 6m 1984 exchange
kotl)
M1C Staro polje 1,2,3 (sahta kotl-
80 113 m 1984 exchange
shahta staro polje)
M1C_1_1 65 30 m 1984 exchange
M1C_2_1 65 8m 1984 exchange
M1C_3_1 65 34 m 1984 exchange
M1D_1_1 125 1984 exchange
M1E Zgrada IV/1 (zapadna strana) 125 157 m 1984 exchange
thereof reconstructed 125 101 m 2014
M1E_1_1 100 14 m 1984 exchange
M1E_2_1 100 15 m 1984 exchange
M2 Sloboda, ukupno 12 TP DN length year measure
M2A Trikotaza-shahta crkva 125 177 m 1981 exchange
M2A Trikotaza-IV/1 (zgrada iznad
125 1981 exchange
sumske)
M2A Crkvena kuca 1981 exchange
M2A shahta crkva-shahta Karadj 80 47 m 1981 exchange
M2A_1_3 50 25 m 1981 exchange
M2A_1_4 50 1981 exchange
M2A_1_5 50 1981 exchange
M2B_1_2 125 71 m 1981 exchange
M2B_2_1 100 68 m 1981 exchange
M2C_1_2 25 10 m 1981 exchange
M2C_1_3 80 98 m 1981 exchange
M2C_2_3 25 2m 1981 exchange
M2C_2_5 80 104 m 1981 exchange
M2C_3_1 125 161 m 1981 exchange
M3 INEX (Posta), ukupno 9 TP DN length year measure
M3_1_1 0m 1981 exchange
M3A Kotl - ul Oslobodilaca 200 67 m 2007
M3A_1_4 125 323 m 2007
M3A_2_3 80 37 m 2007
M3A_2_4 100 33 m 2007
M3A_2_5 65 58 m 2007
M3A1 Kotl - ul Oslobodilaca 125 67 m 2010
M3A1_3_1 100 14 m 1981 exchange
M3A1_4_1 65 9m 1981 exchange
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M3B,C kotl- shahta RP Uvac 200 56 m 1981 exchange

M3B_1_1 100 32 m 1981 exchange
M3C shahta RP Uvac-shahta LHE 130 30 m 1981 exchange
M3C_1_1 80 18 m 1981 exchange
M3C_2_1 65
M4 BRANOSEVAC, ukupno 3 TP DN length year measure
M4_1_1 0m 1989
M4_2 Kotlarnica- shahta Branosevac 2 150 16 m 1991-2001
M4_2_1 80 11 m 1991-2001
M4_3_1 80 61 m 1991-2001
Table 15: Measures for the networks rehabilitation
Automatically controlled Individual sub-stations are currently not needed from the
technical point of view. With means of controlled sub-stations a low return flow
temperature can be maintained which will save some electricity for the network pumps
and reduce a little bit the heat losses. As the prices for electricity and biomass are
relatively low in Serbia the installation of IHS is neither highly profitable nor even
profitable itself.
5. BIOMASS PROCUREMENT AND VALUATION
Biomass procurement and valuation is based on literature review, review of earlier

biomass supply studies1 and data procured from consultants field visits to Nova Varos
and interviews with state forest managers and sawmill operators. Considering the
required amount of wood chips for the DH plant in Nova Varos of total energy value of
9,130MWh per year or up to 3,250tons per year2 we can recommend the option of
buying wood chips from existing and future wood chips producers. This option
encompasses contracting wood chips supply on long term or annual term basis with
either existing or future wood chips producers. Apart from wood pellet factories, which
1
2009. Glavonjic, B., Petrovic, S., Savic, R., Radovic, S., Jovic, D., Sretenovic, P., Pajovic, Lj. Potentials for
Commercial Utilization of Woody Biomass for Energy Production and Economical Development of
Municipalities: Nova Varos, Priboj and Nova Varos. Project: Stimulating Renowable Energy Sources on Local
Level. Ministry of Forestry, Agriculture and Water Management; UNDP Belgrade Office; Local administration of
Prijepolje, Priboj and Nova Varos; Faculty of Forestry, Belgrade University; PE Srbijasume, FE Prijepolje.
2014. R. Bahnmller, B. Brndle, F. Eckert, V. Milijic, D. Orlic, M. Ortner, P.Vasiljevic, M. Watzal. Pre-Feasibility
Studies on 15 Biomass CHP-plants for District Heating Companies in Serbia. iC consulenten Ziviltechniker
GesmbH, Wienna for KfW.
2015. Djakovic, D., Gvozdenac-Urosevic, B., Urosevic, D. Design of logistic concepts for wood biomass supply
chains for district heating plants in municipalities of Priboj, Novi Pazar, Bajina Bata and Nova Varo. GIZ DKTI
2015. Djakovic, D., Gvozdenac Urosevic, B., Urosevic, D. 2015. Logistics concept of district heating supply with
woody biomass (wood chips) in the municipalities of Prijepolje and Mali Zvornik. GIZ DKTI
2012. USAID. Prefeasibility Assessment of Biomass District Heating Applications in Serbia, which covered Nova
Varos and Priboj among other 8 municipalities in Serbia; 2014. NALED. Action Plan for Biomass Co-generation
Plant Construction in Nova Varos; 2014. Tri E burro. Expertise for Enhancement and Modernization of Existing
District Heating Systems in Nova Varos; 2014. Biomasa Grupa doo. Feasibility Study for District Heating System
for Public and Residential Objects in Nova Varos; etc.
2
Assuming wood chips maximal water content of 40% and lowest energy value of 2.80MWh/t.
Revision: 0 Page 34
have capacities for wood chips production, there are also specialized wood chips
producers in Nova Varos area. In addition, some of existing sawmills may invest in and
develop capacities for wood chips production if demand for wood chips increase.
Another hypothetical option is that the DH plant operator buys firewood, forest residues
and sawmill residues and process them at the DH plant site. This option would require
that the DH plant operator procures the equipment necessary for wood chips
production or hires the wood chipping services and develops operations in raw woody
biomass supply, storage and processing. However, this would require additional
investments from the DH operator in biomass processing, manipulation and transport
capacities and investments in provision of storage space for woody biomass and wood
chips. This option would also require additional number of employees to be trained and
engaged in woody biomass mobilization, transport and processing.
5.1 SUPPLY OF BIOMASS AND COSTS
Costs of wood chips supply include capital and operational costs. Capital costs include:
costs of woody biomass transport, processing, manipulation and transport
equipment procurement
investment costs in woody biomass storage, if required.
Necessary equipment for woody biomass transport encompasses costs of procurement

of trucks and trailer specialized for wood transport. Sawmills from Nova Varos area
already possess all the equipment necessary for wood and woody biomass transport.
Investment costs in processing woody biomass include wood chipper procurement costs
and procurement costs for equipment used for woody biomass and wood chips
manipulation encompass telescopic handler or a front loader or a tractor equipped with
loading extension. Transport capacities include trucks or tractors equipped with self-
unloading trailer for bulk cargo. Such trailers can be tipper trailers for trucks or tractors
or walking floor trailers for trucks.
Investment costs Capacity Price EUR
Wood chipper 10-20tons per hour 120,000-400,000
Telescoping handler 80-120kW, 3-5tons weight for 60,000 100,000

lifting
Truck (used) / 60,000 80,000
Tipper trailer (used) 40-50 cbm, 10-12tons 15,000-25,000
Walking floor trailer (used) 90-100 cbm, 22-23tons 15,000-25,000
Wood transport trailer with crane Up to 24tons 8,000-15,000

(used)
Table 16: Biomass equipment costs
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Finally, supplier needs to organize woody biomass and wood chips storage. Existing
wood chips producers or sawmills selling sawmill residues already have open storage
space for raw woody biomass. Wood chips storing, on the other side, requires shed
open from at one or three sides with roof protecting wood chips from rain or snow.
Sides should be at least partly opened to facilitate air circulation and natural drying of
wood chips. Considering the fact that 40% water content of wood chips is required and
that most of wood chips produced in Serbia is from already dried sawmill residues,
provision of simple wood shed represents a suitable solution. Since existing or future
wood chips suppliers, already have paved storage locations investment costs for wood
chips storage are significantly reduced.
The DH plant also needs to organize wood chips storage with enough size to cover a 2
weekly demand for wood chips. For this purpose DH plant should also foresee a on-site
storage facility as described in chapter 4.3.5. On Site Biomass Logistic.
Operational costs of wood chips procurement include:

costs of woody biomass mobilization
costs of woody biomass transport to the point of processing
costs related to woody biomass storing, chipping and manipulation;
costs of wood chips transport to incineration point;
Operational unit costs are presented in the table below.
Products/Prices State forests Private forests Sawmills
On stump On forest On stump On forest road/log At sawmill

road/log storage storage site
Firewood and long 4.521 26 36 EUR/ton 12-19 30 - 40 EUR/ton /

firewood EUR/ton EUR/ton
Cuttings 3-12EUR/ton 18-24EUR/ton Sold as Sold as firewood /

firewood
Forest residues 2-8EUR/ton / Sold as Sold as firewood /

firewood
Sawmill residues / / / / 20-25

EUR/ton
Services
Harvesting and 3-5 EUR/ton + 7-11 EUR/ton

wood extraction
3
Wood chipping 250-270 EUR/hour or 10-15 EUR/ton
3
Market price of wood chipping services includes service providers margin, machinery amortization,
machinery procurement costs, fuel costs and costs of workers. As a service price it is based on chipping smaller
quantities of wood (up to 500tons) and also includes all other costs related to provision of chipping service
(transport of the machines, etc)
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Wood transport Up to 100km 11-15 EUR/ton
Unit costs
4
Wood chipping 4-6 EUR/ton
Woody biomass 1.5-3 EUR/ton

manipulation
Woody biomass 3-6 EUR/ton

and wood chips
transport
Table 17: Operational costs of wood chips procurement
Costs of woody biomass mobilization include costs of woody biomass procurement and
its delivery to a processing point. Forest biomass in Serbia can be bought from state
forest managers (in case of Nova Varos Public Enterprise Srbijasume) or private forests
owners (small scale forest owners) at following parities: at stump, next to stump or at
the forest road. Biomass mobilization encompass following processes: manual and chain
saw operations in wood harvesting and skidder or tractor operations in wood extraction
to the forest road. Second phase of transport from forest road to paved road or central
storage is also often required for further processing of wood and woody biomass. In
state forests, usual method of wood harvesting is wood product method, meaning that
all wood products are designed and manufactured at the harvesting point. This means
that in order to extract woody biomass, operator needs to collect it and organize
extraction of forest residues only. Other method is whole tree or part of the tree
method, meaning that whole wood or part of the wood is extracted to the point where
it is processed further. Application of this method means that woody biomass is
extracted together with other more valuable wood products, thus woody biomass
extraction costs are reduced. Second method, with some modifications is applied in
private forests. In both state and private forests, specialized harvesting companies hired
as subcontractors perform harvesting and wood extraction operations. Cost effective
woody biomass mobilization if either of methods is applied requires well developed
forest infrastructure optimal road density, which is not a case in Nova Varos area.
On the other hand, sawmill residues can be bought from sawmills situated at paved
roads. Those residues are packed and stored at sawmill sites, thus operations and costs
in order to mobilize sawmill resides are not needed. This is the main reasons why most
of woody biomass processors (including chipboard and wood pellet producers) prefer to
supply with sawmill residues. In addition sawmill residues are not fresh but naturally
dried, so water content difference between forest and sawmill residues is another
reason for buyers preference to sawmill residues.
Costs of woody biomass transport to the point of processing are linked to transporting
prices or fuel and truck maintenance and amortization costs. Same is with costs of wood
chips transport to incineration point. Costs of wood chipping and on storage
mobilization are also related to fuel, maintenance and amortization costs.
4
Wood chipping costs include direct costs of wood chipping, including fuel and man power costs. It is based on
the average costs of wood chips production.
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5.2 POTENTIAL BIOMASS SUPPLIERS
Woody biomass supply in Nova Varos area is very developed. While forest residues are
partially used for firewood production in private and state forests, for wood pellet
factories supply or wood chips production. Almost all sawmill residues are utilized.
There are 2 wood pellet factories and one chipboard factory supplying from Nova Varos
area. Sawmill residues are also imported from Montenegro and Bosnia and Herzegovina.
Table below present most important buyers of sawmill residues from Nova Varos area.
No. Company Location
1 Jela Star doo Prijepolje
2 Nanix Wood doo Nova Varos
3 Kronospan srb doo Lapovo
Table 18: Woody biomass buyers from Nova Varos municipality
Existing wood chips producers in Serbia, which can be expected to partake in supply of
Nova Varos DH plant are presented in table below.
1 Star Jela doo Prijepolje
2 Holz Tim doo Ivanjica
Table 19: Wood chips producers in the area
Also, several sawmills from Nova Varos can be interested to develop wood chips supply
to DH plant. There are listed in a table below.
1 Omoprom doo Bistrica
2 Zlatar Sped doo Kokin Brod
3 Koran doo Priboj
Table 20: Sawmills from Nova Varos region

As mentioned, wood pellet factories especially Jela Star doo have all equipment needed
for wood chips production, however level of their interest to partake in wood chips
supply will depend on wood chips contracting price. Currently it is more financial viable
for them to use wood chips they produce in pellet production, however pellet market is
instable and export pellet prices for suppliers from Serbia selling to Italy are reducing
due to the competition from US, Canada, Baltic countries and Ukraine.
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5.3 PRICE EVALUATION OF WOOD CHIP DELIVERIES
Price of wood chips delivery is depending on operating and investment costs. Serbian
wood chips market is developing, yet apart from chipboard and pellet factories, there no
significant wood chips buyers especially those buying wood chips for energy production.
In Serbian market, price of wood chips depend much on its properties. Price of
broadleaved softwood wood chips (poplar) is around 7.5-8EUR per bulk cbm (or 38-40
EUR per ton), price of conifer wood chips is 10-12 EUR per bulk cbm (40-50 EUR per ton),
while price of hardwood broadleaves (beech) is 15-18 EUR per bulk cbm (45-55 EUR per
ton). Since most of wood chips buyers in Serbia are not using it for energy production,
but for production of other products such as chipboard or wood pellet, water content is
not linked to the price. In practise, delivered wood chips water content range is from 20-
40%. As mentioned, in Nova Varos area there is an operational wood chips and wood
pellet producer, which currently consumes all of produced wood chips for pellet
production. In case existing sawmills develop their own wood chips production,
investment costs in wood chipping processing equipment will also reflect on the price. It
is also important to stress that required quantities of wood chips by DH plant Nova
Varos especially if combined with demand of other neighbouring DH plants Priboj and
Prijepolje are sufficient to encourage investments in wood chips production by existing
sawmills. Price of woody biomass and competition between woody biomass buyers is
another important factor which may reflect on end wood chips price. It is important to
stress that most of the wood in Nova Varos area is softwood, being cheaper than
hardwood. It is also important to stress that due to increased demand sawmill residues
prices are growing. On the other hand price of firewood and woody biomass is not
increasing significantly. Chart below presents expected price of wood chips delivery to
DH Nova Varos. Prices are based on raw material prices and raw material costs
presented in table 2. For sawmills and wood chipping companies woody biomass price is
calculated at 23EUR per ton, as the market price wood chipping companies are paying
for sawmill residues and sawmills are selling their residues. For sawmills developing
wood chipping business to supply Nova Varos DH plant, transport costs for woody
biomass, if assumed they will use their own sawmill residues at sawmill and chipping
site, are not calculated, while for existing wood chipping companies supplying from
other sawmills, transport costs of woody biomass are calculated at 3EUR per ton, having
in mind that they collect sawmill residues and store it on wood chipping company
location before wood chips production.
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Wood chips delivered to DH plant 50

50
Margin and investment costs 15

15
Wood chips Transport 3

3
Manipulation 2
3
Chipping 4
6
Biomass transport 3
0
Woody biomass 23
23
0 10 20 30 40 50 60
Wood chippinng companies Sawmils in Nova Varos area EUR/ton
Figure 34: Expected price of wood chips
Having in mind that existing woody chipping companies will transport wood chips to DH
Nova Varos from distances less than 50km transport costs of wood chips are calculated
at 3EUR per ton, while for existing sawmills developing wood chips supply unit costs of
wood chips transport are calculated at 3EUR per ton. On the other hand unit costs of
wood chips manipulation and wood chipping, are dependent on production capacities
higher the production is, lower the costs are. For existing wood chipping companies,
costs of wood chips manipulation are calculated at 2EUR per ton, while for local sawmills
those costs are calculated at 3EUR per ton. Finally, wood chipping unit costs for existing
wood chipping companies having large wood chips production capacities are set at 4EUR
per ton, while for local sawmills those costs are calculated at 6EUR per ton. Margin and
investment unit costs are for both options calculated at 15EUR per ton.
In Nova Varos area wood chips price of 48-52EUR per ton or 12-13EUR per bulk cbm at
water content of 30%, or 68.57EUR to 74.29EUR per atro (dry) ton can be regarded as
sustainable and profitable for suppliers. For further economic calculations in this Report
average price of 14.7EUR/MWh will be used.
It is possible that due to competition of suppliers price is reduced to certain extent. Also,
in case of reduction of woody biomass prices or decrease of other inputs, price can be
reduced, but so far we cannot confirm it can be expected.
5.4 KEY CONTRACT CONDITIONS FOR WOOD CHIPS TENDERING
Contracting of woody biomass can be done annually or long term. Considering future DH
plant demand for wood chips and that long term supply contracts for woody biomass
supply are not common in Serbia and do exist only for larger quantities of wood (above
30,000 cbm) for some chipboard and wood pellet factories, we can recommend option
of annual contracting of wood chips supply to DH plant in Nova Varos based on a public
Revision: 0 Page 40
tender. Contract conditions for wood chips tendering should be set in order to ensure
secure supply of wood chips with required quality.
Selected wood chips suppliers need to guaranty delivery of contracted quantities of

wood chips at required quality level. Procedures for measurement and quality
determination should be a part of the contract. On the other hand buyer of wood chips
needs to guarantee takeover of contracted quantities. Contracted price should be
indicated in relation to quality of delivered wood chips yet in units practical for
measurement.
Point of delivery needs to be specified as DDP DH plant Nova Varos, meaning that wood
chips seller have the obligation of wood chips delivery to DH plant with all costs included
at contracted wood chips price.
Contracted quantities needs to be guaranteed, meaning that contract should be backed

by sellers provision of bank guaranty or a bill. Value of bank guaranty or a bill should be
at least 10% of contracted wood chips quantities. Failure to fulfil delivery of contracted
quantities needs to be subjected to penalties. Formula below can be suggested for
calculation of penalties for non-delivery of contracted quantities:
P = (Pfoss Pwc)x Q
P = Penalty
Pfoss = Unit price of fossil fuel counterpart
Pwc = Unit price of wood chips
Q = quantities of contracted yet undelivered wood chips.
Buyer also needs to be subjected to penalties in case of not taking over contracted
quantities. Formula below can be suggested for calculation of buyers penalties for not
taking over contracted quantities:
P = 0.5 x (Qcon-Qdel)
P=Penalty
Qcon=contracted quantities
Qdel= actually delivered quantities
Preliminary delivery schedule, based on contracted quantities, should be determined on

monthly basis and needs to be indicated in the contract. However, delivery of biomass
can be organized with sellers consent according to buyers demands on weekly or 15 day
basis. Penalties can be linked with failure to fulfil monthly supply according to the
contract. Except penalties, contract cancelation with supplier can also be included if
significantly fails to deliver contracted quantities for two months in a row.
Measurement procedures and quality control should be determined by the contract,

along with units used for wood chips measurement. We suggest utilization of bulk cbm
as a unit for wood chips measurement. Application of this unit does not require
investments on truck scales needed for weight measurement, while delivered quantities
can be determined by simple measurement of wood chips transport trailer volume.
Application of bulk cbm as a unit, needs to be followed with control of water content of
delivered wood chips. Control of water content can be efficiently organized with
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application of probe based water content portable measuring devices5. Every shipment
of wood chips can be controlled by probe insertion to a wood chips bulk at every corner
of the trailer used for transport and additional 4 probes insertion to a wood chips bulk
after unloading if possible. Average of measured water content values should be
determined and used for price evaluation. Additional quality control should include
particle size control and compliance with contracted particle size according to Serbian
wood chips standards. Also, control should include inspection of wood chips properties
in terms of rot, decay or presence of matters other than wood chips. For non-
compliance with contracted quality reclamations and reduction in terms of wood chips
volumes to be paid should be applied.
Contracted price of wood chips should be indicated in RSD per bulk cbm at 30% water
content, therefore price should be linked to an average water content of every wood
chips shipment. For reduction or increase of price we suggest method presented in a
table below.
Water Energy value MWh/t Corection factor

content %
15-20 4.15 1.2
20-25 3.80 1.1
25-30 3.50 1.0
30-35 3.25 0.9
35-40 2.90 0.8
Table 21: Correction factors for wood chips prices
Correction factors should be applied on contracted price to determine actual price of

wood chips form every shipment.
As mentioned, we can recommend annual contracting of wood chips delivery, since
there is no usual practise of long term contracts for wood chips delivery in Serbia yet.
However, if long term contract is applicable this can be an adequate solution as well. In
this case price should be indicated but possibility for price escalation should be
accounted as well. Conditions for price change should be determined in the contract.
Price can be subjected to annual change or price can be change in relation of the change
of significant factors influencing the price.
In case of long term contact following formula accounting wood chips price escalation
can be applied:
PVn = PVn-1 x In
I = IS x 25 % + IC x 25 % + IT x 25 % + IB x 25 %
PVn = New price without VAT (RSD/ton)

PVn-1 = Previous price without VAT (RSD/ton)
http://www.humimeter.com/bioenergy/humimeter-bll-wood-chip-moisture-meter/
5
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In = index in period between previous and new price

I = Index
IS = Index determining change of average salaries and social contributions
IC = Index of fuel prices
IT = Regional index of transportation costs
IB = Index of wood prices (linked to changes of prices according to PE Srbijaume
pricelist)
Table below presents most important conditions for wood chips tendering.
Condition Criteria Explanation

Fulfilment of basic Elimination criteria According to the Law on public procurement all companies
conditions set by (or their subcontractors) participating in the public tender
Law on public need to submit:
procurement6 Proof of registration
Proof of not being criminally processed or convicted
Proof they have paid taxes
Security of supply Elimination criteria Bank guarantee or signed bill
Wood chips quality Elimination criteria or Quality should be indicated in concordance with Serbian solid
range rejection criteria at biomass biofuels standard SRPS EN 15234-4:2014. Exact particle size
takeover and water content should be declared according to
incineration technology requirement. Usual particle size is
P16 to P45, while usual water content is M30 to M40.
Origin of wood Elimination criteria Wood chips supplier should present proof of origin of wood
contract for raw chips contract for raw woody biomass supply. In case of
woody biomass sawmills wood supply contract should be submitted and
reviewed.
Wood chips price Selection criteria Price should be indicated per cbm at 30% water content.
Lower price should have an advantage.
Payment conditions Selection criteria Payment should be indicated in number of days after wood
chips delivery.
Delivery schedule Selection criteria Preliminary delivery schedule should be indicated on monthly
and quantities of basis before contract completion. Confirmed delivery
woody biomass schedule , on 15 day or weekly basis when delivery starts
Table 22: Key tendering conditions for wood chips supply
Procedures required by Law on public procurement in tendering process need to be

fulfilled by any public sector tender organizer. Goal of these procedures is to reduce
possibilities for corruption or other criminal actions. Fulfilment of basic conditions set by
the Law on public procurement should be an elimination criterion.
Security of supply needs to be provided and contracted quantities need to be secured

via bank guarantee or signed bill on the value of contracted quantities. This should be an
elimination criterion.
Required wood chips quality range needs to be clearly determined in the tender
process. Particle size needs to be indicated in the tender procedure. Particles larger than
required size can jam wood chips transporting system. Water content directly affects
energy content of delivered wood chips. Water content also can affect combustion
process and boilers efficiency. Fulfilment of these conditions should be rejection criteria
at takeover of the biomass which can lead to contract cancelation.
6
Law on Public Procurement. Official Gazette of the Republic of Serbia no. 124/2012 and 14/2015
Revision: 0 Page 43
In order to ensure sustainability of forest management and woody biomass supply,

proof of woody biomass origin proving that woody biomass is obtained in accordance
with forestry regulation is required. In order to prevent illegal logging for wood chips
production, contracts between forest owners or managers for raw wood or woody
biomass supply should be delivered. Proof of woody biomass origin and contract backing
up woody biomass supply for contracted quantities of wood chips needs to be an
elimination criteria.
Price of wood chips reflects on profitability of DH operations and the end consumer
price. Usual model for wood or wood chips payment in constant delivery is 15 or 20days
after delivery. Payment can also be organized in weekly or 15day lots, meaning 10-
20days after all deliveries during one week or 15day period. Payment can be either set
as condition in the tender or used as a selection criteria based on suppliers offers.
Delivery schedule directly influence investment costs of DH plant in terms of wood chips
storage. Seasonal quantities of woody biomass need to be indicated by the potential
suppliers.
Potential suppliers at a tendering process should be ranked based on wood chips price
per dry ton, with possible ranking based on payment conditions, if all other conditions
are met. Finally quantities should also be used for ranking, especially in case there are
suppliers who have competitive prices but not enough quantities to cover DH plant
demand. In that case, contracting with several most competitive suppliers can be
decided.
6. COST ESTIMATE
6.1 INVESTMENT COSTS
The table below gives an overview of the investment costs for the boiler house Sloboda.
There are no costs indicated for the fossil boiler plants as the boiler houses of Zebinovac
and Posta will be kept operational as back-up boilers and peak load boilers.
Component Biomass HoB Fossil HoB

1. Fuel storage and handling equipment and area 250.000 0
2. Thermal plant with boiler 420.000 0
3. Ash disposal facilities 150.000 0
4. Electrical equipment, electrical installation works 220.000 0
5. Interface substation 130.000 0
6. Cooling water facilities, if any 0 0
7. Civil works 120.000 0
8. Demolition costs 20.000 0
9. Connection to DH network 0 0
10. Commissioning 100.000 0
11. Contingencies (10% share of sum from 1 10) 140.000 0
12. Planning costs (incl. consultancy services) 240.000 0
TOTAL CAPEX 1.790.000 0
Table 23: Investment costs for the heating station
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For the merger of the networks Zebinovac and Posta with Sloboda 2 connecting
pipelines are necessary. The costs for these pipelines are shown in the table below:
Connection pipelines DN length CAPEX

Sloboda - Posta 150 600 m 189.000
Sloboda -Zebinovac 150 350 m 110.300
Total 950 m 299.300
Table 24: Investment costs for the connection pipelines
6.2 COMPLEMENTARY INVESTMENT COSTS
The table below shows the complementary investments to rehabilitate the existing
networks. These measures are necessary from the technical point of view to keep the
network operational within the next future. For Branoevac there are no pipe
replacement necessary.
M1 Zebinovac, ukupno 10 TP DN length costs

M1A_1_1 80 85 m 14.900
M1B_1_1 100 78 m 16.800
M1B_2_1 80 24 m 4.200
M1B_3_1 80 48 m 8.400
M1C Staro polje 1,2,3 (do sahte ispred kotl) 100 6m 1.300
M1C Staro polje 1,2,3 (sahta kotl-shahta staro
polje) 80 113 m 19.800
M1C_1_1 65 30 m 4.400
M1C_2_1 65 8m 1.100
M1C_3_1 65 34 m 4.900
M1E Zgrada IV/1 (zapadna strana) 125 157 m 41.600
M1E_1_1 100 14 m 3.000
M1E_2_1 100 15 m 3.200
M2 Sloboda, ukupno 12 TP DN length costs
M2A Trikotaza-shahta crkva 125 177 m 46.900
M2A shahta crkva-shahta Karadj 80 47 m 8.200
M2A_1_3 50 25 m 2.900
M2B_1_2 125 71 m 18.700
M2B_2_1 100 68 m 14.600
M2C_1_2 25 10 m 700
M2C_1_3 80 98 m 17.200
M2C_2_3 25 2m 100
M2C_2_5 80 104 m 18.200
M2C_3_1 125 161 m 42.700
M3 INEX (Pota), ukupno 9 TP DN length costs
M3A1_3_1 100 14 m 3.000
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M3A1_4_1 65 9m 1.300
M3B,C kotl- shahta RP Uvac 200 56 m 23.200
M3B_1_1 100 32 m 6.900
M3C shahta RP Uvac-shahta LHE 130 30 m 8.300
M3C_1_1 80 18 m 3.200
Total complementary investment costs 1.533 m 339.700
Table 25: Complementary investment costs
6.3 OPERATION AND MAINTENANCE COSTS
O&M measure Cost approach

Maintenance for generating facilities 2% of CAPEX per year
Maintenance for distribution networks 1% of CAPEX per year
Additional staff members for Biomass HoB 6 men
Mean yearly personnel costs (all-in) 6 260 per men and year
Own electricity demand for Biomass HoB 7 kWh per MWh fuel input
Own electricity demand of network pumps 3 kWh per MWh heat fed into network
Costs for ash disposal 40 /ton
Table 26: Approach for operation and maintenance costs
7. PRELIMINARY FINANCIAL ANALYSES
7.1 FINANCIAL COST BENEFIT ANALYSIS
For the evaluation of investment options the technical project parameters have been
applied based on the elaborations presented in the previous, technical chapters. The
investment options analysed for Nova Varos include
the projection of the existing heat generation facilities

a project variant elaborating on the implementation of a biomass based HOB
including complementary investments
The technical variants consider respective data on

Production of heat
Fuel consumption
Heat consumption, tariffs and revenues
Operating costs considering fuel input, materials and staff
For the determination of cash flows for the project evaluation of a specific technical
investment variant only incremental costs are applicable. In the following table the total
energy cost are presented to show relevant changes in this key cost factor.
With regard to energy cost, the prices of fossil fuels are estimated to follow a gradual
recovery in real terms from recent sharp declines as shown for regional data in the
graph below.
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Figure 35: Fossil fuel price developments
Current international market analyses project a growth pattern bringing oil prices to the
longer term trend over the medium term7. These projections have been adopted for an
escalation scenario of fossil fuel prices in real terms as shown in the table below.
2015e 2016e 2017e 2018e 2019e

OIL / MAZUT 100% 108% 126% 144% 146%
Table 27: Projection of operations and Net Cash Flows (NCF) Variant HOB
From 2019 an average growth of 1% has been assumed.
The energy costs following from the implementation of the project are subsequently
balanced with the time series of energy costs determined for the case of the toplana
without the project (section 7.5). Other cost items including materials, staff and
administrative items are only given on an incremental basis.
7
HSBC Global Research, Bloomberg, HSBC assumptions, Crude oil market insightsSeptember15, p. 4
Revision: 0 Page 47
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
T otal heat supplied MWh 8,287 8,287 8,205 9,154 9,063 8,972 8,882 8,794 8,706 8,619 8,532 8,447 8,363 8,279 8,196 8,114 8,033
to private households MWh 6,034 6,034 5,973 6,669 6,602 6,536 6,471 6,406 6,342 6,278 6,216 6,154 6,092 6,031 5,971 5,911 5,852
to commercial customers & public MWh 2,254 2,254 2,231 2,486 2,461 2,436 2,412 2,388 2,364 2,340 2,317 2,294 2,271 2,248 2,225 2,203 2,181
Household T ariff EUR/m pm 0.80 0.80 0.28 0.28 0.28 0.28 0.28 0.28 0.28 0.28 0.28 0.28 0.28 0.28 0.28 0.28 0.28
EUR/MWh - - 39 39 39 39 39 39 39 39 39 39 39 39 39 39 39
T ariffs - Commercial, Public EUR/m pm 1.20 1.20 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42
EUR/MWh - - 57 57 57 57 57 57 57 57 57 57 57 57 57 57 57
Revenues
Private households 1,000 EUR 363 363 360 388 385 382 380 377 375 372 370 368 365 363 360 358 356
Commercial customers & public users 1,000 EUR 199 199 198 213 211 210 208 207 206 204 203 202 200 199 198 196 195
T OT AL REVENUES 1,000 EUR 562 562 559 600 596 592 588 584 581 577 573 569 565 562 558 554 551
Incremental revenues 1,000 EUR - - - -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0
OPERATING COSTS
Energy total
Mazut EUR/MWh 30 32 38 43 44 44 45 45 46 46 46 47 47 48 48 49 49
1,000 EUR 330 357 413 107 107 106 106 105 105 104 104 107 106 106 106 106 106
Biomass EUR/MWh 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15
1,000 EUR - - - 139 139 138 137 136 136 135 134 133 132 131 131 130 129
Electric energy Share 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
MWh - - - 56 56 56 55 55 55 55 54 54 53 53 53 53 52
EUR/kWh 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07
T otal electric energy costs 1,000 EUR - - - 4 4 4 4 4 4 4 4 4 4 4 3 3 3
T otal energy 1,000 EUR - - - 250 249 248 246 245 244 243 242 243 242 241 240 239 238
Materials & Services incremental
Maintenance 1,000 EUR - - - 45 45 45 45 45 45 45 45 45 45 45 45 45 45
Consumables (chemicals, lubricants, etc.) 1,000 EUR - - - 3 3 3 3 3 3 3 3 3 3 3 3 3 3
1,000 EUR - - - 3 3 3 3 3 3 3 3 3 3 3 3 3 3
T otal Supply materials 1,000 EUR - - - 51 51 50 50 50 50 50 50 50 50 50 50 50 50
Personnel incremental
Skilled staff Number - - - 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Avg. Monthly salary EUR 522 522 522 522 522 522 522 522 522 522 522 522 522 522 522 522 522
T otal cost of personnel 1,000 EUR - - - 38 38 38 38 38 38 38 38 38 38 38 38 38 38
Administrative costs incremental 1,000 EUR - - - 13 13 13 13 13 13 13 13 13 13 13 13 13 13
T OT AL OPERAT ING COST S - - - 351 349 348 347 346 344 343 342 343 342 341 340 339 339
Incremental to Existing
Incremental Cost of sales - - - -168 -170 -172 -174 -176 -178 -180 -182 -182 -184 -186 -188 -189 -191
Incremental SG&A - - - 13 13 13 13 13 13 13 13 13 13 13 13 13 13
T otal incremental to Existing - - - -156 -158 -160 -162 -164 -166 -168 -170 -169 -171 -173 -175 -177 -179
Net Cash Flows 1,000 EUR - - -1,611 -363 158 160 162 164 166 168 170 169 171 173 175 177 1,072
Table 28: Projection of operations and Net Cash Flows (NCF) Variant HOB
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7.2 ECONOMIC COST BENEFIT ANALYSIS
7.2.1 Economic performance
All technical variants have also been subjected to economic analysis considering benefits
from
import substitution of fossil fuels valued at the cost of biomass
avoided emissions.
Data related to emissions vis--vis the projection of existing facilities

(including measures under implementation) have been elaborated in the
technical sections of this report.
Costs of CO2 are determined in line with the IPCC approach, which calculates
the 'social cost of carbon' in terms of future damages. The cost of future
emissions is dependent on the inherent uncertainty in projected volumes of
emissions and therefore how much global warming will occur. Discount rates
and non-monetary values also have to be accounted for. The mean estimate
from the literature in 2005 was USD 43 +/-USD 86/ton. For the economic
calculation, a value of 45 EUR/t has been applied
8
.
The format of economic evaluations carried out for all technical variants and degrees of
plant availability is presented in Table 29.
7.2.2 Levelized Unit Costs LUC
In order to compare the project on the basis of investment and operating costs only, the
LUC for heat production have also been determined.
Operational costs of consist of the operating costs of the baseline, i.e. without project
measures analysed in this report, and the incremental operating costs.
The attribution of annual totals of cost to the respective annual heat outputs have been
discounted at 2.5% corresponding to the estimated, weighted average cost of capital.
Table 30 presents the format used for these analyses.
8
IPCC, Summary or Policymakers, Contribution of Working Group II to the Fourth Assessment Report of the
Intergovernmental Panel on Climate change, 2007
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1,000 EUR
Item 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Cash flows - - -1,611 -363 158 160 162 164 166 168 170 169 171 173 175 177 1,072
External Costs and Benefits
Correction of biomass cost - 1,000 EUR - - - 139 139 138 137 136 136 135 134 133 132 131 131 130 129
CO2 emissions saved
Emissions avoided - t - - 17 2,579 2,561 2,544 2,526 2,509 2,491 2,473 2,456 2,419 2,402 2,385 2,367 2,350 2,333
Cost of CO2 emissions - EUR/t - - 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0
Benefits from avoided emissions - 1,000 EUR - - 1 116 115 114 114 113 112 111 111 109 108 107 107 106 105
Incremental Cash Flows incl. External Benefits - in 1,000 EUR - - -1,610 -108 411 412 412 413 413 414 414 411 411 412 412 413 1,306
Table 29: Economic Evaluation Format Variant HOB
1,000 EUR
in 1,000 EUR 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Total cost
Investment - - 1,611 519 - - - - - - - - - - - - -
Revenues of combination output - 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Operations 522 549 605 541 539 538 537 535 534 533 532 533 532 531 530 529 528
Table 30: Levelized Unit Cost Format Variant HOB
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Results from all analyses including

Profitability of investment expressed in
- the Financial IRR
- the Net Present Value
Overall cost expressed in the long term LUC (15 years)
National economic effect expressed in the Economic Rate of Return (EIRR)
carried out for the project are presented in the following table.
For a base case all analyses have been carried out in real terms.
LUC NPV
IRR EIRR
RSD/KWh in Mio. EUR
Existing 9.22
HOB 4.9% 8.55 -0.0 19.1%
Table 31: Summary of results
7.3 SENSITIVITY ANALYSIS
The project has been tested for modifications in key assumptions so as to examine on
changes of results. The financial IRR is considered a central indicator of project benefits.
It is consequently used to evaluate the sensitivity of project profitability by alternating
possible positive and negative changes to assumptions.
Changes in real terms percentage additions costs and prices
Investment costs - Percentages added to investment cost budget
Incremental operating costs - Percentages added to all non-energy
operating costs
Initial price of biomass (wood)
Initial level of prices of fossil fuels
Plant availability
Results of the sensitivity analyses are shown in the subsequent graph.
Revision: 0 Page 51
7%
6%
5%
4%
3%
2%
1%
0%
-6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6%
Level investment cost Level of incremental operating costs
Level of fossil fuels prices Biomass price level
Plant availability
Figure 36: Sensitivity of IRR on changes in key parameters
The sensitivity analysis clearly demonstrates the critical impact of assumptions on prices
of fossil fuels on the project profitability.
For negotiable parameters of investment and the biomass purchase price, results for
individual values are presented.
Basecase Variations
Investment - mn. EUR 2.1 2.3 2.8 3.7
Variation 0% 10% 20% 30%
FIRR 4.9% 3.7% 2.7% 1.8%
Biomass price - in EUR 14.7 13.2 14.6 17.5
Variation 0% -10% 10% 20%
FIRR 4.9% 4.9% 4.9% 4.9%
Table 32: Sensitivities on individual values of parameters
7.4 TARIFF STRUCTURE
The Toplana presently applies an area based tariffing system charging a fixed price per
square meter.
Revision: 0 Page 52
T ariff 2015
RSD/m
Private Households 96.80

Commercial customers 145.20
Public institutions 145.20
Table 33: Tariff rates
The Serbian Law on Efficient Use of Energy requires consumption based billing from
2015 onwards. However, its implementation is lagging due to lack of required
infrastructure. Hence it will not be applied to the heating season 2015/16. Also, it is
unlikely that full implementation can be expected for the next heating season.
In the framework of this assessment, a tariff consisting of two parts (a 35% fixed portion
based on heated are and a 65% variable portion based on measured heat consumption)
was assumed from 2017. The split is calculated based on the projected 2016 total
revenue per customer category.
The area based fixed portion would consequently change 34 RSD/m, the consumption
based variable portion would amount to 4,725 RSD/MWh for private consumers. For
institutional customers it is calculated as 51 RSD/m and 6,950 RSD/MWh.
7.5 DHCS CURRENT FINANCIAL SITUATION AND DEBT CAPACITY
Based on the information received from the Toplana, past financial data and
development plans have been reviewed. The financial statement reflects the
organisational changes with an intermittent privatisation in 2013. The following tables
present standardized formats of both the profit and loss statements and the balance
sheets for the past three years. They include all business handled by the utility in charge
of heat supply.
1,000 EUR
Item 2012 2013 2014
Sales 1,181.9 0.0 612.2
Cost of Sales -1,159.0 0.0 -405.9
Gross Margin 22.8 0.0 206.4
Depreciation Depreciation on Fixed Assets -46.0 0.0 -14.4
Depreciation on Intangible Assets
Sales, General & Administration Overheads, other & non-op -80.6 0.0 -133.8
Net Operating Profit (NOP) -103.8 0.0 58.1
Interest Expense (incl. Bank fees) -22.9 0.0 0.0
Interest Income 52.9 0.0 0.0
Other Financial Income (incl. Subsidies) 35.0 0.0 0.0
Profit after Financial Items -38.8 0.0 58.1
Exceptional Expense 0.0 0.0 0.0
Profit before Tax -38.8 0.0 58.1
T ax liabilities 0.0 0.0 0.0
T ax receivables 0.0 0.0 0.0
Taxable Profit -38.8 0.0 58.1
Corporate T ax 0.0 0.0 0.0
Net Profit after Tax (NPAT) -38.8 0.0 58.1
Revision: 0 Page 53
Table 34: Profit and loss statements
1,000 EUR
Item 2012 2013 2014
Cash and Deposits 34 0 11
T rade Receivables (Debtors) 385 0 116
Inventory 149 0 23
Other Current Assets 36 0 28
Current Assets 605 - 178
T angible assets 616 0 108
Net Property, Plant and Equipment 616 - 108
Other Investments 0 0 0
Intangibles/Goodwill 0 0 0
Non Current and Fixed Assets 616 - 108
Total Assets 1,221 - 285
Item 2009 2010 2011
Short T erm Bank Loans 482 0 0

T rade Creditors (Payables) 94 0 0
Other Creditors 149 0 17
Current Liabilities 757 - 17
Long T erm Bank Loans 40 0 0
Long Term Liabilities 40 - -
T ax/Deferred T axation 0 0 0
Long Term Liabilities and Provisions 40 - -
Ordinary Shares (Common Stock) 383 0 127
Profit and Loss Reserve (Retained Earnings) 44 0 141
Shareholders' Funds 427 - 268
Total Liabilities and Equity 1,224 - 285
Table 35: Balance Sheets
7.5.1 Projection of financial statements
For the projection of the financial development of the Toplana the present situation has
been considered as well as the technical changes currently planned. Projected revenues
are based on the demand trends and envisaged system developments described in the
chapter on the heat market.
Information received does not indicate subsidies were quoted in the past year. No
specific information on regulations and basis of subsidies was received.
Revision: 0 Page 54
1,000 EUR
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Sales 592 592 589 626 623 619 615 612 608 605 602 598 595 591 588 585 582
Cost of Goods Sold -392 -420 -476 -567 -567 -568 -569 -570 -571 -571 -572 -573 -574 -575 -576 -577 -578
Gross Margin 199 172 112 59 55 51 46 42 38 34 29 25 21 17 12 8 4
Depreciation on Fixed Assets -14 -14 -14 -21 -28 -28 -28 -28 -28 -28 -28 -28 -28 -28 -28 -28 -28
Sales, General &Administration Overheads -129 -129 -129 -129 -129 -129 -129 -129 -129 -129 -129 -129 -129 -129 -129 -129 -129
Net Operating Profit (NOP) 56 29 -31 -91 -102 -106 -110 -115 -119 -123 -128 -132 -136 -140 -144 -149 -153
Interest Expense (incl. Bank fees) - -0 -0 -0 -21 -28 -35 -42 -51 -60 -70 -81 -93 -106 -120 -136 -152
Interest Income 0 2 3 2 - - - - - - - - - - - - -
Other Financial Income (incl. Subsidies) - - - - - - - - - - - - - - - - -
Profit after Financial Items 56 30 -29 -89 -123 -134 -145 -157 -170 -183 -198 -213 -229 -246 -265 -284 -305
Taxable Profit 56 30 -29 -89 -123 -134 -145 -157 -170 -183 -198 -213 -229 -246 -265 -284 -305
Corporate taxes -8 -4 - - - - - - - - - - - - - - -
Net Profit after Tax (NPAT) 48 25 -29 -89 -123 -134 -145 -157 -170 -183 -198 -213 -229 -246 -265 -284 -305
Table 36: Projected Profit and Loss Statements WITHOUT project scenario
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1,000 EUR
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Cash and Deposits 79 119 105 - - - - - - - - - - - - - -
Trade Receivables (Debtors) 112 112 111 118 130 129 128 127 127 126 125 124 124 123 122 122 121
Inventory 22 22 22 24 26 26 26 25 25 25 25 25 25 25 24 24 24
Other Current Assets 27 27 27 29 31 31 31 31 31 31 30 30 30 30 30 30 29
Current Assets 241 280 265 171 187 186 185 184 183 181 180 179 178 177 176 175 175
Lands and buildings - - - - - - - - - - - - - - - - -
Technical installations and machinery 104 104 104 444 444 444 444 444 444 444 444 444 444 444 444 444 444
Depreciation 14 28 42 63 90 118 145 173 200 228 255 283 310 338 365 393 420
Net Property, Plant and Equipment 90 76 62 381 354 326 298 271 243 216 188 161 133 106 78 51 23
Other Investments - - - - - - - - - - - - - - - - -
Intangibles/Goodwill - - - - - - - - - - - - - - - - -
Non Current and Fixed Assets 90 76 62 381 354 326 298 271 243 216 188 161 133 106 78 51 23
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Assets 330 356 327 552 540 512 483 455 426 397 369 340 312 283 255 226 198
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Short Term Bank Loans - - - 312 423 529 646 774 916 1,070 1,239 1,424 1,624 1,842 2,079 2,334 2,611
Trade Creditors (Payables) - - - - - - - - - - - - - - - - -
Other Creditors 17 17 17 18 17 17 17 17 17 17 17 17 17 17 17 16 16
Current Liabilities 17 17 17 329 441 546 663 791 933 1,087 1,256 1,441 1,641 1,859 2,095 2,351 2,628
Long Term Bank Loans 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 6
Long Term Liabilities 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 6
Tax/Deferred Taxation - - - - - - - - - - - - - - - - -
Long Term Liabilities and Provisions 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 6
Ordinary Shares (Common Stock) 123 123 123 123 123 123 123 123 123 123 123 123 123 123 123 123 123
Profit and Loss Reserve (Retained Earnings) 185 210 181 92 -30 -164 -309 -466 -636 -819 -1,017 -1,230 -1,459 -1,705 -1,970 -2,254 -2,559
Shareholders' Funds 307 333 304 215 93 -41 -187 -344 -513 -697 -894 -1,107 -1,336 -1,582 -1,847 -2,131 -2,436
Total Liabilities and Equity 330 356 327 552 540 512 483 455 426 397 369 340 312 283 255 226 198
Table 37: Projected Balance Sheets WITHOUT project scenario
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1,000 EUR
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Free Cash Flow
Depreciation / Amortisation / Non-cash Items 14 14 14 21 28 28 28 28 28 28 28 28 28 28 28 28 28
EBITDA 70 43 -17 -70 -74 -79 -83 -87 -91 -96 -100 -104 -108 -113 -117 -121 -125
Changes in Net Working Assets - - 1 -9 -16 1 1 1 1 1 1 1 1 1 1 1 1
Net Operating Cash Flow (NOCF) 70 43 -16 -79 -91 -78 -82 -86 -91 -95 -99 -103 -108 -112 -116 -120 -125
Expenditure on Property, Plant and Equipment - - - -340 0 -0 -0 0 0 0 0 -0 -0 -0 -0 -0 -0
Net Cash Outflow for Taxation -8 -4 - - - - - - - - - - - - - - -
Operating Free Cashflow 62 38 -16 -419 -91 -78 -82 -86 -91 -95 -99 -103 -108 -112 -116 -120 -125
Subsidies, Residual Value - - - - - - - - - - - - - - - - -2,430
Free Cash Flow 62 38 -16 -419 -91 -78 -82 -86 -91 -95 -99 -103 -108 -112 -116 -120 -2,554
Table 38: Projected Free Cash Flows WITHOUT project scenario
Residual Value represents the final value of the entity including valuation of fixed assets and working capital.
Revision: 0 Page 57
7.5.2 Evaluation of debt capacity
Free Cash flows as shown in above table are weighed at an assumed DSCR requirement
of 1.2 resulting in a present value debt capacity for the existing toplana of -2.51 Mio.
EUR. Projections of cash flows at the given assumptions result in a negative debt
capacity.
No debt to the Republican Directorate for Commodity Reserves was indicated.
7.5.3 Projection of implementation of the HOB project in the Toplana
For a forecast of the development of toplana given the implementation of the project,
assumptions have been entered into the projections of financial statements of the
company.
Specifically the following parameters have been considered:

Investment cost estimates and scheduling
Energy cost changes considering avoided cost for heat production and
Incremental operating cost items pertaining specifically to the operation of
the project regarding
- Consumables
- Ash disposal
- Staff cost
- Administrative cost (eg insurance of new equipment)
The following tables present the effect of the project in the projected financial
statements of the company.
Projected revenues are based on the demand trends and envisaged system
developments described in the chapter on the heat market.
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in 1,000 EUR
Item 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Sales 592 592 589 626 622 619 615 612 608 605 601 598 595 591 588 585 582
Cost of Services -392 -420 -476 -399 -397 -396 -395 -394 -392 -391 -390 -391 -390 -389 -388 -387 -387
Gross Margin 199 172 112 227 225 223 221 218 216 214 211 207 205 202 200 197 195
Depreciation Depreciation on Fixed Assets -14 -14 -68 -134 -147 -147 -147 -147 -147 -110 -96 -96 -96 -96 -96 -96 -96
Sales, General &Administration Overheads -129 -129 -129 -142 -142 -142 -142 -142 -142 -142 -142 -142 -142 -142 -142 -142 -142
Interest Expense (incl. Bank fees) 0 0 -28 -42 -48 -48 -48 -46 -41 -44 -50 -56 -63 -71 -79 -88 -98
Interest Income 0 1 2 1 2 3 3 4 1 0 0 0 0 0 0 0 0
Other Financial Income (incl. Subsidies) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Profit after Financial Items 56 30 -110 -89 -110 -111 -113 -112 -113 -82 -76 -87 -96 -106 -117 -128 -141
Corporate taxes -8 -4 - - - - - - - - - - - - - - -
Net Profit after Tax (NPAT) 48 25 -110 -89 -110 -111 -113 -112 -113 -82 -76 -87 -96 -106 -117 -128 -141
Table 39: Projected Profit and Loss Statement Toplana WITH the project
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in 1,000 EUR
Item 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Cash in Deposits 62 100 58 95 116 152 188 32 0 0 0 0 0 0 0 0 0
Cash in hand 11 11 13 11 11 11 11 11 11 11 11 11 11 11 11 11 11
Trade Receivables (Debtors) 112 112 111 118 130 129 128 127 127 126 125 124 124 123 122 122 121
Inventory 22 22 22 24 26 26 26 25 25 25 25 25 25 25 24 24 24
Other Current Assets 27 27 27 29 31 31 31 31 31 31 30 30 30 30 30 30 29
Current Assets 234 273 231 276 314 349 383 227 194 193 192 191 189 188 187 186 185
Lands and buildings 0 0 243 270 270 270 270 270 270 270 270 270 270 270 270 270 270
Technical installations and machinery 104 104 1,472 1,964 1,964 1,964 1,964 1,964 1,964 1,964 1,964 1,964 1,964 1,964 1,964 1,964 1,964
Depreciation 14 28 96 230 377 524 671 818 965 1,074 1,170 1,266 1,362 1,458 1,554 1,650 1,746
Net Property, Plant and Equipment 90 76 1,619 2,004 1,857 1,710 1,563 1,416 1,269 1,159 1,063 967 871 775 679 584 488
Other Investments 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Intangibles/Goodwill 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Non Current and Fixed Assets 90 76 1,619 2,004 1,857 1,710 1,563 1,416 1,269 1,159 1,063 967 871 775 679 584 488
Total Assets 324 349 1,850 2,280 2,171 2,059 1,946 1,642 1,463 1,352 1,255 1,158 1,061 964 867 770 673
Item 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Short Term Bank Loans 0 0 0 0 0 0 0 0 125 288 459 641 832 1,033 1,245 1,468 1,703
Trade Creditors (Payables) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Other Creditors 17 17 17 18 17 17 17 17 17 17 17 17 17 17 16 16 16
Current Liabilities 17 17 17 18 17 17 17 17 142 305 475 657 848 1,050 1,261 1,484 1,720
Long Term Bank Loans 0 0 1,450 1,917 1,917 1,917 1,917 1,725 1,533 1,342 1,150 958 767 575 383 192 0
Long Term Liabilities - - 1,450 1,917 1,917 1,917 1,917 1,725 1,533 1,342 1,150 958 767 575 383 192 -
Tax/Deferred Taxation 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Long Term Liabilities and Provisions - - 1,450 1,917 1,917 1,917 1,917 1,725 1,533 1,342 1,150 958 767 575 383 192 -
Ordinary Shares (Common Stock) 123 123 284 336 336 336 336 336 336 336 336 336 336 336 336 336 336
Profit and Loss Reserve (Retained Earnings) 184 210 100 10 -99 -211 -324 -435 -548 -630 -706 -793 -890 -996 -1,113 -1,242 -1,382
Shareholders' Funds 307 333 384 346 236 125 12 -100 -213 -294 -371 -458 -554 -661 -778 -906 -1,047
Total Liabilities and Equity 324 349 1,850 2,280 2,171 2,059 1,946 1,642 1,463 1,352 1,255 1,158 1,061 964 867 770 673
Table 40: Projected Balance Sheet Toplana WITH the project
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7.6 MUNICIPALITIES FINANCIAL SITUATION AND DEBT CAPACITY
In order to provide some information on the debt position of the municipality, being the
owner of the utility, data for the calculation of relevant indicators has been investigated.
Legal debt limits stipulate for Local Self-Governing Units (LSU) a 50% (of total current
revenues of the previous year) ceiling on long term debt and a 15% maximum for annual
debt service.
In the case of Nova Varos information was received, that presently 0.42 million EUR of
debt are held by the municipality. Based on the 2014 annual revenues, the calculation
results in an undrawn potential debt of 2.19 Mio. EUR.
8. INSTITUTIONAL ANALYSES
8.1 INTERNAL ORGANISATION AND INSTITUTIONAL CAPACITY
The company for the production and distribution of thermal energy, Limited Liability
Company (LLC) Energija Zlatar NV" d.o.o., - Nova Varo was founded in 2014 . The
company is 100% in municipal property.
The company employs 16 workers who were assigned to the three organizational units
such as:
Production and distribution of thermal energy and maintenance

Legal affairs
Economic, commercial affairs.
Figure 37: Organizational chart
Revision: 0 Page 61
8.2 STAFF CAPABILITIES AND INSTITUTIONAL TECHNICAL CAPACITY
The manager is highly qualified and experienced. The Toplana is capable to manage the
realization of such a project with the assistance of a consulting engineer.The Toplana
has support from the local government for this project.
8.3 FUTURE TRAINING AND RECRUITMENT POLICY
Purchase of biomass
Biomass logistic on site
Boiler plant operation
Heat sales
Qualified boiler operator
Operation of wheel loaders
The existing staff is able to operate a biomass HoB after the above mentioned trainings.
The plant itself will need following staff members:
4 Plant operators
4 Machine fitters
1 Electricians
1 Energy purchaser (biomass)
1 Chemist
1 Control engineer
The recruitment policy will have to consider these jobs if the existing staff will not be
available for the additional tasks.
Vienna, 21.10.2015
iC - ECKERT Felix
Revision: 0 Page 62
Annex 1:
Basic characteristics - Baseline Nova Varos

Network: Zebinovac Sloboda Pota Branoevac
General city data

Number of citizens in the city (not the whole municipality) -- 8.800
Number of households in the city (not the whole municipality) -- 2.950
Number of separate networks -- 4
Generating facilities:
Number of operational boilers -- 2 3 3 2
Total installed capacity of the heating plant MWt 3,4 6,0 4,1 1,6
max. operating capacity of the heating plant MWt 3,0 1,8 2,7 0,8
Boiler No. 1
Year of commissioning -- 1988 1981
2008 2001
Boiler manufacturer -- MINEL- MINEL- IMANOVCI MIP-800GF
Termoremont Termoremont Termoelektro - uprija
Boiler's efficiency % 85% 85% 92% 85%
Nominal thermal capacity MWt 1,7 2,0 2,2 0,8
Fuel consumption by types of fuel:
Coal t/yr
Mazut t/yr 185 76 100 36
NG 1000
m/yr
Revision: 0 Page 63
Pellets t/yr
Boiler No. 2
Year of commissioning -- 1988 1981 1989 2001
Boiler manufacturer -- MINEL- MINEL- EMO Celje MIP-800GF
Termoremont Termoremont - uprija
Boiler's efficiency % 80% 85% 81% 85%
Nominal thermal capacity MWt 1,7 2,0 1,6 0,8
Coal t/yr
Mazut t/yr 76 100 36
NG 1000 185
m/yr
Pellets t/yr
Boiler No. 3
Year of commissioning -- 1981 1989
Boiler manufacturer -- MINEL- EMO Celje
Termoremont
Boiler's efficiency % 85% 81%
Nominal thermal capacity MWt 2,0 1,6
Coal t/yr
Mazut t/yr 76 100
NG 1000
m/yr
Pellets t/yr
Revision: 0 Page 64
Boiler No. 4
Year of commissioning -- 1981
Boiler manufacturer -- MINEL-
Termoremont
Boiler's efficiency %
Nominal thermal capacity MWt out of oper.
Coal t/yr out of oper.
Mazut t/yr
NG 1000
m/yr
Pellets t/yr
District heating network data:

Average length of heating season days 185 185 185 185
Shut off during the night? yes/no yes yes yes yes
Yearly operating hours of the network (considering shut off during the night) hr 2.775 2.775 2.775 2.775
Summer operation da/ne no no no no
Yearly heat production (= heat fed into the DH network) MWh 3.370 2.240 2.775 700
Yearly heat consumption of end users (= sold heat) MWh 3.150 1.970 2.510 660
Yearly network heat losses MWh 220 270 265 40
percentage of heat demand controlled individual substations % 0% 0% 0% 0%
percentage of individual substations reconstructed in last 5 years % 0% 0% 0% 0%
measured consumption with heat meters % 0% 0% 0% 0%
Total connected capacity MW 2,8 1,8 2,7 2,7
Revision: 0 Page 65
Total route length of distribution network m 612 757 744 149

Number of residential dwellings connected to DH- system -- 311 184 56 78
Number of residential buildings connected to DH- system 9 11 2 3
Number of sub-stations for residential buildings -- 9 9 2 3
Total heated area of residential buildings connected to the DH- system m 18.636 11.049 3.370 4.704
Number of commercial units connected to DH- system -- 0 0 1 3
Number of sub-stations for commercial units -- 0 0
Total heated area of commercial clients m 476 872 341 173
Number of public buildings connected to DH- system -- 0 0 8 0
Number of sub-stations for public buildings -- 6
Total heated area of public consumers m 0 0 11.968 0
New clients (area) connected to the DH- system m
Lost clients (area) disconnected from the DH- system m
Fuels:
Coal:
Price delivered to site /ton
LHV kJ/kg
Mazut:
Price delivered to site /ton 341 341 341 341
LHV kJ/kg 41.000 4.100 41.000 41.000
Natural gas:
Price /1000m
LHV kJ/m
Pellets
Price delivered to site /ton
LHV kJ/kg
Revision: 0 Page 66
Preliminary results and key figures

Percentage of households connected to the DH- system % 1%
Annual heat consumed per m kWh/m 176 188 177 144
Energy density of network MWh/m 5,1 2,6 3,4 4,4
capacity density of network kW/m 4,6 2,4 3,6 18,1
water exchange rate of the network 1/yr 34 25 no data 1
Average heat losses in distribution network % 7% 14% 11% 6%
District heating system's total efficiency % 77% 73% 76% 80%
Specific district heating network losses W/m 80 80 80 65
Age of the network years 25 34 8 - 34 15-24
Toplana's company data: Total utility

Number of staff pers. 14
Total annual revenues 1,000 612
Total production cost 1,000 554
of it fuel cost 1,000 332
Financial result before taxes 1,000 58
Total value of assets (book value) 1,000 285
Equity capital 1,000 268
Long term debt 1,000 0
Accounts payable 1,000 0
Accounts receivable 1,000 116
Tariff system (mean values)

Private households /kWh 0,060
Commercial customers & public users /kWh 0,088
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Municipality financial data

Total annual revenues 1,000 5.228
Total annual costs 1,000 4.560
Long term debt total all lenders 1,000 419
Revision: 0 Page 68

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Report

Pre-Feasibility Studies on 4 Biomass plants for

Ministry of Mining and Energy

Sub-report: Nova Varo

This report is an amendment to the previous studies prepared in

iC consulenten Ziviltechniker GesmbH

M:\52_CES\15187_KfW_Srb_4_DHC_HoB\5_Arbeit\Reports\151021_Report Nova Varos.docx

DOCUMENT CONTROL SHEET

PROJECT NUMBER: 52x15187 - Reference Number: 312-01-00603/2012-10

PREPARED BY: iC consulenten Ziviltechniker GesmbH

PREPARED FOR: Ministry of Mining and Energy

PREPARED FOR: KfW Entwicklungsbank

EDITOR: iC - ECKERT Felix, B. Brndle, M. Watzal, V. Milijic, P. Vasilijevic

Date Revision No. Editor Checked by Approved by Signature

21.10.2015 Rev. 0 DRAFT B.Brndle et al. Eckert Helbl

1. Executive Summary .......................................................................................................... 1

4.3.5 On Site Biomass Logistic ........................................................................................................... 31

Annex 1 Basic Characteristic table

Revision: 0 Page III

Table 1: Technical and economical key figures ....................................................................................... 2

Figure 1: Location of the 4 service areas................................................................................................. 4

BOT Build-Operate-Transfer scheme

1.1 DATA COLLECTION

Yearly fuel consumption

no automatically controlled sub-stations

1.2 THE PROJECT

The biomass HoB heating station is characterized by:

Wood chips as main fuel to substitute mazut

Key figure Value

NPV in Mio. EUR 0.4

f) the possibility of expanding the district heating systems and

Data collection was characterized by sending questionnaires to the DHC to collect

3. HEAT MARKET ANALYSES

3.1 TOPLANAS PRODUCTION STATISTICS

Figure 1: Location of the 4 service areas

4.000 MWh Network losses

3.2 URBAN DEVELOPMENT

3.3 CURRENT TOTAL HEAT LOAD

Figure 3: Installed capacities and maximum operating capacities

Figure 4: Connected square meters of the last 3 years

3.4 CURRENT ANNUAL LOAD DURATION CURVE

Figure 5: Zebinovac - Current load duration curve

Figure 6: Sloboda - Current load duration curve

Figure 7: Pota - Current load duration curve

Figure 8: Branoevac - Current load duration curve

3.5 THE FORECASTS ON THE HEAT LOAD AND LOAD DURATION

Figure 9: Zebinovac - Future load duration curve of the first year

3.6 POTENTIAL FUTURE HEAT DEMAND

All buildings in Nova Varo are characterized by:

connecting of approx. 20 family houses

Figure 17: Zebinovac - Forecast on the networks heat demand

Figure 19: Pota - Forecast on the networks heat demand

4. TECHNICAL DESIGN CONCEPTS

4.1 CURRENT SITUATION

Boiler Fuel Commissioning Installed capacity

District Heating Network

Network characteristic Figure Comments

Heat losses 8% good

1 boiler remained on coal and is now out of operation.

Boiler Fuel Commissioning Installed capacity

District Heating Network

Network characteristic Figure Comments

Boiler Fuel Commissioning Installed capacity