COMPETITIVE DIALOGUE NO.

1
(OJEU REFERENCE: S74 16/04/2010 111051-2010-EN)

ON ISSUING A CONCESSION FOR FINANCING, DESIGNING, BUILDING AND

OPERATING A REGIONAL LANDFILL FOR MUNICIPAL SOLID WASTE IN
THE SOUTH-EASTERN PLANNING REGION (REPUBLIC OF MACEDONIA)

Minutes of the Meeting

Joint, Clarification meeting and

individual meetings with the local
decision makers

(20-23 September 2010)

(7-8 October 2010)
Introduction
The planned field visit that was organized in the period 20-23 September 2010 in the
Southeastern Planning Region, in line with the Indicative Timetable and the one week
postponement of the Joint and Clarification Meeting requested by the pre-selected the
candidates, initiated the second phase of the Competitive Dialogue. The programme of
meetings and field visits was predefined by the Committee and distributed to the
companies and Mayors.

There were two joint meetings organized (on the 20th and 23rd September), during which
the candidates could discuss the key project issues with the local decision makers, as
well as 9 individual meetings with Mayors, Directors of the Public Enterprises and local
administrations officers in every municipality. Individual meetings with the local decision
makers have been organized in: Vasilevo, Strumica, Radovis, Bosilovo, Novo Selo,
Dojran, Valandovo, Bogdanci and Gevgelija. The only exception was the municipality of
Konce not being visited due to time constraints, however, the Mayor and his resource
persons joined the meeting in Radovis.

In line with the conclusions from the Clarification Meeting, the Mayors joined on 7 th and
8th of October to discuss the status of the LOT II and III respectively, as well as the
relevant legal / institutional issues concerning the concession project. The MoM was
made and included into this document.

Apart from this, a methodology for setting of disposal tariffs has been inserted as a
guideline to the candidates for calculating and presenting their unit costs for the LOT I
and II respectively.

First Day, 20 September 2010

Joint Meeting

The Joint Meeting was attended by 5 out of 6 pre-selected the candidates:

1. A.S.A. International Environmental Services GmbH

2. Cantanzaro Construzioni SRL
3. Hinkel International GmbH
4. PORR Unwelttechnik GmbH
5. STRABAG AD

The only not attending candidate was Empire Communities Group, which responded to
the Invitation to Participate in Dialogue (ITPS), but was not able to arrange to be in the
region in the determined period. Meanwhile this company has withdrown from the
process, thus the remaining five companies (listed above) will continue to compete in the
course of the dialogue phase.

After the introduction and welcome to companies by the Mayor of Strumica, the
companies were invited to comment on the Agenda and, since there were no comments,
the candidates were provided with the Committee`s answers to the candidates
questions raised in the Response Forms. The candidates asked to receive an electronic
version of the answers, which are annexed to this MoM.
Some answers, however, required further clarification. The candidates commented
specifically on:

- The high weight (65%) assigned to the Unit Price (Euro / ton collected and/or
disposed waste), in view of the not sufficiently defined methodology for its
calculation. The candidates` concern was that in case of different cost calculation
a sustainable solution could be eliminated due to a higher unit price for the first
year / period; The answer was that the candidates are required to provide a curve
with the change of the Unit Price for different waste quantities (+/- 20% variation
linked to the uncertainty due to the lack of waste weighting).
- The candidates` concern was also connected with the not predetermined length
of the concession period, having an impact over the Unit Price as well.
- The interrelation between LOT I and LOT II was emphasized along with the need
for the municipalities to clearly state their position on the acceptance of the LOT
II on a case by case basis.

It became clear that, guided by the descriptive tender documentation, the candidates
were not furnished with sufficiently precise and up-to-date data; moreover, due to the
hesitation of the decision makers to clearly state their position regarding the LOT II and
LOT III respectively, the scope of the project was not yet clear. Therefore, it was
suggested to discuss the outstanding issues during the field visit and provide
straightforward direction to the candidates as soon as possible in order to enable them
to begin the development of their Outline Solutions No. 1. The Joint Meeting was closed
in good spirit due to the common understanding achieved on the issues pending
clarification in the forthcoming period.

Visit to the Municipality of Vasilevo

The candidates firstly visited the landfill located in the vicinity of the village Dobrasinci,
being designated to serve as a regional landfill. At the landfill the candidates could
observe the environmental conditions in general, the morphology of the site and the
waste composition.

In the premises of the municipality the candidates met the Mayor and local officials. The
Mayor gave an introduction and overview of the waste management situation.

Waste collection is carried out by the Public Enterprise (PE) Turija. Last year it showed
significant improvement regarding the fee collection rate. The reason for that is the direct
contact with the costumers through the bill collectors.

The candidates doubted the organic wastes share of 25% (Pre-feasibility Study), in spite
of the organic waste observed in lesser quantities at the landfill. The municipal
representatives answered that the organic waste is used as fodder for livestock either at
the landfill or at the yards of citizens. Also, in summer the landfill fires reduce the organic
fraction and waste quantities in general. Without organic waste at the landfill, however,
one can not prepare a baseline for a Clean Development Mechanism (CDM) project nor
can he use carbon credits to reduce the costs for the closure / reclamation of the landfill
in Dobrasinci.
Total accumulated quantities of waste at the landfill are not known. The Mayor
encouraged the candidates to make their own estimations using the assumption that
waste being generated by around 150,000 people have been disposed off for the last ten
years. Immediately after this statement of the Mayor, the Director of the PE corrected
him: the candidates should assume that the use of the landfill started some ten years
ago and it was used for depositing the waste collected from around 60,000 inhabitants
for a period of 7-8 years, while for the last two-three years the waste collected from
100,000 inhabitants is being disposed off at Dobrasinci.

The PE serves the following clients:

- 485 households
- 43 legal persons

It uses 1 refuse truck with volume of 7-8 3, 15 years old. Also a tractor plus trailer
supplements the refuse truck in the areas where it has a limited access. A number of
metal bins in ownership of the PE have been delivered to the households; there are also
43 - 1,1m3 containers in use.

Service users pay a flat rate of 120 MKD charged to households and 360 MKD charged
to legal persons. Average fee collection rate in 2009 was 80%; the legal persons are
better payers. Service users receive a mixed bill for water and waste; the legal persons
receive invoices. There are two bill collectors in the municipality.

At the landfill there is one guard which is employed by the PE of Strumica. Occasionally,
an additional worker (employed by the PE of Strumica) works on the compacting of the
waste by a bulldozer at the landfill. There are scavengers at the landfill who collect
mainly PET. The Mayor said that once their access to the landfill will be restrained, there
will not be any complaints; he also said that the ban to scavenge at the landfill will not
cause any social problems because only 2-3 families make earnings from the waste at
the landfill.

The landfill is within the Cadastre area of the municipality of Vasilevo. Hazardous waste
is being disposed off at the landfill as well. Hazardous waste generators are situated
within the municipality of Strumica.

The candidates were also interested in the environmental liability issues, namely they
asked who will be responsible to draw a line between the contamination from the old
landfill and the environmental effects from the new landfill. In addition, there werent any
analyses made so far in the Pre-feasibility study on the subject of separation between
the old and new landfill. The candidates, however, understood that the municipalities
were not responsible for the decision making regarding the environmental impacts and
that the authority for the Environmental Impact Assessment (EIA) and Integrated
Pollution Prevention and Control (IPPC) lays with the Ministry of Environment and
Physical Planning (MEPP). All the relevant environmental issues will be dealt with during
the processes of obtaining approval for the EIA and the relevant IPPC permit for the
closure & reclamation of the old and the operation of the new landfill respectively. But,
prior to the selection of the best bidder, the Committee shall appoint environmental
experts to evaluate the outline solutions in order to eliminate those which are associated
with the highest environmental risks deriving from both the closure / reclamation
method for the old and the operational concept of the new landfill.

The Mayor of Vasilevo was asked to provide the following:

- Military topographic maps (scale 1:25,000)

- Cadastre maps, satelite and orto-photo maps (if available).

Driving to the landfill, the candidates noticed that the access road is in very bad
condition; in addition, the last one kilometer to the landfill there was a macadam road.
The Mayor answered that the access road will be improved for a length of around 5
kilometers using a grant from the national budget, while the bidders shall foresee the
costs for the construction of up to 1 kilometer access road to the landfill in their outline
solutions.

Companies asked also some questions related to the future institutional model: who will
sign the contract with the private partner? At this point it is not known which model will
be accepted and it is not possible to define whether the public party will be represented
by one legal person, or the private partner shall sign the contract with all the ten
municipalities.

Regarding the LOT II, the Mayor stated that the municipality of Vasilevo, like the others,
is interested in contracting out the waste collection. As for the LOT III - the Mayor
conveyed the opinions of other Mayors in the region - only the landfill at Dobrasinci
should be part of the project, while the small illegal landfills should be taken care of by
the municipalities, in order to keep the project investment / operational costs low.

The Mayor asked what will happen with the present employees of the PEs in case the
LOT II is part of the project. Some of the candidates responded that maybe in the initial
project stage there will be some cuts of labor, while with the extension of the system the
number of staff will increase. Also, shifting of staff from overstaffed PEs to smaller PEs
may be possible. The staffing is part of the scoring and therefore the discussion was
interrupted in order to avoid the disclosure of variant approaches to this issue by the
candidates.

For the municipality of Vasilevo the coverage with a waste collection service is important,
since they cover 6 settlements; the rest of 7 settlements (around 2,500 households)
need to be included in the system. However, for the households which have never
received a waste collection service the fee level will have to be set moderately in the
beginning, order to familiarize and involve them into the system. Some of the candidates
asked for an opinion on the household fees upper limit in order to adjust the technical
concepts in their outline solutions to the level of affordability. Such a ceiling can be
discussed among the Mayors and submitted to the candidates by the time of sending
this MoM out, if appropriate.

Visit to the Municipality of Strumica

The Mayor of Strumica introduced the participants with the basic information on the
municipality:
Strumica is the biggest municipality in the Southeast planning region with 39,000 in
habitants; major economic driver is the agriculture in which over 30% of the population is
engaged.

Around 90% of the deposited waste at the landfill in Dobrasinci is collected in Strumica.
There are two employees at the landfill; occasionally there are more workers who carry
out leveling and compacting of the waste by bulldozers.

The PE from Strumica has 52 employees in its unit for public hygiene, out of which 8 are
drivers and the rest is engaged in other positions. The PE owns 4 refuse trucks and 2
tractors + trailers. When all the vehicles are operational the working hours are in one
shift; however, very often some vehicles are out of order and in this case there must be
two shifts organized to serve the 5 settlements and the town of Strumica. In Strumica the
work is performed 7 days a week and also during holidays. The PE also owns:

- 4,700 dust bins (120 l.) given to households;

- 254 containers 1,1 3 for collective buildings and legal persons
- 26 skip containers 53

Tariff is linked to m2 of indoor and outdoor flat / house area:

- 2,7 MKD/indoor + 0,6 MKD./ outdoor for households;

- 4 MKD/indoor + 1,2 MKD / outdoor for legal persons.

In other words, a monthly fee for a family living in a house of over 1002 and a larger
garden would amount around 500 MKD. Average fee is about 300 MKD. The present fee
collection rate is around 70%. Billing is joined with water.

The tariff system linked to area of a flat / apartment has been established since 2010.
Previously the PE charged a flat fee to clients. In order to change the billing in
accordance with the new tariff system, new contracts are concluded with the clients. The
tariff is set by the municipal Council and it does not appear in the contract. These
contracts are rather simple indicating the flat / apartment and outdoor area and these
can not cause problems for the private operator once he / she is in the field. The
candidates may like to see anyway a sample contract.

There are15,896 households out of which 8,831 are included in the waste collection
system via contracts. Apart from the town, the nearby settlements (2-3) are also covered
by a service. However, the present tariff system can not be applied in the rural areas and
therefore in rural settlements the monthly fee is flat (100 MKD / household). In order to
stimulate their integration in the system the PE subsidizes the collection costs in areas
with lower population density. Householders are, in general, better payers than the legal
persons.

The public hygiene department of the PE makes profit of around 500.000 Euro (1 million
revenues, half million expenditures). Besides, the PE can not invest into a modern
integrated waste management system and therefore a private partner would be
welcomed to do so.
The municipality of Strumica is ready to contract out the waste collection and
transportation to a private operator, in case the offered technical solution would
encompass the coverage of the entire territory of the municipality thus enabling a clean
environment and competitive agricultural products.

There are some initial endeavors to separately collect paper and PET in about 20% of
the town. The collection is organized via so called ecological islands where the waste
generators bring their segregated waste. The PE separately collects the paper and PET
and delivers to a NGO Planetum (supported by GEF funds); the NGO further markets
the recyclables.

As for the hazardous waste (mainly deriving from the hospitals and veterinary stations) it
is segregated, disposed and disinfected by lime in holes at the landfill.
The candidates asked specifically to set a methodology for calculation of unit disposal
costs in order to avoid that some companies propose extraordinarily low disposal tariffs
in the beginning while inflating them as soon as they win the tender. In addition, some
the candidates asked to lower the weighing factor of 65% for the unit price and in the
first round to evaluate the technical concepts only.

Asked about his opinion regarding the major benefit from having a private partner, the
Mayor of Strumica responded that he is mainly interested in having clean settlements,
healthy environment and competitive agricultural products and food. Also, he asked the
candidates to consider keeping his 52 employees in the system. The PE will move soon
into new (under construction) modern premises and will therefore increase its capital.

During the meeting it was not agreed whether the street cleaning and maintenance of
public areas is part of the LOT II.

The candidates requested to check whether in the Macedonian law there is a rule which
prescribes a retendering of a project in case the reinvestment made in the course of the
concession period exceeds 50% of the amount set in the contract.

The annual waste quantities deposited at the landfill in Dobrasinci are 34,788 m3 (111,5
3/day average). The estimation is made on the base of the number of tours for specific
vehicles assuming their full capacity. There arent any measurements allowing
conversion of volume into mass.

The amount of organic waste is estimated at 70% of the total in autumns. Regarding the
LOT III, the municipalities will clean up the small landfills in rural areas while the closure
and reclamation of the landfill in Dobrasinci should be part of the project.

The candidates asked about the penalties charged for illegal disposal. In reality, such
penalties are rarely applied; in the law on public hygiene there are strict penalties for
littering in urban and rural areas. The penalties in the above law are not sufficient. There
should be new Decisions on communal order in line with the new law on waste
management which should define the rules for the waste collection; a revision of the
penalties for illegal disposal should be made in the framework law on waste
management.
During this meeting the upper limit for a household fee was mentioned again, while an
answer was expected by municipalities on the next clarification meeting on Thursday.

Clarifications were also needed regarding the quantities and the location of the deposits
of hazardous waste on the landfill in Dobrasinci. If possible, the candidates would readily
receive a map on which the cells filled in with hazardous waste are localized.

Visit to the Municipality of Radovis

At the meeting the facts and figures of the municipality of Konce were firstly presented.
This municipality was separated from the former municipality of Radovis and as such it
has a territory of 237 2 and 3536 inhabitants. There are 14 settlements out of which
only 7 are alive, in 3 up to 5 families are inhabited and the remained 4 are depopulated.
Waste is collected from 4 settlements for the last three years. The provision of an
organized waste collection service is a rather new habit in these rural areas and
therefore the fees are rather low (flat rate amounting 100 MKD for households and 150
MKD for legal persons. Fee collection rate increased from 71% to 90% in 2009.

The coverage of the municipality with an organized waste collection service is

unsatisfactory. This is merely a result of the lack of capacity of the PE, and has little in
common with the lack of discipline of the service users in terms of both their response to
receive the service and to pay for it. The PE has 5 employees in its waste department.
Population is not wealthy but the affordability to pay for the service is not under question.
The Mayor of the municipality of Konce repeated that the Mayors of all the 10
municipalities reached consensus regarding the contracting out the LOT II; also, he
stated that all the illegal dumpsites shall be cleaned up by the municipalities (around 14
in the municipality of Konce); an exception is found with the landfill in Dobrasinci. The
road network in the municipality is well developed for the 7 bigger settlements, but in
others the access is difficult; in smaller settlements most probably bring centers should
be established. It is planned to erect a new weekend settlement for which a waste
collection service will have to be organized in 1-2 years.

After that, the Mayor of the municipality of Radovis took the floor and presented a
glimpse on the municipality and the PE.

The municipality of Radovis has around 30,000 inhabitants distributed in 25 settlements.

There is one central landfill in use for the disposal of the waste collected in the town and
a number of illegal dumpsites created in rural settlements. The town of Radovis has
22,000 inhabitants. In the beginning of this year the PE initiated contracting with clients
in bigger rural settlements towards extending the waste collection area.

Regarding the LOT II it was not clear whether the Mayor intends to keep the PE or to
contract out the waste collection to the private partner, but it seemed that he understood
that the present waste collection should undergo a process of optimization. His bigger
concern for the venture is the staff of the PE and not its equipment, while the
partnerships model regarding the LOT II will have to be determined further.

In the municipality 6167 households are served (majority in the town of Radovis) and 3-
3,500 households are not served. There are 1055 legal persons in the municipality out of
which 505 are served (the PE is their contractor).
The tariffs are linked to indoor / outdoor area of a flat / apartment:

- 1,47 MKD / m2 indoor and 0,6 MKD / m2 outdoor area for households;
- 2,1 MKD / m2 indoor and 0,6 MKD / m2 outdoor area for legal persons.

Fee collection rate is 75,15 % in 2009 while there is a positive trend over the last years.
Annual revenues are 12,026,000 MKD but the expenditures are 15,133,778 MKD due to
the high maintenance costs for vehicles. The PE has 22 employees plus 2 people in
administration.

There are two refuse trucks (14 and 16m3) being older than 20 years (one second hand
truck has been purchased in 1979 from Germany) and two tractors plus trailers. Annually
the PE collects 14,500 m3 (compressed) waste. They combine the tractor and the refuse
trucks; there are plans to cover the rural settlements with posting of 5 m 3 skip containers
to serve as bring centers. The PE owns 100 1,1 m3 containers and 100 dust bins (80 l.)
The rest of the clients use own (nonstandard) containers.

The candidates asked for the main reasons for not covering the rural settlements with
organized waste collection. The Mayor of the municipality of Radovis said that the
people in rural communities are interested in receiving an organized waste collection
service, but the PE is not prepared to respond to their needs. In addition, people in rural
communities can not be charged the same amount for waste collection like in urban
areas. Also, they produce less waste and, although the costs to provide service in rural
areas are higher, rural households need to be subsidized by the urban ones.

The Mayor of Konce added that:

- The PEs initiated provision of waste collection in the urban areas due to the low
costs of the service in densely populated areas;
- The waste collection is mingled with water supply and wastewater disposal, while in
rural settlements the water related services are not yet provided by the municipalities
and as a result, the waste collection service is also pending;
- The laws in the past did not require a universal service and the environmental
awareness was rather low.

Both Mayors stated that there arent any initiatives to segregate and recycle waste. In
case the present fees would have to be increased for 100%, would that be a challenging
task for the municipal councils? The Mayor of Radovis shared with the candidates that
the present tariff date from 1993 and that there is room for their increase. Also, in the
municipality of Konce the fees increased for 100% since the establishment of the service
after one year: they started with 50 MKD and in a year time there was an increase up to
100 MKD.

The Mayor of Konce admitted that in case the PEs would have covered the entire
territory with waste collection there would not be needed by the municipality to clean up
all these illegal dumpsites and make unnecessary expenses.

The candidates stressed that it is of utmost importance to set a ceiling for the future fees
and discuss the room for increase of the tariffs once again during the Clarification
Meeting. However, the candidates were positively surprised to hear that some Mayors
recognized the need to increase the present fees and are ready to support this in the
municipal councils. There were discussions that the population in Macedonia happily
pays their bills for the cellular phone (these bills are rather high) while the waste and
other communal fees are not regarded important. Campaigns will have to be initiated in
order to publicize the environmental benefits from having a modern waste management
system in place.

Visit to the Municipality of Bosilovo

Like the other hosts, the Mayor of the municipality of Bosilovo welcomed the participants
and presented the mean features of the municipality of Bosilovo. It has 14,260
inhabitants and 3,661 households; also there are 183 legal persons (industries,
commercial entities and small family businesses). The population is spread in 16
settlements over a total territory of 150 km2; the road connection between the
settlements is appropriate and the conditions are suitable for a normal traffic. All the
damages of local roads will be improved in the next 3-4 years.

According to the statistical information, 71% of population is engaged in agriculture.

There are four bigger companies which contribute to a growing economic development
of the municipality (diary, greenhouses, vineyards and vinery). Some of them acquire a
profit of around 3 million Euros annually. Remaining companies are active in the
construction business, wood processing, other services (small and medium size
companies with 10-20 employees). Families (70% of population) are engaged in the
agriculture and have own small size business.

The PE has been established in 2001; the waste collection started in 2006 . By mid of
2010 there were 551 out of 3661 households connected to the service. Starting from this
summer the PE obtained a new refuse truck (REC project) and since then there were
around 1,500 new contracts concluded with clients in order to extend the service over
the entire territory. In addition, 75 new 1,1 m3 containers and 200 dust bins have been
purchased. The 1,1 m3 containers are placed in areas with higher waste generation rate
(shops, supermarkets etc.) and in front of narrower streets serving as bring centers.
The disposal of collected waste is executed at more or less controlled sites. Originally
there were ditches excavated for the waste which was then covered with the excess soil
from the excavations. If required, at these sites they place construction machinery in
order to level and arrange the sites to receive more waste. Apart from these efforts, one
should have in mind that the local population is free to dispose their own waste at these
locations and it is rather difficult to maintain the dumpsites in proper condition.

Households are charged a flat monthly fee of 150 MKD (VAD included) and the legal
persons need to pay 300 MKD a month. Fee collection rate is 72% which is expected to
increase due to the recently improved quality of the service. An example was shared
with the participants that the clients are satisfied with the present water supply service
and therefore the fee collection rate is in the range of 94-96%.

The PE generates losses in the waste collection department which are cross-subsidized
from the water supply service. Due to the increased coverage and number of clients, the
preliminary calculations show a break even situation for the waste collection operations.
The municipality has one refuse truck (the newly obtained one with a volume of 8 m3)
and a tractor plus trailer.

An average salary in the PE is 16,000 MKD net (or 22-23,000 MKD gross).

In the municipality there is one scrap yard where its owner collects metal, waste
batteries / accumulators and paper. The PE is neither involved in any waste segregation
nor in recycling. Sometimes there are campaigns in schools. Bearing in mind the
agricultural character of the local economy there is plenty of organic waste.

The PE has data on collected waste quantities from 586 clients whereas the estimated
quantities for the total collected municipal non-hazardous, commercial and demolition
waste are 1700 t/year. It is too early to come up with estimations for the presently
collected waste quantities.

The healthcare waste is transported to the medical centre in Strumica. Out of 16

settlements 13 have own dumpsites (which are designated by the municipality) out of
which 8 occupy an area over 5002. The municipality cleans up occasionally the smaller
dumpsites and informs the citizens to use the designated sites only for the disposal of
their waste.

The municipality considers the collection and treatment of the agricultural waste as a
very important issue. This waste is generated not only at the fields, but also in the yards
surrounding houses. The generation of organic waste depends on the crop season, but
there are two annual picks in spring (May-June) and autumn (September November)
Home composting of organic waste was proposed to citizens in many occasions (pilot
projects of NGOs, educational campaigns etc.), but obviously there isnt sufficient
incentive for them to change their present habits. The municipality developed a Local
Environmental Action Plan (LEAP) in which useful data on the state of the environment
and priority plans for sustainable development (including waste management) can be
found.

High priority of the municipality is the production of healthy food and therefore they need
to cover the entire territory with organized waste collection service and to clean up the
illegal dumpsites. The population readily accepts the waste collection service, however,
around 20% are creating problems. The municipality will insist on covering all the clients
by the period when the regional facilities as part of the concession project will be
available. The Mayor is not considering the contracting out of the LOT II.

Around 5% of the population is poor and such households need a proper treatment
regarding the payment of their fees. The Mayor is not keen on allowing a kind of
discounted fees for poor; he wants to register households which are really poor and
exclude those who have proofs of their inappropriate financial situation but who have in
reality some gray income. Once he has a clear understanding of the poverty situation
in the municipality, he will propose a solution to the municipal Council.

Around 15% of population is abroad to make for living; most of these people are back
home for one month during the summer and therefore the waste they generate should
be taken into account.
Visit to the Municipality of Novo Selo

In the municipality of Novo Selo the Mayor, the Director of the PE and the member of the
Committee welcomed the candidates. The Mayor provided information on the
municipality. It is a clean area with 2 protected areas (monuments of nature) the
Smolarski and Kolesinski waterfalls.

The municipality has a population of 15,000 inhabitants or 3,500 households; it is spread

over an area of 260 km2 and 13 settlements. There is an organized waste collection
including 1,500 households into the system (around 40% of the total). 150 legal persons
also receive the service. The road network is well developed. Collection is carried out by
a tractor and trailer and a refuse vehicle with volume of 15m3. The PE has 31 employees
out of which 15 are in the public hygiene. There is one communal inspector and two
communal overseers. Inspectors are active in the field with issuing warnings and rarely
penalties. Their presence is important for an improved discipline.

The fee is flat: 100 MKD are charged to households and 150 MKD chargeable to legal
persons. The PE generates an annual income of 1,163,000 MKD; the expenses are
750,000 MKD.

There are 10 illegal dumpsites used by the citizens not receiving waste collection. There
is also one designated municipal landfill used for the disposal of waste collected by the
PE. Occasionally the municipality organizes clean up campaigns.

The PE collects annually around 1,500 tons of waste. There are fluctuations of collected
waste quantities depending on the season. For example in spring there is an increase of
the HDPE foils due to the waste generated from greenhouses. It happens that at the
municipal landfill huge quantities of HDPE foil are dumped and burned.

Waste is collected once a week (one shift), while in the municipal center twice a week.
The bill in Novo Selo is combined with water; in other settlements the PE issues a
separate bill for waste. In settlements where the waste is charged separately the fee
collection rate is better than in areas where the bill is combined with water. The fee
collection rate is related to the quality of the service; recently the PE increased the waste
collection frequency and the feedback by the clients is obvious (the fee collection rate
increased significantly). The fees are mostly collected via bill collectors with the
exception of the the municipal center where the bills are invoiced to the clients. The
direct contact with the clients was considered crucial for an improved fee collection rate.

The population is exclusively orthodox, there arent socially vulnerable.

Some the candidates asked the Mayor about his attitude regarding the provision of PE`s
assets into the future venture. The Mayor said that the small rural municipalities are not
concerned about their assets to contribute as a minor share. Their major concerns are
the taking over of the PE`s employees by the private partner as well as the setting of the
fee chargeable to clients. As for the trucks in possession of the PE, there are various
solutions: they may sell them to other municipalities, sell them as scrap metal, rent,
dedicate them as a share into the venture or give them away to the operator. It will all
depend on the chosen institutional model.
The Mayor was having his doubts whether the LOT II should be part of the project.

Also, he stated that there is room for a fee increase, but if there is to be such an
increase, it will cause a drop in the fee collection rate. If the fee increases, the
willingness of the households to make contracts with the PE will diminish. In any case,
the marketing of the new service on the part of the private sector will be very important
for the acceptance of the new system by the population. However, it does not strictly boil
down to marketing alone, rather, he believes that the people can recognize the quality of
the service, hence, it will have to be satisfactory in order to obtain a high response and
payment of the fees in return.

The candidates noticed an underpass which can be problematic for manipulation by a

refuse truck. They asked to prepare a check list for municipalities in order to indicate
bottlenecks in the transportation network. Another approach would be that the
candidates prepare a check list while the Committee would send it to the Mayors for
filling it in.

Visit to the Municipality of Dojran

The Mayor was not able to meet the candidates, instead the Director and the financial
officer of the PE along with an officer of the municipal administration welcomed the
participants.

Municipality of Dojran has an area of 130 km2 and lays at the border among three
countries: Macedonia, Greece and Bulgaria. The Dojran Lake is a source of life for the
municipality: major economic activities are the tourism and fisheries. There are 2000
houses (out of which around 50% are weekend houses) and 3600 inhabitants. There are
around 1000 families. During weekends there are 10-15,000 visitors who, despite of their
contribution to the economy, burden the public utilities due to the occupation of all the
available parking areas; they generate excessive waste quantities, litter and overuse
water.

There are two urban settlements (Nov and Star Dojran, which are submerged into one
settlement) and 11 villages, out of which 5-6 are inhabited by a Turkish minority.
Excluding weekend houses, there are 1000 dwellings receiving a regular service.

The accommodation capacity (in hotels, resorts, private rooms, weekend houses etc.)
may serve 1000 visitors; yet, during the weekends there are often present over 10,000
tourists. The tourist season is gradually increasing during the previous years. It is owed
to the rise of the water level in the lake; new hotels and casinos recently erected also
contribute to an extended tourist season. The agreeable climate is a reason for the
sports clubs coming for preparations.

Prior to the ecological catastrophe in 1988 Dojran counted over 300-400,000 overnights.
The hydro system Dojran Lake provides for an input of fresh groundwater to fill the lake
up to its original volume. As the lake is recovered, the tourism shows improvements: this
year there were 135,000 overnights realized. Apart from the lake and the climate, there
are other attractions, such as the biodiversity (Dojran is nominated for a UNESCO and
Ramsar site) and the traditional fisheries using birds for chasing of fish.
The PE was established in 1998 ; No. of employees is 23 out of which 12 are
engaged in the public hygiene department (they also employ 12-15 part time workers
during the three summer months).

The PE possesses one refuse truck (Mercedes) 30 years old, with a volume capacity of
7m3 and 2 tractors plus trailers to manipulate through narrow streets. The PE collects in
average 7 m3 of waste; one should have in mind that in summer five times winter waste
quantities are collected.
The PE owns 69 - 1,1 m3 containers; the rest of 6 - 1,1 m3 containers is owned by
companies (which makes 75 - 1,1 m3 containers in total); there are also 60 dust bins
given to households. 640 households (including the weekend houses) use either the -
1,1 m3 containers or have non standardized bins / barrels on their disposal.

Only the urban area is served (Nov and Star Dojran). The PE of Dojran initiated the
provision of an organized waste collection in a nearby rural settlement free of charge for
households. This method was chosen to create habits first; in 1-2 years they will start
charging for the service provided. Meanwhile, the expenditures are covered from the
payments of legal persons already connected to the service in this rural settlement.

The municipal landfill is 1 km. distanced from the last weekend house and 2 km. from
the center of the settlement. It is spread over 4 hectares. There are 6-7 illegal dumpsites
around the other settlements which are temporarily cleaned up by the PE. 2430 tons are
disposed off every year.

Tariffs are: 3 MKD/2 for indoor areas. Permanent citizens pay regularly, while the
owners of weekend houses pay for six months only. They used to pay for three months
only, but recently the Council adopted a decision for an extended payment period per
annum. The municipality carries out educational campaigns, but the habits can not
change easily.

The fee collection rate was 71,3% in 2009 which in comparison to the previous period
shows slight increase. The intention is to maintain the positive trend.

There isnt any waste segregation. At the landfill scavenging is common for a number of
Roma families.

The PE recovers the costs of operations, but due to the outstanding debts for unpaid
electricity bills its account is blocked. The EVN claims their account receivables letting
an amount on the disposal to the PE to cover minimum operational costs (fuel, spare
parts etc.) excluding workers` salaries. In 2009 the PE collected 4,100,000 MKD for the
waste collection and 3,500,000 MKD was spent to cover related expenditures.

In summer ~10-20m3 of waste in total is collected in two shifts from the beaches which
amount is not chargeable.

There are 210 legal persons, majority of them are connected to the service. They pay a
flat rate; 2 bigger generators are charged based on the quantity of waste collected.
There are small quantities of healthcare waste which end up at the landfill. Waste oils
and other industrial hazardous wastes are collected by contracted licensed transporters
who take them over and remove from the municipal territory.

Since the Mayor did not attend the meeting, the municipal representatives took an
obligation to convey the question regarding the LOT II and III to the decision makers.

The tourist and communal tax are designed to provide for the recovery of the costs
incurred due to the tourist visits. The taxes are payable for tourists who stay overnight,
meaning that the costs for the collection of waste which is generated by the one-day
visitors over the weekends can not be recovered. Based on the estimated number of
overnights and one-day visits, there should be tourist taxes generated around 4,000,000
MKD a year, but only half of that is actually collected due to the tax evasion by the
private owners of rooms for renting; a small portion of the collected taxes is revenue of
the municipal budget and not of the PE.

This year, for the first time, the Ministry of Transport and Communications issued
concessions for maintenance of the beaches. The new concessionaires (8 in total) are to
conclude contracts with the PE for the waste collection. The PE was already contracted
out but to collect wastes from the beaches and restaurants located on the coast but the
concessionaires did not pay their outstanding debts for the executed service yet.

Visit to the Municipality of Valandovo

At the meeting the municipality was represented by the Chair of the municipal Council,
an officer of the PE and two officers of the municipal administration.

The municipality has a population of 8,900 inhabitants and around 3500 households.
The PE presently serves 1100 households and for the serving of the rest, the local
communities contract out legal and physical persons. The PE intends to replace the
present contractors with their own service in 14 settlements. For this purpose a new 8m3
refuse truck was obtained (a Swede grant managed through the REC). There is an
ongoing activity to provide 1,1 m3 containers to households and legal persons in the
urban part of the municipality. There are plans to purchase a new 13m3 refuse truck in
order to cover the entire area with a service. For the 14 rural settlements, however, there
arent any standardized containers available. Since the municipality is allowed to borrow,
there are plans to finance the necessary equipment for a full coverage with a service.

The PE obtained 33 1,1 m3 containers which shall be placed in the urban area; they
will obtain soon 40 such containers in addition.

The fee collection rate is moderately fluctuating around the average of 85%. Legal
persons are better payers. Originally the fee collection rate was 40-50%, but due to the
efforts made to improve the quality of the service the clients demonstrate a better
payment discipline. In the waste department of the PE there are 8 full time employees
and 5-9 part time in the harvest season.

The citizens do not realize the importance of the waste collection service yet. There
should be some publicizing of the environmental impacts from the inappropriate waste
management in the municipality.
The tariffs are linked to the area of a flat/house:

- 1,3 MKD/m2 charged to households, and

- 1,6 MKD/m2 charged to legal persons.
- 5 MKD/m2 charged to bigger waste generators using relatively small indoor area
(restaurants);
- 8 MKD/ m2 charged to bigger waste generators using very small indoor area
(markets)

If the tariff is converted into a monthly fee, an average household would pay around 110-
200 MKD, depending on the size of house. A monthly fee for legal persons ranges from
350 to 2000 MKD.

The PE has annual revenues of 3,500,000 MKD and 2,500,000 MKD expenditures in the
waste department only.

Due to the lack of capacity to cover the entire territory with a service, there are 13 illegal
dumpsites created by the population, out of which 4 are spread on over 500 m 2. The
contractors of local communities are using these sites. In addition, there are four legal
persons (mainly processing industries) who are relatively big generators and are not
covered by a service. They manage to transport their wastes to the municipal landfill;
they are charged for the disposal half of the total price they would pay in case the waste
was collected by the PE.

Big waste generators are industries for processing (pickling) of vegetables, vineries and
garment industry. There were some negotiations with these companies to receive an
organized waste collection by the PE, but the offered price was not acceptable for them.
The quantities of non-hazardous industrial waste are not known. There should be
additional investigation made to understand the patterns of the industrial waste
generation in the municipality.

The municipal landfill is also used by legal and physical persons, out of which there are
some who dispose their wastes illegally.

The PE collects around 2000 tones/year. There arent any contracts with the present
clients, but with the new ones the PE will have to make appropriate contracts.

The contractors in rural municipalities charge a flat rate - 100 MKD per household. The
collected waste is dumped around the villages.

The Chair of the municipal Council could not provide a clear cut answer to the question
regarding the appropriateness of the LOT II. He stated that prior to any decision
analyses of the Public Enterprises in the region should be made in order to assess their
capacity to respond to the requirements of a modern integrated waste management. In
his view, unless a stringent reform of the PEs is executed, the private partner should
take over the LOT II as well.
Shortly an option to join the PEs into an inter-municipal public enterprise was explored:
the Chair of the council expressed his view that the small municipalities like Valandovo
should look for such option in order to exploit the economies of scale.

Visit to the Municipality of Bogdanci

There are 8707 inhabitants (2800-3000 households) distributed in 3 settlements and the
municipal center (4 settlements in total). The municipal center is positioned centrally; two
settlements are 4 km. distanced from the municipal center and one is located 8 km. far
from the municipal center.

The PE presently serves around 6000 people. One bigger settlement is served by the
PE from Gevgelija which also provides water supply in this settlement. Only 187 are not
covered by a waste collection service. There are 150 legal persons who are small size
enterprises: diary, garment industry, furniture etc., and all generating industrial non-
hazardous waste. Waste is collected 6 days a week in one shift. The PE collects around
14-16,000 m3 of waste.

The PE possesses 23 - 1,1 m3 containers and are in a process of obtaining 50 in

addition; they use a 12m3 second hand truck purchased recently (production from 2001),
one small Zastava truck (20 years old) and one tractor plus trailer.

Fee collection rate is 84%; the trend is positive starting from 20% some five years ago.
The tariffs are linked to indoor area of a flat / house:

- 1,6 MKD/m3 for households;

- 3,33 MKD/m3 for legal persons.
- Lump sum for legal persons depending on the generated waste quantities.

The monthly fee for legal persons is in the range of 200 to 2000 for big generators. The
tariffs have been set 15 years ago with no adjustments whatsoever.

There are plans to increase the tariff for water supply and wastewater disposal because
they undertook construction of a wastewater treatment plant. They will not change the
waste tariff pending the outcomes of the present concession project.

The transportation network is in very good condition and the waste collection can be
organized efficiently with no bottlenecks.

There is a feasibility study (on Macedonian language) on the potential for recycling of
waste disposed off at the municipal landfill. It will be made available to the candidates
afterwards.

The Mayor is interested to contract out the LOT II. This is the main reason for making
contracts with duration of 6 months with the workers in the waste department in the PE.
There are 9 workers in the waste department.

The present tariff may undergo an increase up to 3 MKD/m 2 without any complaints by
citizens. When setting the fee level one should have in mind the application of amounts
ending with 99 MKD, for example a monthly fee of 299 MKD would be well accepted.
The major input to the decision making for accepting the LOT II is the fee level; if the fee
would go too high, the PE would continue to provide the service.

The Mayor does not consider the contracting out of the LOT III. There is one private
investor who intends to erect a solar plant at the site of the present landfill, who accepts
its remediation free of charge in exchange for the right to use the land.

The landfill is spread over 1,5 hectares.

Annual revenues are 4,600,000 MKD and the expenditures are 4,000,000 MKD.

Visit to the Municipality of Gevgelija

There are 23,000 inhabitants and 7221 households in total, out of which 6000 are
served; there are 2537 legal persons, out of which 730 are served.

The tariffs are:

- 1,8 MKD/m2 charged to households for indoor area and 0,28 MKD/m2 for outdoor
area.
- There are a number of categories applied for the legal persons depending on the
indoor/outdoor area and the waste quantities. Big waste generators are charged
per a container collected (loading of a 1,1 m3 container costs 350 MKD). Some
legal persons pay monthly an amount up to 20,000 MKD (sometimes the PE
collects the waste twice a day, or within their premises there are placed more 1,1
m3 containers).

The PE collects annually around 50,000 m3 of waste. In case the entire territory of the
municipality would be served these quantities would increase for around 10%. The
waste generation is also linked to the presence of tourists from Greece paying visits to
the numerous casinos.

In 2009 the PE had 19,225,351 MKD revenues and 17,725,721 expenditures.

The fee collection rate is around 75%. There are 35 workers in the waste department
while the joint administration counts 30 employees. An average monthly salary is 35,007
MKD gross. Minimum salary is 15,000 MKD net; heads are paid 18-20,000 MKD net.

The PE owns 201- 1,1 m3 and 60 5m3. There are 4 refuse trucks (one 5m3 and three
6m3. Only one truck is rather new, the rest are obsolete (the oldest is 60 years old).

There is another PE owned by the local communities in Negorci, Miravci and

Bogorodica.

The PE segregates paper and PET from certain legal persons and delivers the
recyclables to some scrap yards, whose owners market them in Greece. They barely
cover the costs of fuel from the earnings.

There are 5 illegal dumpsites out of which 3 are spread over an area bigger than 500m2.
The construction & demolition waste is accepted at the landfill free of charge. The PE
uses this waste to erect embankments for flood protection from the nearby river. Legal
and physical persons may use the landfill for disposal of their wastes for a fee amounting
at 150 MKD / m3. They bring their wastes with tractors. Around 15-20,000 PET bottles
are scavenged at the landfill by a couple of Roma families.

Around 100m3 waste annually is disposed off due to unexpected events, such as the
returned exports of garments etc. There are plans for building of new hotels and casinos
which will imply increased waste quantities.

Bearing in mind the uncertainties associated with the start up of the regional landfill, the
Mayor intends to equip the PE with new refuse trucks in order to cover the territory with
an organized waste collection. Once all the clients would be connected to the service,
the municipality would undertake the closure of the illegal dumpsites.

The Mayor considers the delivery of the waste collected by the PE at a strategically
positioned reception point which, in his view, should be organized in the municipality of
Gevgelija and not in the municipality of Valandovo. Such a reception point is required
because the PE of Gevgelija uses a 7m3 truck for collection which can not transport the
waste to Dobrasinci. The municipality of Gevgelija is the second biggest municipality in
the region and it is as important as Strumica for the success of the project.

The Mayor asked the candidates whether there will be a uniform disposal fee at the gate
regardless of the transport distances or every municipality will pay a different tariff. Also,
he was wondering whether municipalities which collect and transport waste to some
reception points will obtain some discounts; he was also interested in the requirements
of the candidates regarding the pre-agreed waste quantities for delivery at the reception
points. Lastly, he asked who will collect fees from the clients. The candidates were not
prepared to provide any answers because if they would do so, they would disclose parts
of their outline solutions.

Regarding the LOT II and III, he could not provide any clear statement. He asked for the
companies` proposals first, upon which the Mayors will make a decision. Their decision,
however, will depend on the price for the service and the treatment of the staff of the PE.
He understands that the competitive dialogue should be exploited to the fullest and
discussions on variant options with the candidates should be carried out until coming to
the most acceptable one.

Clarification Meeting (23rd of September)

The meeting was opened by the president of the Council for the development of the
Southeastern planning region. He stated that in this region a new and EU compliant
regional waste management system should be established. The improvement of the
present sub-standard waste management system is among the highest priorities of the
municipalities. In addition, in order to increase the competitiveness of the agricultural
products, the protection of the environment and the waste management should improve
significantly.

The President expressed his pleasure regarding the success of the mission of the
candidates; he heard, however, that some municipalities were still hesitating to give up
their Public Enterprises and to contract out the waste collection and transportation. Most
of them are concerned for the future status of their waste collection equipment. Also, the
data which were given to the candidates were not precise, due to the low coverage with
the service of the territory in the region and the lack of weighing of the collected /
disposed waste.

The Mayor of Strumica said that the LOT II is attractive for some municipalities and
therefore it should be part of the project, at least for those municipalities which would like
to sign individual contracts for collection and transportation of the waste.

The representative of the Ministry of Environment and Physical Planning expressed her
satisfaction with the results of this part of the process and stated that the progress in this
region will stimulate similar actions in other regions as well.

The representative of the REC expressed her gratitude for the patience of the
candidates and their active participation in the rather exhausting programme. She gave
an introduction for the discussions:

- The status of the LOT I is clear;

- Regarding the LOT II the REC will continue to work with the Mayors in order for them
to come up with a clear position;
- Also for the LOT III there is a lack of precise data and its scope is not sufficiently
clear.

The candidates were asked to express their final questions / comments.

Hunkel: The programme enabled them to understand the regional problems. The LOT I
is related to the LOT II and if the latter is not part of the project its success is under
question.

PORR: They joined the conclusion that the LOT II should be integrated in the project.
The LOT III should, however, be supported from other sources in order to reduce the
investment.

ASA: They liked the competitive dialogue during the past days and enjoyed the
competitive eating as well. The importance of the LOT II to become part of the project
was emphasized again. The distinguishing between the historical pollution from the
existing landfill and the new landfill was seen very important. The maps requested by the
municipality of Vasilevo should be made available prior to the start up of the preparation
of the ISOS I. The waste generation should be checked and disclosed to the candidates.
A clear methodology for the calculation of the unit costs should be given to the
candidates as well. In addition, the existing equipment of the Public Enterprises should
be listed and the expectations of the municipalities with regard to the future public share
should be made clear to the candidates.

Catanzaro: Individual contracts regarding the LOT II would complicate the system. The
LOT III will also increase the costs of the system and therefore it is important to find a
solution for the illegal and non-compliant landfills outside the concession project.
STRABAG: Their attitude was similar to other candidates regarding the LOT I and LOT
II. They also stated that the present low coverage of the population with the service is
causing the appearance of illegal landfills and therefore the municipalities should
introduce a better communal order.

The President of the region promised that the municipalities will strive to provide more
accurate data in order for the candidates to prepare better ISOS I. He said that individual
contracts for the LOT II are not an appropriate solution.

The Mayors will meet again and discuss all the issues raised by the candidates.

The Mayor of the municipality of Konce said that it is in the best interest of the
municipalities to cont4ract out the LOT II, however, due to the low coverage with the
service the municipalities will have to provide some logistical support to the selected
private partner. The full coverage with the service will not be possible to achieve
immediately.

The Mayor of the municipality of Strumica repeated his interest in contracting out the
LOT II. He was interested in the method of the fee collection, whether it will be a
responsibility of the private partner or the municipalities. Also, he was interested in
transferring the employees of the PEs into the company that will provide the waste
management services. Once new trucks and containers will be made available and the
quality of the service will increase, the municipal councils will support the decision to
issue a concession to a private partner.

The Mayor of the municipality of Vasilevo encouraged the candidates to come up with a
modern technology for treatment / disposal of waste in order for the population in the
municipality to accept the landfill in their vicinity.

The statements of the Mayors were to be officialized and signed, in order to avoid
unnecessary efforts of the candidates.

The Mayors were also warned that their hopes that the waste already disposed at the
non-compliant landfills has some value for the candidates are unrealistic, because it is
contaminated and should be closed appropriately. In addition, the request of the Mayors
to keep the unit costs low is in contradiction with their request to take over the staff of the
PEs. Therefore all the requests of the Mayors should be revised.

The precise requests of the Mayors will be given to the candidates in two weeks.

The candidates were asked on their opinion how much time they need to prepare their
ISOS I after the receipt of the clarifications of the Mayors.

STRABAG: They could not state any deadline because they needed additional
consultations.

Catanzaro: They can submit their ISOS I after two months.

ASA: 2-3 months would be appropriate, given that the scope of the ISOS I is not yet
known.
PORR: 1,5 months.

Hinkel: 4-6 months.

In order to allow to all the candidates sufficient time and obtain good ISOS I, the Mayors
set the deadline at 3 months after the receipt of the clarifications of the Mayors. Also,
given the extended period for the ISOS I (which should result in preliminary conceptual
solutions), the time span between the ISOS I and ISOS II shall be reduced.

Minutes of the Meeting

Inter-municipal Dialogue
Southeastern planning region

The questions of candidates raised in the period 20-23 September 2010, related to the
scope of LOT II and LOT III were discussed among the Mayors of the 10 municipalities
in the Southeastern planning region. The conclusions from these discussions are given
below:

1. All the municipalities agreed to shut down the waste collection & transportation
units of their existing Public Communal Enterprises (PCE) and to contract out the
right to provide this service to the selected concessionaire.
2. Street cleaning and maintenance of public hygiene shall remain a duty of the
PCE. The waste collected by the PCE from public areas shall be taken over and
disposed by the waste collection & transportation service provider free of charge.
3. Providing 90-95% of the area population access to waste collection &
transportation services shall be implemented by the concessionaire within a
period of not more than 2 years, starting from the day of the validity of the
concession contract. The increase of service coverage shall be planned in view
of availability of a suitable road infrastructure and of the population density. It is
not clear yet in which way the municipalities will participate in the new venture,
however, the candidates should be informed that the necessary support by the
local authorities towards the meeting of this deadline will be given to the selected
concessionaire under the terms that will be stipulated in the Concession
Contract. In addition, the envisaged coverage by the service should only serve
the analyses of the candidates for the development of their Outline Solutions No.
1, while the precise performance conditions for the waste collection &
transportation provider will be defined in the next stage.
4. The mutual rights and liabilities of the ten municipalities in the Southeastern
planning region related to the LOT II are to be balanced and articulated in an
Inter-Municipal Agreement (IMA).
5. Most of the issues to be further stipulated in such an Agreement are presented
below:
8. Municipalities are not inclined to participate with their present assets into the
future venture. Instead the value of the assets of the PCEs shall be evaluated by
an (internationally recognized) auditing company. The municipalities expect to
sell their assets to the selected concessionaire reflecting the actual value of their
assets.
9. The assets in question are given in the attached excel table containing data on
the present waste management situation along with the existing Public
 Enterprises` profiles. The list of the equipment in use corresponds to the
equipment that will be evaluated and offered to the potential private partner. The
candidates are invited to check upon the available equipment and assess
whether it can be used further on or it shall be replaced based on the foreseen
technical concept. The excel table should be used for the analytical purposes
only, while the final list of the assets that shall become part of the Concession
Contract will be defined in the next stage.
10. The uniform Regional collection and disposal fees shall be defined based on a
methodology capturing all the costs (including the investment, replacement and
annual recurrent costs) associated with the implementation of the selected
(regional, integrated) waste management technical solution. In addition, the fees
shall be defined to:
i. Harmonize the presently varying tariffs and setting at most two
tariff levels for: (i) municipal (urban) centers (10 in total) and (ii)
rural settlements;
ii. The ratio between the tariffs applied for municipal centers
compared to rural settlements shall be 1/0.5 for the first
operational year.
iii. The raising of the tariffs in the rural settlements shall follow the
following pattern: in the second operational year the tariff ratio
shall be 1/0.6, in the third operational year it shall be 1/0,7 and in
the fourth operational year it shall be 1/0,8 of the tariff applied in
the municipal centers;
iv. The ratio of 1/0.8 municipal centers / rural settlements shall then
remain valid for the entire concession period. The concession
period shall be proposed by the candidates, in order to allow for a
suitable investment and cost recovery program, which will be
reflected by affordable tariffs.
11. The fees for the service shall be paid by the service users. The service level /
quality and the duties of the service users shall be regulated by separate
contracts between the selected service provider and the costumers (households
and legal persons). If necessary, the municipalities will adopt local regulations
that will define the rules for the waste handling by the generators (e.g. penalties
for littering, illegal disposal, damaging of containers etc.) in order to enforce
these contracts. The scope of such local regulation shall be discussed with the
candidates in the next stage.
12. The municipal administration and other relevant enforcement entities shall take
care that the service users and the concessionaire comply with their obligations
set out in the contract(s)1.
13. The present method of tariff setting which is based on the area of indoor and
outdoor space of the beneficiarys house / apartment shall be changed and in
future be linked to the number of family members respectively waste quantity
collected.
14. The method of billing the service users should be proposed by the
concessionaire. The municipalities shall accept any of the below methods:
i. Waste bills can be separate from water bills and collected by the
concessionaire;
1
Please note that here it is referred to both the Concession Contract and individual Contracts to
be concluded with all service users (legal persons and households on one hand and the service
provider, on the other, if not agreed otherwise in the Concession Contract).
 ii.
Waste bills can be separate from water bills and collected by the
PCEs;
iii. Waste bills can be included as a separate item in the water bills
and collected by the PCEs;
15. The fee collection rate archived by PCEs can realistically increase from the
present 70% to 90% within a period of 2 years. After the stabilization of the fee
collection rate, 10% of the invoiced and executed services provided to socially
vulnerable households will not be possible to collect. The margin of 10%
uncollected bills should be foreseen within the waste tariff.
16. Although the potential bidders asked for an upper limit of an affordable fee level
in the region, the municipalities were reluctant to provide such an orientation for
the companies. The municipalities stated that providing room for a more flexible
setting of unit costs shall stimulate more creative technical solutions by the
candidates.
17. The weight of 65% in the evaluation grid table for the unit (waste collection &
transportation as well as disposal) operating2 costs remains. Candidates should
have in mind that their unit price to be set in the Outline Solution No. 1 will be
considered a preliminary proposal which will be revised subsequently in line with
the progress of the dialogue and the deepening of the details provided in the
technical concept. This first stage of the dialogue phase should result in filtering
of the candidates which come up with a technical solution that proves to be
extensively above the limits of affordability.
18. The municipalities are committed to engage a sufficient number of communal
and environmental inspectors in order to ensure that all the generated waste
quantities are delivered to the waste collection & transportation service provider.
In the next stage of the dialogue the municipalities shall define the total number
of inspectors that will be assigned with the duty to monitor and penalize the
illegal disposal. The potential bidders are requested to formulate their
expectations in this regard.
19. The municipalities shall establish a regional regulatory committee in order to
adjust the uniform regional tariffs. Members of the committee will be the
Presidents of the municipal councils. The changes of the tariffs shall be justified
by an equation as part of a methodology for adjustment of tariffs to be set in the
concession contract. If necessary, the committee shall appoint experts in order to
review the requests of the concessionaire for increase of the tariffs. In order to
make such a committee operational, there must be made changes to the Law on
Waste Management. The changes shall enable a mechanism for an automatic
tariff increase / decrease after a decision made by the regional regulatory
committee.
20. The number of employees to be taken over from the present PCEs by the
concessionaire shall be determined based on the staff demand of the technical
system suggested by the bidder and in proportion to the population size (waste
generation) of each municipality.
21. The average net salary of the collection service workers employed by the
concessionaire should not be less than 250 Euro / month, or 363 Euro gross.
6. In the IMA there will be an obligation for the municipalities to ensure that agreed
waste quantities are delivered by the end users and that the waste quantities that
2
Please be advised that the unit operating costs should include all the relevant costs:
investment / financing, and replacement, in line with the proposed methodology for setting of the
disposal fee which is integrate part of this MoM.
 end up at illegal sites will be progressively reduced in line with the increasing
waste collection coverage. In addition, the mandate of a regulatory body will have
to be defined further. However, in order for the Agreement to become operational
and allow for the establishment of the regulatory body, amendments of the Law
on Waste Management have to be made as mentioned above. The scope of the
amendments was already detected and corresponding activities were taken. The
Chair of the Committee will inform the candidates on a realistic schedule for the
execution of the amendments as soon as possible. Also, the draft IMA will be
made available to the candidates by 15th of January, regardless of the progress of
the legal effort.
7. The lawyer which is assigned for the purpose of the project did check the
situation regarding the PPP law in Macedonia, which does not set any limitations
on the enlargement of the contract for more than 50% of the initial investment
during the contracting period.
8. LOT I: Length of the access road to the landfill:
i. The concessionaire should plan for the construction of one
kilometer of the access road into the concession project. The
pavement or any other final preparation of the road will depend on
the requirements of the traffic, to be proposed by the candidates.
9. LOT III: This lot shall consist of the three big municipal landfills only: Gevgelija,
Radovis and Valandovo. According to previous estimations, the investment costs
for their closure and reclamation are up to 3 million Euros. The Government shall
explore the opportunities to participate in the financing the remediation costs for
these landfills. For the time being, however, the candidates should make their
own estimations of the costs associated with the closure and remediation of
these (three) non compliant landfills. Along with the extension of the service
coverage, the municipalities shall clean up the illegal dumpsites in villages being
included in the waste collection system. In 2 years period the municipalities will
clean up all the illegal dumpsites in villages.
10. Incentives for the municipality of Vasilevo which is hosting the landfill:
i. The settlements Dobrasinci, Visoka and Nova Maala shall not pay
for the services for collection & transportation nor will they pay for
the disposal. The total population in these villages is around 2256
inhabitants.
ii. The regional funds shall be used for construction of up to 5 km. of
the access road and the construction of 1 km of the access road
shall be financed through the concession project.
iii. All the employees at the landfill shall be citizens of the municipality
of Vasilevo.
 SOLID WASTE DISPOSAL FEE
FOR COVERING LANDFILL OPERATING COSTS

- DRAFT FEE REVIEW METHODOLOGY -

Purpose:

The purpose for this review of the solid waste disposal fee methodology is:
to provide the Operators of Regional Sanitary Landfills for communal solid waste
with a calculation base to recover increased operating cost for safe and adequate
disposal of wastes on the facilities which they operate, and
to provide the Conceding Authorities with a comprehensive and objective process
to review fee increase requests by the Landfill Operators.

ANNUAL WASTE DISPOSAL OPERATING COSTS REVIEW PROCEDURE:

A. Allowable Costs and Base Rate Determination:

The annual fee review will adjust, if necessary, the solid waste disposal rates to provide
for cost of living adjustments and compensation on allowable costs and for any changes
in pass-through costs incurred by the Landfill Operators during the previous twelve
months. This process will involve establishing an agreed-upon maximum base rate on
which to apply future annual rate adjustments and escalating factors. For the purposes
of this methodology, the base rates for the initial period (year) will be the solid waste
disposal fees established at the time of signing a Concession Contract between the
Landfill Operator and the Conceding Authorities.

To facilitate this annual rate review process, the Landfill Operators must identity the
companys allowable, non-allowable, and pass-through costs and to allocate the
appropriate monetary portion of these costs to the base rates. The purpose of this cost
segregation and allocation is to determine the cost per unit on which to apply the rate
review methodology, and thereby determine the appropriate unit rate (Euro/ton)3 for
covering operating expenses related to the waste disposal services. Allowable, non-
allowable, and pass-through costs are defined as follows:

1. Allowable Costs: Allowable costs will mean the Operators annual costs associated
with providing the waste disposal service. Allowable costs are those costs that are
integral to the operation, and include the following:

a. Variable (direct) operating costs:

Waste/refuse placement
Daily soil cover
Intermediate soil cover
Temporary roading
Leacheate treatment
b. Fixed (indirect) operating costs:
Salaries, wages and overheads
General maintenance
Landfill gas control and management
Storm water management
Nuisance control (litter, odor, birds, vector)
Monitoring (storm water, groundwater, leacheate, landfill gas, etc.)
Electricity charges
Reasonable marketing (public awareness raising) costs

2. Pass-Through Costs: Pass-through costs are those costs that are reimbursable, but
not costs for which the Landfill Operator should receive a profit. These costs include
permit fees and other similar costs.

3. Non-Allowable Costs: Non-allowable costs are those costs for which the Operator will
not receive compensation, which may include:

a. Political and charitable contributions or donations.

b. Fines and penalties as a result of violations of or failure of the Operator to
comply with State or local laws and regulations.
c. Legislative and lobbying costs.
d. State and Local income and other taxes.
e. Excess marketing costs

B. Rate Review Application Process:

3
MKD Macedonian Denar (currency unit).
On or before April 15th of each year, the Landfill Operator may submit to the conceding
authorities a waste disposal fee adjustment request, to be effective the following May
1st . The request shall include the following:

1. A cover letter requesting an annual disposal fee review and indicating any major
events or significant trends that may have occurred to increase the Operators costs
during the previous year.

2. Supporting documentation and a breakdown of the current base rate proportionately

charged per ton for the waste disposal service into the following allowable cost
categories:

a. Material, fuel, energy, spare parts and inventories, based on normalized

(regularized) consumption rates and average local market prices during the
previous twelve months.
b. Property maintenance and administration costs, up to 15% - 20% of the annual
depreciation.
c. Gross labor costs (wages and benefits), based on agreed number of
employees per categories (determined according to the investment project
business plan and initial financial proposal) and the Macedonian national
average salaries per categories during the previous twelve months
d. Management salaries and bonuses, based on agreed terms regarding their
base level and increase rates.
e. Pass-through costs (relevant taxes, benefits, concession fees and other
expenses), based on current regulations and standards.
f. Insurance costs for buildings and equipment, based on the prevailing insurance
market premiums incurred by the Operator.
g. All other allowable costs, e.g. for services provided by other organizations
(apart from regular maintenance and administration services) and incidental
costs, based on average % of such costs in relation to costs under a. (above)
during the previous 3-year period.
h. Non-allowable costs.

3. Documentation of the change in the Consumer Price Index (CPI) for the previous
year, published by the Macedonian State Statistical Office.

4. Other relevant documentation.

C. Annual Rate Review and Adjustment:

The appropriate regulatory body will review and evaluate the Operators fee adjustment
request to determine whether an adjustment to the solid waste disposal rates will be
necessary to compensate the Operator for increased operating costs during the previous
year. If applicable, the adjustment may include additional compensation as follows:

1. Compensation for increases in the Operators allowable costs will be accomplished by

applying an annual escalating factor or CPI-based index.
2. Compensation for any increases in pass-through costs incurred during the previous
year as a direct payment of these costs.

Following is the equation to be used for an annual waste disposal rate adjustment
calculation:

DF ( f 1 * FC f 2 * VC ) * (1 p ) PTC [MKD/ton]
Where:
DF Waste disposal fee (for covering operating costs)
FC Fixed cost component of DF
VC Variable cost component of DF
PTC Pass-through cost component of DF
p Profit margin; to be agreed upon prior to signing of a Concession Contract
f1f2 -- Weight factors for FC and VC, to be used as a policy measure for
operational efficiency improvement and risk mitigation [0.9 1]. These
factors will be determined and justified by the IMPE.

***********************************

FC FC t 1 * (1 CPI t ) [MKD/ton]
Where:
FCt 1 DF fixed cost component in previous year (review period)
[MKD/ton]
CPIt Consumer Price Index [%]

FC t 1 TFC t 1 / QWt 1 [MKD/ton]

Where:
TFCt 1 Total value of fixed costs for waste disposal operation in previous
year (review period) [MKD]
QWt 1 Total quantity of disposed (landfilled) waste in previous year
(review period) [tons]

***********************************

VC VC t 1 * (1 CPI t ) VCFt 1 * FPI [MKD/ton]

Where:
VCt 1 DF variable cost component in previous year (review period),
excluding fuel costs [MKD/ton]

VC t 1 TVC t 1 / QWt 1 [MKD/ton]

Where:
 TVCt 1 Total value of variable costs for waste disposal operation in
previous year (review period), excluding fuel costs [MKD]

VCFt-1 DF fuel costs in previous year (review period) [MKD/ton]

VCFt 1 TVCFt 1 / QWt 1 [MKD/ton]

Where:
TVCt 1 Total value of fuel costs in previous year (review period) [MKD]

FPI Fuel price index

FPI PFt / PFt 1
Where:
PFt Current market price of fuel [MKD]
PFt-1 Market price of fuel at the start of previous year [MKD]

***********************************

PTC TPTC t 1 / QWt 1 [MKD/ton]

Where:
TPTCt 1 Total value of pass-through costs in previous year (review
period) [MKD]

After clarification of any questions or discrepancies in the waste disposal fee adjustment
request, the regulatory committee staff will notify the Landfill Operator of its rate review
and forward a recommendation to the conceding authorities for final determination.

D. Extraordinary Rate Review and Adjustment:

A Landfill Operator may also request an Extraordinary waste disposal fee review to
adjust the rates outside of the (regular) annual rate review process to account for
increased or decreased costs resulting from extraordinary events, provided, however,
that the Operator demonstrated and exercised its best business efforts to avoid the
occurrence of and to mitigate such extraordinary costs. Examples of events that might
lead to an extraordinary rate review may include the following:

1. Increased costs that have incurred in connection with providing waste disposal service
due to changes in State or local laws, rules, or regulations not within the control of the
Operator.

2. Changes in service or operations required or mandated by the IMPE.

3. Increased costs due to natural disasters.

4. Other justifiable events.

The Extraordinary waste disposal fee adjustment review will be administered according
to steps and stipulations described above under paragraphs B and C.