Sava Zagreb Project has to be open to everybody

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1 Croatian Real Estate Newsletter Volume 89, January 2014 TOPIC OF THIS ISSUE: Interview Leo Penović Sava Zagreb Programme Manager Sava Zagreb Project has to be open to everybody CREN Patrons:

2 TABLE OF CONTENTS 1. ANNOUNCEMENT The Tenth Annual International Conference on the Real Estate Market in Croatia 3 2. TOPIC OF THIS ISSUE Interview: Leo Penović, Sava Zagreb Programme Manager Sava Zagreb Project has to be open to everybody 4 3. STATISTICS 3.1. Average Asking Prices of Real Estate Offered for December Statistical Reports of the Central Bureau of Statistics from the Area of Construction Construction work indices, October Completed construction works, orders and residential construction, business entities employing 20 or more persons, third quarter of Croatian Real Estate Newsletter, January

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4 2. TOPIC OF THIS ISSUE Leo Penović Sava Zagreb Programme Manager Sava Zagreb Project has to be open to everybody Could you please introduce yourself to our readers? I am a civil engineer by profession, and I dedicated my whole career to project management. So far, the teams I lead have successfully implemented numerous projects, the total value of which exceeds EUR 500 million. The last project that I conducted was the construction of the Arena Centre in Zagreb Lanište, which we completed with 2% savings in relation to the planned amount, and this project received an award from the Croatian Association for Project Management, based on internationally set criteria. In the last year and a half, I have been managing the development of the Programme for the Protection, Regulation and Use of the River Sava from the border with the Republic of Slovenia, to the town of Sisak this project is better known under the name Sava Zagreb. Can you present the Sava Zagreb Project to us? Sava Zagreb is a multi-purpose project with the primary aim to stop the negative environmental trends and at the same time to awaken the potential of the Sava River. The state of the Sava River on the stretch between the Slovenian border and Sisak is unsustainable, with extremely negative trends. As the result of the river regulation and its use for energy facilities in the Republic of Slovenia, certain morphological changes have started to take place downstream, and the river bottom has sunk by some 4-6 m in the past 30 years, which has a negative impact on the level of underground water. The ecosystems, which depend on the level of underground water, have thus become threatened, and the flood defence system is exhausted. The system was At this moment, a feasibility study is being developed, which will compare the new concept with what was considered so far and provide the answer to the question how can the Sava River best be protected and its potential awakened. Croatian Real Estate Newsletter, January

5 designed with the level of the river bottom, which was there 30 years ago, and now with the river bottom being 4-6 m lower, it is activated too late. Today, the issue is not whether we have to do something, but what has to be done. In early 2013, a consortium of Croatian companies developed a new concept of the project Sava Zagreb for HEP (Public Electricity Company) and Hrvatske vode (Croatian Waters), which addressed and resolved mentioned problems, and which can also awake the potential of this river and the river itself in an optimum way. At this moment, a feasibility study is being developed, which will compare the new concept with what was considered so far and provide the answer to the question how can the Sava River best be protected and its potential awakened. The Project has four main objectives. Can you please describe them? During the preparations for the feasibility study, 12 groups of benefits were identified, which will be released by the new concept, and which will be analysed within the study. From the beginning, the new concept was developed as a multi-purpose concept, and this is its comparative advantage in relation to the previously discussed concepts. However, in order to facilitate understanding, we have divided the benefits into 4 main categories. The first and the main group of benefits concerns water management. The new concept will stabilize the underground water level and it will secure the water supply for Zagreb and its surroundings in the long term. Statistically, the level of flood defence for the settlements along the We have divided the benefi ts of the project into 4 main categories. The first and the main group of benefi ts concerns water management. The second group of benefi ts are transport-related. The third group of benefi ts is the use of the river energy potential on this stretch. Finally, we arrive to the issue of spatial planning in the City of Zagreb 350 hectares will become free for use in the city centre, and a decision about its use should be made after broad consultations with all the stakeholders. Croatian Real Estate Newsletter, January

6 Sava River will be improved tenfold, and it will make it possible to develop modern agriculture with irrigation and drainage systems. The second group of benefits are transport-related. The Sava River will become fit for the transport of 2nd category vessels to the Slovenian border, and the downstream part of the reconstructed Sava-Sava canal will become fit for use as a waterway for the 4th category of vessels, which opens the potential to build a river port connected to the Rhine-Main-Danube inland waterway. By connecting the Port of Rijeka with this new port on the canal, the time of transportation of goods from the Suez will be shorter by 7 days in comparison to the North Sea ports. The third group of benefits is the use of the river energy potential on this stretch. The total available energy potential of this part of the river is 150 MW, which is planned to be used within the new concept by building 3 classic water power plants and 4 small water power plants throughout Zagreb. Finally, we arrive to the issue of spatial planning in the City of Zagreb. Given that the new concept envisages the re-direction of large water waves in a way that they would bypass Zagreb, the Sava River flowing through Zagreb will remain within its natural river bed under all conditions, and the dykes along the river will stop being used for flood defence. Thus, 350 hectares will become free for use in the city centre, and a decision about its use should be made after broad consultations with all the stakeholders. What will be built? The new concept envisages the construction of a water power plant (WPP) Zaprešić (Podsused), which is equal to the facility that has been designed previously, the WPP Prečko, which together with the water-gate Lučko will become the hub for distributing the water waves, and the WPP Sisak, which will create a slowdown and make it possible for Sava to be used as a waterway upstream. Throughout the City of Zagreb, there are plans to build 4 water steps, which will be used as small WPPs. Their primary Croatian Real Estate Newsletter, January

7 It s important to emphasize that in the future model for financing this project, the surface area in Zagreb will not be burdened with a single Euro of loan financing. This is the only way to keep this area as a development potential of the city, for the benefit of all citizens. function is to stabilize the underground water levels, and they will look as small waterfalls, with a pedestrian crossing across each of them. There are plans to extend the existing Sava-Odra canal by 5km and again to connect it to the Sava River at the closest point, somewhere around Prevlaka. It will be necessary to significantly deepen the canal, in order to achieve the satisfactory level of flood protection and the possibility to use it as a waterway, and there are also plans to build a dam at Palanjek, which will increase the level of water management regime for the Lonjsko polje area. The Project envisages commercial development of the land along the Sava River, which has so far been used for flood defence. What is the surface area of this land, and what is your vision of the urbanisation of this area? One of the benefits of this project is that it will release 350 ha of development land, which was so far reserved for flood protection in the very centre of the city. Now, this surface area is only actually used for flood protection about 5% of the time during a year, whereas the remaining time it is not used at all. By moving the flood defence line from the Sava dykes through Zagreb to the left dyke of the Sava-Sava canal, the risk for all citizens will be reduced, and it will significantly reduce the system maintenance costs. The allocation of thus liberated surface area of the city of Zagreb is only to be defined through the involvement of all stakeholders. At that moment, it will be a unique case in the world, and it will provide space for unlimited options for the assertion of Croatian urban planning professionals. Sava Zagreb is a project which does not define the allocation of the liberated surface area, the project only serves the purpose of moving the flood defence line away from the Sava River dykes. It s important to emphasize that in the future model for financing this project, the surface area in Zagreb will not be burdened with a single Euro of loan financing. This is the only way to keep this area as a development potential of the city, for the benefit of all citizens. Who are the key stakeholders and what is their role? Based on the Conclusion of the Government of the Republic of Croatia adopted on August 1, 2013, the Croatian Government was identified as an institutional stakeholder, and it will participate with its 7 ministries and one agency. Further institutional stakeholders include 2 counties and the City of Zagreb as regional selfgovernment units, in which the project will be taking place, and Croatian Waters and HEP as public companies and institutions, whose competence is related to the purpose and the benefits of this programme. All institutional stakeholders are of key importance and they have to make joint decisions related to project development. Besides the institutional stakeholders, we have involved the professionals from this area from the very beginning. Delegates of professional associations are members of the Expert Committee, which oversees the development of all documentation and assesses the final results. We believe that in this way we act transparently towards everybody, and as projects will develop further, it will become increasingly important to gain support of the public as the main stakeholder. How do you manage the preparation of such a complex project? What are the key duties and obligations? Sava Zagreb Project has been initiated several times already, and after some time it has been stopped, among other things due to the management model. Not all institutional stakeholders were involved, and it was not clear who was in charge of project development. This time, the model has been clearly set with clearly defined duties and responsibilities. Company that I am heading has been assigned with the role of programme manager, whereas the strategic decisions about Sava Zagreb Project has been initiated several times already, and after some time it has been stopped, among other things due to the management model. Not all institutional stakeholders were involved, and it was not clear who was in charge of project development. This time, the model has been clearly set with clearly defined duties and responsibilities. Croatian Real Estate Newsletter, January

8 project development are made by the Programme Council. The Programme Council includes representatives of all stakeholders at the highest level, i.e. ministers, county prefects, CEOs and their deputies and assistants. They are the ones that strategically define what tasks the programme manager has to fulfil and this is how they manage the preparations. Since the support of institutional stakeholders is necessary and within their competence, an Operational Group was established, which includes operational representatives of stakeholders, whose task it is to support programme manager. These people communicate daily with the programme manager and help with the operational management. However, the most important part of programme management is to maintain transparency towards the public. The already mentioned Expert Committee has a two-fold role. Along with maintaining transparency towards the circle of experts, the Committee includes the best Croatian experts from the fields of hydrotechnics, environment, energy and urban planning. They help us keep all project documents and all the solutions at the highest professional and scientific level. Moreover, we provided a rare example when we dared publish our entire conceptual design on the project website, so that anybody who is interested in this can see it and provide critical comments. The Expert Committee will be monitoring our work also in the stages that will follow, and we will keep publishing the documentation because Sava Zagreb Project has to be open to everybody. The strategic Environmental Impact Study is currently being developed. The European Union, through its Western Balkans Investment Framework, is cofinancing the development of this study. How did this cooperation happen? As early as July 2012 we have applied to the Western Balkans Investment Framework with the conceptual note of the project and we were assigned technical assistance amounting to EUR 1.5 million for developing a feasibility study and strategic environmental impact study. The total value of the study is EUR 2 million, so we will have to co-finance one fourth of the total value. The WBIF is an instrument established by the European Commission and the international financial institutions, among others the EBRD and the EIB, and its main task is to identify and assist in project preparation that have potential to attract future financing. Who is involved in the development of this study? The studies will be developed by an international consortium MottMacdonald WYG Atkins, that was selected by the Western Balkans Investment Framework. During the past couple of months, we have been working on the Terms of Reference for the studies, which were then accepted by the European Commission and the international financial institutions in August and that is when the development started. The consultants have assembled a team, which will in total include more than 30 persons across all stages, and studies will be developed in the period of 18 months. The development of the studies will be monitored by us and the Expert Committee, that will verify all the input and output data and if necessary guide the work of the consultants. What are its assumptions and key parts? In the initial stages of working on the Feasibility Study, the consultants will evaluate all the technical background documents, including our basic concept. Then a comparison will be made on the basis of technical, economic, environmental and social criteria between 3 possible conceptual solutions for the protection, regulation and use of the Sava River from the Slovenian border to Sisak. The first concept is the one, which involves minimal interventions on the Sava River in order to mitigate the negative trends of underground water and increase the level of flood defence. The second option is the one that was developed until 2003, with 4 WPPs throughout the area of the City of Zagreb, whereas the third option is the one developed in After selecting the optimum concept, a DCF model will be developed for each of the components of the respective concept together with the technical specifications. It is at that time that the price of the whole system will be assessed more precisely, and model water management regime will be developed as well as connections to the network. A part of the Feasibility Study will be a detailed Preparation and Implementation Plan, with the Procurement and Contracting Plan and the business and financing model. The other study to be developed by the consultants is the strategic Environmental Impact Assessment for the entire programme. This study will be in line with the Croatian and European legislation. It has to take into account Natura 2000, as well as environmental policies of the international financial institutions. When will the results of the study be presented? The studies will be developed throughout the next 18 months and we will certainly inform the public about their progress. We have presented our work several dozens of times so far, and we have developed a project website, in order to be able to constantly communicate with all the stakeholders and to report about project progress. The exact reporting dynamics will certainly depend on the dynamics of the consultants work so that it is difficult to discuss this now. However, we already know that there are several important milestones within the study, and the public will be informed about each of the milestones. Should the EU decide to co-fi nance this project, this study will be the basis for obtaining the money from the EU funds. What other objectives does this study pursue? The Feasibility Study and the strategic Environmental Impact Study will be the basic project documents of the Sava Zagreb Project. By developing these documents, we will make a framework for further preparations and Croatian Real Estate Newsletter, January

9 implementation. Besides the financial basis, we will have a clear roadmap and all the implementation steps elaborated in detail, from the necessary changes to the spatial plans to environmental protection measures that need to be undertaken. The studies will put things in perspective and once they are finalized we will have a clear idea about the benefits that Sava Zagreb Project will bring and what potential will it awaken. What are the envisaged deadlines for the Project for the forthcoming ten year period? The next 18 months are envisaged for developing the feasibility study and strategic environmental impact assessment. Once this is finalized, the Government of the Republic of Croatia is expected to adopt a Programme for the Protection, Regulation and Use of the Sava River, which will be adopted on the basis of these two documents. The beginning of construction of first facilities belonging to this system can be expected in 4 years, whereas it will take about 15 years until the whole system is finished. There are several reasons why the plans for the development of this system were not envisaged to be developed faster. The main reason is a hydrotechnical reason, which means that during the construction, the level of flood protection in the river basin has to be adequate, which necessitates staged development of the whole system. Another reason is the wish to achieve the highest possible participation of the Croatian construction industry and experts, who after this project in implemented will be able to compete on international markets in the implementation of multi-purpose projects like this one. Croatian Real Estate Newsletter, January

10 3. STATISTICS 3.1. Average Asking Prices of Real Estate Offered for December average price EUR/m² price range EUR/m² ZAGREB COAST Housing Apartments Houses Commercial space Offices Business premises Office blocks Housing Apartments Houses Commercial space Tourist facilities Average is calculated on the basis of the currently quoted prices on the Burza nekretnina d.o.o. (Real Estate Stock Market ltd.), which is available online: Upon your request, Burza nekretnina composes statistical reports of ask prices and achieved prices in 2-10 days time Statistical Reports of the Central Bureau of Statistics from the Area of Construction Construction work indices, October 2013 According to gross indices, in October 2013, as compared to October 2012, construction works decreased by 4.9%. According to working-day adjusted indices, in October 2013, as compared to October 2012, construction works decreased by 3.6%. According to seasonally adjusted indices, in October 2013, as compared to September 2013, construction works increased by 0.3%. Advice: Construction work indices, October 2013, Central bureau of statistics, Zagreb, 2013 Croatian Real Estate Newsletter, January

11 3.2.2 Completed construction works, orders and residential construction, business entities employing 20 or more persons, third quarter of 2013 Value of new orders: - in the third quarter of 2013 increased by 0.3%, as compared to the same period of in the period from January to September 2013 decreased by 0.6%, as compared to the same period of Value of construction works done with own workers: - in the third quarter of 2013 decreased by 9.6%, as compared to the same period of in the period from January to September 2013 decreased by 2.8%, as compared to the same period of In the period from January to September 2013, business entities employing 20 or more persons completed dwellings, which was by 6.0% less than in the same period of At the end of September 2013, these entities were working on dwellings (uncompleted dwellings), which was by 24.3% less than in the same period of Advice: Completed construction works, orders and residential construction, business entities employing 20 or more persons, third quarter of 2013, Central bureau of statistics, Zagreb, 2013 Croatian Real Estate Newsletter, January

12 PUBLISHER: Filipović Business Advisory Ltd. Trg bana Josipa Jelačića 3/V Zagreb Croatia Tel: Fax: cren@filipovic-advisory.com It is our wish that the Croatian Real Estate Newsletter / CREN be a source of speedy and quality information for all who are active in the real estate sector developers, planners, contractors, mediation agencies etc. Please send your comments, proposals and opinions to cren@filipovic-advisory.com to help us improve CREN and make it the leading medium on the Croatian real estate market. Editorial staff: Vladimir Filipović editor-in-chief, Natalija Kordić, Tanja Marković, Bojana Mikelenić, Marija Noršić and Petra Škevin. Croatian Real Estate Newsletter, January

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