The World Bank Belarus Biomass District Heating Project (P146194) REPORT NO.: RES38341 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF BELARUS BIOMASS DISTRICT HEATING PROJECT APPROVED ON MARCH 31, 2014 TO THE REPUBLIC OF BELARUS ENERGY & EXTRACTIVES EUROPE AND CENTRAL ASIA Regional Vice President: Cyril E Muller Country Director: Satu Kristiina J. Kahkonen Regional Director: Lucio Monari Practice Manager/Manager: Sameer Shukla Task Team Leader: Feng Liu The World Bank Belarus Biomass District Heating Project (P146194) ABBREVIATIONS AND ACRONYMS The World Bank Belarus Biomass District Heating Project (P146194) BASIC DATA Product Information Project ID Financing Instrument P146194 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 31-Mar-2014 31-Dec-2019 Organizations Borrower Responsible Agency Belinvestenergosberezhenie (PMU),Energy Efficiency The Republic of Belarus Department, State Standardization Committee Project Development Objective (PDO) Original PDO The Project Development Objective is to scale up the efficient use of renewable biomass in heat and electricity generation in selected towns of Belarus. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-83510 31-Mar-2014 08-Apr-2014 31-Jul-2014 31-Dec-2019 90.00 64.91 25.10 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Belarus Biomass District Heating Project (P146194) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Progress towards Achieving Development Objectives 1. The PDO continues to be relevant and project is progressing well towards achieving its PDO. The project includes investments in replacing gas-fired boilers with biomass-fired boilers in 20 sites; in addition to the fuel switching all sites cover improvements in energy efficiency by investing in modernization of heat transmission and distribution systems. Although project main results indicators (projected lifetime energy savings, heat and electrify generated from renewable biomass, and projected lifetime reduction in CO2 emissions) based on July 2019 numbers are lower compared to respective projected target values, the values are to improve considerable and be close to reaching targets as works reach completion. Thus far, most completed and operational sites are of small or medium capacity, with the larger ones not started operations yet. During the first restructuring (February 2018) seven new sites were added to utilize the loan savings of US$ 26.3 million and are currently at different stages of implementation. For the thirteen initial sites the main indicator ‘projected lifetime energy savings’ is at 100 percent of the end target, two other indicators ‘heat and electrify generated from biomass’ and ‘GHG emission reductions’ are at 73 percent and 68 percent of end target respectively. 2. Current disbursements are of US$64.91 million, 72 percent of the loan amount, with total commitments of about US$75.6 million, or about 84 percent of the loan amount. Out of twenty contracts fourteen will be completed by the end of 2019. The remaining sites will be completed by the end of 2020 and mid-2021.Three of them are at the bid evaluation stage and one site is under the Bank’s review. The main reasons for the delay in completing the additional seven sites included during the previous restructuring are: a. repeated bidding procedures for several sites due to the small capacities of the proposed projects, which resulted in very limited competition; b. dropped/replaced sites due to underestimated cost estimates; c. insufficient experience of bidders who submitted the proposals. B. Rationale for Restructuring 3. The Government requested (i) an extension of the Loan Closing Date until October 31, 2021 (request by the Council of Ministers as of July 5, 2019 #03/47); (ii) addition of two new sites (Stolin and Kamenets); and (iii) expanding the scope of work by adding heat network and individual heat substations for two existing sites (Buda- Koshelevo and Cherikov) (request by the Energy Efficiency Department as of July 19, 2019 #02-09/329) proposed to be financed from the loan savings. 4. A Level 2 restructuring is proposed to complete the construction of the ongoing sites and the bidding procedures of the remaining four sites and utilize the uncommitted loan savings allocated to different oblasts. The restructuring would include: (i) an extension of the Loan Closing Date; and (ii) changes in the scope of the project as show in Table 1 below. The World Bank Belarus Biomass District Heating Project (P146194) 5. The Bank team has conducted technical and economic due diligence of the two new sites, and safeguards due diligence for all new and existing sites with expanded scope of work is under review. Subject to full completion of safeguards requirements these sites will be included in the project scope. 6. The project is in compliance with the financial management requirements, including quarterly reporting and audit requirements. The project does not have any overdue audits. 7. Assuming the project restructuring is approved the following actions are needed to achieve the PDO by the extended Loan Closing Date: (i) completion of the remaining seven sites; (ii) completion of the national approval procedures for the two new sites (Stolin, Kamenets); (iii) continuing the work on social accountability issues and consumer access to information in seven sites. II. DESCRIPTION OF PROPOSED CHANGES The proposed changes are in line with the Project restructuring request by the Government as mentioned in paragraph 3 above. The restructuring will not affect the PDO and the safeguard category will not be changed. 1. Out of thirteen original contracts twelve have been completed, and the sites are in operation (Kadino, Cherikov, Zyabrovka, Bereza, Zarechie, Ivanovo, Kholopenichi, Veremeiki, Starye Dorogi, Baranovichi Phase 1, Volkovysk, and Kalinkovichi). The remaining one site (Cherven) and part of Baranovichi contract Phase 2 will be completed by the end of 2019. 2. Regarding the seven additional sites added in the restructuring in 2018 (Baranovichi-new, Kobrin, Buda-Koshelevo, Novogrudok, Schuchin, Vorontsy, and Borovliany), two were dropped (Novogrudok and Baranovichi-new), and two new sites are proposed to be added (Stolin and Kamenets). Works in these sites include replacing old and inefficient gas-fired boilers with modern biomass-fired boilers for heat generation and improving energy efficiency of heat transmission and distribution and in some cases purchasing modern gas-fired peak load boilers. The final list of the seven additional and new sites for the Project includes: Kobrin, Buda-Koshelevo, Schuchin, Vorontsy, Borovliany, Kamenetsand Stolin. Table 1 below includes all sites of the Project and their current status and expected completion times. Table 1 Project final scope with expected completion dates Sites added in Original 13 Sites added in Status as of Expected No. this restructuring sites 2018 (new sites) September 30, 2019 completion (additional sites) 1 Kadino Completed 2 Cherikov Completed 3 Zyabrovka Completed 4 Bereza Completed 5 Zarechie Completed 6 Ivanovo Completed 7 Kholopenichi Completed The World Bank Belarus Biomass District Heating Project (P146194) 8 Veremeiki Completed 9 Starye Dorogi Completed 10 Baranovichi Phase 1 completed Dec-19 11 Volkovysk Completed 12 Kalinkovichi Completed 13 Cherven Partly completed Dec-19 14 Baranovichi-new Dropped 15 Kobrin Implementation Oct-19 16 Buda-Koshelevo Implementation Nov-19 17 Novogrudok Dropped 18 Schuchin Bid evaluation Feb-21 19 Vorontsy Tendering Nov-20 20 Borovliany Implementation Sep-20 21 Stolin Bid evaluation Dec-20 22 Kamenets Preparation of BD Apr-21 3. The completion schedule and estimated costs of the final seven additional and new sites are provided in Table 2: Table 2: Cost Estimates and Completion Timeline for Seven New Sites Site Name Cost Estimate Contract signing date Expected completion Kobrin US$ 3.9 million October 2018 October 2019 Buda-Koshelevo US$ 3.8 million October 2018 November 2019 Schuchin US$ 5.6 million September 2019 February 2021 Vorontsy US$ 5.6 million December 2019 November 2020 Borovliany US$ 7.0 million June 2019 September 2020 Stolin US$ 3.3 million October 2019 December 2020 Kamenets US$ 1.3 million March 2020 April 2021 4. The PDO indicators will remain same, but their target values will be adjusted in the results framework to reflect the dropped and new sites. Based on the site-specific indicators the new target values have been defined for the following PDO indicators: (i) Lifetime energy savings; (ii) Heat and electricity generated from renewable biomass; (iii) Projected lifetime reduction of CO2 emissions. 5. Changes in the Intermediate Results Indicators will include the following: (a) Intermediate indicators for the dropped and new sites will be updated in the results framework and the target values for the indicators (i) projected lifetime energy savings; (ii) heat and electricity generated from renewable biomass; (iii) projected lifetime reduction of CO2 emissions; (iv) generation capacity of renewable energy (biomass) constructed; (v) direct project beneficiaries and (vi) construction progress will be updated respectively taking into account the revised sites and revised closing date; The World Bank Belarus Biomass District Heating Project (P146194) (b) Cherven site (in the list of thirteen original sites) is currently missing from the list of intermediate indicators and will be added to the list. 6. Taking into consideration the project current progress, it is proposed to extend the project Closing Date until October 31, 2021. Based on the data provided in Table 2, is expected that all sites will be completed by April 2021. However, the Government has requested some additional time to secure project completion taking into account possible delays caused by unexpected winter conditions. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Loan Closing Date(s) ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ The World Bank Belarus Biomass District Heating Project (P146194) Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-83510 Effective 31-Dec-2019 31-Oct-2021 28-Feb-2022 . The World Bank Belarus Biomass District Heating Project (P146194) . Results framework COUNTRY: Belarus Belarus Biomass District Heating Project Project Development Objectives(s) The Project Development Objective is to scale up the efficient use of renewable biomass in heat and electricity generation in selected towns of Belarus. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target Reduce energy consumption and increase renewable energy use Projected lifetime energy savings (Megawatt hour(MWh)) 0.00 1,916,500.00 Action: This indicator has been Revised Heat and electricity generated from renewable biomass associated with investments financed under the project 0.00 15,816,000.00 (Megawatt hour(MWh)) Action: This indicator has been Revised Projected lifetime reduction in CO2 emissions due to 0.00 3,607,600.00 investments financed under the project (Metric ton) Action: This indicator has been Revised PDO Table SPACE The World Bank Belarus Biomass District Heating Project (P146194) Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target District Heating Energy Efficiency Average cost-recovery rate for residential district heating 15.00 35.00 (Percentage) Action: This indicator has been Revised Consumer access to information (Number) 0.00 3.00 Action: This indicator has been Revised Biomass Heat Generation Generation Capacity of Renewable Energy (other than 0.00 179.00 hydropower) constructed (Megawatt) Action: This indicator has been Revised Generation Capacity of Renewable Energy constructed - Other 0.00 179.00 (Megawatt) Action: This indicator has been Revised Direct project beneficiaries (Number) 0.00 117,380.00 Action: This indicator has been Revised Female beneficiaries (Percentage) 0.00 50.00 Action: This indicator has been Revised Strengthened social protection measures adopted (Yes/No) No Yes Action: This indicator has been Revised Site specific designs completed (Number) 0.00 20.00 Action: This indicator has been Revised The World Bank Belarus Biomass District Heating Project (P146194) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target S&I contracts competitively awarded (Number) 0.00 20.00 Action: This indicator has been Revised Construction progress (Percentage) 0.00 100.00 Action: This indicator has been Revised Construction progress Kadino (Percentage) 0.00 100.00 Action: This indicator has been Revised Construction progress Zarechie (Percentage) 0.00 100.00 Action: This indicator has been Revised Contruction progress Zyabrovka (Percentage) 0.00 100.00 Action: This indicator has been Revised Construction progress Starye Dorogi (Percentage) 0.00 100.00 Action: This indicator has been Revised Construction progress Kholopenichi (Percentage) 0.00 100.00 Action: This indicator has been Revised Construction progress Cherikov (Percentage) 0.00 100.00 Action: This indicator has been Revised Construction progress Veremeiki (Percentage) 0.00 100.00 Action: This indicator has been Revised Construction progress Bereza (Percentage) 0.00 100.00 Action: This indicator has been Revised Contruction progress Kalinkovichi (Percentage) 0.00 100.00 The World Bank Belarus Biomass District Heating Project (P146194) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Action: This indicator has been Revised Construction progress Baranovichi (Percentage) 0.00 100.00 Action: This indicator has been Revised Contruction Progress Volkovysk (Percentage) 0.00 100.00 Action: This indicator has been Revised Construction progress Ivanovo (Percentage) 0.00 100.00 Action: This indicator has been Revised Construction progress Cherven (Percentage) 0.00 100.00 Action: This indicator is New Construction progress Baranovichi (new) (Percentage) 0.00 100.00 Action: This indicator has been Marked for Deletion Construction progress Kobrin (Percentage) 0.00 100.00 Action: This indicator has been Revised Construction progress Buda-Koshelevo (Percentage) 0.00 100.00 Action: This indicator has been Revised Construction progress Novogrudok (Percentage) 0.00 100.00 Action: This indicator has been Marked for Deletion Construction progress Schuchin (Percentage) 0.00 100.00 Action: This indicator has been Revised Construction progress Vorontsy (Percentage) 0.00 100.00 Action: This indicator has been Revised The World Bank Belarus Biomass District Heating Project (P146194) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Construction progress Borovliany (Percentage) 0.00 100.00 Action: This indicator has been Revised Construction progress Stolin (Percentage) 0.00 100.00 Action: This indicator is New Construction progress Kamenets (Percentage) 0.00 100.00 Action: This indicator is New IO Table SPACE The World Bank Belarus Biomass District Heating Project (P146194) Note to Task Teams: End of system generated content, document is editable from here. 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