The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) REPORT NO.: RES34188 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF UZBEKISTAN BUKHARA AND SAMARKAND SEWERAGE PROJECT APPROVED ON AUGUST 4, 2009 TO REPUBLIC OF UZBEKISTAN WATER EUROPE AND CENTRAL ASIA Regional Vice President: Cyril E Muller Country Director: Lilia Burunciuc Senior Global Practice Director: Jennifer J. Sara Practice Manager/Manager: David Michaud Task Team Leader: David Malcolm Lord, Bakyt Arystanov The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) ABBREVIATIONS AND ACRONYMS AF Additional Financing CD Country Director CMU Country Management Unit GP Global Practice IDA International Development Association PCU Project Coordination Unit PDO Project Development Objective PMFM Practice Manager, Financial Management BVK Bukhara Regional State Unitary Enterprise Suvokova, formerly Bukhara Vodokanal SECO Swiss State Secretariat for Economic Affairs SVK Samarkand Regional State Unitary Enterprise Suvokova, formerly Samarkand Vodokanal WFAFO World Bank Group Finance and Accounting, Financial Operations The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) BASIC DATA Product Information Project ID Financing Instrument P112719 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 04-Aug-2009 30-Jun-2019 Organizations Borrower Responsible Agency BSWSP PCU, Uzkommunkhizmat,BUKHARA REGIONAL Republic of Uzbekistan PRODUCTION ENTERPRISE SUVOKOVA,SAMARKAND REGIONAL PRODUCTION ENTERPRISE SUVOKOVA Project Development Objective (PDO) Original PDO The project development objectives (PDO) are to mitigate the environmental impact from wastewater pollution and improve the efficiency and sustainability of wastewater management in Bukhara and Samarkand. This will be achieved through (a) rehabilitating select sections of the sewerage system that are deteriorated; (b) limited expansion of the sewerage system into currently unconnected central historical areas, (c) installing more energy-efficient equipment such as wastewater pumps and aeration systems at the wastewater treatment plants and pumping stations; and (d) improving the capacity of the water utilities (vodokanals) in the areas of management, communications and public outreach. Current PDO The proposed PDOs are to reduce wastewater pollution and improve the performance of utilities responsible for wastewater managementin Bukhara and Samarkand. OPS_TABLE_PDO_CURRENTPDO The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-56980 23-Jun-2015 13-May-2016 12-Aug-2016 30-Jun-2019 95.44 18.91 75.73 IDA-56990 23-Jun-2015 13-May-2016 12-Aug-2016 30-Jun-2019 9.56 0 9.91 IDA-46330 04-Aug-2009 26-Nov-2009 01-Apr-2010 30-Jun-2019 54.24 50.63 1.12 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. Bukhara and Samarkand Sewerage Project was approved by the Board on August 9, 2009 and became effective on April 1, 2010. The original project had total IDA commitments of US$54.24 million. An Additional Financing (AF) of US$105 million was approved on June 23, 2015 and became effective on August 12, 2016. The AF was designed to scale up activities under the BSSP and restructure the original project to modify the project development objective (PDO), results monitoring framework and extend the closing date of the original project till June 30, 2019. 2. Progress towards achievement of the PDO is currently Moderately Unsatisfactory. Around 75% of the project financing is contractually committed and total disbursements are at around US$70 million (or 45 percent of total IDA credits). Works under the original project have been fully completed, expanding sewerage services to 6,600 new households and partial rehabilitation of existing wastewater treatment plants in both cities. The AF activities were launched in August 2016 and to date the total physical progress is around 25 percent. This includes commissioning of new Farkhad wastewater treatment plant in Samarkand in May 2018. Rehabilitation works for the main wastewater treatment plants in Bukhara and Samarkand continue and are now estimated to be complete in June 2020, some 12 months beyond the current project closing date. These two contracts, which are on critical path, were substantially affected by lengthy procurement delays and contract registration processes. Considering delays, it is projected that the PDO-level indicators related to reduction of wastewater pollution and energy efficiency will only be partly achieved by June 30, 2019. 3. The project’s implementation schedule for AF was substantially affected by prolonged procurement delays, associated with a series of changes in national regulations and internal authorizing environment, commencing in early 2017 and continuing to date. Such changes have included several new laws and regulations affecting procurement and project management which were coupled with major institutional developments including the introduction of the State Investment Committee and establishment of the Project Management Agency. In addition, the Ministry of Housing and Communal Services, which is responsible for the sector, was only recently created (May 2017) and has been in process of establishing their own internal systems and staffing arrangements. These major regulatory and institutional changes, came into effect during the same period where significant procurement activities were planned and in progress. Such issues have been further compounded by frequent changes to key personnel within the Ministry, Suvokova and Project The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) Coordination Unit. In effect the project lost some 18 months of productive time, due to failure to complete procurements and award contracts. The three large AF civil works contracts which were successfully awarded before the above changes came into effect, have all been completed on time as originally scheduled. 4. Implementation progress is currently rated Unsatisfactory, reflecting procurement delays and other implementation issues, many of which are beyond the direct control of the implementing entities. Considering the challenging circumstances of the project over the last 18 months, and in response to a request from the State Investments Committee, a strategic plan was developed jointly with the authorities outlining clear actions required to ensure satisfactory completion of the project. This plan followed extensive discussions with Government authorities, including the Deputy Prime Minister (Mr. Kholmuradov) during the Water GP Senior Director's visit from June 17-18 - and was subsequently endorsed by CMU. Implementation of the strategic action items should allow full utilization of IDA funds (including cost savings) and enable sufficient time to complete on-going and potential scale-up activities. To avoid any further delays, it was agreed with the Government that remaining planned AF procurements should be completed before December 31, 2018. From the seven remaining civil works procurements, one contract has since been awarded and commenced in September 2018. The other six packages are in advanced stages of procurement with contract award scheduled by December 2018. The proposed plan allows for the full use of project resources to deepen and expand project impacts and development outcomes, however should further delays take place, cancelations will become necessary. 5. On-going infrastructure development and institutional strengthening activities will be further complemented by SECO co-financing technical assistance, scheduled to commence in early 2019. This co-financed program will provide additional support for corporate and professional development of Bukhara and Samarkand Suvokovas, which will help to ensure sustainability of investments and service provision more generally. 6. The responsible agency has overdue entity audit reports for 2017 due to delayed procurement and implementation of auditing services. However, audited project financial statements were submitted to the Bank on October 10, 2018. The Government authorities were notified of this issue and potential remedial actions in the Bank’s Management Letter dated September 7, 2018. Following this, a time bound action plan for completing the auditing activities was prepared, jointly by the implementing entities and the auditor, and submitted to the Bank. The auditing activities are in progress and as per the action plan schedule, the audited entity financial statements for the year ending December 31, 2017 are to be submitted before the end of December 2018. PMFM and WFAFO manager clearance has been obtained to proceed with restructuring notwithstanding overdue audits. II. DESCRIPTION OF PROPOSED CHANGES 7. This restructuring package is part of broader water sector portfolio improvement action plan, combining cancelations, extensions and changes in disbursement percentages, representing an acceptable compromise between the Bank’s interest and the Government of Uzbekistan’s priority to complete the projects. The proposed action plan will help to address the situation of three on-going water and sanitation projects that were heavily impacted by frequent changes in procurement regulations, institutions and authorizing environment since 2017, and will allow overall portfolio to be brought back to a more satisfactory path. 8. The proposed Level 2 restructuring includes an extension of the AF loan closing date by 18 months, till December 31, 2020. It is the first extension of the AF loan, and being less than 2 years from original AF loan closing dates it requires approval at CD level. The extension will enable sufficient time to complete on-going AF activities and utilization of cost savings, assuming the respective agencies can keep with their implementation progress commitments. The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) 9. The requested extension will be complemented by a course of other actions agreed with the Government to accelerate and improve project implementation performance. These actions include vigilant supervision and contract management to ensure timeliness for completion of on-going civil works, remedial action plans for financial and safeguards management, strengthening the PCU capacity, and commitment to contract all remaining activities under the project prior to December 31, 2018 and other measures discussed and communicated during the mission in June 2018. 10. Considering the proposed extension and commitment of the Government to complete procurement of all uncommitted funds by December 31, 2018, the PDO is likely to be fully achieved. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Loan Closing Date(s) ✔ Disbursement Estimates ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) Social Analysis ✔ 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 30-Jun-2016, 30-Jun- IDA-46330 Effective 31-Dec-2015 2019 IDA-56980 Effective 30-Jun-2019 31-Dec-2020 30-Apr-2021 IDA-56990 Effective 30-Jun-2019 31-Dec-2020 30-Apr-2021 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2010 0.00 0.00 2011 2,600,000.00 2,662,515.82 2012 4,600,000.00 4,616,567.65 2013 9,600,000.00 9,618,817.95 2014 9,400,000.00 9,417,830.60 2015 11,700,000.00 13,071,366.30 2016 20,000,000.00 15,612,901.68 2017 50,000,000.00 4,210,684.14 2018 30,000,000.00 10,390,336.51 2019 22,000,000.00 24,169,069.00 2020 0.00 44,153,273.00 2021 0.00 18,414,734.10 The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) . The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) . Results framework COUNTRY: Uzbekistan Uzbekistan Bukhara and Samarkand Sewerage Project Project Development Objectives(s) The proposed PDOs are to reduce wastewater pollution and improve the performance of utilities responsible for wastewater managementin Bukhara and Samarkand. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 9 Reduced wastewater pollution in Bukhara and Samarkand (Action: This Objective is New) Direct project beneficiaries (CRI, 350,000.00 400,000.00 400,000.00 450,000.00 450,000.00 450,000.00 500,000.00 Number) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised Female beneficiaries 52.00 52.00 52.00 52.00 52.00 52.00 52.00 (CRI, Percentage) Action: This Rationale: indicator has Intermediate targets were added to reflect project extension. been Revised Volume(mass) of BOD pollution load 1,590.00 1,680.00 1,680.00 2,000.00 2,000.00 2,000.00 2,000.00 removed by The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 9 treatment plant under the project (CRI, Tones/year) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised Volume(mass) of BOD pollution load removed by 2,450.00 2,450.00 2,450.00 3,100.00 3,100.00 3,100.00 3,100.00 treatment plant under the project (CRI, Tones/year) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised Improved performance of utilities responsible for wastewater management in Bukhara and Samarkand (Action: This Objective is New) Energy efficiency at the WWTP in BVK 4.10 3.00 (Text) Rationale: Action: This End date was changed to reflect project extension. Actual current value was updated manually based on the Results Framework from the last Aide Memoire of June indicator has been 2018. Revised The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 9 Energy efficiency at the WWTP in SVK 4.00 3.00 (Text) Rationale: Action: This End date was changed to reflect project extension. Actual current value was updated manually based on the Results Framework from the last Aide Memoire of June indicator has been 2018. Revised Operating cost coverage ratio in ratio 1.28 ratio 1.41 ratio 1.43 ratio 1.44 ratio 1.44 ratio 1.44 ratio 1.45 BVK (Text) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised Operating cost coverage ratio in ratio 1.08 ratio 1.35 ratio 1.37 ratio 1.39 ratio 1.39 ratio 1.39 ratio 1.40 SVK (Text) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised Number of sewer blockages per year 1,404.00 1,400.00 1,300.00 1,200.00 1,000.00 900.00 800.00 800.00 800.00 600.00 in BVK (Number) Action: This Rationale: indicator has been End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework Revised from the last Aide Memoire of June 2018. The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 9 Number of sewer blockages per year 1,056.00 1,000.00 900.00 800.00 800.00 800.00 700.00 in SVK (Number) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised % of customers satisfied with the 0.00 40.00 50.00 40.00 50.00 55.00 55.00 55.00 60.00 services received in BVK (Percentage) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised of which female 0.00 40.00 50.00 55.00 55.00 55.00 60.00 (Percentage) Action: This Rationale: indicator has Intermediate targets were added to reflect project extension. been Revised % of customers satisfied with the 0.00 40.00 50.00 40.00 50.00 55.00 55.00 55.00 60.00 services received in SVK (Percentage) The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 9 Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised of which female 0.00 40.00 50.00 55.00 55.00 55.00 60.00 (Percentage) Action: This Rationale: indicator has Intermediate targets were added to reflect project extension. been Revised PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 9 Component A. Institutional Strengthening and Capacity Building (Action: This Component is New) Communication and Public Awareness Strategy for the BVK Draft Draft None Implemented Implemented Implemented Implemented and SVK developed Developed Developed and implemented (Text) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 9 VK staff trained in utility management, O&M, finance, and 0.00 10.00 10.00 500.00 700.00 900.00 900.00 900.00 1,000.00 communications, procurement (Number) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised Number of people who participated in the public outreach 0.00 500.00 1,000.00 1,500.00 1,500.00 1,500.00 2,000.00 workshops conducted (Number) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised Of which female 0.00 30.00 50.00 50.00 50.00 50.00 50.00 (%) (Percentage) The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 9 Action: This Rationale: indicator has Intermediate targets were added to reflect project extension. been Revised Pilot SCADA system installed and None Installed Installed Installed Installed Installed Operational operational (Text) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised Feasibility studies and detailed engineering design No No No No No No Yes for future investments completed (Yes/No) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised Component B. Physical Investments (Action: This Component is New) Cumulative length of sewer lines 0.00 0.00 0.00 4.00 14.00 15.00 40.00 65.00 65.00 65.00 82.70 replaced in Bukhara (Kilometers) The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 9 Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised Cumulative length of sewer lines replaced in 0.00 0.00 3.00 11.00 27.75 34.35 34.35 34.35 34.35 34.35 Samarkand (Kilometers) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised Cumulative length of new sewer lines constructed in 0.00 0.00 1.00 2.00 1.40 7.40 9.00 9.00 9.00 11.20 Bukhara (Kilometers) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised Cumulative length of new sewer lines constructed in 0.00 0.00 1.00 3.00 5.20 20.00 40.00 40.00 40.00 59.20 Samarkand (Kilometers) The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 9 Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised New household sewer connections constructed under 0.00 2,000.00 2,500.00 3,500.00 3,500.00 3,500.00 4,500.00 the project (CRI, Number) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised New household sewer connections constructed under 0.00 4,000.00 7,000.00 11,000.00 11,000.00 11,000.00 14,000.00 the project (CRI, Number) Rationale: Action: This End date was changed and intermediate targets were added to reflect project extension. Actual current value was updated manually based on the Results Framework indicator has been from the last Aide Memoire of June 2018. Revised IO Table SPACE The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719)