Document of The World Bank FOR OFFICIAL USE ONLY Report No: 79705 v 1 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF DO APL1 WATER AND SANITATION IN TOURIST AREAS (P054221) LOAN 7680-DO Approved on April 2, 2009 TO THE DOMINICAN REPUBLIC July 18, 2013 Sustainable Development Department The Caribbean, Guyana and Suriname Country Management Unit Latin America and Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS SEEPYD State Secretariat of Economy, Planning and Development (Secretaría de Estado de Economía, Planificación y Desarrollo) GdRD Dominican Republic Government (Gobierno de República Dominicana) PIU Project Implementation Unit (Unidad Ejecutora de Proyecto) MTR Mid-Term Review INAPA National Drinking Water and Sewerage Institute (Instituto Nacional de Agua Potable y Alcantarillado) Regional Vice President: Hasan A. Tuluy Country Director: Francoise Clottes Sector Manager: Wambui Gichuri Task Team Leader: Oscar Alvarado 2 DOMINICAN REPUBLIC DO APL1 WATER AND SANITATION IN TOURIST AREAS CONTENTS Page A. SUMMARY ........................................................................................................................... 6 B. PROJECT STATUS .............................................................................................................. 6 C. PROPOSED CHANGES ...................................................................................................... 7 ANNEX 1: RESULTS FRAMEWORK AND MONITORING ................................................. 9 3 Restructuring Status: Draft Restructuring Type: Level two Last modified on date : 01/11/2013 1. Basic Information Project ID & Name P054221: DO(APL1)Water&Sanitation inTourist Areas Country Dominican Republic Task Team Leader Oscar E. Alvarado Sector Manager/Director Wambui G. Gichuri Country Director Francoise Clottes Original Board Approval Date 04/02/2009 Original Closing Date: 09/30/2013 Current Closing Date 09/30/2013 Proposed Closing Date [if applicable] EA Category A-Full Assessment Revised EA Category A-Full Assessment-Full Assessment EA Completion Date 02/01/2003 Revised EA Completion Date 2. Revised Financing Plan (US$m) Source Original Revised BORR 6.50 6.50 IBRD 27.50 27.50 Total 34.00 34.00 3. Borrower Organization Department Location MEPyD Dominican Republic 4. Implementing Agency Organization Department Location 5. Disbursement Estimates (US$m) Actual amount disbursed as of 07/18/2013 4.35 Fiscal Year Annual Cumulative 2013 0.00 4.35 Total 4.35 4 6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured projects trigger any new safeguard policies? If yes, please select N from the checklist below and update ISDS accordingly before submitting the package. 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes The objectives of the first phase of the proposed APL (the Project, APL I) are: (i) strengthening and consolidating the policy framework of the water and sanitation sector in the Dominican Republic; (ii) improving and expanding access to sanitation and wastewater treatment and disposal services in the Puerto Plata region; (iii) improving the financial and operational performance of CORAAPLATA, the region’s water utility; and (iv) enhancing operational and commercial performance of other regional utilities and preparing them to participate in the second phase of the Program (APL II). 7b. Revised Project Development Objectives/Outcomes [if applicable] 5 DO APL1 WATER AND SANITATION IN TOURIST AREAS RESTRUCTING PAPER A. SUMMARY 1. This Restructuring Paper reflects the following proposed changes with regards to the closing date and other features of the DO APL1 Water and Sanitation in Tourist Areas, (the Project), Loan 7680-DO (P054221) requested by the Borrower: (i) Extension of the loan’s closing date from September 30, 2013 until June 30, 2015 to enable the completion of ongoing contracts. (ii) Modifications to the project’s scope and activities, which will consequently impact the project indicators. These changes do not alter the main objectives or the structure of the components defined previously in the Loan Agreement. (iii) Reallocate category loan allocations for Loan No. 7680-DO to account for actual expenditures. 2. The Project's development objectives of the first phase of the proposed APL (the project, APL I) are: (i) strengthening and consolidating the policy framework of the water and sanitation sector in the Dominican Republic; (ii) improving and expanding access to sanitation and wastewater treatment and disposal services in the Puerto Plata region; (iii) improving the financial and operational performance of CORAAPLATA, the region’s water utility; and (iv) enhancing operational and commercial performance of other regional utilities and preparing them to participate in the second phase of the Program (APL II). B. PROJECT STATUS 3. The US$27.5 million loan was approved on April 2, 2009. The Loan was declared effective on February 25, 2010, with an original estimate of US$6.5 million in counterpart financing. Since the project was declared effective, project’s activities have revolved around the preparation and launching of bidding processes for technical, environmental studies and support to CORAAPPLATA, CORAAMOCA and COAAROM water utilities. Most of the bidding documents for these activities have been finalized and launched and a number of activities have now been contracted. 4. The change in Government last year and the death of the PIU coordinator affected implementation. However a new project management team was put in place by the new administration and it has made progress in managing procurement processes and has shown that it can achieve the goals set in a number of 6-month action plans developed during Bank supervision missions. A new action plan was defined for mid-2013, aiming at having most final designs concluded and bidding documents for works ready, as well as advances in institutional strengthening of the CORAAS and sector activities. Project implementation was also affected by a long dispute in the selection process of the final designs for the works. The impasse was satisfactorily solved, but it meant an almost 5 months further delay in the physical works component. 6 5. After three and a half years of implementation, the amount disbursed is US$4,417,105.48 and the project is currently rated as Moderately Unsatisfactory (MU) due to delays in procurement processes. However, during the Mid-term review mission in November 2012 the set of remaining three final designs were repackaged and procurement process immediately re- initiated. In light of this, during the MTR the implementation action plan timeline was revised and a new plan agreed upon. The newly agreed plan envisaged that three out of four works would be ready for procurement by late June 2013, (the other two months later) and would achieve several advances in the institutional strengthening and sector components. 6. Advances in the institutional strengthening and sector components have been significant, with the metering and commercial programs fully defined and ready for procurement and first steps of commercial improvement plans defined. Progress in the final designs and procurement started readily, but incurred additional delays as there was a need, initially unforeseen, to reallocate tasks between the newly repacked set of consultancies, which meant modifications in the contracts. As a result, the initiation of the procurement processes is expected by September 2013 to be finalized by February 2014. The team followed up closely and is comfortable that with the new management team in place, the project has made good effort to move ahead as fast as possible, and that the expected outcomes and prospects for outcomes should not suffer any further delays. The State Secretariat of Economy, Planning and Development Minister and the new Vice- Ministers of Economy and Planning are committed to ensuring that the project achieves its development objectives. The MTR also confirmed the Project Unit team capacity and commitment to implement the project, as well as the positive and strong momentum. 7. Given the project status, despite the Project Unit Team continuous commitment and current capacity and proactivity, the Project requires an extension to be able to reach the PDOs related to both Institutional strengthening and physical works. C. PROPOSED CHANGES 8. Extension of closing date. The closing date for the Project will be extended from September 30, 2013 until June 30, 2015, in order to allow for the implementation of remaining project activities that were affected by the procurement processes. An action plan for Project implementation during this time has been agreed upon with the government and is reflected in the latest procurement plan that has been approved for the Project. 9. Project Results/Indicators. The results framework originally prepared for the project is overly ambitious and does not necessarily encompass indicators that are directly related to the project’s proposed interventions. As such, the Borrower proposes modifications to the results framework, which do not impact the achievement of the Project’s Development Objectives. These revisions will contribute to a more simplified and realistic monitoring of the project’s achievements and impacts, and some of the targets of indicators that remain are also being adjusted to reflect the new scope of the project components. Details of the proposed modifications can be found in Annex 1. a. PDO Indicators: There are no changes to these indicators. b. Component 1: Technical Assistance for Sector Development: There are no changes to these indicators. c. Component 2: Rehabilitation and Expansion of Sanitation Services in Puerto Plata: The first three outcome indicators of this component remain unchanged. However the two remaining indicators have the following changes: 7 i. 2.4: “Metering coverage reaches 15 percent of all consumers in CORAAPPLATA�: will be reduced from 15% to 12% because at the time of the project’s conception there was no concrete metering plan; now that such plan is prepared, the 12% rate is more realistic and achievable. Currently metering coverage is about 4%. ii. 2.5: “The ratio of total revenue to total operating expenses, including electricity costs, reaches 70 percent for CORAAPPLATA�: this indicator will be eliminated but will be measured through monitoring. Once again at the project’s conception there was not a concrete strengthening plan, or any allocation of funds to improve the indicator. This depends on the water service, which needs investments not yet contemplated. Therefore the Bank will monitor this indicator but does not have the capacity to reach it as a goal. d. Component 3: Program Administration i. 3.1: “60 percent of domestic and 60 percent of hotel sector consumers are ‘Satisfied’ or ‘Highly Satisfied’ with CORAAPPLATA performance based on results from consumer satisfaction surveys�: This indicator is proposed to be revised, into conducting customer satisfaction surveys before the end of the project. The CORAAPPLATA has deep systematic problems providing fresh drinking water, and these are not addressed by the project, affecting therefore any rating of consumer surveys. ii. 3.2: “Management Information System (MIS) has been developed and implemented and generates regular operational and fiduciary monitoring information as outlined�: This indicator will be eliminated because t he management information system could only sensibly be prepared and managed within a water sector Government entity which has not yet been created (depends on the passing of a Law) and when this will happen is unknown. 10. Reallocation of funds. The restructuring also includes changes in allocations of funds between categories of eligible expenditures. The proposed change reflects a much better refined cost estimate, and redefined larger scope of the institutional strengthening activities, that increase both goods and consultancies, and the corresponding decrease in the works category. The proposed change also includes financing of 100% for all categories. Below is the proposed reallocation of amounts between categories of Loan No. 7680-DO. Category of Expenditure Percentag Current Revised e (1) Goods 300,000 709,000 100% (2) Works 20,731,250 18,292,177 100% (3) Consultant’s Services 6,000,000 8,030,073 100% (4) Training 100% 400,000 400,000 (5) Premia for Interest Rate Caps and -0- -0- Interest Rate Collars 8 (6) Front-end Fee 68,750 68,750 TOTAL AMOUNT 27,500,000 27,500,000 11. The proposed restructuring involves no other changes in terms of project objectives, institutional arrangements, or procurement. The Project Development Objectives remain the same and continue to be achievable with the proposed changes. The team also confirms that (i) there are no audits that are overdue, (ii) the project is not subject to suspension of disbursements. 9 ANNEX 1: Results Framework and Monitoring REPUBLICA DOMINICANA: Water and Sanitation in Tourist Areas (P054221) Results Framework: (C = continued, N = new, R = reviewed, S = suppressed) Development C Development Outcome Indicators C Outcome Indicators Reviewed Objective of the N Objective of the N Overall Program R Overall Program R Reviewed Improve the provision of C Improve the provision of The installation of the Water Sector C The installation of the Water Sector efficient and sustainable efficient and sustainable Council as the entity charged with the Council as the entity charged with the water and sanitation water and sanitation responsibility for setting policy and responsibility for setting policy and services in the Dominican services in the Dominican oversight of the water sector and oversight of the water sector and functions Republic’s tourist areas. Republic’s tourist areas. functions according to acceptable according to acceptable Terms of Reference, as agreed with Terms of Reference, as agreed with World World Bank standards. Bank standards. A strategic environmental assessment has C A strategic environmental assessment has been prepared, for the coastal areas served been prepared, for the coastal areas served by all participating utilities. by all participating utilities. The utilities participating in the Program C The utilities participating in the Program have expanded coverage for sanitation to have expanded coverage for sanitation to achieve the targets of the MDGs. achieve the targets of the MDGs. Disposal of wastewater into the sea are C Disposal of wastewater into the sea are met according to both national and met according to both national and international standards for water quality. international standards for water quality. All utilities participating in the Program S Note: It will be used as an indicator of show financial indicators that guarantee performance monitoring their sustainability. Development Development Outcome Indicators Outcome Indicators Reviewed Objective of the APL Objective of the APL Phase 1 Phase 1 Reviewed Strengthening and C Strengthening and Setting-up of the Water Sector Council. C Setting-up of the Water Sector Council. consolidating the policy consolidating the policy framework of the water framework of the water and sanitation sector in and sanitation sector in the Dominican Republic. the Dominican Republic. Improve the quality and C Improve the quality and Development and adoption by the Water C Development and adoption by the Water coverage of sanitation coverage of sanitation Sector Council of a National Strategy for Sector Council of a National Strategy for services in Puerto Plata. services in Puerto Plata. the water and sanitation sector. the water and sanitation sector. Improve the financial and C Improve the financial and Consumers that receive access to C Consumers that receive access to operational performance operational performance improved or new sanitation and to improved or new sanitation and to of CORAAPPLATA. of CORAAPPLATA. wastewater treatment and disposal wastewater treatment and disposal services in the Puerto Plata region, the services in the Puerto Plata region, the target for this indicator is to provide target for this indicator is to provide access to these services for 128,000 access to these services for 128,000 consumers. consumers. Enhanced operational and C Enhanced operational and Percentages of consumers and hotels that C Percentages of consumers and hotels that commercials performance commercials performance are connected to the sanitation network in are connected to the sanitation network in of utilities to participate of utilities to participate Puerto Plata, the target i s 80 percent for Puerto Plata, the target i s 80 percent for in APL II. in APL II. consumers and 70 percent for hotels. consumers and 70 percent for hotels. CORAAPPLATA has completed and R CORAAPPLATA has identified 100 made operational a cadastre of consumers percent of their potential consumers and coverine all its oDerational areas. has made operating an active registry of at least 40,000 users, covering at least 60 percent of its operational areas. The ratio of total revenue to total S Note: It will be used as an indicator of operating expenses reaches 70 percent for performance monitoring CORAAPPLATA, including electricity costs. Number of regional utilities signing Compliance agreements have been signed �Performance and Financial Support on improving of Cadastre, Commercial Agreements� and meeting operational and Systems, Administrative and Financial commercial performance targets (e.g. Systems of CORAAPPLATA, and targets for non-revenue water, revenue CORAAROM and COAAMOCA, also a collection rates, and cadastre coverage) Strengthening Program for Operation and outlined in these agreements to participate Maintenance of Sewerage Systems of in the APL II, the target is to have two Puerto Plata. utilities, other than CORAAPPLATA, meeting these standards. 11 Intermediate APL Intermediate APL Intermediate Outcome Indicators Intermediate Outcome Indicators Phase I Outcomes Phase I Outcomes Reviewed Reviewed Component One: C Component One: Component One: C Component One: Development and Development and adoption of a National adoption of a National Installation of National Water and Installation of National Water and Strategy for the water and Strategy for the water and Sanitation Sector Information and Sanitation Sector Information and sanitation sector with sanitation sector with Benchmarking System. Benchmarking System. associated public associated public consultation, consultation, environmental education, environmental education, investment planning and investment planning and the capacity building of the capacity building of key sector regulatory and key sector regulatory and policy institutions. policy institutions. Completion of business and C Completion of business and modernization plans for regional utilities modernization plans for regional utilities participating in the Program, as part of participating in the Program, as part of their Financing and Performance their Financing and Performance Agreements. Agreements. Component Two: C Component Two: Component Two: C Component Two: Improved and expanded Improved and expanded access to sanitation and access to sanitation and 80 percent of consumers are connected to 80 percent of consumers are connected to wastewater treatment and wastewater treatment and network sanitation in Puerto Plata. network sanitation in Puerto Plata. disposal services in the disposal services in the greater Puerto Plata greater Puerto Plata region. region. Improved financial and C Improved financial and 70 percent of the occupancy capacity of C 70 percent of the occupancy capacity of operational performance operational performance hotels in the Puerto Plata region are hotels in the Puerto Plata region are of CORAAPPLATA. of CORAAPPLATA. connected to communal sanitation connected to communal sanitation networks. networks. A reviewed and operational cadastre is in C A reviewed and operational cadastre is in use. use. Operating ratio reached 0.7%, including S electricity costs. Metering coverage reaches 15 percent of R Metering coverage reaches 12 percent of 12 all domestic and 100% of large consumers all domestic and 100% of large consumers in CORAAPPLATA operational areas. in CORAAPPLATA operational areas. 60 percent of domestic and 60 percent of R Customer satisfaction survey made. hotel sector consumers are ‘Satisfied’ or ‘Highly Satisfied’ with CORAAPPLATA performance based on results from consumer satisfaction surveys. Component Three: C Component Three: Component Three: C Component Three: CORAAPPLATA has CORAAPPLATA has developed sufficient developed sufficient 70% of loan committed and 50% 70% of loan committed and 50% institutional capacity to institutional capacity to disbursed by the expected start of APL II. disbursed by the expected start of APL II. effectively implement the effectively implement the Project. Project. A Management Information System S (MIS) has been developed and implemented and generates regular operational and fiduciary monitoring information as outlined. Arrangements for results monitoring: Project Development Objective (PDO): The objectives of the first phase of the proposed APL (the Project, APL I) are: (i) strengthening and consolidating the policy framework of the water and sanitation sector in the Dominican Republic; (ii) improving and expanding access to sanitation and wastewater treatment and disposal services in the Puerto Plata region; (iii) improving the financial and operational performance of CORAAPLATA, the regional water utility; and (iv) enhancing operational and commercial performance of other regional utilities and preparing them to participate in the second phase of the Program (APL II). Revised Project Development Objective: Not applicable Project Outcome Indicators Modifications 128,000 consumers in the Project area receive improved access to water None. and sanitation services. Component One 1.1 Completation and adoption of the National Strategy for the water and None. sanitation sector. 13 1.2 Completion of business and modernization plans for regional utilities. None. 1.3 Regional utilities other than CORAAPPLATA meet operational and None. commercial performance targets outlined in Financing and Performance Agreements. Component Two 2.1 80 percent of consumers are connected to network sanitation in Puerto None. Plata. 2.2 70 percent of the occupancy capacity of hotels in the Puerto Plata None. region are connected to communal sanitation networks. 2.3 Cadaster operational. None. 2.4 Metering coverage reaches 15 percent of all consumers in Reduce to 12 percent. CORAAPPLATA. 2.5 The ratio of total revenue to total operating expenses, including It will be used as an indicator of performance monitoring. electricity costs, reaches 70 percent for CORAAPPLATA. Component Three 3.1 60 percent of domestic and 60 percent of hotel sector consumers are A goal has been set of conducting a customer satisfaction survey before ‘Satisfied’ or ‘Highly Satisfied’ with CORAAPPLATA performance the end of the project. No percentages to achieve will be defined as goals based on results from consumer satisfaction surveys. during this survey. 3.2 Management Information System (MIS) has been developed and Eliminated implemented and generates regular operational and fiduciary monitoring information as outlined. 3.3 Periodic monitoring and qualitative, mid-term and impact evaluation None activities are executed as planned in operations manual. 14