The World Bank Alat and Karakul Water Supply Project (P118197) REPORT NO.: RES29051 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ALAT AND KARAKUL WATER SUPPLY PROJECT APPROVED ON DECEMBER 13, 2012 TO REPUBLIC OF UZBEKISTAN WATER EUROPE AND CENTRAL ASIA Regional Vice President: Cyril E Muller Country Director: Lilia Burunciuc Senior Global Practice Director: Guang Zhe Chen Practice Manager/Manager: Michael Haney Task Team Leader: David Malcolm Lord The World Bank Alat and Karakul Water Supply Project (P118197) I. BASIC DATA Product Information Project ID Financing Instrument P118197 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 13-Dec-2012 31-Dec-2017 Organizations Borrower Responsible Agency BUKHARA REGIONAL PRODUCTION ENTERPRISE Republic of Uzbekistan SUVOKOVA Project Development Objective (PDO) Original PDO The project development objective (PDO) is to improve the coverage, quality and efficiency of public water supply service in the two districts of Alat and Karakul in the Bukhara region. The objective will be achieved through the rehabilitation and expansion of water production, transmission and distribution infrastructure in urban and rural areas. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-51890 13-Dec-2012 18-Jul-2013 13-Feb-2014 31-Dec-2017 82.00 24.13 50.72 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The World Bank Alat and Karakul Water Supply Project (P118197) Project Status 1. The project was approved by the Board on December 13, 2012 and became effective on February 13, 2014. The project closing date is December 31, 2017. The project has total IDA commitments of US$82 million equivalent for four components: (A) Improvement of Water Supply Infrastructure; (B) Institutional Strengthening and Capacity Building; (C) Studies for Future Investments; and (D) Project Management. The PDO is "to improve the coverage, quality and efficiency of public water supply service in the two districts of Alat and Karakul in the Bukhara region”. The objective will be achieved through the rehabilitation and expansion of water production, transmission and distribution infrastructure in urban and rural areas. 2. Progress towards achievement of the Project Development Objectives (PDO) is Moderately Satisfactory, a rating which reflects the Government’s request for extension of the project closing date. Implementation Progress is also rated Moderately Satisfactory, due to substantially improved project performance over the last 12-18 months, attributable in part to focused intervention from the Government and the Bank through the implementation of a performance improvement action plan. 3. Despite the accelerated rate of progress over the last 12-18 months, the project still suffers from initial setbacks in early stages of implementation. Specifically, a prolonged effectiveness period (14 months) and cumbersome procurement/contract registration issues led to late engagement of the Project Implementation Consultant (August, 2015) responsible for the survey and engineering design works. As a result, key project activities including the water supply infrastructure works, commenced with significant delays and will not be completed by original closing date, December 31, 2017. 4. The disbursement rate for the project is now 32.5 percent (US$24.13 million) of the IDA Credit 51890, which includes more than US$8.0 million over the last 5 months (>10 percent disbursement rate this Financial Year to date). This recent increase in the disbursement rate is a result of substantial progress of water supply infrastructure works under Component A. All key procurements have been completed and the credit amount is contractually committed. Nine large civil works contracts are currently under implementation at various levels of progress. Two contracts are scheduled for completion before the end of December 2017. 5. Whilst the construction works have been separated into nine contract packages, it is important to note that the water supply infrastructure is designed to operate as a single system, through which more than 232,000 people in the project areas will be connected. It is therefore critical to ensure all contract packages are completed, for the scheme to operate and PDO to be achieved. 6. Key institutional strengthening activities under Component B, which provide support to the State Unitary Enterprise of Bukhara Region (Suvokova) are progressing well. An Operational and Performance Improvement Action Plan (OPIAP) is under implementation. Key activities include capacity building and training for the utility staff in operational and commercial areas including monitoring information systems and communications. 7. Component C supports the preparation of feasibility studies for the development of wastewater management solutions in the project area. This important activity, which includes sewerage investments and on-site sanitation systems, is progressing and the draft report is scheduled for submission in December, 2017. The World Bank Alat and Karakul Water Supply Project (P118197) 8. The responsible agency has overdue audit reports, due to unforeseen procurement issues which delayed contract award and commencement of auditing services. These procurement issues have now been resolved and the auditing services are in progress. Per the agency, the entity and project audit reports will be conveyed to the Bank by December 31, 2017. PMFM and WFAFO manager clearance has been obtained to proceed with restructuring notwithstanding overdue audits. Changes 9. The proposed Level 2 restructuring includes an extension of the closing date by 18 months, till June 30, 2019, and reallocation between disbursement categories. It will be the first restructuring of the project. 10. The proposed extension is reasonable considering the start-up delays, and will allow sufficient time for completion of on-going civil works and commissioning of the new water supply system. Completing the infrastructure investments is necessary for achievement of the PDO, enabling water to be supplied to around 232,000 residents in the project area. 11. The requested reallocation of the IDA Credit will remediate an existing disconnect between the current allocated funds per Withdrawal Schedule and the Procurement Plan. Specifically, the SDR 23.33 million reallocation from the Goods to the Works category is being made in order to correctly align the funds with the existing set of contracts and activities as reflected in the approved Procurement Plan. This will facilitate completion of the civil works contracts, necessary for achievement of the Project Development Objective (PDO). The amounts for Consultant services, training and operating costs under Category 3 remain unchanged. 12. Considering the rate of progress over the last 12-18 months and proposed changes, the PDO is likely to be achieved, with some 232,000 residents, in Alat and Karakul districts of Bukhara region, directly benefitting from the water supply investments. The other PDO indicators, which relate to improvements in the quality and efficiency of water service delivery, are largely dependent upon completion of the infrastructure investments, and as such are also expected to be achieved within the revised implementation period. III. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-51890 Effective 31-Dec-2017 30-Jun-2019 30-Oct-2019 The World Bank Alat and Karakul Water Supply Project (P118197) REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Current Current Actuals + Proposed Disbursement % Ln/Cr/TF Expenditure Allocation Committed Allocation (Type Total) Category Current Proposed IDA-51890- WORKS 18,960,000.00 9,984,175.76 42,290,000.00 69.20 69.20 001 Currency: XDR GOODS 26,540,000.00 394,311.42 3,210,000.00 69.20 69.20 CS incl AUD, TR, 7,700,000.00 4,160,192.48 7,700,000.00 100.00 100.00 IOC Total 53,200,000.00 14,538,679.66 53,200,000.00