The World Bank Honduras Pilot Program for Climate Resilience Phase 1 Grant (P157795) REPORT NO.: RES39847 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF HONDURAS PILOT PROGRAM FOR CLIMATE RESILIENCE PHASE 1 GRANT APPROVED ON APRIL 17, 2017 TO THE REPUBLIC OF HONDURAS WATER GLOBAL PRACTICE LATIN AMERICA AND THE CARIBBEAN REGION Regional Vice President: J. Humberto Lopez Country Director: Yaye Seynabou Sakho Regional Director: Anna Wellenstein Practice Manager/Manager: Rita E. Cestti Task Team Leader: Marco Antonio Aguero The World Bank Honduras Pilot Program for Climate Resilience Phase 1 Grant (P157795) ABBREVIATIONS AND ACRONYMS AMDC Alcaldía Municipal del Distrito Central (Municipality of Tegucigalpa) CAT-DDO Catastrophe Deferred Drawdown Option CIF Climate Investment Funds COPECO Permanent Contingency Commission EoI Expression of Interest ESIA Environmental and Social Impact Assessment IDA International Development Agency IFC International Finance Corporation INVEST-H Implementer (PIU) MS Moderately Satisfactory PDO Project Development Objective PIU Project Implementation Unit PPCR Pilot Program for Climate Resilience RP Restructuring Paper SANAA Servicio Autónomo Nacional de Acueductos y Alcantarillados SEFIN Ministry of Finance SPCR Strategic Program for Climate Resilience TA Technical Assistance ToR Term of Reference The World Bank Honduras Pilot Program for Climate Resilience Phase 1 Grant (P157795) BASIC DATA Product Information Project ID Financing Instrument P157795 Investment Project Financing Original EA Category Current EA Category Approval Date Current Closing Date 17-Apr-2017 31-Dec-2019 Organizations Borrower Responsible Agency Secretaria de Finanzas de Honduras (SEFIN),Secretaria de Honduran Strategic Investment Office (INVEST-H) Energia, Recursos Naturales, Ambiente y Minas Financing (in USD Million) FIN_SUMM_PUB_TBL SUMMARY Total Project Cost 0 Total Financing 0 Financing Gap 0 DETAILS -NewFin3 Project Development Objective (PDO) Original PDO The proposed PDO is to strengthen institutional capacity of the Government for integrating climate resilience in development planning. OPS_TABLE_PDO_CURRENTPDO The World Bank Honduras Pilot Program for Climate Resilience Phase 1 Grant (P157795) Summary Status of Financing Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A4893 11-Apr-2017 13-Sep-2017 13-Sep-2017 31-Dec-2019 1.40 1.40 0 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This Restructuring Paper (RP) seeks the Country Director’s approval of a Second Order Restructuring of the Grant TF0A4893 for the Honduras Pilot Program for Climate Resilience (PPCR) Phase I (P157795). The proposed restructuring entails (i) extending the closing date of the Project (Recipient Executed Grant) by 6 months, from December 31, 2019 to June 30, 2020 to allow the Client to conclude the final review of the outputs (studies) delivered through different ongoing consultancies; and (ii) updating the Results Framework to reflect the extended closing date. The Beneficiary submitted the request to the Bank for the aforementioned changes on December 23, 2019. A. Project Background 2. The US$1.4 million recipient executed grant was approved on April 11, 20171 and declared effective on September 13, 2017. The current closing date is December 31, 2019. 3. This is the second restructuring of the Grant. The first restructuring entailed the extension of the closing date from December 31, 2018 to December 31, 2019 and changes in the result framework to reflect the change in the closing date. The first extension of the closing date was needed to allow the studies and consultancies to inform the Strategic Program for Climate Resilience (SPCR) and the preparation of the World Bank lending operations contemplated as part of the SPCR’s investment plan, namely the Tegucigalpa: Water Supply Strengthening Project (P170469), already approved by the Board, and the Water Security in the Dry Corridor Project (P169901), under preparation. B. Overall Project Status 4. The Project was rated Moderately Unsatisfactory (MU) in Implementation Progress (IP) and Moderately Satisfactory (MS) in progress towards achievement of the Project Development Objective (PDO) in the last archived ISR dated December 28, 2018. Progress towards achievement of the PDO and overall implementation have progressed significantly since the last ISR and both are currently rated MS in the draft ISR to be submitted. The WB has disbursed the total funding available (US$1,400,000) to the designated account. The draft versions of key studies pending have been submitted recently to the PIU and are under review. The PDO indicator 1 The project was approved on April 17, 2017 in the system The World Bank Honduras Pilot Program for Climate Resilience Phase 1 Grant (P157795) ‘Government’s Climate Resilience policies and/or climate change strategies are informed by the SPCR’ and two out of three intermediate indicators are on track to be achieved as reflected in the draft ISR. Based on the understanding that the closing date will be extended by 6 months, all components will remain MS and the PDO is expected to be achieved by June 30, 2020, as the extension will allow key studies to be revised and concluded accordingly, complementing a set of instruments already prepared (e.g. Water Security Strategy in the Dry Corridor) that will inform the PDO. 5. As a result of the grant, the country has a clear and comprehensive SPCR endorsed by the Government and presented to the Climate Investment Fund (CIF) in December, 2017; informing the National Adaptation Agenda and prioritizing the preparation of water security policies and strategies for targeted vulnerable areas in the country, such as the Water Security Strategy for the Dry Corridor of Honduras, which was concluded by the Government in November, 2019. The latter sets the course for improved national and local level water management capacities by promoting the operation of the National Water Authority (ANA) and the establishment of the Water Basin Councils, prioritizing the most vulnerable basins. Both the ANA and the Water Basin Councils mechanism are considered key reforms of a proposed Development Policy Credit (DPC) with a Catastrophe Deferred Drawdown Option (Cat DDO) currently under preparation. Considering the above, the main PDO indicator (Government’s Climate Resilience policies and climate change strategies are informed by the SPCR) is likely to be achieved. 6. The Government has shown its commitment in moving forward the activities under this grant since the last ISR: in total, 5 key terms of reference were prepared in a participatory manner with technical sector representatives from Agriculture, Water and Environment. All bidding processes of this key consultancies were launched, and all studies are on track to be finalized, despite some initial delays in project effectiveness and procurements. The key studies are: (i) the Climate Change and Resilience Communication Strategy; (ii) the Efficiency Strategic Plan to enhance “Coyolar Dam”; (iii) the Local Climate Adaptation Plan for Tegucigalpa; (iv) the Environmental and Social Impact Assessment (ESIA) for the Integrated Urban and Rural Water Security Systems (Cosechas de Agua) in the Dry Corridor; and (v) the Preliminary Environmental and Social Impact and Dam Safety Assessment to Enhance the Water Services provided by the Jose Cecilio del Valle reservoir. All studies will inform the SPCR including the two strategic Bank lending operations in water, leveraging approximately US$120 million in investments, with the objective to address the impacts of climate change in water services in Tegucigalpa and other targeted areas in the Dry Corridor, and therefore with considerable climate co-benefits. C. Rationale for Restructuring 7. The objective of the extension is to allow the Government to conduct a thorough review of the different outputs financed through the grant and disseminate the results. Draft outputs are expected to be submitted by the end of December. Thus, an extension of the closing date would also allow for enough time to carry on the administrative closure of the consultancies and the preparation of the Project’s audit report. The extension would not result in increasing the cost of the Project nor additional supervision costs. 8. Furthermore, the possibility of the replenishment of funds for the Project through a new request to the PPCR global initiative is being considered as there may be funds available to support preparation of SPCRs investment programs, and a new round of call for proposals may be launched during February/March 2020. Therefore, an extension of the closing date would allow to prepare and submit an Expression of Interest (EoI), as well as enough time to process the additional financing request in case of approval of new allocation of PPCR’s funds to Honduras. Additional resources would allow the Government to optimize technical assistance and prepare the necessary assessments that would contribute to the readiness of a new water and sanitation operation (P173125) aimed at improving resilience of municipal water providers affected by water scarcity in urban areas. The World Bank Honduras Pilot Program for Climate Resilience Phase 1 Grant (P157795) 9. The Task Team confirms that the proposed restructuring follows the Articles of the Grant Agreement signed between the Bank and the Government of Honduras. Furthermore, the restructuring meets the requirements set out in paragraph 24 of the Bank Policy for Investment Project Financing (IPF) and paragraph 50 of the Bank Directive for Investment Project Financing: (ii) the Recipient does not have any outstanding audit reports or audit reports which are not satisfactory to the Bank; and (iii) the Project’s DOs remain achievable with the extension, and the performance of the Recipient remains satisfactory. II. DESCRIPTION OF PROPOSED CHANGES 10. This Restructuring seeks to extend the grant’s closing date from December 31, 2019 to June 30, 2020, as requested by the Government of Honduras. The Task Team confirms that there are no changes in the scope or nature of project activities, nor in implementation arrangements, and that the restructuring does not hold any restrictions from the Donor’s side (CIF). 11. The Restructuring will also update the Results Framework to reflect the new closing date. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Loan Closing Date(s) ✔ Implementing Agency ✔ Project's Development Objectives ✔ Components and Cost ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Change in Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ The World Bank Honduras Pilot Program for Climate Resilience Phase 1 Grant (P157795) Other Change(s) ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Government s Climate Resilience policies and/or climate change strategies are informed by the SPCR Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 1.00 Revised Date 20-Apr-2017 21-Sep-2018 30-Jun-2020 Intermediate Indicators IO_IND_TABLE Number of pre-feasibility studies framed within the SPCR, one for each of the prioritized areas (institutional strengthening on climate risk, water security and agriculture) prepared by ICCC Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 4.00 Revised Date 20-Apr-2017 21-Sep-2018 30-Jun-2020 Number of key sector institutions (MiAmbiente, MoF, SANAA & Ministry of Agriculture, INVEST-H, among others exchanging information & best practices to mainstream CCA capacity into development planning Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 4.00 4.00 Revised Date 20-Apr-2017 21-Sep-2018 30-Jun-2020 Proposal for strengthening the regulatory framework and inter-institutional coordination mechanism in priority sectors related to climate change developed Unit of Measure: Number Indicator Type: Custom The World Bank Honduras Pilot Program for Climate Resilience Phase 1 Grant (P157795) Baseline Actual (Current) End Target Action Value 0.50 1.00 Revised Date 20-Apr-2017 21-Sep-2018 30-Jun-2020 Participants in consultation activities during project implementation (number) Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 150.00 320.00 Revised Date 31-May-2017 21-Sep-2018 30-Jun-2020 Participants in consultation activities during project implementation - female Unit of Measure: Number Indicator Type: Custom Breakdown Baseline Actual (Current) End Target Action Value 0.00 43.00 128.00 Revised Date 31-May-2017 21-Sep-2018 30-Jun-2020 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline TF Status Closing Closing(s) Closing for Withdrawal Applications TF-A4893 Effective 31-Dec-2018 31-Dec-2019 30-Jun-2020 30-Oct-2020