PHILIPPINES METRO MANILA WASTEWATER MANAGEMENT (MWMP, P113844) IMPLEMENTATION SUPPORT MISSION November 18-29, 2019 Aide Memoire INTRODUCTION 1. A World Bank Team' carried out an implementation support mission of the Metro Manila Wastewater Management Project (MWMP) from November 18-29, 2019. The mission aimed to: (a) review the project's performance in terms of achieving its development objective, (b) review MWMP portfolio and update compliance on agreed action plans, (c) conduct visits to subprojects, (d) discuss remaining activities that need special attention, and (e) discuss preparation for the Government's Project Completion Report (PCR) and the Bank's Implementation Completion and Results (ICR) Report. The mission expresses its appreciation for the cooperation and support received from officials and staff of the Land Bank of the Philippines (LBP), Manila Water Company Inc. (MWCI), and Maynilad Water Services, Inc. (MWSI). The list of persons met is attached as Annex 1. This Aide Memoire presents the key points of discussions, recommendations made, and the agreements reached during the Project team meeting on November 18, 2019 and subsequent validation activities carried out by the mission and the implementing agencies. KEY PROJECT DATA 2. The MWMP was approved on May 15, 2012 for US$275 million and became effective on October 19, 2012. It was originally scheduled to close on June 30, 2017. The project was extended twice for a cumulative period of three years. It is expected to close on June 30, 2020. As of October 31, 2019, disbursements stand at US$244.0 million (88.7% of total loan amount): MWCI (78.5%) and MWSI (98.9%). MWSI is projected to draw the remaining amount of US$1.5 million by December 2019. MWCI has a pending of around US$ 9.26 million eligible for drawdown by December 2019. By year-end, fund utilization is projected at US$137.5 million (MWSI) and US$ 117.1 million (MWCI), totaling to US$ 254.6 million (92.6% of total loan amount). KEY FINDINGS Table 1: MWMP PDO Indicators: Targets and Progress to-Date Baseline End-of-Project Progress % of Target Target (10/31/2019) Indicator 1: Reduction of BOD in the collected wastewater (tons/year) Project Total 0 3,556 [ 2,583 73% MWSI 0 1.708 [ 1,971 115% MWCI 0 1,848 [ 1,041 56% Indicator 2: Population equivalent in the catchment area that would benefit from the project (million) Project Total 0 2.49 1.4 56% MWSI 0 1.29 1.0 78% MWCI 0 1.20 0.42 33% 3. Achievement of PDO. Seven months prior to the closing date, the project has shown substantial progress in achieving its PDO of improving wastewater services in selected sub-catchments of Metro Manila and surrounding areas. As of October 31, 2019, the project has achieved 73% of the targeted reduction in biological 'The Mission comprised: Christopher Ancheta (Sr. Sanitary Engineer and Task Team Leader); Maya Villaluz (Sr. Environmental Specialist); Rene SD Manuel (Sr. Procurement Specialist); Marivi Amor Jocutan Ladia (Social Development Specialist); Maria Liennefer Rey Penaroyo (Financial Management Specialist); Ronald Muafia (Wastewater Engineering Consultant); Marilyn Tolosa- Martinez (Economist- Consultant), and Venessa Sarkar (Program Assistant). 'Partial figure until Ilugin STP is completed. 1 oxygen demand (BOD) in collected wastewater; and 56% of the total number of people equivalent in the catchment area who are expected to benefit from the project. The implementing agencies predict that MWMP will be able to exceed its PDO targets, as a number of ongoing projects will be completed and will start to accumulate benefits during the project extension period. For MWCI, the inclusion of the Marikina and UP contracts has contributed to the achievement of its key performance indicators (KPI) targets. See Table 1 and Annex 2. 4. Implementation progress. The project has only seven months left before its closing on June 30, 2020. The mission monitored overall implementation to help ensure that all facilities supported by the project are operational, loan proceeds are fully disbursed, and the project achieves its PDO. A summary of the over- all implementation progress by MWCI and MWSI are presented below in Table 2. Table 2: MWMP Summary of Overall Implementation Progress Parameter MWCI MWSI STPs and conveyance networks Implementation of all contracts Remaining 3 STPs and are on-going conveyance systems are on-going Total value of signed contracts US$ 149.2 million US$ 220.5 million Total physical accomplishment 77.2% 85.2%4 * Completion of STP contracts (%) 90.0% (for 1 STP) 90.4% (6 STPs and 1 SpTP) * Completion of sewerage network 71.9% (out of 83.94 km)3 78.8 % (out of 41.29 km) contracts (%) Sub-loan disbursement (%), each sub- 78.5% 98.9% loan is US$137.5 million 5. Progress of MWCI STP contracts. The construction of Ilugin sewage treatment plant (STP) has progressed from 75% to 90% in terms of total earned value. The STP is slated to be physically completed by December 2019, with trial operations commencing by then. Remaining works include cabling and electro- mechanical detailing. In addition to site development, the project is also undertaking road paving, and architectural finishing of completed buildings. 6. Progress of MWCI sewer network contracts. Sewer networks contracts for the Ilugin sewer system has progressed from 50% to 72% in terms of total earned value. MWCI has achieved significant milestones in the permit acquisition under the new local government unit (LGU) leadership. Works that previously took over one year to complete has now been finished in just three months, as the LGU of Pasig City has approved multiple headings and longer working hours. MWCI has recalibrated its network program so that an additional five kilometers of sewers are expected to be completed by June 2020. Of the four UP sewer network contracts, three are already fully completed with the remaining package (Phase 2D) already at 96.3% physical completion. Package 2D has been delayed by over six months due to permitting restrictions through private lands managed by a private company, but it is expected be completed by the revised date of December 31, 2019. The Marikina sewer system contracts were all physically completed since September 2018 and are now delivering project benefits. MWCI presents a detailed workplan to address remaining works in Annex 3. 7. Progress of MWSI STP contracts. The construction of STPs have progressed from 83% to 90% in terms of percentage earned value. Four out of seven STPs are already completed and delivering benefits. The 60-MLD Valenzuela STP, 46-MLD Cupang STP, and 20-MLD Tunasan STP are in various stages of implementation. Cupang STP is most advanced at 88.9% completion rate, with remaining works mostly on mechanical equipment installation, road paving, and site development. However, permitting-related construction delays in the last 90-meters of effluent pipeline, which was already raised in the last mission, I Includes the accomplishments of additional projects Inclusive of MWSIs Capex for Muntin]upa conveyance 2 remain. While the barangay has finally provided the permit last August 2019, it is now the Mayor's permit that has been held back, due to anticipated heavy traffic from the scheduled Southeast Asian (SEA) Games, which will have events in the city. MWSI is making representations with the LGU to secure the permit, which if granted within the next two weeks will enable the operations trial testing of the facility within year end 2019. 8. The Tunasan STP is 85.3% physically completed according to its original contract and 68.5% if variation order for nutrient removal is included. Remaining works are mainly at the head works and influent pump station. Construction of the STP has recently faced contract management issues, i.e., financial issues, which affected its ability to pay works and renew bank guarantees and caused delays for Tunasan STP. Physical completion of the Valenzuela STP is reported at 94.5% according to its original contract and 69.7% if variation order for nutrient removal is included. The contractor under the Tunasan STP is also the same contractor for this subproject and liquidity issues, similar to Tunasan STP, have also led to some delays. MWSI assisted the contractor in resolving these issues and facilitated the amendment of the contracts for Valenzuela and Tunasan STPs in October 25, 2019 to ensure work continuity. The target completion dates of Valenzuela and Tunasan STPs has slid from November 2019 to June 2020. Considering the limited time left before the project closes in June 2020, the mission urged the MWSI to resolve contract management issues immediately to ensure no further slippages will be experienced and contracts will be completed by project closing. The Bank can be consulted by MWSI (and MWCI) to resolve such issues but could not be expected to discuss these directly with contractors as it is not a party to the contract. 9. Progress of MWSI sewer network contracts. MWSI has shown improvements in the implementation of sewer network contracts in the last six months. However, overall progress is still at 87.4%. The implementation of sewer network contracts was significantly delayed mainly due to tight restrictions of the LGU on road excavations along major roads and stakeholder and right-of-way acquisition- related issues. In the case of Valenzuela sewer system, MWSI achieved milestones as Valenzuela City Government has finally released construction permits, albeit limited, for the trenchless pipelaying package along the heavily trafficked McArthur Highway. MWSI is closely coordinating with the traffic management office and the mayor's office of Valenzuela City to demonstrate the effectiveness of the project's traffic management and stakeholder engagement plans. Meanwhile, the long-standing issues of Pump Station #12 and pipe laying works along Pinalagad St., both related to stakeholder issues, remain to be addressed. 10. For Cupang sewer system, while the sewer pipe laying is already at 95% physical completion, delays were met in the interceptor structures and associated pump station. Work progress at Pump Station #7, Bayanan interceptor, and Bayanan pump station now stands at 60%, 70%, and 10% physical completion, respectively. In Tunasan sewer system, the situation is reversed with the pump stations and interceptors completed or at very advanced stages while the sewer pipe laying is still at 70%. The remaining 30% is concentrated in the southern portions where works were restricted due to the aforementioned SEA Games. 11. Pending Actions in the Agreed Work Plan. The mission urged the MWCI and MWSI to accelerate the implementation of remaining actions in Agreed Work Plan agreed during project restructuring in June 2019 (see Annex 3). a. MWCI to submit quarterly physical progress and safeguards monitoring report for the Ilugin sewer network by December 31, 2019 until project completion; b. MWCI to complete remaining segments (70 meters) under the UP sewer network by December 31, 2019; c. MWSI to continue to make representation with the LGU to secure permit for the construction of the last 90-meters of effluent pipeline; 3 d. MWSI to immediately resolve contract management issues relating to Tunasan and Valenzuela STPs to ensure no further slippages will be experienced and contracts will be completed by project closing; and e. MWSI to continue to closely follow up actions to resolve land/right-of-way acquisition- related issues relating to Valenzuela Pump Station #12 (MWMP-12-05A), Valenzuela Network PS9 (MWMP-12-05C), Valenzuela network (MWMP-12-05A), Cupang STP (MWMP-12-04), and Cupang sewer network (MWMP-12-04A). 12. Additional Wastewater Interceptors. MWSI and MWCI have already completed necessary additional works relating to interim wastewater interceptors in compliance with the recommendations of previous missions of ensuring that STPs receive sewage inflows when these are completed. The mission commends the MWSI and MWCI for their responsiveness and flexibility to implement critical additional works. MWCI's Ilugin STP is expected to receive 15MLD from its interim interceptors along Ilugin creek while MWSI's Valenzuela STP is expected to get around 20MLD from its interceptor along Marulas creek. FIDUCIARY AND SAFEGUARDS 13. Procurement. No more procurement activities are expected under the project. For MWCI, eight contracts were procured. The other four contracts, which were originally listed under the project but were not procured or their implementation was not moving, were dropped and replaced with seven contracts that were approved as part of project restructuring on June 28, 2019. MWCI, therefore, has a total of 15 contracts under implementation. For MWSI, procurement of all 12 contracts were completed. Some are still under implementation and others were already completed. Time extension on most of the on-going contracts have been granted, with expected completion dates still within the extended life of the project. 14. Financial Management (FM). No significant changes were made on the project's FM system. Implementation of FM arrangements is adequate. Total disbursements as of November 26, 2019 is US$ 243,955,016.47. Disbursements represent 89% of the total loan amount. See Table 3 and Annex 4. Table 3: MWMP Breakdown of Disbursements as of November 26. 2019, US$ Total Disbursements Category Description MWCI MWSI Total Goods, Works, Non-Consulting, Consultancy Services 83,015,398.62 125,793,067.80 208,808,466.42 Withdrawal Application in process 1,484,983.53 1,484,983.53 Designated Account 24,924,601.38 10.221,948.67 35,146,550.05 Total 107,940,000.00 137,500,000.00 243.955,016.47 Loan Amount 137,500,000.00 137,500,000.00 275,000,000.00 % Disbursed 79% 100% 89% 15. Expected additional disbursements also include US$26.5 million (MWCI for the Marikina sewer system) and US$5.7 million (MWSI). Disbursement requests were submitted to LBP for evaluation. 16. Compliance with Financial Covenants a. Interim Financial Reports (IFRs). The project's Semi-Annual Project Report covering the period January 1 - June 30, 2019 was received on August 30, 2019. The Loan Agreement requires that IFRs should be received by the Bank within 60 days after the close of each calendar semester. b. Audited Financial Statements. The audited project and entity financial statements for the year ending December 31, 2018 was due on June 30, 2019. The audited entity financial statements 4 of MWSI was received on May 14, 2019. The MWSI audit report has unmodified opinion. The audited project financial statement was received on July 16, 2019. The Commission on Audit rendered unmodified opinion. The audited entity financial statements of both the MWCI and LBP were received on July 16, 2019. Both audit reports have unmodified opinion. 17. Environmental Safeguards. The mission visited the Valenzuela, Cupang, and Tunasan STPs under MWSI; and Ilugin STP, Marikina and UP sewer networks under MWCI. MWCI and MWSI need to update the detailed environmental compliance monitoring reports, and the environmental audit checklist discussed in the last mission. The construction of the STPs are now in the stage of completing the remaining final chambers, influent lines connected to the sewer network, effluent discharge pipes, mounting of the mechanical equipment and instrumentation, electrical wirings, and finishing works. Moreover, under construction are interim interceptor canals that will convey heavily polluted waters from waterbodies running alongside the three ongoing STPs of MWSI and one creek close to the Ilugin STP. Based on the strong stench and the dark color of the waters, these creeks mostly convey domestic sewage and municipal wastes, which serve as natural conveyance systems for the catchment area where wastewater will be collected for treatment during the commissioning/process proving period. The occupational health and safety performance for the ongoing construction of the STPs and sewer networks for both concessionaires have zero accident records to date. The mission noted that the sub-project environmental and social management plans of both concessionaires need to be updated in terms of the following: (a) landscape plan - land development to prevent flooding around and outside the vicinity of the STPs, identification of native tree species that will make up the mini-forests at the lowest point of the facilities to allow run-off percolation to recharge the aquifer and improve natural drainage. This is also to offset the large natural surface area that was lost due to the concreting of the entire STP facilities which cover from 1 - 5 hectares in each site. The trees can also serve as a biodiversity offset for the lost vegetation aside from serving as wind barriers, odor control, and aesthetics enhancement; (b) inclusion of rainwater collection reservoirs and silt traps to capture the sand and silt from mixing with the run-off and maximize the recycling of collected rainwater. This will also help in preventing flooding inside the facilities and outside surrounding places, which normally have elevations lower than the STPs and the overloading of the drainage discharge point that may result in the overflowing of natural waterways. 18. Social Safeguards. Aside from the Land Acquisition Report (LAR) for the Pasig sewerage network that has yet to acquire lots and right-of-way under MWMP, MWCI has no other pending LARs. For MWSI, the homeowner's association affected by the Valenzuela sewerage network has finally agreed for the pipes to pass through the subdivision. In addition, permitting issues along the McArthur Highway for the R. Valenzuela interceptor has been resolved thereby no longer necessitating the need to affect the house of a private individual. The only remaining issue for the Valenzuela sewerage system is with the owner of an adjacent lot of Pump Station #12 who fears possible adverse impacts on her structure. MWSI managed to negotiate with the owner when verification revealed that her house structure encroaches on MWSI property. MWSI has substantially progressed on the legal negotiations, but the owner could not come up with a concrete compromise with MWSI. MWSI will continue negotiations until the issue is resolved in accordance with the Environmental and Social Safeguards Framework. 19. ICR and PCR Preparation. The preparation of the ICR and PCR was already initiated. The Bank Team provided MWCI and MWSI brief orientation on the ICR and PCR requirements and processes. The Bank and the implementing agencies have already agreed on the templates for subproject completion reporting. MWSI has already completed two subproject completion reports, which were shared with the Bank for review. MWCI will initiate the preparation of its subproject completion report in January 2020. The Bank team will conduct separate orientation for LBP in January 2020. 5 Action Indicative Timeline Responsible Entities Data gathering and, field work and validation November 2019- August 2020 MWCI, MWSI, LBP, WB Submission of subproject PCRs August 2020 MWCI, MWSI Consolidation of subproiect PCR reports August 2020 LBP Submission of Draft PCR to WB September 2020 LBP Review of the PCR September 2020 WB Submission Final PCR October 2020 LBP Internal submission and review of Draft ICR October - November 2020 WB Review of the Draft ICR by Implementing Agencies October - November 2020 MWCI, MWSI, LBP Submission of Final ICR November 2020 WB 20. Agreed Next Steps Action Item Responsible Timeline Conduct monthly monitoring, updating of project progress, particularly MWCI, MWSI Monthly until achievement of a detailed list of targets summarized in the Action Plans project closes on (Annex 3) and compliance with safeguards commitments (Annex 5) June 30, 2020 Initiate preparation of Subproject Completion Reports MWCI, MWSI As subprojects are completed Conduct PCR Orientation for LBP WB, LBP January 2020 Conduct data gathering and, field work and validation for PCR/ ICR WB, LBP-MWCI, Starting February MWSI 2020 21. The next implementation support mission is proposed on the last week of April 2019 with intermittent technical missions as part of the close monitoring of remaining ongoing subprojects. 6 Annex 1: List of Key Persons Met Name Position/Office LBP Emma M. Brosas Vice President, CBD 1 Margarita C. Cabrera Department Manager, FSD Ana Liza B. Antepuesto Program Officer, PMD 2 Marireth F. Coloso Account Officer, CBD 1 Raya M. Bautista Program Assistant, PMD 2 Rey Felix R. Ruda Account Assistant, CBD 1 Kris Anne M, Santiago Program Assistant, FSD Hannah Alexandria S. Ramirez Program Assistant, EPMD MWCI Princess Jennifer Patricio Sr. Project Manager, Corporate Project Management Jocelyn Pagsaligan Sr. Project Manager, Corporate Project Management MWSI Apollo Tiglao Sr. Assistant Vice President, Wastewater Management Division Yolanda Lucas Head, Program Management Division Leslie Tubianosa Head, Loans Management Marie Angel Head, Treasury Jerry Palma Head, Planning and Management Services Angelica Manrique Engineer Maria Elena Pangilagan Head, Planning and Support Gerald Velasco Junior Project Manager Victor Albayalde OIC Head, Wastewater Construction Emman Martinez Head, Environment Management Rose Ann Eugenio CQESH Assistant Manager Angelo Navera CQESH Specialist 7 Annex 2: Results Framework Project Development Objective (PDO): To improve wastewater services in selected sub-catchnients of Metro Manila and surrounding areas. PROJECTION Responsibility ACTUAL (original schedule as per PAD) (extended END for Data PDO Level Results 6 closing date) TARGET Data Source/ Collection Indicators* Q (as per Methodology YR01 YRO2 YRO3 YRO4 YRO5 YR065 YRO7 PAD) Indicator One: Reduction of BOD Tons/year Semi- Progress Concessionaires in the collected - - - 239 435 634 2,583 4,324 3,556 annual Reports wastewater Indicator Two: Population Equivalent in the Number (in Semi- Progress catchment area that millions) - - - 0.10 0.21 0.32 1.40 3.24 2.49 annual Reports Concessionaires would benefit from the project INTERMEDIATE RESULTS INDICATORS One: Progress in 0 Semi- Progress construction for constructed - - 7.5% 29% 39% 65% 85% 100% 100% annual Reports Concessionaires Maynilad Two: Progress in Semi- Progress construction for constructed - 0% 8% 29% 39% 52% 71% 100% 100% annual Reports Concessionaires MWCI Three: Increase in 1,000 Semi- Progress treate acity m/day- - 15.50 15.50 15.50 61.50 352.50 343.50 annual ep s Concessionaires Four: Increase in septage treatment m3/day 0 250.00 Sem-50.00 Sal Concessionaires before disposal June5 5 As of June 30, 2019 Annex 3 WORK PLAN FOR PENDING ISSUES Sup-projects Description of Responsible Reference (Contract of Action Plan Timeline P nnbr/)Pending Issue Person number/s) MWCI Program Interim flow interventions to * Complete engineering design * Completed PM PJ Patricio provide wastewater inflow into the * Award to contractor * Completed facility * Construct inlet and network connection * Completed 1.1 Ilugin STP * Complete construction of interim * Completed (WWTP01) interceptor * Conduct STP pre-commissioning * Nov 2019 (ongoing) * Ensure STP full completion * Dec 2019 (on-track) * Ensure STP full operation * Jan 2020 Permits granted by LGU allow * Submit quarterly physical progress and * Quarterly starting Sep 30, 2019 PM PJ Patricio 1.4 - 1.7 Ilugin Sewer only a few meters per day. safeguards monitoring report to the Bank (next due by Dec. 31, 2019) Network Construction to spill over beyond until project completion June 2020 Secure permit from private * Secure permit for mainline pipe-laying * Completed. PM Joy 2.1 UP sewer network developer APMC to complete * Complete remaining segments (70 * Dec 31, 2019 Pagsaligan (UP-2D) pending segments of the sewer meters) network MWSI Program Interim flow interventions to * Complete engineering design * Completed PM Gerald Valenzuela- provide wastewater inflow into the * Issue Notice to Proceed * Completed Velasco Marulasfal 6.1 Interceptor facility * Construct inlet and network connection * Completed (WW-19-CON- * Complete construction of intake inlet * Completed 10) and partial inflows into STP * Completion of weir * Completed Permit with trenchless works * Secure permit * Completed. Secured sectional permit. PM Gerald Valenzuela along McArthur Hi-way Started construction on November Velasco 6.2 network 10,2019 (MWMP-12-05AS) * August 30, 2020 (completion of * Complete pending segments (1,968 network is estimated to be 30% of meters) the 1968 mteer- segment. Delays in construction due to a Secure agreement for MWSI to sub- * Completed PM Gerald encroachment of neighbor's divide land and sell to neighbor Velasco structure into lot purchased for the landowner (w/ Legal pumping station * Transmit "contract to sell" (CTS) * Transmitted CTS to affected property Department) Valenzuela Pump documents owner on November 18, 2019. 6.2 Station #12 Property owner has yet to respond to (MWMP-12-05A) the revised CTS * Transmit amended CTS & NOL * Delayed * Resume negotiation with property owner * Delayed * Complete pumping station * New target- Jun 2020; but depends on the agreement with affected property owner Construction of Pump Station #9 * Identify matrix of alternative measures * Completed PM Gerald affected by lack of right-of-way (i.e., alternative Pump Station site) Velasco due to negotiation issues with * MWSI to decide to delete pumping * No longer applicable (w/ MWSI private land owners (Bahayang station from project (inflows Project Pag-asa) compensated by additional intake Management Valenzuela structures discussed in item 6.1) Group) 6.2 Network PS9 * Secure permit from Bahayang Pag-asa * Completed. With signed NOL (MWMP-12-05C) HOA to allow the sewer pipelaying. * Secure barangay clearance * Completed * Issuance of city excavation permit (application was endorsed to Valenzuela * MWSI received excavation permit TMO) and request for excavation on Nov 26, 2019 moratorium Segment of sewer network passes * Draft MOA on right-of-way with * Draft MOA shared with affected PM Gerald through a private property affected land owner (Polar Mines) property owner. MOA now being Velasco (pending segment at 104 meters); reviewed by the property owner (w/ Legal need to secure right-of-way * Exchange of MOA draft with land ownei * Delayed Department) 6.3 network (MWMP- memorandum of agreement * Issuance of final draft of MOA to Polar * Delayed 12-05A) (MOA) Mines * Commence construction on-site upon * Delayed; depends on progress in MOA and LGU permit are secured negotiation with affected property owner Valenzuela Property owners refused to install * Conduct consultation with affected * Continuing PM Gerald Network MCC the MCCs on sidewalks fronting residents Velasco 6.3 Location for Pump their houses due to obstruction * Finalize/negotiate action plan with * Jan 2020 (w/ Right-of- Stations #5, #13 & (i.e., issue on size of MCCs) affected residents (still ongoing) Way Unit) # Il (MWMP-12- * Commence construction on-site * Feb 2020 05A) * MCC comletion * Jun 2020 * Request assistance with MWSS for * Completed PM Gerald intervention in acquiring permit for the Velasco remaining works. (w/ Right-of- 6.4 Cupang STP Permit clearance from Barangay * MWSS requested for a meeting with * Not pursued; MWSI instead met with Way Unit) PM (MWMP-12-04) for the effluent pipelie LGU LGU. LGU provided MWSI until Gerald Velasco * MWSS-CO send a letter to Manila Bay December 2019 to complete road (w/ Right-of- Task force and DENR seeking works. However, applications for Way Unit) assistance/ support to allow MWSI to permit and road works were proceed with the remaining pending temporarily stopped due to the Cupang sewer Permit clearance from Barangay works in Barangay Buli and Cupang. conduct of SEA Games. Activities 6.5 network for the completion of sewer Commence work upon release of permit are expected to resume after the SEA (MWMP-12-04A) pipelaying * Complete remaining works Games * Delayed; new target date is June 2020 * Work is already in progress despite slow phase of construction due to restriction from permit that allows 20meters only to be laid and must be Tusne sewer Completion of remaining 285- completed before another 20 meter PM Gerald 6.6 network (MWMP-12-04A) meter segment segment is given Velasco * Commence work upon release of * Dec 2019- Jan 2020 permit (if request of MWSS to DENR/MBTF/LGU is approved) * Complete remaining works * Apr 2020 Full completion of STP Tunasan STP particularly, completion of IPS * Additional manpower for workable areas * Completed PM Gerald 6.5 (MWMP-13-01) and headworks given the * Require additional manpower * Dec 2019 Velasco anticipated bridge closure near the * Complete remaining works * Jun 2020 STP Annex 4 FINANCIAL MANAGEMENT PROJECT IMPLEMENTATION SUPPORT REVIEW October 30, 2019 1. Objectives aid scope of review. A financial management (FM) project implementation support mission was carried out on July 26, 2019 by Maria Liennefer Penaroyo (Financial Management Specialist). The review aimed to ensure that the FM arrangements for the loan continue to be adequate for the successful achievement of project's development objective. The review included an assessment of the status of the sub-projects on the financial covenants and other FM concerns in relation to the loan agreement. 2. Overall FM system rating. The FM system of the project is on the overall considered Moderately Satisfactory. The FM arrangements are in place and are deemed acceptable. 3. Overall FM risk ratine. The FM risk rating of the project is Low. 4. Status of disbursements. Total disbursements as of July 26, 2019 at US$ 214,222,054.17 (including the Withdrawal Application (WA) in process for MWSI amounting to US$2,982,703.51 as well as the Designated Accounts of US$ 5,711,649.10 and US$ 10,221,948.67 of MWCI and MWSI, respectively) or 78% of the total loan amount of US$ 275,000,000. The breakdown of disbursements is shown in the table below. Table 1:Breakdown of MWMP Disbursements as of July 26, 2019 Total Disbursements Maynilad Category Description MWCI MWSI Total Goods, Works, Non- Consulting, Consultancy Services 77,328,350.90 117.977,401.99 195,305,752.89 WA in Process 2.982,703.51 2,982,703.51 Designated Account 5,711,649.10 10,221,948.67 15,933,597.77 83,0 Total 40,000 131,182,054.17 214,222,054.17 Loan Amount 137,500,000.00 137,500,000.00 275,000,000.00 % Disbursed 60% 95% 78% Additional disbursements are expected to come in include PhPl.325 billion or about US$26.5 million from MWCI for the Marikina sewer system and US$5.7 million from MWSI. Both have been submitted to LBP for evaluation and validation. 5. Project restructuring. On June 28, 2019, Government's request for project restructuring was approved. It extended the project closing date to June 30, 2020 and allowed the replacement subprojects for MWCI. Seven network subprojects under the UP and Marikina sewer systems (worth US$42.7 million) were approved to be included will now be fully financed by MWMP. 6. Adequacy of accounting staff and maintenance of accounting records. The FM staff and the maintenance of accounting records at LBP and the sub-borrowers, MWCI and MWSI, are considered adequate. There were no significant changes in the FM staffing arrangements for the overall FM of the project at LBP and the sub-borrowers. 12 7. Internal controls. There is proper segregation of duties and internal control system is acceptable. Physical and other internal control systems over cash, documents and records are considered adequate. There is adequate segregation of duties, approval processes from procurement to disbursement and reporting. 8. Compliance with the financial covenants a) Interim Financial Reports (IFRs) - The project's Semi-Annual Project Report covering the period January 1 - June 30, 2019 will be due on August 29, 2019. The Loan Agreement requires that IFRs should be received by the Bank within 60 days after the close of each calendar semester. b) Audited Financial Statements The audited project and entity financial statements for the year ending December 31, 2018 was due on June 30, 2019. The audited entity financial statements of MWSI was received on May 14, 2019. The MWSI audit report has unmodified opinion. The audited project financial statement was received on July 16, 2019. The Commission on Audit rendered unmodified opinion. The audited entity financial statements of both the MWCI and LBP were received on July 16, 2019. Both audit reports have unmodified opinion. 13 Annex 5 LIST OF SUBPROJECTS AND SAFEGUARDS STATUS As of 12/09/2019 ESMP Disclosure Treatment monitoring Dates Subproject Design CMR SMR TPA report Remarks Capacity (date) (date) (date) submission 16 Dec 2019 (MLD) to WB (date) MWCI Program Dec. 2018 - Iugin (Pasig) STP 165 Feb 2019 NA completed June 2019 Construction is QI-Q2 2019 ongoing. ongoing North Pasig 1 PS Feb 2019 Completed Completed Completed Construction is ongomng. Feb 2019 Construction is North Pasig I (C5, J Completed Completed Completed ongoing. Vargas) Feb 2019 FrLn North Pasig 2 LS Completed Completed Completed a n Acquisition Feb 2019Cosrcins North Pasig 3 Completed Completed Completed Construction is ongomng. South Pasig IA Feb 2019 Completed Completed Completed On-hold South Pasig IB Feb 2019 Completed Completed Completed Construction is ongomng- South Pasig 2A (A. Feb 2019 Completed Completed Completed Construction is Sandoval) ongoin. UP Sewer Network Dec. 2018 Dec. 2018 Dec. 2018 Final report on Completed Rehabilitation Phase 2A 11 Dec. 2018 Sewer Expansion Phase June 2019 NA NA Final report on Completed 2B 11 Dec 2019 Sewer Expansion Phase NA Dec. 2018 Final report on Completed 2C June 2019 11 Dec 2019 Sewer Expansion Phase NA Final report on Construction 2D June 2019 11 Dec 2019 Ongoing Priority Segment NA NA NA NA Completed and Prioity egmet NAoperational NA NA NA NA Completed and Nangka Segment operational San Mateo Phase 1 NA NA NA NA Completed MWSI Program Ayala-Alabang STP 10 14 Feb 2019 10 Apr 2019 29 May 2019 6 Dec 2019 Completed and 12 Jul 2019 operational. Talayan STP 15 14 May 2019 12 Apr 2019 24 Jun 2019 6 Dec 2019 Completed and 09.Jul 2019 operational. South SpTP 0.25 14 Feb 2019 11 Apr 2019 30 May 2019 6 Dec 2019 Completed and 09 Jul 2019 operational. 6 Dec 2019 100% physically Pasay STP 46 15 May 2019 N/A 13 Jun 2019 completed, on- going process proving 6 Dec 2019 Road concreting and effluent line Cupang STP 46 15 Mar 2019 N/A 06 Jun 2019 construction(still waiting for permit) Tunasan STP 20 15 Mar 2019 N/A 07 Jun 2019 6 Dec 2019 Construction is ongoing. Valenzuela 60 14 Jan 2019 12 Jul 2019 14 Jun 2019 Final report on Construction is S11 Dec 2019 ongoing. 14 신 1 5