Document of The World Bank Report No: RES14858 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM PROJECT APPROVED ON JULY 9, 2009 (LOAN NO. 8117-BR) TO THE STATE OF RIO DE JANEIRO, BRAZIL WITH THE GUARANTEE OF THE FEDERATIVE REPUBLIC OF BRAZIL JUNE 4, 2015 TRANSPORT AND ICT GLOBAL PRACTICE LATIN AMERICA AND THE 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. 1 ABBREVIATIONS AND ACRONYMS CENTRAL State agency in charge of the suburban railway system; it is also the project implementation agency reporting to SETRANS; it succeeded Flumitrens (see below) (Companhia Estadual de Engenharia de Transportes e Logística) PDTU Urban Transport Master Plan (Plano Diretor de Transporte Urbano) RJMR Rio de Janeiro Metropolitan Region RJMR Rio de Janeiro Metropolitan Region SEAIN Federal Secretariat for Foreign Affairs (Secretaria de Assuntos Internacionais) SETRANS Rio de Janeiro State Secretariat for Transport (Secretaria de Estado de Transportes do Rio de Janeiro) SUPERVIA Private concessionaire in charge of operations and maintenance of the Rio de Janeiro suburban rail since 1998 Regional Vice President: Jorge Familiar Country Director: Deborah L. Wetzel Senior Global Practice Director Pierre Guislain Practice Manager: Aurelio Menendez Task Team Leader: Daniel Pulido 2 BRAZIL Upgrading and Greening the Rio de Janeiro Urban Rail System (P111996) CONTENTS A. SUMMARY …………………………………………………………………..5 B. PROJECT STATUS ……………………………………………………………6 C. PROPOSED CHANGES………………………………………………………..6 D. ANNEXES Annex I Official request for the amendment (Ofício GG 404-14) Annex II Roteiro SEAIN 8117-BR Annex III Revised Disbursement Table for Loan 8117-BR Annex IV Revised Procurement Plan Annex V Revised Project Indicators 3 DATA SHEET Brazil Upgrading and Greening the Rio de Janeiro Urban Rail System (P111996) LATIN AMERICA AND CARIBBEAN Transport & ICT Report No: RES14858 Basic Information Project ID: P111996 Lending Instrument: Specific Investment Loan Regional Vice President: Jorge Familiar Calderon Original EA Category: Partial Assessment (B) Country Director: Deborah L. Wetzel Current EA Category: Partial Assessment (B) Senior Global Practice Pierre Guislain Original Approval Date: 09-Jul-2009 Director: Practice Aurelio Menendez Current Closing Date: 30-Jun-2017 Manager/Manager: Team Leader(s): Daniel Pulido Borrower: State Government of Rio de Janeiro Responsible Rio de Janeiro State Sercretariat of Transport Agency: Restructuring Type Form Type: Full Restructuring Paper Decision Authority: Country Director Approval Restructuring Level 2 Level: Financing ( as of 29-May-2015 ) Key Dates Approval Effectiveness Original Revised Project Ln/Cr/TF Status Signing Date Date Date Closing Date Closing Date P111996 IBRD-77190 Effective 09-Jul-2009 24-Sep-2009 03-Dec-2009 30-Jun-2014 30-Jun-2017 P111996 IBRD-81170 Effective 26-Jan-2012 05-Sep-2012 05-Oct-2012 30-Jun-2017 30-Jun-2017 Disbursements (in Millions) % Cancelle Disburse Undisbur Project Ln/Cr/TF Status Currency Original Revised Disburse d d sed d P111996 IBRD-77190 Effective USD 211.70 211.70 0.00 201.45 10.25 95 4 P111996 IBRD-81170 Effective USD 600.00 600.00 0.00 195.79 404.21 33 Policy Waivers Does the project depart from the CAS/CPF in content or in other significant Yes [ ] No [ X ] respects? Does the project require any policy waiver(s)? Yes [ ] No [ X ] A. Summary of Proposed Changes The proposed restructuring concerns the Additional Financing and seeks to create a new category of expenditure and to reallocate proceeds between categories for Loan No. 8117-BR. The Project and related Loan Agreement will be modified as follows: (1) introduce new category of expenditure “Category 3 – Civil Works�, to allow for financing the renovation and modernization of the building that houses the State Secretariat of Transport (SETRANS); (2) increase proceeds under “Category 1 – Goods and non- consultancy services (including warehousing of the trains) for parts A.1 and A.2 of the Project� to accommodate price adjustments from existing contracts and allow for the procurement of additional trains and the implementation of an urban transport information system; and (3) decrease proceeds under “Category 2 – Consultants’ services for Parts B of the Project�, reflecting a decrease in the scope of the Institutional and Policy Development Component to be consistent with the client’s priorities and implementation capacity. The above-mentioned modifications do not imply a change in the Project Development Objective (PDO), nor will they have implications on safeguards or disbursement arrangements. The Project team supports the introductions of these changes as the proposed activities are realistic and consistent with the PDO. The reallocation of proceeds between categories of expenditure in the Withdrawal of Loan Proceeds does not surpass the limit of 5 percent. It is also important to note that the Project is not under a suspension of disbursements, and has no audit reports outstanding or not satisfactory to the Bank. Change in Implementing Agency Yes [ ] No [ X ] Change in Project's Development Objectives Yes [ ] No [ X ] Change in Results Framework Yes [ ] No [ X ] Change in Safeguard Policies Triggered Yes [ ] No [ X ] Change of EA category Yes [ ] No [ X ] Other Changes to Safeguards Yes [ ] No [ X ] Change in Legal Covenants Yes [ ] No [ X ] Change in Loan Closing Date(s) Yes [ ] No [ X ] Cancellations Proposed Yes [ ] No [ X ] Change to Financing Plan Yes [ ] No [ X ] Change in Disbursement Arrangements Yes [ ] No [ X ] Reallocation between Disbursement Categories Yes [ X ] No [ ] Change in Disbursement Estimates Yes [ ] No [ X ] Change to Components and Cost Yes [ X ] No [ ] Change in Institutional Arrangements Yes [ ] No [ X ] Change in Financial Management Yes [ ] No [ X ] 5 Change in Procurement Yes [ X ] No [ ] Change in Implementation Schedule Yes [ ] No [ X ] Other Change(s) Yes [ ] No [ X ] Appraisal Summary Change in Economic and Financial Analysis Yes [ ] No [ X ] Appraisal Summary Change in Technical Analysis Yes [ ] No [ X ] Appraisal Summary Change in Social Analysis Yes [ ] No [ X ] Appraisal Summary Change in Environmental Analysis Yes [ ] No [ X ] Appraisal Summary Change in Risk Assessment Yes [ ] No [ X ] B. Project Status Progress towards achievement of the Project Development Objective (PDO) is currently rated as “Satisfactory�. The latest Implementation Progress Rating is “Moderately Satisfactory� on account of the delays in the contracting and development of the studies under the Institutional and Policy Development Component. Regarding the Infrastructure and Equipment Component, the operation of the initial 30 trains is now consolidated and the upgraded fleet is already having a positive impact on quality of service and passenger demand. In addition, manufacturing of the 60 trains is advancing well, with deliveries occurring before the originally scheduled dates. Of the 60 trains, 24 have already been delivered, of which 15 are already in operation, and 8 more are in transit to Rio. Although progress in the Institutional and Policy Development component has not been as good, the State is slowly advancing in the execution of ongoing activities and preparation of new ones. The State Logistics Plan is well advanced, with 11 out of 20 products already completed. Also, although with important delays, the Urban Transport Master Plan (PDTU) is progressing and is expected to be concluded by the end of October 2015. The State has also launched the process to contract a non-motorized transport study and is soon to launch a Transit Oriented Development (TOD) pilot project for the area surrounding the station of Queimados. The preparation of other studies under this component is well-advanced, but the launching of the associated bidding processes is delayed reflecting the limited capacity of the State to carry out the high number of activities contemplated. C. Proposed Changes Development Objectives/Results Project Development Objectives Original PDO a) Improve the level-of-service provided to the suburban rail transport users in the RJMR in a safe and cost-efficient manner and b) improve the transport management and policy framework in the RJMR. Current PDO (a) to improve the level of service provided to suburban rail transport users in the RJMR in a safe and cost- efficient manner; (b) to place the suburban rail transport system on a lower carbon growth path; and (c) to improve the transport management and policy framework in the Borrower’s territory and in the RJMR. Change in Project's Development Objectives Financing 6 Reallocations Explanation: Reallocation of funds will allow for covering changes in scope as follows: proceeds for Category 1 increase from US$570,293,640.00 to US$577,656,109.21, proceeds for Category 2 decrease from US$29,706,360.00 to US$11,832,852.00, and Category 3 is defined as US$10,511,038.79. The detailed procurement plan and estimated values per disbursement categories can be found as annexes to the Restructuring Paper. Current Category of Disbursement % (Type Ln/Cr/TF Currency Allocation Expenditure Total) Current Proposed Current Proposed GO-INCLUDE IBRD-77190 USD WAREHOUSING-PART *199,655,06 199,655,065 100.00 100.00 A 5.25 .25 CS - PART B OF *11,515,684 11,515,684. 100.00 100.00 PROJECT .75 75 WORKS FOR ROLLING STOCK 0.00 0.00 100.00 100.00 PART A1 WORKS UNDER PART 0.00 0.00 100.00 100.00 A2 Designated Account 0.00 0.00 100.00 100.00 FRONT END FEE 529,250.00 529,250.00 100.00 100.00 211,700,000 211,700,000 Total: .00 .00 GO & NON-CS Parts 570,293,640 577,656,109 IBRD-81170 USD 100.00 100.00 A.1 & A2 .00 .21 CS - PART B OF 29,706,360. 11,832,852. 100.00 100.00 PROJECT 00 00 Designated Account 0.00 0.00 100.00 100.00 CW - PART C OF 10,511,038. 0.00 0.00 100.00 PROJECT 79 600,000,000 600,000,000 Total: .00 .00 Components Change to Components and Cost Explanation: *Due to system issues, the Datasheet does not reflect the last reallocation of proceeds of 12/27/2013, but the information is accurately reflected in the Restructuring Paper. 7 The Project has the following components: Infrastructure and Equipment (Part A) and Institutional and Policy Development (Part B). The present restructuring does not introduce new project components or introduces changes to the existing project components. However, the allocation of funds to each of these components will change to reflect the following changes: Part A -The allocation of resources to the Infrastructure and Equipment (Category 1) needs to be increased to cover contract contingencies and to further expand the Project scope. The 30-train supply contract (funded out of the Original Financing) included criteria for price adjustments related to local wages in China. Changes in this variable led to an increase in the final price of the rolling stock. Part of this reallocation aims to cover the cost of this price adjustment and the Bank legal team has confirmed that this would be an eligible expenditure. On the other hand, the procurement of the 60-train lot resulted in substantial economic benefits for the State of Rio, estimated at US$ 177 million (contract price 37 percent below the reference budget price), creating additional room for expanding the scope of the Project though the purchase of additional rolling stock. The State intends to apply the savings towards the purchase of additional trains, which will enter into operation in the SUPERVIA network and contribute to the Project objectives of: (1) improving the level of service provided to suburban rail users in a safe and cost-efficient manner; and (2) placing the suburban rail transport system on a lower carbon growth path. The 22 additional trains will contribute to improve the level of service and increase mass transit demand; while the 7 new fuel-efficient light rail trains will serve some of the poorest areas on the SUPERVIA rail network, currently served by older trains that have higher emissions. -The Original Loan included a Civil Works category (Category 3) for the purpose of the renovation of the administrative building of SETRANS. This category was later dropped because the procurement process for the renovation of the building was unsuccessful. Nonetheless, the execution of this project continues to be critical for SETRANS to be more effective. The current facilities are in poor physical condition, technologically outdated, inadequate for people with special needs and non-compliant with safety regulations. The Bank team has confirmed that SETRANS will take the steps required to avoid the issues that resulted in the failure of the first procurement process: contracting of the project's design to define a robust cost estimate prior to bidding and an increase the budget allocated to the renovation works. The renovation of the SETRANS building will be included in Part A (Infrastructure and Equipment). Part B -the allocation of resources for consulting services (Category 2) was decreased in recognition of the limited capacity of SETRANS staff to prepare and execute the projects under this component and that were envisioned at appraisal, some of which require technical capacity that is not available in-house or are multi-disciplinary and demand coordination with other government agencies. In recognition of this limited capacity, the Bank team and the Client have agreed on prioritizing the execution of a selection of key projects without sacrificing the objectives of the component. These studies include: the evaluation of a pilot for a Transit Oriented Development (TOD) project; a climate change adaptation strategy for transport systems in the metropolitan region; a study to design a business model to foster the integration between non-motorized modes (bicycles) and the railway system; and the first phase of an Intelligent Transportation System (ITS) project (“CIMU – Centro Integrado de Mobilidade Urbana�) that focuses on generating real time data on public transport for the benefit of the State and transit users. The Bank has mobilized resources from sources different than the Supervision Budget to build capacity and support the preparation of the terms of reference and budgets for these activities. The table below describes the changes in the Project Components: Current Component Proposed Component Current Cost Proposed Action 8 Name Name (US$M) Cost (US$M) Infrastructure and 215.66 206.40 Revised Equipment Institutional and Policy 5.33 5.30 Revised Development AF - Infrastructure and 570.00 588.17 Revised Equipment AF- Institutional and 30.00 11.83 Revised Policy Development Total: 820.99 811.70 Other Change(s) Change in Procurement Explanation: a. Category 1 will be changed to: (1) include the acquisition of 22 new trains, 10 of which will be purchased through the amendment of contract 018/ASJUR/12 for the acquisition of the 60 trains and the remaining 12 through a new bidding process; (2) include the acquisition of 7 new light rail trains, to be used in the Vila Inhomirim and Guapimirim Lines (Saracuruna Branch), currently operated by SUPERVIA with diesel locomotives; (3) pay for the price adjustment of the initial 30 train contract in an amount of CNY 205,312,503.42, equivalent to US$ 33,112,874.54 (using an exchange rate of US$ 1.00 to CNY 6.2); (4) allocate proceeds of US$ 45,208,654.62 for contingencies relative to contract 018/ASJUR/12 for the acquisition of 70 trains (originally 60 plus 10 more that were added to the contract through an amendment) (Annex II); (5) include the procurement of an Integrated Center for Urban Mobility for the State of Rio de Janeiro (“CIMU – Centro Integrado de Mobilidade Urbana�), consisting of services, software and information communications technology equipment to be operated out of a specialized facility to be located in the Operations Center for the State of Rio de Janeiro; (6) allocate proceeds of US$ 10,484,942.34 for contingencies of future contracts for the acquisition of 12 new trains and of 7 new light rail trains; (7) adjustment of the total value of the category reflecting the above-mentioned changes. b. Category 2 will be changed and will include, as part of the provision of technical assistance to SETRANS: (1) Climate Change Adaptation Strategy for the Rio Metropolitan Region Transport System; (2) basic design for a Transit Oriented Development (TOD) pilot project around the Queimados station; (3) the Logistics and Freight Strategic Plan (PELC/RJ); (4) technical support for the preparation and execution of the Integrated Center for Urban Mobility for the State of Rio de Janeiro (“CIMU – Centro Integrado de Mobilidade Urbana�); (5) the detailed design for the renovation and modernization of the administrative building for SETRANS, which is provisioned under Category 3; (6) the study and development of a management model for integrating non-motorized transport into the Rio de Janeiro Metropolitan Region rail system; (7) consultancy services to support the development of studies and policies; (8) study to development a baseline to evaluate project results; (9) additional contract for the management and supervision of the Project; (10) technical consulting services for train quality inspection and validation of manufacturing performance; and (11) contracting of the audit of the project for years 2015-2017. c. Category 3 will be created to allow for contracting of the renovation and modernization of the State Secretariat of Transport administrative building. 9 10