The World Bank MN-Mining Infrastructure Investment Supp (P118109) () REPORT NO.: RES38575 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF MN-MINING INFRASTRUCTURE INVESTMENT SUPP (P118109) APPROVED ON MAY 10, 2011 TO MONGOLIA ENERGY & EXTRACTIVES EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Martin Raiser Regional Director: Ranjit J. Lamech Practice Manager/Manager: Jie Tang Task Team Leader: Yuriy Myroshnychenko The World Bank MN-Mining Infrastructure Investment Supp (P118109) () I. BASIC DATA Product Information Project ID Financing Instrument Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 10-May-2011 30-Sep-2019 Organizations Borrower Responsible Agency Mongolia Ministry of Finance Project Development Objective (PDO) Original PDO To facilitate investments in infrastructure to support mining and downstream processing activities, regardless of funding source, and to build local capacity to prepare and transact infrastructure projects. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-48880 10-May-2011 24-May-2011 20-Nov-2011 30-Sep-2019 19.24 17.14 .01 TF-16382 28-Mar-2014 30-Apr-2014 30-Apr-2014 31-May-2019 4.05 4.05 0 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The World Bank MN-Mining Infrastructure Investment Supp (P118109) () Project Status 1. The Project was approved by the World Bank Board in May 2011. Its development objective (DO) is to facilitate investments in infrastructure to support mining and downstream processing activities, regardless of funding source, and to build local capacity to prepare and transact infrastructure projects. The Project has total IDA commitments of US$25 million equivalent for four components: (1) Support for Infrastructure Investments (US$18.11 million); (2) Capacity Building and Knowledge Transfer (US$2.47 million); (3) Strengthening Groundwater Management (US$3.23 million); and (4) Project Management (US$1.19 million). An extension of the project closing date by three months -- from September 30, 2019 to December 31, 2019 -- is requested. 2. Project DO and Implementation Progress (IP) ratings remained moderately satisfactory or satisfactory throughout implementation, except for 2018 when they were downgraded to moderately unsatisfactory. The downgrade was caused by delays faced by several key studies supported under the Project. The DO and IP were rated as moderately satisfactory in the last ISR (of June 2019) and it is expected that if extended, the project will retain these ratings at completion. 3. The project status for each component is provided below: Component 1: Support for Infrastructure Investments 4. The Component was originally supposed to support preparation of at least two strategic/priority projects for investments through financing feasibility studies (FS) and Environmental and Social Impact Assessment (ESIA) or Cumulative Impact Assessment (CIA). 5. Six priority projects were initially identified to be supported under this Component: i. Shuren Hydropower Plant ii. Orkhon Water Diversion iii. Rural and Industrial Water Supply iv. Integrated Steel Complex v. Synthetic Natural Gas vi. Baganuur Coal Mine Expansion. 6. In 2015, a seventh project was added – Tavan Tolgoi Coal Mine Expansion. The feasibility study for this project was supported under the Mongolia Mining Sector Technical Assistance Project (MMSTA) (P108768) that closed in December 2015. The CIA for the Tavan Tolgoi project was not implemented by the MMSTA project closing date and was transferred to the Mining Infrastructure Investment Support Project (MINIS). 7. Component 1 will be largely completed by the project closing date of September 30, 2019, as detailed in the attached document "Status of Studies under MINIS Component 1. However, while safeguards studies for three projects -- Integrated Steel Complex, Synthetic Natural Gas, and Tavan Tolgoi Coal Mine Expansion will be publicly consulted upon, they cannot be completed by end-September 2019. Component 2: Capacity Building and Knowledge Transfer The World Bank MN-Mining Infrastructure Investment Supp (P118109) () 8. The objective of this component was to build local capacity and of the concerned line ministries to prepare and transact infrastructure projects for public and/or private financing. The Component supported more than 100 capacity building activities, including trainings on procurement, risk management, project appraisal, governance, auditing, environmental impact assessment, water supply, water management, and debt management; study tours to learn from best international practice on PPP, groundwater management and other topics. Participants included representatives from the Ministry of Finance, Ministry of Economic Development, Ministry of Mining and Heavy Industry, Ministry of Economy and Tourism, Ministry of Energy, Ministry of Road and Transportation, and Ministry of Construction and Urban Development. This Component has largely achieved its objectives. All activities planned under this Component have been completed. Component 3: Strengthening Groundwater Management 9. Component 3 aimed to support the proper management of groundwater resources in the southern part of Mongolia. It was supported by US$ 3.075m from IDA, scheduled to close on September 30, 2019, and a US$ 4.050m grant from Australia’s DFAT, which closed on May 31, 2019. The Component supported the establishment of several groundwater institutions, including three River Basin Administrations (RBAs) and River Basin Councils (RBCs) in the South Gobi region, and Groundwater Monitoring and Information Unit. It also financed strategic studies, including Integrated Water Resource Management Plans for the three RBAs. All activities, but a Cumulative Assessment, have been completed. The Assessment requires about 12 months for implementation and therefore it cannot be carried out even with a three-month extension of the Project. 10. The Project underwent four restructurings: I. Level 1 restructuring in March 2014 approved the triggering of additional safeguard policies and budget reallocation between disbursement categories and an additional financing of US$2.1 million from the Australian Department of Foreign Affairs and Trade (DFAT), later amended to reach US$4.05 million; II. Level 2 restructuring in July 2016 extended the orig inal project closing date by one year – through September 30, 2017. III. Level 2 restructuring in September 2017 to extend the project closing date by two years – through September 30, 2019, which resulted in a cumulative 36-month extension from the original closing date of September 30, 2016. IV. Level 2 restructuring in August 2019 to take out feasibility and safeguards studies for the three projects (Shuren hydropower plant, Orkhon water diversion, Rural and industrial water supply) under Component 1, cancel IDA funds associated with studies for the three projects in total amounting to USD5.7 million equivalent (or SDR4,155,000) and reallocate funds between categories. 11. This will be the third extension of the project closing date. Cumulatively, the project implementation will be extended by 39 months, including 36 months approved through restructuring II and III. 12. After the recently implemented cancellation of IDA funds (restructuring IV), project disbursements reached 99 percent. 13. The project is compliant with fiduciary requirements -- there are no outstanding Internal Financial Reports, nor audit reports. It also meets safeguards requirements and legal covenants. It has neither INT, nor Inspection Panel outstanding issues. Rationale for Restructuring The World Bank MN-Mining Infrastructure Investment Supp (P118109) () 14. The extension will help the Project meet one of its major objectives -- prepare at least two strategic projects for transaction/investment, which is achieved through the implementation of feasibility and safeguards studies. All feasibility studies have been completed. Face-to-face consultations for all safeguards study reports supported by MINIS will be completed by end-September 2019. However, three reports, namely, ESIA for Integrated Steel Complex, ESIA for Synthetic Natural Gas, and CIA for Tavan Tolgoi Coal Mine Expansion will require additional time of up to three months for completion. This time is needed to collect additional comments during two weeks after face-to-face consultations, prepare response matrices and finalize the said reports. The Ministry of Finance, realizing the importance of the studies for the successful completion of the Project sent to the Bank a request for an extension of the project closing date by three months – to end-December 2019. 15. The extension is compliant with IPF policy: the Mongolian counterparts have worked out and have agreed with the Bank a detailed time bound action plan to complete the above-mentioned safeguards studies. The capacity and performance of the Project Management Unit are satisfactory to complete the remaining tasks before end-December 2019. 16. The extension will not affect the Results Framework of the Project. II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 30-Sep-2017, 30-Sep- IDA-48880 Effective 30-Sep-2016 31-Dec-2019 30-Apr-2020 2019 30-Sep-2017, 31- TF-16382 Closed 30-Sep-2016 May-2019