Document of The World Bank FOR OFFICIAL USE ONLY Report No: RES20225 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF MAPUTO MUNICIPAL DEVELOPMENT PROGRAM II (MMDP II) CREDIT NUMBER 4811-MZ SEPTEMBER 2, 2010 TO THE REPUBLIC OF MOZAMBIQUE December 3, 2015 Social, Urban, Rural and Resilience Global Practice (GSURR) Country Department AFCS2 Africa 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. ABBREVIATIONS AND ACRONYMS CD Country Director CMM Maputo City Council GDEI Office of Strategic and Institutional Development GOM Government of the Republic of Mozambique IDA International Development Association KPI Key Program Indicator MTR Mid-Term Review PAD Project Appraisal Document PDO Project Development Objective Regional Vice President: Makthar Diop Country Director: Mark Lundell Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager/Manager: Sameh Wahba Task Team Leader: Andre Herzog 2 COUNTRY MAPUTO MUNICIPAL DEVELOPMENT PROGRAM II (MMDP II) CONTENTS A. SUMMARY 5 B. PROJECT STATUS 6 C. PROPOSED CHANGES 6 ANNEX 1: RESULTS FRAMEWORK AND MONITORING 11 3 DATA SHEET Mozambique Maputo Municipal Development Program II (MMDP II) (P115217) AFRICA Social, Urban, Rural and Resilience Global Practice Report No: RES20225 Basic Information Project ID: P115217 Lending Instrument: Adaptable Program Loan Regional Vice President: Makhtar Diop Original EA Category: Partial Assessment (B) Country Director: Mark R. Lundel Current EA Category: Partial Assessment (B) Senior Global Practice Ede Jorge Ijjasz-Vasquez Original Approval Date: 30-Sep-2010 Director: Practice Sameh Naguib Wahba Current Closing Date: 31-Dec-2015 Manager/Manager: Team Leader(s): Andre Herzog Borrower: Ministry of Economy and Finance Responsible Maputo Municipal Council Agency: Restructuring Type Form Type: Full Restructuring Paper Decision Authority: Country Director Approval Restructuring Level 2 Level: Financing ( as of 05-Nov-2015 ) Key Dates Approval Effectiveness Original Revised Closing Project Ln/Cr/TF Status Signing Date Date Date Closing Date Date P115217 IDA-48110 Effective 30-Sep-2010 17-Nov-2010 21-Jan-2011 31-Dec-2015 31-Dec-2016 Disbursements (in Millions) % Project Ln/Cr/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P115217 IDA-48110 Effective XDR 33.00 33.00 0.00 30.77 2.23 93 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 ] 4 A. Summary of Proposed Changes This Restructuring Paper seeks Country Director approval of the following changes to the project which constitute a Level 2 restructuring: Financial Agreement: 1. Extension of the Credit's closing date by 12 months from December 31, 2015 to December 31, 2016, to enable the completion of the public works in the already signed contracts under Component C and D. 2. Reallocation of proceeds within disbursement categories 1, 2, 3, 4, 5b, 5c, and 6 and from the “unallocated� category 8 to categories 1, 2, 5 and 6 and corresponding changes to the disbursement estimate and implementation schedule. Project Agreement: 3. Revision of the agreement concerning the increase of the solid waste management fee. This is the second restructuring for this project. The first restructuring was carried out after the MTR in 2013. The project development objective and the safeguards category will remain the same. The changes proposed in this restructuring have been requested through a letter from the Ministry of Finance and Economy dated November 9 2015. 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 [ X ] No [ ] Change in Loan Closing Date(s) Yes [ X ] No [ ] 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 [ X ] No [ ] Change to Components and Cost Yes [ ] No [ X ] Change in Institutional Arrangements Yes [ ] No [ X ] Change in Financial Management Yes [ ] No [ X ] Change in Procurement Yes [ ] No [ X ] Change in Implementation Schedule Yes [ X ] No [ ] 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 ] 5 B. Project Status MMDP II is currently rated as moderately satisfactory, with 69.6% total disbursement rate (International Development Association (IDA), Maputo Municipal Council (MMC), and government of Mozambique), and 93% disbursement of IDA resources (SDR 30.5 million out of SDR 33 million). Five of seven Project Development Objective (PDO) indicators have been achieved, and it is likely that the other two PDO indicators will be achieved by the revised closing date (December 31, 2016) also. The overall implementation of the Project components is progressing as planned, with the exception of the three major urban infrastructure works (Components C and D) which were delayed due to longer than expected procurement time, a contract default, complex drainage design, additional resettlement of affected families, and impact of rainy season. As such, it is expected that most of the activities of components A, B and E activities will be completed by December 31, 2015. The three infrastructure work contracts within Components C and D have been signed, and the works are under way. However, full implementation will require an additional 9 months beyond the original closing date. Taking also into consideration the rainy session that happens usually from November to February, and its possible impact on the execution of these three infrastructure works, it is proposed to extend the closing date to December 31, 2016. The restructuring is also needed to: (i) amend a Legal Covenant (the percentage increase in solid waste management fee), which was achieved but in a manner that is slightly different from that in the financing agreement; and, (ii) adjust the categories of expenditures in order to reflect the extension of closing date and the increased cost of these infrastructure works. C. Proposed Changes Change in Legal Covenants Explanation: This is the second restructuring of the legal covenant regarding the increase of the solid waste management fee. The first restructuring, which followed the Mid-Term Review in 2013 and was approved on January 15, 2014, combined the processing of two separate SWM fee increases of 20% each by July 2013 and by December 2015 into one single fee adjustment of 40% by the end of 2014. After careful analysis of sustainability and willingness to pay, the CMM concluded that it could achieved the same adjustment by combining (i) a 30% increase of the SWM fee; with (ii) a reduction from 15 to 5% of the commission being charged by Electricidade de Mocambique (EDM) for the collection of the SWM fee. The expected revenue would further increase through an increase in the number of commercial payers for SWM services. All these three measures were implemented in early 2015, and the Bank team verified that CMM has achieved the sustainability target of 40% revenue increase. As such, the Ministry of Economy and Finance solicited to amend the Agreement, Section IV.2 of Schedule 2 as follows: “The Project Implementing Entity shall no later than December 31, 2014, increase the Solid Waste Fee by at least 30% from its June 30, 2010, value and reduction from 15% to 5% of the commission for fare collection by EDM� Finance Ln/Cr/T Date Agreement Description of Covenant Status Recurrent Frequency Action F Due Reference IDA- Finance Agreement: FA- Complied No 48110 Schedule 2-Section V. 1 | with Change 6 Description: the Recipient shall include in each proposed annual budget to its legislature & make available each year of project implementation the amounts set out in this section. | Frequency :Yearly Finance Agreement: FA- Schedule 2-Section V. 2 | Description :Not later than 6 months after the Effective Date, the After IDA- Recipient has approved a delay No 48110 decree regulating complied Change property assessment in with the Recipient's territory, in form and substance satisfactory to IDA | Due Date :21-Jul-2011 Finance Agreement: FA- Schedule 2-Section V. 3 | Description :Not later than 3 months after effective date, the IDA- Recipient shall cause the Complied No 48110 implementing Entity to with Change hire external auditors for the project, under terms of reference satisfactory to the Association | Due Date :21-Apr-2011 Finance Agreement: PA- Schedule 2-Section IV. 2 (a) | Description: Increase Partially Marked IDA- solid waste management complied for 48110 by at least 20% from its with Deletion June 30, 2010, value. | Due Date :31-Jul-2013 Finance Agreement: PA- Schedule 2-Section IV. 2 (b) | Description: Increase Partially Marked IDA- the Solid Waste Fee by at complied for 48110 least 20% from its 2013 with Deletion value. | Due Date :31- Dec-2015 Increase the revenue IDA- PA-Schedule from the Solid Waste Fee 31-Dec- Complied New 48110 2-Section IV.2 by at least 40% from its 2015 with June 30, 2010 value. 7 Financing Change in Loan Closing Date(s) Explanation: In a letter dated November 9, 2015, the Ministry of Economy and Finance originally requested an extension of 18 months to June 30, 2017, in order to complete the implementation of the three large infrastructure projects, namely (i) the informal settlement interventions in Chamanculo C; (ii) the informal settlement interventions in George Dimitrov; and, (iii) the rehabilitation of Avenida Julius Nyerere. All key procurement processes for these three works have been completed, contracts were signed, and the execution of the works is underway. However, on November 30, 2015, the Bank and the Municipal Council of Maputo (CMM) carefully reviewed the execution plan of these three works, taking into consideration possible delays due to the country's rainy season from November to February, the complexity of the drainage design and works, and concluded that the extension should be for 12 months to December 31, 2016. The agreed timeline for completion of these infrastructure works is as follows: (i) The infrastructure works in Chamanculo C and George Dimitrov carried out under Component C are expected to be completed by September 2016. (ii) The infrastructure works of Avenida Julius Nyerere under Component D are expected to be completed by July 2016. (iii) The complete resettlement of the families affected by the works of Chamanculo C, and of Avenida Julius Nyerere, including household access to water, electricity, and sanitation should be completed by September 2016. Ln/Cr/T Original Closing Current Closing Proposed Closing Previous Closing Status F Date Date Date Date(s) IDA- Effective 31-Dec-2015 31-Dec-2015 31-Dec-2016 31-Dec-2015 48110 Reallocations Explanation: During the last Implementation Support Mission (September 2015) a detailed budget review was prepared. Based on this review, it is necessary to reallocate the proceeds in disbursement categories 1, 2, 3, 4, 5b, 5c, and 6 to allow for reallocation of funds between the categories and from the “unallocated� category 8 to categories 1, 2, 5 and 6. In particular: Works category (category 1) needs to be increased by 13% to reflect the additional costs related to the new tender on the rehabilitation of the principal road project on Ave. Julius Nyerere. The existing Project RAP and ESMF and ESMP will be fully applied to this category. Goods category (category 2) needs to be increased by 21% resulting from new activities related to the reclassification of informal settlements, support to the massive land regularization as well as new equipment for the deconcentration activities. Consultant Services (category 3) needs to be reduced by 12% due to the cancellation of institutional development activities and a revision of the urban structure plan. Training (category 4) needs to be reduced by 25% to reallocate funds to other categories. Services category (category 5): Subcategory 5a. The percentage of expenditures to be financed by IDA to cover for the maintenance of these services until program closure was revised and should remain at the value of 100%. 8 Subcategory (5b) needs to be reduced by 4% to reflect the actual cost of the contract of Solid Waste Management Services, paid by CMM funds, until program closure. The percentage of expenditures to be financed by IDA of subcategory 5b also needs to be adjusted. The percentages for FY2014 and FY2015 will be revised and kept at the FY2013 value of 40%. This is to: (i) take into account the overpayments made with IDA resources; (ii) but also due to increases in the current cost structure resulting from the delay in implementing the planned fee increases, thus requiring substantially higher contributions from CMM’s general revenues to the financing of service delivery contracts during 2013-2015 than originally projected; and, (iii) to economies in relation to projected IDA contributions that would arrive from the SWM disposal in the new land fill to be operational in 2018, after the revised closing date. Subcategory (5c) needs to be increased by 6% to support the implementation of new activities related to the massive regularization of DUATs. Operating Costs category (category 6) needs to be increased by 15% mostly associated with expenses to maintain the PIU and technical teams given the project extension. Due to the reallocation of proceeds to the other categories, as described above, the Unallocated category (category 8) needs to be reduced by 75% to 275,000.00 (75%). Current Category of Disbursement % (Type Ln/Cr/TF Currency Allocation Expenditure Total) Current Proposed Current Proposed Wks A.1c A.2c Bc Cd 13,360,000. 15,100,000. IDA-48110 XDR 100.00 100.00 Da, Db Dd E.2b 00 00 2,480,000.0 Gds except Parts A.1(i) 3,000,000 100.00 100.00 0 10,400,000. 9,200,000.0 Consulting Services 100.00 100.00 00 0 Training 920,000.00 690,000.00 100.00 100.00 Services other than CS 500,000.00 500,000.00 100.00 100.00 Parts A.1(e) Services other than CS 3,270,000.0 3,135,000.0 40.00 40.00 Parts E.1(b) 0 0 Serv other than CS Parts 330,000.00 350,000.00 100.00 100.00 Bc Cc Cd Op Costs except Parts 650,000.00 750,000.00 100.00 100.00 A.1(h) A.2(e) Compen or Displac 0.00 0.00 0.01 0.01 people fin by CMM 1,090,000.0 UNALLOCATED 275,000.00 0.00 0.00 0 Designated Account 0.00 0.00 0.00 0.00 33,000,000. 33,000,000. Total: 00 00 Disbursement Estimates Change in Disbursement Estimates 9 Explanation: The total of IDA funds by 31 of August 2015 to be executed amounts to $15,110,070 until project closure. The funds for the remaining FY 2016 will be dedicated to: (i) for the contracts of the three infrastructure works; (ii) contract payments of the Technical Assistance contracts given the project extension; and (iii) payments associated with new approved activities. The funds for FY 2017 will be used for: (i) the final infrastructure works payments; and (ii) project close out activities such as the Financial Audit. Fiscal Year Current (USD) Proposed (USD) 2011 3,100,000.00 2,101,546.50 2012 12,500,000.00 10,480,754.39 2013 15,300,000.00 13,184,172.66 2014 10,700,000.00 6,708,487.60 2015 5,300,000.00 12,617,752.53 2016 3,100,000.00 3,189,736.12 2017 0.00 1,717,550.20 Total 50,000,000.00 50,000,000.00 Other Change(s) Change in Implementation Schedule Explanation: The three large infrastructure works, the informal settlement interventions in Chamanculo C and George Dimitrov of Component C and the rehabilitation of av. Julius Nyerere of Component D, including the fully implementation of the resettlement actions is expected to be completed by September 2016, but could take one or two months longer depending on the intensity of the rainy season which is starting now. 10 ANNEX 1: RESULTS FRAMEWORK Project Maputo Municipal Development Program II (MMDP II) Project Restructuring Status: DRAFT Name: (P115217) Stage: Team Requesting Leader(s) Andre Herzog AFCS2 Created by: Unit: : Product Responsible IBRD/IDA GSU13 Modified by: Line: Unit: Country: Mozambique Approval FY: 2011 Lending Region: AFRICA Adaptable Program Loan Instrument: Project Development Objectives Original Project Development Objective: Improve the delivery and sustainability of priority municipal services in Maputo Municipality. Results Core sector indicators are considered: Yes Results reporting level: Project Level Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Actual(Current) End Target Direct project beneficiaries Number Value 729264.00 1130109.00 1041545.00 Date 02-Sep-2010 02-Jun-2015 31-Dec-2016 Comment Female beneficiaries Percentage Value 51.50 51.50 51.50 Sub Type Supplemental % cumulative annual real increase in revenue Percentage Value 0.00 282.00 288.00 from IPRA Date 02-Sep-2010 02-Jun-2015 31-Dec-2016 Comment Mean User Perception of Quality Public Services Number Value 2.80 2.70 3.00 Date 02-Sep-2010 25-Nov-2014 31-Dec-2016 Comment Number of people in urban areas provided with Number Value 729264.00 1130109.00 1041545.00 access to regular solid waste collection under the Date 02-Sep-2010 02-Jun-2015 31-Dec-2016 project Comment Number of people in urban areas provided with Number Value 60000.00 588975.00 300000.00 access to all-season roads within a 500 meter Date 02-Sep-2010 02-Jun-2015 31-Dec-2016 range under the project Comment Households with secure land tenure formalized Number Value 0.00 12546.00 30800.00 (with DUAT) Date 02-Sep-2010 02-Jun-2015 31-Dec-2016 Comment Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Actual(Current) End Target Component A: Average processing time (days) Number Value 75.00 84.00 45.00 for construction licenses Date 15-Jan-2014 02-Jun-2015 31-Dec-2016 Comment 12 Component A: Report Card Results Text Value June CRC to be June conducted in late 2015 Date 02-Sep-2010 02-Jun-2015 31-Dec-2016 Comment Component A: Financial Execution Report Text Value April N.A. Exercise to April be conducted in June. Date 02-Sep-2010 02-Jun-2015 31-Dec-2016 Comment Component B: % of recurrent expenditures Percentage Value 96.00 162.00 100.00 covered by own-source revenue Date 02-Sep-2010 02-Jun-2015 31-Dec-2016 Comment Component B: Recurrent expenditures spent on Number Value 7892640.00 45111045.00 9593553.00 roads operation and maintenance (in MT) Date 02-Sep-2010 02-Jun-2015 31-Dec-2016 Comment Component C: Total number of bairros with land Number Value 9.00 18.00 17.00 use oriented by local spatial plans Date 02-Sep-2010 02-Jun-2015 31-Dec-2016 Comment Component E: Sectoral commissions undertake Text Value None Ongoing 2 sectoral specific initiatives each year to improve implementation Metropolitan metropolitan coordination in keys sectors of metropolitan Commissions (Metropolitan Transport Commission, and strategy for being Metrop. Solid Waste Commission) SWM. implemented Date 02-Sep-2010 02-Jun-2015 31-Dec-2016 13 Comment Roads rehabilitated, Non-rural Kilometers Value 0.00 28.20 28.00 Date 02-Sep-2010 02-Jun-2015 31-Dec-2016 Comment 14