Document of
                                          The World Bank

                                    FOR OFFICIAL USE ONLY

                                                                                   Report No: 76159-KZ




                                    RESTRUCTURING PAPER

                                                  ON A

                 PROPOSED PROJECT RESTRUCTURING
                               OF
        UST-KAMENOGORSK ENVIRONMENTAL REMEDIATION PROJECT

                                LOAN NO. 4848 KZ
                     (BOARD APPROVAL DATE: FEBRUARY 1, 2007)


                                                TO THE

                                 REPUBLIC OF KAZAKHSTAN


                                          MARCH 25, 2013




SUSTAINABLE DEVELOPMENT DEPARTMENT
EUROPE AND CENTRAL ASIA 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


CWR    Committee of Water Resources
EC     European Commission
PMU    Project Management Unit
UKER   Ust-Kamenogorsk Environmental Remediation Project




          Regional Vice President:       Philippe H. Le Houérou
                Country Director:        Saroj Kumar Jha
                 Sector Manager:         Kulsum Ahmed
               Task Team Leader:         Katelijn Van den Berg

                                     2
                           KAZAKHSTAN
     UST-KAMENOGORSK ENVIRONMENTAL REMEDIATION PROJECT (UKER)

                                              P078342
                                          LOAN NO. 4848 KZ

                                         Restructuring Paper

1. The closing date for Kazakhstan, Ust-Kamenogorsk Environmental Remediation
   Project (P078342), Loan No.: 4848 KZ will be extended from March 30, 2013 until
   December 31, 2014.

2. In line with the Bank’s Loan Agreement which only finances goods and civil works,
   the preparation of the site investigations and detail designs for the remediation of the
   seven industrial waste dumps, the establishment of the groundwater monitoring
   program, the detail design of the groundwater treatment system and the supply of leak
   detection and laboratory equipment, including the implementation of a water leakage
   reduction program in Ust-Kamenogorsk were implemented with counterpart
   financing from the Government of Kazakhstan and a European Commission (EC) co-
   funding Grant.

3. Substantial delays however occurred in project implementation due to a necessary re-
   tendering process of the civil works for the remediation of six1 out of the seven
   priority industrial waste dumps and following the successful retendering further
   delays in contract signature for these remediation works. The delay in the signing of
   the contracts was caused by the hesitation of the implementing agency to sign the
   contracts due to a discrepancy between national cost estimates and the bid prices.

4. They requested confirmation from the Government that signing such contracts with
   higher prices than the approved national cost estimates would not be against the
   national legislation. This Government confirmation was received on February 28,
   2013 and the implementing agency has signed the civil works contracts for the six out
   of seven priority industrial waste dumps on the same day. For one priority industrial
   waste dump, due to the delays in the contract signing by the implementing agency,
   the contractor did not countersign the contract signed by CWR and retendering is
   planned together with the last priority industrial waste dump by early April, 2013. For
   the other five priority industrial waste dumps, the selected contractor is planning to
   start the works as of April 1, 2013.

5. The Project Development Objective (PDO) continues to be achievable, following the
   signature of the civil works contract. The performance of the borrower (Project



1
   For Lot 4, rehabilitation of industrial waste dump of Ulba Metallurgical Plant, there were delays in the
state approvals for the detail design; the key delay regarding sanitary approval has been resolved and the
detail design is expected to receive final outstanding state approvals shortly.
                                                      3
    Management) is moderately satisfactory2 and a specific action plan acceptable to the
    Bank has been developed.

6. The proposed extension is required and sufficient to allow for the physical
   remediation of the five priority industrial waste dumps for which the contracts have
   been countersigned. The general progress of PDO achievement and disbursements as
   well as progress of the (re)tendering process of the two remaining priority industrial
   waste dumps under the project, the finalization of the design of the groundwater
   treatment system and its subsequent tendering and construction will be closely
   assessed in autumn 2013. In case of further significant delays, the Project’s
   restructuring requirements in terms of components financed under the Loan and
   outcome indicators will be assessed at that time.

7. This will be the first extension of the project.




2
 As the PDO objectives are not achievable anymore prior to the current Closing Date, the PDO and
Implementation Progress are not yet rated satisfactory.
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