Public Disclosure Copy The World Bank Implementation Status & Results Report BR Sergipe Water (P112074) BR Sergipe Water (P112074) LATIN AMERICA AND CARIBBEAN | Brazil | Water Global Practice | IBRD/IDA | Specific Investment Loan | FY 2012 | Seq No: 8 | ARCHIVED on 30-Mar-2016 | ISR23083 | Implementing Agencies: SEMARH, DESO-SE, SEMARH-SE Key Dates Key Project Dates Bank Approval Date:26-Jan-2012 Effectiveness Date:11-Dec-2012 Planned Mid Term Review Date:29-May-2015 Actual Mid-Term Review Date:29-May-2015 Original Closing Date:30-Jun-2017 Revised Closing Date:30-Jun-2017 Project Development Objectives Project Development Objective (from Project Appraisal Document) The project development objective is to promote the efficient and sustainable use of water in the Sergipe River Basin, by strengthening the State's sector management, enhancing land management practices and improving water quality. Has the Project Development Objective been changed since Board Approval of the Project Objective? No PHRPDODEL Components Name Component 1: Integrated Water Resource Management and Institutional Development:(Cost $17.10 M) Component 2: Water for Irrigation:(Cost $14.20 M) Component 3: Water for Cities:(Cost $83.60 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO  Moderately Satisfactory  Moderately Satisfactory Overall Implementation Progress (IP)  Moderately Unsatisfactory  Moderately Unsatisfactory Overall Risk Rating  Moderate  Moderate 3/30/2016 Page 1 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BR Sergipe Water (P112074) Implementation Status and Key Decisions Project Prospects: Following the MTR Mission carried out in May, 2015, a Supervision Mission was carried out in December 14-18, 2015 with focus on assessing the implementation and revision of the Performance Improvement Action Plan. The main targets agreed during the MTR mission were reached – 35% of the LA funds were contracted by December, 2015 and an additional 15% of the LA was under procured procedures (considering the appraisal's exchange rate). A substantial part of the list agreed of priority actions is being implemented. However, the slow start of the project implementation coincides with a period of raising inflation and depreciation of the Brazilian Real against the US Dollar, respectively 39% and 110% since appraisal. As a result, the project has additional resources in Brazilian Real estimated at US Dollar 10 million equivalent. It is also clear that the project will need additional time to complete ongoing and planned activities, which will require an extension of the closing date to be discussed within a restructuring proposal. Based on the above macroeconomic scenario, the mission discussed four possible scenarios for the project: 1. Implementation remains unsatisfactory, no extension of the closing date, substantial reduction in project scope and expected results, substantial cancellation of loan funds; project closes unsatisfactorily; 2. Implementation improves and contracting targets are met, project is restructured, extension of the closing date may be granted, minor revision in project scope and expected results, minor cancelation of loan funds, project is able to close satisfactorily; 3. Implementation improves but some contracting targets are not met, project is restructured, shorter extension may be granted, revision in project scope and expected results, partial cancelation of loan funds, project may close unsatisfactorily; 4. Implementation improves substantially and contracting targets are met, project is restructured, needed extension may be granted, minor revision in project scope and expected results, all loan funds are disbursed, project may close satisfactorily; Actions taken: After the SPN Mission, the task team: (i) holds a weekly dialogue with the PMU coordinator to monitor the implementation of the action plan, to identify any potential problem and to take any needed proactive actions; (ii) met the State Secretary for the Environment and Water Resources, to follow-up de implementation path of the action plan; (iii) met the CEO of the State WSS Utility DESO to follow-up the specific actions under DESO’s responsibility, which are crucial to reach the agreed targets; (iv) met the State Secretary of Finance to assess the ongoing country's macroeconomic crisis and the impacts on the state and on the project performance, and agreed on proactive measures to mitigate fiscal risks affecting the project. Ongoing activities: construction works for wastewater systems of the cities of Nossa Senhora das Dores and of Itabaiana (phase I) are under way; engineering design for the drainage system of critical basins of the city of Itabaiana is completed; consulting services for the cadastering of water users and for the revision of the water sector institutional organization is contracted. There are several key procurement processes under way, such as: supervision of works for the construction of the wastewater systems; services of rehabilitation of degradated areas surrounding reservoirs in the Sergipe River Basin; updating DESO assets in the MR of Aracaju; batimetry of key water reservoirs in the Sergipe river basin; construction works and goods for the rehabilitation of the water main supplying the MR of Aracaju; consulting services for dam safety; construction works and services for improving efficiency in irrigated perimeters. Storyline - The Project progress has improved, disbursement increase to 15% thus far and it is expected to reach 20% by the end of June 2016. The agreed Action Plan with key tasks for every component is being followed by the State Governor. The Borrower was advised that failure to meet the MTR targets and deadlines would impact in the Project restructuring. Borrower capacity to preparation procurement packages needs to be strengthened. Short-Term Prospects - based on the above information on project actions already being taken and higher political commitment by State authorities, the team sees a positive prospect for improved implementation. Upon the restructuring mission the project status and prospects will be updated. The deterioration of Brazil’s macroeconomic situation may affects either the accomplishment of the agreed targets, due to the severe devaluation of the Brazilian Real and fiscal constraints, which will be closely monitored and proactive actions will be taken if deemed necessary. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating 3/30/2016 Page 2 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BR Sergipe Water (P112074) Political and Governance  --  Moderate  Moderate Macroeconomic  --  Moderate  Moderate Sector Strategies and Policies  --  Moderate  Moderate Technical Design of Project or Program  --  Moderate  Moderate Institutional Capacity for Implementation and Sustainability  --  Substantial  Substantial Fiduciary  --  Substantial  Substantial Environment and Social  --  Moderate  Moderate Stakeholders  --  Moderate  Moderate Other  --  --  -- Overall  --  Moderate  Moderate Results Project Development Objective Indicators PHINDPDOTBL  Integrated procedures and tools for environmental licensing and water rights implemented (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value N N N Y Date 30-Sep-2014 22-Sep-2015 31-Dec-2015 30-Jun-2017 PHINDPDOTBL  20% water efficiency improvements in the use of water as measured by liters/second/hectares in the Poção da Ribeira and Jacarecica I irrigation perimeters (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 20.00 Date 30-Sep-2014 22-Sep-2015 31-Dec-2015 30-Jun-2017 PHINDPDOTBL  Pollution load discharged by the municipalities targeted by the Project’s wastewater investments is reduced by 5620 tons of BOD/year by 2017 (Number, Custom) 3/30/2016 Page 3 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BR Sergipe Water (P112074) Baseline Actual (Previous) Actual (Current) End Target Value 1427.00 1427.00 1427.00 5600.00 Date 30-Sep-2014 22-Sep-2015 31-Dec-2015 30-Jun-2017 Overall Comments Intermediate Results Indicators PHINDIRITBL  Number of water utilities that the project is supporting (Number, Core) Baseline Actual (Previous) Actual (Current) End Target Value 1.00 2.00 2.00 2.00 Date 30-Sep-2014 22-Sep-2015 31-Dec-2015 30-Jun-2017 PHINDIRITBL  Agency responsible for water resources management is created or designated. (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value N N N Y Date 30-Sep-2014 22-Sep-2015 31-Dec-2015 30-Jun-2017 PHINDIRITBL  State environmental conservation areas in the Sergipe river basin are created/expanded and managed. (Hectare(Ha), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 213.87 213.87 213.87 235465.00 Date 30-Sep-2014 22-Sep-2015 31-Dec-2015 30-Jun-2017 3/30/2016 Page 4 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BR Sergipe Water (P112074) PHINDIRITBL  60% of farmers in the Jacarecica river sub-basin and outside of the irrigated perimeters benefiting from improved water quality andsoil conservation practices adopt said practices. (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 300.00 Date 30-Dec-2011 22-Sep-2015 31-Dec-2015 30-Jun-2017 PHINDIRITBL  Establishment and implementation of water tariffs for farmers operating within the Poção da Ribeira and Jacarecica I irrigation perimeters. (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value N N N Y Date 30-Dec-2011 22-Sep-2015 31-Dec-2015 30-Jun-2017 PHINDIRITBL  Number of domiciliary connections to wastewater collection services increased from 55,000 in 2010 to 143,000 in 2017 in the municipalities of the Sergipe river basin targeted by the project (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 55000.00 87000.00 105400.00 143000.00 Date 30-Sep-2014 22-Sep-2015 31-Dec-2015 30-Jun-2017 PHINDIRITBL  DESO’s EBTIDA margin improved from 0.5% in 2010 to 16.7% in 2017 (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 9.75 8.60 8.60 17.00 Date 31-Dec-2013 31-Dec-2014 31-Dec-2015 30-Jun-2017 Overall Comments Data on Financial Performance 3/30/2016 Page 5 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BR Sergipe Water (P112074) Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P112074 IBRD-81130 Effective USD 70.28 70.28 0.00 10.17 60.10 14% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P112074 IBRD-81130 Effective 26-Jan-2012 13-Sep-2012 11-Dec-2012 30-Jun-2017 30-Jun-2017 Cumulative Disbursements Restructuring History There has been no restructuring to date. Related Project(s) There are no related projects. 3/30/2016 Page 6 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BR Sergipe Water (P112074) 3/30/2016 Page 7 of 7 Public Disclosure Copy