The World Bank Energy Efficiency Project (P143580) REPORT NO.: RES39260 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ENERGY EFFICIENCY PROJECT APPROVED ON MARCH 13, 2014 TO BOSNIA AND HERZEGOVINA ENERGY & EXTRACTIVES EUROPE AND CENTRAL ASIA Regional Vice President: Cyril E Muller Country Director: Linda Van Gelder Regional Director: Lucio Monari Practice Manager/Manager: Sameer Shukla Task Team Leader(s): Janina Andrea Franco Salazar, Rhedon Begolli The World Bank Energy Efficiency Project (P143580) I. BASIC DATA Product Information Project ID Financing Instrument P143580 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 13-Mar-2014 29-Feb-2024 Organizations Borrower Responsible Agency FBH Ministry of Physical Planning,RS Ministry of Spatial Bosnia and Herzegovina Planning, Civil Engineering and Ecology Project Development Objective (PDO) Original PDO The project development objective is to demonstrate the benefits of energy efficiency improvements in public sector buildings and support the development of scalable energy efficiency financing models. Current PDO The project development objective is to improve energy efficiency in public buildings, and to support the development and implementation of scalable energy efficiency financing models Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-89060 30-Oct-2018 18-Jan-2019 29-Feb-2024 32.00 0 32.00 IDA-53930 13-Mar-2014 29-Oct-2014 27-May-2015 31-Dec-2019 28.00 25.21 0 IDA-55380 13-Mar-2014 29-Oct-2014 27-May-2015 31-Dec-2019 4.00 2.15 1.50 The World Bank Energy Efficiency Project (P143580) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES A. Project Status The Project development objective (PDO) is to improve energy efficiency (EE) in public sector buildings, and to support the development and implementation of scalable EE financing models. The progress towards achievement of the PDO and the Overall Implementation Progress are currently rated Moderately Satisfactory. Most activities have been completed and the remaining activities are being finalized. As of December 3, 2019, total disbursement rate reached 95 percent of the original credit with only US$1.5 million remaining to be disbursed. The Project was approved on March 13, 2014 and became effective in the Republika Srpska (RS) on May 27, 2015, and on December 14, 2015 in the Federation of Bosnia and Herzegovina (FBiH). The Original closing date was June 30, 2018 and it was extended 18 months until December 31, 2019. An Additional Financing (AF) was approved by the World Bank Board of Directors on October 30, 2018 (currently it is pending effectiveness).* The AF seeks to continue financing EE investments in public buildings and support the development of scalable financing mechanism and capacity building. The closing date of the AF is February 29, 2024. The proposed restructuring will include only the extension of closing date for the original IDA credits, bringing the cumulative extension to 24 months. The restructuring does not propose any changes to the overall project closing date of February 29, 2024 approved under the Additional Financing. The Project includes three components: (i) EE investments in public facilities (e.g. schools, hospitals, clinic centers, and other public buildings), as well as related technical consultancy services (US$27.37 million); (ii) support for the development of scalable financing mechanisms and capacity building (US$2.71 million); and (iii) project management (US$1.92 million). Overall implementation progress of Component 1 is satisfactory. To date, EE renovation works have been completed in 80 public buildings (including 48 public buildings in the FBiH and 32 in the RS). Currently, preparatory work for civil works is close to completion for seven remaining cantonal buildings in the FBiH that are expected to be completed by the end of June 2020. The EE investments supported under the Project have helped to demonstrate strong energy savings and other benefits associated with EE improvements, including the following: (i) lifetime energy savings of more than 641,000 megawatt hour (MWh); (ii) reduction of lifetime carbon dioxide (CO2) emissions by 177,000 tons of C02 equivalent; (iii) 210 trained municipal energy managers; and (iv) more than 750,000 children, students, patients, teachers, doctors, nurses and other staff estimated to have benefitted from improved learning, recovery and working conditions in retrofitted buildings, with female beneficiaries reaching 46 percent in the RS and 53 percent in FBiH. The seven remaining buildings under Component 1 faced delays due to: (i) the formation of the cantonal government after the October 2018 election; (ii) decisions regarding the selection process for the cantonal buildings; and (iii) the signing of the Subsidiary Agreements between the FBIH Ministry of Finance and the two cantons (Sarajevo canton and Herzegovina-Neretva canton (HNK)), and signing of Memorandum of Understanding with Canton 10.** The government as well as the FBiH, are fully committed to completing project implementation and have completed all needed agreements, including: (i) confirmation of the selection of buildings by the Steering Committee and the Project The World Bank Energy Efficiency Project (P143580) (April 2019); and (ii) signing of Subsidiary Agreements with Sarajevo canton (July 5, 2019) and HNK canton (November 28, 2019), and Memorandum of Understanding signed with Canton 10 (November 27, 2019). The PIU is completing technical documentation for all buildings; Sarajevo and Canton 10 buildings would bid in late December, and buildings in HNK canton would be bid in January. The renovation works for the remaining buildings works would be completed by June 2020. There has been substantial progress made to develop a scalable EE financing model (Component 2), that have been instrumental inputs for the design of revolving schemes under the AF. Consultancies are under way to help develop performance-based contracting schemes, with 10-year investment repayment periods, with net present value (NPV), in the FBIH and an energy service company (ESCO) model in the RS. Moreover, the revolving scheme would be consolidating as other donors/partners will be using the same financing mechanism. For instance, Kreditanstalt für Wiederaufbau (KfW) has agreed to provide a €9.5 million grant for EE improvements in public buildings to be implemented through the FBiH PIU under the revolving scheme to be set up by the Project. In the RS, KfW will provide a €4 million grant for EE improvements in public buildings to be implemented through the Ministry of Spatial Planning, and will be closely synchronized with the Project given similar eligibility and selection criteria for public buildings, and the use of the same list of nominated buildings. Thus, the revolving fund mechanism is being adopted in the country, beyond the Bank’s project, which is important for continued progress under the Project and for moving towards sustainable EE financing for public buildings. EE capacity has also been built in local energy service providers (e.g. energy auditors, design companies, construction firms and others) through Project implementation experience, as demonstrated through a steady increase in t he number of responsive bidders and improved quality of technical documentation. In addition, extensive communication and promotion activities were conducted to help increase awareness and understa nding of EE among public and private stakeholders, and to promote achievements of project results. To this end, a wide range of communication tools were used, including dedicated project websites, brochures and videos, social, printed and TV media, child- friendly awareness campaigns in retrofitted schools, and organization of EE conferences with regional participation. As for Project Management, the PIU of FBIH remains fully staffed with a Project Manager, technical experts, fiduciary specialists and supporting staff. The RS PIU remains fully staffed except for the procurement specialist, who resigned in October. The ToRs for a procurement specialist have been published and is expected it be hired by mid-December. All staff contracts are ongoing until the Project’s current Closing Date, December 31, 2019 and their contracts would be extended until June 30, 2020. All original credit funds allocated to the RS have been withdrawn, and only about US$1.50 million remains to be withdrawn by the FBiH. The Project is in compliance with environmental, social, and financial management. Interim un-audited Financial Reports (IFRs) have been submitted regularly to the World Bank and were found to be acceptable. The audit reports of previous years have been delivered on time and considered acceptable. There are no outstanding audit reports for this Project. B. Proposed Changes The proposed restructuring seeks to extend the Closing Date of the original IDA credits for six months (from December 31, 2019 to June 30, 2020), as per the Government's letter dated September 3, 2019. The restructuring includes only the extension of closing date for the original IDA credits, bringing the cumulative extension to 24 months in total, however it does not propose any changes to the overall project closing date of February 29, 2024 approved under the The World Bank Energy Efficiency Project (P143580) Additional Financing. The Closing Date extension will enable the completion of the additional seven cantonal buildings in the FBIH and provide more time to meet the Additional Financing effectiveness deadline of January 13, 2020. *The AF is pending approval of the FBiH Parliament in order for the Government (Borrower) to issue a satisfactory notification confirming that required legally binding actions needed after the singing of the Loan Agreement have been undertaken. The House of Representatives of the FBiH Parliament has adopted the decision on the AF on October 9th, 2019 and is now waiting its adoption by the House of People of the FBiH, which should take place on its next session scheduled for the first half of December. **In Canton 10 the works will be financed from VAT refunds and Cantonal Budget Funds, and therefore only a signed Memorandum of Understanding is needed. II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-89060 Not Effective 29-Feb-2024 IDA-53930 Effective 30-Jun-2018 31-Dec-2019 30-Jun-2020 30-Oct-2020 IDA-55380 Effective 30-Jun-2018 31-Dec-2019 30-Jun-2020 30-Oct-2020