$ Report No: RES00312 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF Lilongwe Water and Sanitation Project APPROVED ON 20-Dec-2017 TO The Republic of Malawi Water Global Practice Eastern and Southern Africa Region Regional Vice President: Victoria Kwakwa Regional Director: Iain G. Shuker Country Director: Nathan M. Belete Practice Manager: Francis Ghesquiere Task Team Leader: Ivaylo Hristov Kolev The World Bank Lilongwe Water and Sanitation Project (P163794) ABBREVIATIONS AND ACRONYMS BOD5 5-day Biochemical Oxygen Demand ESMPs Environmental and Social Management Plans GRM Grievance Redress Mechanism LWSP Lilongwe Water and Sanitation Project NRW Non-Revenue Water QPPR Quarterly Project Progress Report TW3 Third Drinking Water Treatment Plant The World Bank Lilongwe Water and Sanitation Project (P163794) @#&OPS~Doctype~OPS^dynamics@restrhybridbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P163794 Lilongwe Water and Sanitation Project Product/Financing Instrument Geographical Identifier Investment Project Financing (IPF) Malawi Approval Date Current Closing Date 20-Dec-2017 30-Apr-2025 Original EA Category Partial Assessment (B) (PAD Approval Package-20 Dec 2017) Organizations Borrower Responsible Agency The Republic of Malawi Lilongwe Water Board @#&OPS~Doctype~OPS^dynamics@restrhybridoperationstatus#doctemplate OPERATION STATUS Project Development Objective (DO) Original Development Objective To increase access to improved water services and safely managed sanitation services in Lilongwe City Disbursement Summary (in USD million) Source of Funds Net Commitment Disbursed Balance % Disbursed IBRD -- -- -- 0 IDA 145.00 129.42 15.58 89.25 i The World Bank Lilongwe Water and Sanitation Project (P163794) Grants -- -- -- 0 Policy Waivers Does this restructuring trigger the need for any policy waiver(s)? No @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate ii The World Bank Lilongwe Water and Sanitation Project (P163794) TABLE OF CONTENTS I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING ........................................................................................1 II. DESCRIPTION OF PROPOSED CHANGES ....................................................................................................................2 III. PROPOSED CHANGES ................................................................................................................................................2 IV. DETAILED CHANGE(S) ...............................................................................................................................................3 The World Bank Lilongwe Water and Sanitation Project (P163794) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This restructuring seeks to extend the closing date for IDA-61720, IDA-D2660, IDA-70070, IDA-D9350 for 6 months from December 31, 2024 to June 30, 2025, reallocate funds between Components and amend two intermediate results indicators. This will be the second extension of the closing date. The cumulative extension will be 24 months. 2. LWSP was approved by the Board of Directors on December 20, 2017, in the amount of US$100 million (IDA) and became effective on March 26, 2018. An Additional Financing in the amount of US$45 million (IDA) was also approved on December 9, 2021. 3. The overall implementation progress of the project is Satisfactory, and it is on track to achieve its development objectives. At the end of May 2024, the overall project disbursement stands at 86 percent with all major contracts under the parent project completed and contracts under the additional financing planned to be finalized by the closing date. 4. The project has four Components and their progress to date is as follows: a) Component 1 – Water Distribution Network Rehabilitation, Expansion and NRW reduction (Total cost: US$69 million (IDA), of which US$67 million has been disbursed). Almost all works have been completed, some payments related to the Non-Revenue Water (NRW) reductions are still pending due to verification of the actual results achieved. b) Component 2 – Priority Sanitation Improvements (Total cost: US$46 million (IDA), of which US$41 million has been disbursed). Most of the investments are completed only a few like sewerage network extension and onsite sanitation are to be completed by October 2024. c) Component 3 – Technical Assistance (Total cost: US$18 million (IDA), of which US$15 million has been disbursed). All technical assistance contracts are completed with the exception of the Preparation of the Investment plan for Lilongwe Water Board, which is being finalized. d) Component 4 – Institutional Capacity Strengthening (Total cost: US$14.5, of which US$10 million has been disbursed). Capacity building activities continue and will be completed by the closing date. 5. In addition to the World Bank’s support for Lilongwe Water Board, there are ongoing projects with Japanese International Development Agency (JICA) and European Investment Bank (EIB), supporting various infrastructure and service improvements. During the Additional Financing discussions, the World Bank agreed to supervise the construction works of the Third Drinking Water Treatment Plant (TW3) in Lilongwe, which is financed by the EIB. 6. Performance of the implementing entities in terms of fiduciary, safeguards, and monitoring and evaluation are summarized as follows: a) Fiduciary Performance. The current financial management rating of the Project is Satisfactory, and there are no outstanding audits under the Project. All audit and financial management reports have been submitted and found to be acceptable to the World Bank. The procurement rating is at Satisfactory level. b) Safeguards Performance. The current environmental and social safeguards rating is Satisfactory. All Environmental and Social Management Plans (ESMPs) have been cleared by the World Bank and publicly consulted and disclosed. The Grievance Redress Mechanism (GRM) log is submitted as part of the Quarterly Project Progress Report (QPPR). 7. The rationale for the proposed six months extension is to allow for the proper supervision of construction works on the TW3. LWSP is covering the supervision of this important contract, but due to some implementation delays (works only commenced on March 18, 2024), the two parallel projects (LWSP and TW3 construction) are out of sync now and the supervision cannot be completed by the current closing date of December 31, 2024. The Page 1 The World Bank Lilongwe Water and Sanitation Project (P163794) Borrower requested a 9 months’ extension in April 2024, but following an internal assessment, the World Bank is recommending extension by 6 months, when most of the construction works will be completed. Along with the time extension, it is proposed to reallocate a small portion of funds between Components 1 and 3 to utilize accumulated savings and ensure that the TW3 supervision is properly resourced, as well as amend two intermediate results indicators, where no methodology existed during project preparation and can now be fine- tuned to correctly capture the baseline values and indicator targets. II. DESCRIPTION OF PROPOSED CHANGES 8. In line with the status and rationale provided in the previous sections and in response to the Borrower’s official request of April 9, 2024, this Restructuring Paper seeks approval to proceed with: a) Extension of the closing date for IDA-61720, IDA-D2660, IDA-70070, IDA-D9350 by 6 months – from December 31, 2024, to June 30, 2025, allowing for the financing of supervision on the construction of the Third Drinking Water Treatment Plant in Lilongwe. b) Reallocation of funds from Component 1 to Component 3: (i) Reduce Component 1 by US$350,000.00 (ii) Increase Component 3 by US$350,000.00. c) Amend two intermediate project results indicators: (i) Household sewerage connections benefiting from safely managed sanitation services (Number, Custom). The original end target for this indicator of 15,000 is amended to 10,400 with the following justification – household connections to Kauma sewerage network turned out to be 5,384 instead of 10,000 estimated during project preparation. The revised figure is based on physical customer verification exercise conducted by Lilongwe Water Board while developing a sewerage customer database for billing purposes. In addition, new connections supported under the project will be 5,016 leading to total household sewerage connections benefiting from safely managed sanitation services of 10,400. (ii) BOD5 removed by the treatment plant because of project interventions (Metric tons/year, Custom). The original baseline assessment of 3,741 and end target of 4,176 are amended to 441 and 850 respectively with the following justification – a new methodology was developed as well as a physical verification of the existing connections to Kauma sewerage network during project implementation. As a result, the wastewater treated at the end of the project will be 160 liters x 10,400 connections (5,384 baseline + 2,140 phase 1 connections + 700 phase 1 carry over connections + 2,176 phase 2 connections) x 5 persons per household = 8,320,000 liters/day and BOD removal will be 280 mg. x 8,320,000 liters/day x 365 days = 850 metric ton/year. @#&OPS~Doctype~OPS^dynamics@restrhybridsummarychanges#doctemplate Summary changes III. PROPOSED CHANGES Page 2 The World Bank Lilongwe Water and Sanitation Project (P163794) Operation Information Proposed Changes Operation Information Proposed Changes Results Yes Loan Closing Date Extension Yes Disbursements Estimates Yes Loan Cancellations No Development Objective No Reallocations No Safeguard Policies Triggered No Financial Management No ISDS No Procurement No MFD/PCE No Institutional Arrangement No Risks No Implementation Schedule No Legal Covenants No Conditions No Implementation Modalities No Disbursements Arrangements No DDO No Clients No Appraisal Summary No Components No @#&OPS~Doctype~OPS^dynamics@restrhybriddetailedchanges-disclose#doctemplate IV. DETAILED CHANGE(S) COSTS & FINANCING Private Capital Facilitation Is this an MFD-Enabling Project (MFD-EP)? Is this project Private Capital Enabling (PCE)? LOANS Loan Closing Page 3 The World Bank Lilongwe Water and Sanitation Project (P163794) Original Revised Proposed Proposed Deadline Loan/Credit/Trust Status Closing Closing(s) Closing for Withdrawal Fund Applications IDA-61720-001 Effective 30-Jun-2023 30-Apr-2025 30-Jun-2025 30-Oct-2025 IDA-70070-001 Effective 31-Dec-2024 31-Dec-2024 30-Jun-2025 30-Oct-2025 IDA-D2660-001 Effective 30-Jun-2023 31-Dec-2024 30-Jun-2025 30-Oct-2025 IDA-D9350-001 Effective 31-Dec-2024 31-Dec-2024 30-Jun-2025 30-Oct-2025 DISBURSEMENTS Operation Dates & Projection Details Reasons to change the full Disbursement date and/or the projection Restructuring Implementation Start Date Operation Closing Date 20-Dec-2017 30-Apr-2025 Projected Date for Full Disbursement 30-Jun-2025 Expected Disbursements (in US $) (Absolute) Original Estimation at Preparation Actual Year Revised Estimation (Approval Package – 20 Dec 2017) FY2018 0.00 1,829,181.80 2,090,493.49 FY2019 0.00 9,023,343.01 9,023,343.01 FY2020 0.00 16,772,891.92 16,772,891.92 FY2021 0.00 19,684,260.42 19,684,260.42 FY2022 2,260,000.00 31,000,000.00 39,002,258.11 FY2023 5,030,000.00 32,053,333.30 18,335,447.23 FY2024 4,700,000.00 19,410,000.00 23,456,821.46 FY2025 2,950,000.00 14,380,217.38 1,051,201.26 Page 4 The World Bank Lilongwe Water and Sanitation Project (P163794) RESULTS COUNTRY: Malawi Lilongwe Water and Sanitation Project @#&OPS~Doctype~OPS^dynamics@restrannexpolicyandresult#doctemplate PDO Indicators by PDO Outcomes increase access to improved water services in Lilongwe City Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Number of people receiving 0.00 Jun/2018 370,821.00 29-Mar-2024 370,821.00 29-Mar-2024 250,000.00 Dec/2024 improved water services as a result of the project (Number) Of which 50% are women 0.00 Jun/2018 191,714.00 29-Mar-2024 191,714.00 29-Mar-2024 125,000.00 Dec/2024 (Number) Increase access to safely managed sanitation services in Lilongwe City Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Number of people gaining access to 0.00 Jun/2018 186,587.00 29-Mar-2024 186,587.00 29-Mar-2024 250,000.00 Dec/2024 safely managed sanitation services as a result of the project (Number) Of which 50% are women 0.00 Jun/2018 95,159.00 29-Mar-2024 95,159.00 29-Mar-2024 125,000.00 Dec/2024 (Number) Intermediate Results Indicators by Components Page 5 The World Bank Lilongwe Water and Sanitation Project (P163794) Water Distribution Network Rehabilitation, Expansion and NRW reduction Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Length of water supply pipeline laid 0.00 Jun/2018 427.10 29-Mar-2024 427.10 29-Mar-2024 236.00 Dec/2024 under the project (Kilometers) Household water connections 0.00 Jun/2018 81,859.00 29-Mar-2024 81,859.00 29-Mar-2024 27,594.00 Dec/2024 receiving improved water services under the project (Number) Priority Sanitation Improvements Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Length of sewer pipeline laid under 0.00 Jun/2018 76.80 29-Mar-2024 76.80 29-Mar-2024 107.00 Dec/2024 the project (Kilometers) Revise Household sewerage 0.00 Jun/2018 9,105.00 29-Mar-2024 9,105.00 29-Mar-2024 10,400.00 Jun/2025 connections benefiting from safely managed sanitation services (Number) Of which new sewerage 0.00 Jun/2018 2,837.00 29-Mar-2024 2,837.00 29-Mar-2024 5,000.00 Dec/2024 connections (Number) Improved household sanitation 0.00 Jun/2018 30,673.00 29-Mar-2024 30,673.00 29-Mar-2024 32,000.00 Dec/2024 facilities under the project (Number) Volume of sewage treated (in 0.00 Jun/2018 2,630.34 29-Mar-2024 2,630.34 29-Mar-2024 3,175.00 Dec/2024 thousands) (Cubic meters/year) Revise BOD5 removed by the 441.00 Jun/2018 737.00 29-Mar-2024 737.00 29-Mar-2024 850.00 Jun/2024 treatment plant as a result of project interventions (Metric tons/year) Technical Assistance Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Page 6 The World Bank Lilongwe Water and Sanitation Project (P163794) Number of Master Plans prepared 0.00 Jun/2018 2.00 29-Mar-2024 2.00 29-Mar-2024 2.00 Dec/2024 (Number) Institutional Capacity Strengthening Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year ISO 9001 certification for Lilongwe No Jun/2018 Yes 29-Mar-2024 Yes 29-Mar-2024 Yes Dec/2024 Water Board (Yes/No) The percentage of LWB and LCC staff 10.00 Oct/2017 34.00 29-Mar-2024 34.00 29-Mar-2024 30.00 Dec/2024 in decision-making roles (supervisory or managerial) who are female (Percentage) Number of staff trained under the 0.00 Jun/2018 129.00 29-Mar-2024 129.00 29-Mar-2024 50.00 Dec/2024 project (Number) Female staff trained 0.00 Jun/2018 51.00 29-Mar-2024 51.00 29-Mar-2024 25.00 Dec/2024 (Number) Percentage of sewer blockages 0.00 Jun/2018 100.00 29-Mar-2024 100.00 29-Mar-2024 80.00 Dec/2024 complaints resolved within 15 days of being recorded in the database (Percentage) Customer satisfaction index for water 50.00 Jun/2018 76.00 29-Mar-2024 76.00 29-Mar-2024 80.00 Dec/2024 supply services (Percentage) Reduced physical losses in water- 768,696.00 Jun/2018 1,353,852.00 29-Mar-2024 1,353,852.00 29-Mar-2024 1,500,000.00 Dec/2024 stressed areas as a result of project interventions (Cubic Meter(m3)) Page 7