The World Bank Kosovo Energy Efficiency and Renewable Energy Project (P143055) REPORT NO.: RES57818 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF KOSOVO ENERGY EFFICIENCY AND RENEWABLE ENERGY PROJECT APPROVED ON JUNE 18, 2014 TO REPUBLIC OF KOSOVO ENERGY & EXTRACTIVES EUROPE AND CENTRAL ASIA Regional Vice President: Anna M. Bjerde Country Director: Xiaoqing Yu Regional Director: Charles Joseph Cormier Practice Manager/Manager: Sudeshna Ghosh Banerjee Task Team Leader(s): Rhedon Begolli, Aditya Alexander Lukas The World Bank Kosovo Energy Efficiency and Renewable Energy Project (P143055) I. BASIC DATA Product Information Project ID Financing Instrument P143055 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 18-Jun-2014 31-Dec-2023 Organizations Borrower Responsible Agency Kosovo Energy Efficiency Agency,Kosovo Energy Republic of Kosovo Efficiency Fund Project Development Objective (PDO) Original PDO The project development objectives are to: (i) reduce energy consumption and fossil fuel use in public buildings through energy efficiency and renewable energy investments; and (ii) enhance the policy and regulatory environment for renewable energy and energy efficiency. Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-55080 18-Jun-2014 15-Jan-2015 05-Jun-2015 31-Dec-2023 31.00 22.05 5.72 TF-B1487 02-Apr-2020 03-Apr-2020 02-Jul-2020 31-Dec-2023 10.33 6.64 3.48 The World Bank Kosovo Energy Efficiency and Renewable Energy Project (P143055) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The Project in the amount of an US$31 million IDA Credit (“Credit”), which includes the addition of a €9.4 million European Union Instrument for Pre-Accession Assistance (EU-IPA) grant channeled through the Bank, was approved on June 18, 2014, with the objectives to (i) reduce energy consumption and fossil fuel use in public buildings through energy efficiency and renewable energy investments; and (ii) enhance the policy and regulatory environment for renewable energy and energy efficiency. The Project includes three components: (i) energy efficiency and renewable energy investments in public buildings; (ii) policy and regulatory support for renewable energy and energy efficiency; and (iii) project implementation support. Following the extension of the Project closing date to December 31, 2023, procurement of the remaining energy efficiency (EE) and renovation packages under Kosovo Energy Efficiency Fund (KEEF) and Kosovo Energy Efficiency Agency (KEEA) have been completed and civil works have started under all remaining packages, except for one lot of Package 6 under KEEA. Under KEEF, progress has significantly improved after the implementation delays in the previous year. The progress towards achievement of the Project Development Objective (PDO) was rated Satisfactory and Implementation Progress (IP) was rated Moderately Satisfactory in the last ISR and remained unchanged over the past 12 months. Procurement and financial management ratings have been Moderately Satisfactory and Satisfactory over the last 12 months, and the Project has no overdue audit reports. The Project is making good progress in the actions noted in the ISR from July 17,2023. The Project progress by component is summarized below. Component 1: Energy efficiency and renewable energy investments in public buildings. Under KEEA the retendering of renovation works under the last package (Package 6) was completed for the two lots, which included six buildings each. While the Lot 1 contract was signed with the winning bidder on December 30, 2022, Lot 2 had to be canceled due to unresponsive bidders. Under KEEF there has been progress made despite delays in implementation from the previous year. However, it remains challenging to finish all renovation works before the new Project closing date due to additional delays caused by a non-performing contractor in the large Lot 1 of Package 1. Although Lots 2, 3, and 4 under Package 1 were completed in February 2023, the Lot 1 works contract had to be terminated because of the poor performance from the contractor. The remaining works were subsequently retendered under a new Package 4, which was signed in May 2023, with a planned completion date in November 2023. Component 2: Policy and regulatory support for renewable energy and energy efficiency. The component included support to the Energy Regulatory Office (ERO) and Ministry of Energy and was successfully completed. Component 3:Project Implementation Support. Component 3 includes support in technical assistance, procurement, financial management and staffing. The progress is satisfactory and aligned with activities under Component 1. The World Bank Kosovo Energy Efficiency and Renewable Energy Project (P143055) The Project went through two restructurings. The last restructuring approved by the Bank was approved on November 29, 2023 to allow for (i) a first extension of the Grant’s Closing Date by 12 months from December 30, 2022 to December 31, 2023 and (ii) a second extension of the Credit’s Closing Date by 12 months from December 30, 2022 to December 31, 2023. The first restructuring (Level 2) was approved by the Bank on February 12, 2020, to (i) channel a EUR9.4 million IPA Grant (“Grant”) to the Project to co-finance investments in municipal buildings and street lighting infrastructure under the first component, (ii) include KEEF as a new implementing entity to carry out energy efficiency and renewable investments in municipal buildings and street lighting infrastructure, and (iii) extend the Closing Date of the Project by 28 months to allow for disbursement of the additional funds. Proposed Changes The proposed changes are to reallocate a portion of the funds between categories of the Kosovo Energy Efficiency and Renewable Energy Project for - the Grant Agreement between the Republic of Kosovo and IDA signed on April 3, 2020 – Grant TF 0B1487 (Grant Agreement); and - the Financing Agreement between the Republic of Kosovo and IDA, signed on January 15, 2015 – Credit Number 5508 -XK (Financing Agreement). The main purpose of the reallocation is to i) better utilize the unused funds to prepare additional energy audits and designs for buildings on KEEF’s waiting list in municipalities in which KEEF already signed a project initiation agreement; ii) cover the additional cost of the Project Implementation Unit (PIU) that have increased due to the Closing Date extension; and (iii) to compensate the categories negatively impacted from exchange rate fluctuation (between SDR and Euro) in order to meet the current project commitments (denominated in Euro). III. DETAILED CHANGES REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Current Current Actuals + Proposed Disbursement % Ln/Cr/TF Expenditure Allocation Committed Allocation (Type Total) Category Current Proposed IDA-55080- Subprojects,Part 13,465,254.00 11,240,950.12 13,045,254.00 100.00 100.00 001 1(a) Currency: Subprojects,Part XDR 3,694,746.00 1,704,907.31 4,103,746.00 35.00 35.00 1(b) G,CS,nonCS,P1c, 2,489,560.00 2,445,910.41 2,489,560.00 100.00 100.00 1d,2 The World Bank Kosovo Energy Efficiency and Renewable Energy Project (P143055) Operating costs 40,000.00 39,086.33 42,000.00 100.00 100.00 G,CS,nonCS,P3a, 410,440.00 387,001.80 419,440.00 100.00 100.00 3b Total 20,100,000.00 15,817,855.97 20,100,000.00 TF-B1487- Sub-projects, P 0.00 0.00 0.00 0.01 0 001 1(a) Currency: Sub-projects, P EUR 7,555,886.00 4,260,200.28 7,500,000.00 54.00 54.00 1(b) G,CS, non- CS,P1c,1d 1,000,000.00 792,843.97 1,500,000.00 100.00 100.00 proc.by KEEF G,CS, non-CS, P 800,000.00 150,276.85 355,886.00 100.00 100.00 3(c) DISB - OPERATING 0.00 0.00 0.00 0.01 0.01 COSTS Total 9,355,886.00 5,203,321.10 9,355,886.00