The World Bank GEF Romania Integrated Nutrient Pollution Control Project (P093775) REPORT NO.: RES55462 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF GEF ROMANIA INTEGRATED NUTRIENT POLLUTION CONTROL PROJECT APPROVED ON OCTOBER 30, 2007 TO MINISTRY OF FINANCE ENVIRONMENT, NATURAL RESOURCES & THE BLUE ECONOMY EUROPE AND CENTRAL ASIA Regional Vice President: Anna M. Bjerde Country Director: Gallina Andronova Vincelette Regional Director: Sameh El-Saharty Practice Manager/Manager: Kseniya Lvovsky Task Team Leader(s): Berengere P. C. Prince, Alexandru Cosmin Buteica The World Bank GEF Romania Integrated Nutrient Pollution Control Project (P093775) I. BASIC DATA Product Information Project ID Financing Instrument P093775 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 30-Oct-2007 30-Jun-2023 Organizations Borrower Responsible Agency Ministry of Finance Ministry of Environment, Waters and Forests Project Development Objective (PDO) Original PDO To support the Government of Romania to meet the EU Nitrates Directive requirements by (a) reducing nutrient discharges to water bodies, (b) promoting behavioral change at the commune level, and (c) strengthening institutional and regulatory capacity. Current PDO The development objective of the project is to support the Government of Romania towards meeting EU Nitrate Directive requirements at a national scale. Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-85970 28-Mar-2016 14-Apr-2016 13-Apr-2017 30-Jun-2023 52.39 47.87 5.75 IBRD-48730 30-Oct-2007 28-Dec-2007 08-Dec-2008 31-May-2017 65.84 60.30 0 TF-58040 28-Dec-2007 28-Dec-2007 08-Dec-2008 31-May-2017 5.47 5.47 0 The World Bank GEF Romania Integrated Nutrient Pollution Control Project (P093775) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The Borrower (Ministry of Finance) and the project implementing agency (Ministry of Environment, Waters and Forests) have informed the World Bank that they would propose a restructuring of the INPCP to extend the project closing date by six months to December 31,2023, to complete remaining project activities, without changes to the scope of work. This is the second extension request since the processing of the Additional Financing (AF) on April 13, 2017. The INPCP project was approved on October 30, 2007, with the current closing date of June 30, 2023. The INPCP original loan (4873-RO) closed after the grace period (September 30, 2017) with a final balance of EUR 1.92 million (of total EUR 50 million) that had not been used at the closing date, primarily due to cost savings, and the GEF Grant (TF058040-RO) closed with almost 100% execution of the grant amount. The original INPCP met most targets and exceeded some. The AF loan (EUR 48 million) was approved by the Board of Executive Directors on March 28, 2016, and became effective one year later, on April 13, 2017. The proposed extension would be the fourth extension of the project closing date and the second one since the AF approval and will apply only to the AF activities. This will bring the cumulative extension of the project closing date to 62 months, and the resulting project age at the time of completion will be 16 years and two months. The proposed extension will be the last one to be requested until the closing of the project. Rationale. Project extension is required to ensure that all activities are fully implemented in a satisfactory manner and the loan is fully disbursed while contributing to a smooth transition to its follow-on operation and its readiness for implementation. Romania’s short-term growth prospects have been eroded by the Russian invasion of Ukraine, contributing to higher inflation (16.8 percent in November 2022), uncertainty, and further disruptions to supply chains. The high inflation has impacted the procurement process during the past year resulting in rebidding in some instances. The proposed extension would allow the completion of the remaining communal manure platforms which are currently under re-bidding stage and ensure a smooth transition of the INPCP PMU towards the effectiveness of the follow-on Romania Rural Pollution Prevention and Reduction Project (RAPID – P179786, estimated Board date of March 30, 2023), ensuring its readiness for implementation and strengthening the long-term sustainability of INPCP. There are no changes to the PDO, scope of work or safeguards policies. The project development objective (PDO) is to support the Government of Romania towards meeting the EU Nitrate Directive requirements at a national scale. The project is now focusing on implementing activities financed by the AF loan. The PDO remains achievable and progress towards its realization is Satisfactory. The overall implementation progress is Satisfactory, and PMU performance is also assessed as Satisfactory. Progress achieved to date. As of February 28, 2022, considerable progress has been made in achieving the PDO-level indicators. Approximately 63.6% of the project area (of the 70% target) shows a 10% reduction in discharge of nitrates into water bodies, showing a downward trend of nitrates concentration. Sixty nine percent of the population in the project area are adopting preventive and remedial measures to reduce nutrient discharges (of the 75% target), and a The World Bank GEF Romania Integrated Nutrient Pollution Control Project (P093775) nutrient load reduction of approximately 529.83 tons/year has been achieved (of the 600 t/y target). Similarly, the PMU is making strong progress towards the achievement of the intermediate results indicators, with some having already been met. Disbursements significantly increased in FY23, despite challenges posed by inflation. The loan’s disbursement rate continued to increase reaching 89% in February 2023. The forecasted cumulative disbursement rate to be reached by the end of the CY 2023 is 100%. The actual loan’s commitment rate of more than 98% is a good indication to expect a 100% disbursement of Loan proceeds. Several construction contracts encountered implementation difficulties due to the limited availability of construction material resulting from the Russian invasion of Ukraine and the rising inflation. The prices have been soaring with payment increases ranging from 5% to 35% per investment, with some contracts being impacted and thus under a rebidding procedure to finalize works under the new economic conditions, while for others premature termination was avoided due to excellent contract management of the PMU. Price adjustments were paid from project savings built over years of careful financial management. Implementation bottlenecks have been resolved, setting the conditions for successful project completion and a smooth transition to the follow-on operation, if the extension is granted. Recent PMU staffing issues have been mitigated, with only 3 positions being vacant but in different stages of ongoing recruitment. Government budget allocation has improved compared to recent years: the project has received its full allocation for CY2023 which is assessed as sufficient to complete all remaining activities, including accounting for inflation. The budget allocation fully covers the project needs until the end of CY2023 which is a pre-requisite for the project to reach 100% disbursement of the Loan proceeds. Extension beyond the current closing date from June 30 to December 31, 2023, would provide the conditions to complete all project activities. The extension would also enable the National Administration Romanian Waters (ANAR) to complete the construction and rehabilitation of the remaining piezometers across the country. Lastly, the extension would contribute to maintain a Satisfactory rating at the end of the project, as it is expected that all PDO indicators and intermediate results indicators would be achieved by end of CY2023. The project financial management arrangements are satisfactory, with the reporting and auditing requirements met. The project is up to date in terms of audit submission, with a clean (unmodified) opinion issued on the project financial statements as of December 31, 2021. The PMU is fully committed to ensuring the successful completi on of the INPCP and the readiness for the implementation of RAPID. Implementation arrangements for RAPID include the continuation of the existing INPCP PMU and its staff to ensure project readiness and successful implementation. III. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 30-Nov-2015, 31- IBRD-48730 Closed 31-Dec-2013 May-2017, 11-Oct- 2017 The World Bank GEF Romania Integrated Nutrient Pollution Control Project (P093775) IBRD-85970 Effective 31-Mar-2022 30-Jun-2023 31-Dec-2023 30-Apr-2024 30-Nov-2015, 31- TF-58040 Closed 31-Dec-2013 May-2017, 11-Oct- 2017