Lebanon Environmental Pollution Abatement Project (LEPAP) World Bank Project # P143594 Loan # 8410-LB Auditor's Report and Financial Statements For the period from January 1, 2019 to December 31, 2019 Talal Abu-Gbazaleh & Co. Member of Talal Abu-Ghazaleh Global Lebanon Environmental Pollution Abatement Project (LEPAP) World Bank Project # P143594 Loan # 8410-LB Pages Independent auditor's report 1&2 Statement of cash Disbursement 3 Notes to the financial statement 4 TAGAudk Talal Abu-Ghazaleh & Co. Global Company for Auditing and Accounting tii J W Z 4i Societe Civile (R.C. 67) c 9 . (w e*. o Certified Public Accountants Independent Auditor's Report To: The Management of Lebanon Environmental Pollution Abatement Project (LEPAP) Our opinion In our opinion, the financial statements of Lebanon Environmental Pollution Abatement Project ("the Project") comprising of the statement cash disbursement for the period from January 1, 2019 to December 31,2019 and the statement of cash payments classifying the uses of funds, statement of movements in the Designated Account and the notes to the financial statements for the period then ended are prepared, in all material respects, in accordance with the accounting policies described in note 2 to the financial information. Basis for opinion We conducted our audit in accordance with International Standards on auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements' section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Ministry of Environment and the PMU in accordance with the International Ethics Standard Board for Accountants' code of Ethics for Professional accountants (IESBA Code) and the ethical requirements that are relevant to our audit of the financial statements in Lebanon. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code. Basis of accounting and restriction on distribution and use We draw attention to note 2 to the financial statements, which describes the basis of accounting. The financial statements are prepared to enable the PMU to meet its reporting obligations to the World Bank under the terms of the Loan Agreement 8410-LB. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for the Ministry of Environment, the World Bank and the UNDP and should not be distributed to or used by parties other than the Ministry of Environment, Republic of Lebanon, the World Bank and the UNDP. Our report is not modified in respect of this matter. Sanayeh-Al Mansour Bldg. NFORMBEROFTF L-4 - Tel.: +961 1 754 222 m FORUM OF FiRms +q11 Vot Y 6LLA Fax: +9611754 222 t8gi.COM11 I Vet YYY :UJ P.O.Box: 11-7381, Beirut, Lebanon tagco.beirut@tagi.com t*4.AUM ,2 0 Y VA I :Y.A Responsibilities of management and those charged with governance for the financial statements The PMU is responsible for the preparation of the financial statements in accordance with the accounting policies described in note 2 to the financial statements and for such internal control as management determines is necessary to enable the preparation of the financial statements that is free from material misstatement, whether due to fraud or error. Those charged with governance are responsible for overseeing the project's financial reporting process. Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism through the audit. We also: * Identify and assess the risk of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Date of the auditor's report: 28 May, 2020 Audit Firm Talal Abu-Ghazaleh & Co. International Beirut, Lebanon Tel: +961 - 1 - 754222 . vyFax: +961 - 1 - 754222 ext 102 2 CP% Lebanon Environmental Pollution Abatement Project (LEPAP) World Bank Project # P143594 Loan # 8410-LB Statement of cash Disbursement For the period from January 1, 2019 to December 31, 2019 Contract Previous Disbursements Total Note Amount Period 2019 Disbursements Variance Disbursements US$ US$ U US$ US$ Entreprise Name Cimenterie 3 800,000.00 800,000.00 - 800,000.00 Nationale (1) Sicomo SAL 4 385,000.00 384,999.22 - 384,999.22 0.78 Wilco PM 5 2,250,000.00 1,838,034.13 411,965.87 2,250,000.00 - Kassatly Chtaura 6 800,000.00 396,547.53 374,809.17 771,356.70 28,643.30 Cimenterie 7 1,900,000.00 - 1,628,955.89 1,628,955.89 271,044.11 Nationale (2) Libant Lait SAL 8 1,995,374.00 - 1,995,374.00 1,995,374.00 - Cirnent de Sibline 9 2,156,293.00 - 1,617,828.85 1,617,828.85 538,464.15 SAL Zinaline SARL 10 345,000.00 - 345,000.00 345,000.00 - Total 10,631,667.00 3,419,580.88 6,373,933.78 9,793,514.66 838,152.34 3 Lebanon Environmental Pollution Abatement Project (LEPAP) World Bank Proiect # P143594 Loan # 8410-LB Notes to the Financial Statements 1- Project background 1. Technical Assistance Component A major progress has been made on the Technical Assistance (TA) Component in order to reach the project's two objectives. Objective No.1 related to reducing industrial pollution in targeted industrial enterprises has been followed-up upon through the provision of environmental services to around 63 Lebanese industries including the borrowing industries. The technical support provided to the beneficiaries mainly included the following: - Assessment of the environmental status and suggestion of needed mitigation measures through relevant environmental studies; - Provision of advice on the monitoring and laboratory analysis needed; - Planning, designing and procurement of pollution abatement interventions; - Preparation of the environmental and social studies required as per the World Bank safeguard policies; - Technical and financial evaluation of the proposed pollution abatement interventions; - Monitoring of the financed sub-projects during construction and operation of the financed sub-projects; - Assessment of the health and safety plans of the beneficiaries; - Provision of additional technical advice, as needed. On another note, Objective No. 2 related to strengthening MoE's capacity in monitoring and enforcement has been reflected in the increase of non-compliant operational enterprises addressed in letters from MoE to relevant institutions. The support provided mainly included, but was not limited to, the following: - Provision of trainings and workshops on several technical aspects through specialized experts; - Preparation of environmental guidelines for specific industrial sectors; - Assessment of the main environmental laboratories operating in Lebanon; - Support in the updated of the environmental limit values for air emissions and wastewater discharge. In addition to the above, other activities have been completed under the TA component, including: - Development of a communication plan for the project; - External financial audit of the first fiscal year starting from disbursement on December 1, 2017 and ending on December 31, 2018; - Provision of support in the preparation of the project paper for the proposed Additional Financing and finalization of the corresponding Environmental and Social Management Framework. 4 2. Investment Component The total disbursements until 31 December 2019 amount to US$ 10,631 million equivalent to 71% of the total loan amount. The total disbursed amount covers 8 sub-projects (implemented in seven industries) out of which 5 sub-projects have been completed and successfully operated. The remaining three sub-projects are currently under construction and commissioning. The PMU is working closely with several industries that have shown interest in accessing sub- loans through LEPAP financing. It should be noted that the remaining amount under the current project might not be sufficient for financing all potential sub-projects in the pipeline. Accordingly, the sub-projects will benefit from the current LEPAP loan on a first come first serve basis until the funds are entirely consumed. The project's planned Additional Financing is expected to secure the needed funding for the remaining sub-projects in the pipeline which could not be covered under the existing loan, 2- Principal accounting policies and basis of preparation The Project Management Unit ("PMU") prepares the financial statements of the LEPAP ("the Project"). The significant accounting policies adopted by the PMU in the preparation of the financial information are as follows: Basis of preparation The financial statements have been prepared in accordance with the cash basis of accounting. Use of Funds Uses of funds, expenses and other disbursements are recognized when cash is disbursed. 3- Cimenterie Nationale (1): Conversion of Kiln N. 4 ESP to high efficiency bag filter Previous Disbursements Total Disbursements 2019 Disbursements Description USD USD USD Bag filter 800,000.00 - 800,000.00 Total 800,000.00 - 800,000.00 5 4- Sicomo SAL: Installation of a bag filter and online monitoring for air emissions at the waste to energy plant Previous Disbursements Total Disbursements 2019 Disbursements Description USD USD USD Dust collection with 174,139.52 - 174,139.52 accessories Transporters 33,772.60 - 33,772.60 Continuous 145,594.50 - 145,594.50 monitoring system Local work fees 31,492.6 - 31,492.6 Total 384,999.22 - 384,999.22 6 5- Wilco PM: Installation of a rendering plant Previous Disbursements Total Disbursements 2019 Disbursements Description USD USD USD Poultry protein fat recovery plant 1,058,141.00 5,353.40 1,063,494.40 Steel structures 83,164.00 0.00 83,164.00 Boiler 190,800.00 6,925.91 197,725.91 WW equipment & spare parts 87,403.00 0.00 87,403.00 Custom fees 105,680.00 0.00 105,680.00 Pipes, Tanks, pumps 13,217.99 0.00 13,217.99 Pipes 17,503.00 0.00 17,503.00 Tubes 11,147.00 3,722.80 14,869.80 Steel pipes 26,415.49 8,914.80 35,330.29 Concrete 17,952.00 0.00 17,952.00 Bars 15,365.00 0.00 15,365.00 Elevator 34,000.00 0.00 34,000.00 Paint 12,690.00 920.00 13,610.00 Mechanical works 3,500.00 3,540.00 7,040,00 Plastic, sealer 1,949.65 0.00 1,949.65 Water treatment related accessories 60,000.00 0.00 60,000.00 Electricity works 5,873.00 0.00 5,873.00 Steel tank 15,550.00 0.00 15,550.00 Electricity/lighting/cooling/pumps 19,573.00 1,823.00 21,396.00 Electric and electronic supply 18,640.00 12,893.32 31,533.32 Steel fuel tank rendering 1,071.00 0.00 1,071.00 Fuel tank foundation 1,768.00 0.00 1,768.00 Air compressor 23,631.00 0.00 23,631.00 Ventilation 13,000.00 480.00 13,480.00 Generator - 129,000.00 129,000.00 Mechanical Supplies - 1,559.22 1,559.22 Cables and Antenna - 5,316.42 5,316.42 Cables - 3,098.46 3,098.46 Pipes and Valves - 3,107.21 3,107.21 Mechanical Supplies - 4,894.81 4,894.81 Reachtruck - 6,000.00 6,000.00 Regulating Valves and Pressuretrol - 1,270.00 1,270.00 Valves - 988.00 988.00 Electrical Supplies - 785.18 785.18 Pipes & Hose Accessories - 2,535.21 2,535.21 Plumbing Supplies - 4,878.69 4,878.69 Epoxy - 4,054.05 4,054.05 Fans Control - 12,322.84 12,322.84 Mechanical and Civil - 156,441.00 156,441.00 Gas Detector - 823.89 823.89 Isolation - 8,000.00 8,000.00 Painting - 4,344.00 4,344.00 Junction Boxes - 639.00 639.00 Gear Motor - 1,627.96 1,627.96 Sub-Total 1,838,034.13 396,259.17 2,234,293.30 7 5- Wilco PM: Installation of a rendering Previous Disbursements Total plant Disbursements 2019 Disbursements Description USD USD USD Electrical Supplies - 628.83 628.83 Cables - 450.00 450.00 Insulation - 774.00 774.00 USB Converter - 795.00 795.00 Plumbing Supplies & Works - 11,950.00 11,950.00 Bearings - 1,112.00 1,112.00 Total 1,838,034.13 411,965.87 2,250,000.00 6- Kassatly Chtaura: Installation of a wastewater treatment plant Previous Disbursements Total Disbursements 2019 Disbursements Description USD USD USD Construction 20,200.00 31,727.00 51,927.00 material Wastewater 254,121.00 148,872.00 402,993.00 treatment plant Welding work for 17,120.00 17,120.00 wastewater 0.00 treatment plant Deformed bars 27,123.32 0.00 27,123.32 Construction 66,866.80 66,093.00 132,959.80 material Steel structures 11,116.41 44,070.24 55,186.65 Caterpillar rental - 14,414.41 14,414.41 Construction 6,087.22 6,087.22 Material Tanks and Basins - 59,270.80 59,270.80 Pipes - 4,274.50 4,274.50 Total 396,547.53 374,809.17 771,356.70 8 7- Cimenterie Nationale Sub-project #2: Installation of a cover for the petcock storage and improvement of clinker transport Previous Disbursements Total Disbursements 2019 Disbursements Description USD USD USD Shipment fees - 36,222.45 36,222.45 Dedusting fitter system 1,501,478.02 1,501,478.02 for Kilns 2 and 3 Plasma cutting & - 7,732.50 7,732.50 marking Bolts and accessories - 2,578.56 2,578.56 Scaffolding - 10,100.00 10,100.00 Cranes - 28,850.00 28,850.00 Electrode - 433.00 433.00 Plates - 565.50 565.50 Fer plat et tuyaux - 3,391.36 3,391.36 Readymix - 37,604.50 37,604.50 Total - 1,628,955.89 1,628,955.89 9 8- Libant Lait SAL: Nutrient Recovery and Water Recycling plant Previous Disbursements Total Disbursements 2019 Disbursements Description USD USD USD Topograph for wastewater project 500.00 500.00 Pumps, motors and fabrication - 134308237 1,343,082.37 componentry Construction material - 31,707.20 31,707.20 Waterproofing paints, concrete add - 152,665.32 152,665.32 Drawings, studies, monitoring and -6,00000 6,000.00 implementation Steel structures - 89,372.40 89,372.40 Installation of geosynthetic lining 82,028.00 82,028.00 system Water tanks 9,475.00 9,475.00 Cylindrical Tanks - 3,840.00 3,840.00 Docking bays equipment - 2,724.43 2,724.43 Digging cost - 42,395.00 42,395.00 Crating and packaging of WW recycling -88,689.66 88,689.66 plant equipment Storage of chemicals & spare parts - 5,300.00 5,300.00 Lab equipment - 162.93 162.93 Consulting fees - 4,710.00 4,710.00 Lab equipment - 2,672.90 2,672.90 Conveyor - 11,000.00 11,000.00 Electrical works - 39,750.00 39,750.00 Pumps and accessories - 32,994.00 32,994.00 Ready mix boton - 14,711.00 14,711.00 FVC pipes and fittings - 18,957.66 18,957.66 EIP sandwich panels - 1,017.00 1,017.00 Piping material & channel - 2,524.36 2,524.36 Fire hose peel - 2,473.00 2,473.00 Pipes and fittings 275.30 275.30 Plastic pipes 1,168.47 1,168.47 Crane Fees 800.00 800.00 Plastic pipes 1,740.00 1,740.00 Steel rolling shutter for EWR buildings 2,030.00 2,030.00 Steel frame & door - 608.00 608.00 Total - 1,995,374.00 1,995,374.00 10 9- Ciment de Sibline: Installation of a cover for the petcock and coal storage area, Conversion of the conveyor belts into pan and bucket convevors for lines 1 & 2 respectively Previous Disbursements Total Disbursements 2019 Disbursements Description USD USD USD Metallic cover for solid 665,483.85 665,483.85 fuel reservoir Civil works - 204,612.14 204,612.14 Pan and bucket- 17,375.00 17,375.00 conveyors Pan conveyor Steel box -139,853.00 139,853.00 for line 2 External Technical -9,000.00 9,000.00 Assistance/Analysis External Technical -45,621.00 45,621.00 Assistance/Analysis Supply of a total and - 535,883.86 535,883.86 feeding system Total - 1,617,828.85 1,617,828.85 10- Zinaline SARL: Waste Minimization and Resource Efficiency Previous Disbursements Total Disbursements 2019 Disbursements Description USD USD USD Beam Saw, Briquetting 168,167.68 168,167.68 Machine Extraction and- 176,832.32 176,832.32 Filtering Station Total - 345,000.00 345,000.00 11