The World Bank Pacific Aviation Investment - Tonga (P128939) REPORT NO.: RES33594 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF PACIFIC AVIATION INVESTMENT - TONGA APPROVED ON DECEMBER 13, 2011 TO MINISTRY OF FINANCE AND NATIONAL PLANNING TRANSPORT & DIGITAL DEVELOPMENT EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Michel Kerf Senior Global Practice Director: Guangzhe Chen Practice Manager/Manager: Almud Weitz Task Team Leader: Julie Babinard, Pierre Graftieaux The World Bank Pacific Aviation Investment - Tonga (P128939) ABBREVIATIONS AND ACRONYMS AF Additional Financing ATC Air Traffic Control GoT Government of Tonga IDA International Development Association MS Moderately Satisfactory PAIP Pacific Aviation Investment Program PDO Project Development Objective PPIAF Public Private Infrastructure Advisory Facility PRIF Pacific Region Infrastructure Facility TAIP Tonga Airport Investment Project TAL Tonga Airports Limited TBU Fua’amotu International Airport TF Trust Fund VAV Vava’u International Airport The World Bank Pacific Aviation Investment - Tonga (P128939) BASIC DATA Product Information Project ID Financing Instrument P128939 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 13-Dec-2011 31-Dec-2018 Organizations Borrower Responsible Agency Ministry of Finance and National Planning Tonga Airport Ltd Project Development Objective (PDO) Original PDO The project development objective is to improve operational safety and oversight of international air transport infrastructure. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-57700 09-Mar-2016 07-Apr-2016 23-Jun-2016 31-Dec-2018 6.62 2.09 4.81 IDA-D1060 09-Mar-2016 07-Apr-2016 23-Jun-2016 31-Dec-2018 .63 .20 .50 IDA-H7430 13-Dec-2011 17-Feb-2012 14-Mar-2012 30-Dec-2018 27.21 24.37 .09 TF-A1644 09-Mar-2016 07-Apr-2016 23-Jun-2016 31-Dec-2018 .31 .10 .21 TF-12702 11-Jul-2012 19-Jul-2012 10-Aug-2012 30-Dec-2018 1.32 1.32 0 The World Bank Pacific Aviation Investment - Tonga (P128939) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Summary of Proposed Changes This paper proposes that the Tonga Aviation Investment Project (TAIP) be restructured to:  Extend the current closing date for IDA Grant IDA-57700; IDA Credit IDA-D1060; and PRIF grant TF-A1644from December 31, 2018 to December 31, 2019; and,  Include additional regional activities under Component C: ‘Strengthening Airport Operations and Management Capacity’. The closing date for both the original IDA Grant IDA-H7430 financing and the original PRIF Grant TF-12702 for the project will not be extended as it is expected that IDA Grant IDA-H7430 will be fully disbursed by December 30, 2018 and PRIF Grant TF-12702 is already fully disbursed. The proposed restructuring will allow the project to complete the two largest outstanding investments (Air Traffic Control [ATC] tower construction and equipment, and terminal renovations) at the Fua’amotu International Airport (TBU), as well as to use US$1.4 million of project savings for terminal renovations at the Vava’u International Airport (VAV) and the construction of a Cargo Shed at TBU. A small amount) of the remaining funding provided to the project from the Pacific Region Infrastructure Facility (PRIF) will be used to design a regional airfield pavement management system (PMS). This activity will be done in the context of the Pacific Aviation Investment Program (PAIP), which was approved by the Bank in December 2011 as a regional, horizontal Adaptable Program Loan that consists of a series of projects designed to ensure that critical aviation infrastructure meets operational safety requirements, and to strengthen regulatory compliance of international air transport of participating countries in the region. Phase I includes projects in Kiribati, Tonga and Tuvalu. Phase II includes Samoa, and Phase III Vanuatu. PAIP is also supporting the reform of the Pacific Aviation Safety Office (PASO) to provide enhanced aviation oversight services in the region. The proposed PMS would support the Governments of Kiribati, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu by improving the sustainability of key regional aviation infrastructure to help ensure safe and uninterrupted operation of flights. A PMS is a tool used to plan the maintenance and repair of a network of roads (or other paved facilities) in order to optimize pavement conditions over all concerned assets, and this same concept can also be applied to airport runways. For the project, the aim is to establish a system supported by a specialized software named PAVER, with associated capture of inventory, loading, and other relevant data across the eleven airports located in the five PAIP countries (Kiribati, Samoa, Tonga, Tuvalu, Vanuatu). The PAVER software will be installed at each airport location on an internet-connected PC available to airport authorities. The assignment would capture and populate the inventory into PAVER, propose condition monitoring surveys including training of appropriate in-country staff, and work with the airport teams to develop an ongoing program of monitoring and maintaining the monitoring system. The World Bank Pacific Aviation Investment - Tonga (P128939) B. Project Status As part of the Pacific Aviation Investment Program (PAIP), the TAIP project was approved in 2011 and has a disbursement ratio of 77.81%. Since December 2015 the project has been ‘Satisfactory’ for progress to achieving its Project Development Objective, as well as for ‘Implementation Progress’, except in June 2018 when the rating was downgraded to ‘Moderately Satisfactory (MS)’ due to delays in finalizing key activities, including the ATC and terminal renovations at TBU, which were further delayed following Tropical Cyclone Gita. The project has successfully upgraded both the TBU and VAV runways, implemented advanced communications and navigation aid systems, as well as strengthened the safety oversight of the sector by the Government. Tonga Airports Limited (TAL), the implementing agency, now holds required airport and services certifications. Vava’u airport is now receiving regular international flights. Additional Financing (AF) approved in March 2016 scaled up the existing project by primarily financing: (i) further investments in airport operations and security compliance, beyond those identified in the original project design; (ii) priority investment activities in the aviation sector that cannot be completed under the existing project due to a financing gap and; (iii) a contingency fund to finance TFSU operating costs. Tropical Cyclone Gita hit the main island of Tongatapu on 12/13 February 2018, which has had significant impact of the country’s infrastructure and normal business operations. This has exacerbated delays in procurement and government approvals required to complete activities in a timely manner. In addition, the domestic air terminal in Tongatapu sustained major damage with the complete loss of the roof and associated damage. TAL has undertaken to repair the terminal and, in the interim, moved the domestic services to the international terminal. As a result, the civil works on the ATC tower will now not be completed until February 2019, after the current project closing date of December 2018. Activities which are yet to be completed are: (i) procurement and installation of ATC hardware equipment for TBU (US$900,000); (ii) terminal renovation construction at VAV airport (US$300,000) and supervision (US$90,000); (iii) TBU terminal renovations (US$2.35 million); (iv) construction of a VAV boundary fence US$252,000; and (v) construction of cargo shed at TBU (US$275,000). All are expected to be completed by mid-2019. The cost of project management for the additional period of twelve months is estimated to be $430,000 and has been included in a revised financing plan for the project. All Technical Assistance Activities under Components B and C have been completed. II. DESCRIPTION OF PROPOSED CHANGES Extension of Project Closing Date: It is proposed to extend the closing date of TAIP, by 12 months from December 31, 2018 to December 31, 2019. This extension is needed to complete air transport improvement investments on the main island of Tongatapu and the outer island of Vava’u and to allow time to utilize saving from the project to finance: (i) terminal renovations at the Vava’u International Airport (VAV); (ii) construction of a Cargo Shed at TBU; and (iii) establishment of a regional airport pavement management system, which will help ensure the PAIP investments in runways are properly managed. Based on a revised financing plan there are sufficient uncommitted funds to finance the proposed new activities and the additional cost of project management for the period of the proposed extension. The World Bank Pacific Aviation Investment - Tonga (P128939) The Government of Tonga (GoT) has submitted a request for extension to allow for the project to complete its planned investments related to the TBU ATC Tower; construct and renovate terminal buildings at both TBU and VAV international airports; procure and construct additional investments arising from the surplus of US$1.4 million resulting from accumulated savings; and manage delays that have arisen in procurement and government approvals as a result of the emergency repair works necessary following Cyclone Gita on Tongatapu on 12/13 February 2018. The original IDA Grant IDA-H7430 financing for the project is expected to fully disburse and close by December 30, 2018. The original PRIF Grant TF-12702 is already fully disbursed and will also close on December 30, 2018. It is proposed to extend the closing date of the remaining sources of finance, IDA-57700, IDA-D1060, TF-A1644 by 12 months to December 31, 2019. The actions to be undertaken by the Recipient as agreed by the Bank include the following: GoT shall (a) closely monitor the completion of the contracts in question; (b) closely monitor the completion of all the other open contracts; (c) submit short monthly updates on the status of the project until closing; and (d) plan for project closing including final financial audit, update of the results framework, and evaluation report.. Additional Activities Under Component C: The objective of this component as described in the original Project Appraisal Document was to: “… support sector reform both regionally and within each participating country.” As the PAIP projects approach their conclusion, a study was done with funding from the Public Private Infrastructure Advisory Facility (PPIAF) to look at options to help with the sustainability of the PAIP investments. Based on the findings of this study, it is proposed to use remaining funds from the PRIF TF to the establishment of a regional airport PMS, which will help ensure the PAIP investments in runways are properly managed (US$ 0.15 million) An amendment to Component C has therefore been proposed to include an activity for designing such as system under a new sub-part C(b). The airport PMS is expected to be developed by the end of May 2019. III. SUMMARY OF CHANGES Changed Not Changed Components and Cost ✔ Loan Closing Date(s) ✔ Implementation Schedule ✔ Other Change(s) ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ The World Bank Pacific Aviation Investment - Tonga (P128939) Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Aviation Infrastructure Aviation Infrastructure 34.89 No Change 34.89 Investments Investments Aviation Sector Reform and Aviation Sector Reform and 2.17 No Change 2.17 Training Training Strengthening Airport Strengthening Airport Operations 0.63 No Change Operations and Management 0.63 and Management Capacity Capacity Project Support and Training 2.68 No Change Project Support and Training 2.68 Taxes (Government of Tong) 1.08 No Change Taxes (Government of Tong) 1.08 TOTAL 41.45 41.45 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE The World Bank Pacific Aviation Investment - Tonga (P128939) LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-57700 Effective 31-Dec-2018 31-Dec-2019 30-Apr-2020 IDA-D1060 Effective 31-Dec-2018 31-Dec-2019 30-Apr-2020 31-Dec-2018, 30- IDA-H7430 Effective 31-Dec-2016 Dec-2019, 30-Dec- 30-Dec-2018 30-Apr-2019 2018 31-Dec-2018, 30- TF-12702 Effective 31-Dec-2016 Dec-2019, 30-Dec- 30-Dec-2018 30-Apr-2019 2018 TF-A1644 Effective 31-Dec-2018 31-Dec-2019 30-Apr-2020 .