The World Bank Alat and Karakul Water Supply Project (P118197) REPORT NO.: RES44646 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ALAT AND KARAKUL WATER SUPPLY PROJECT APPROVED ON DECEMBER 13, 2012 TO Republic of Uzbekistan Water Global Practice Europe and Central Asia Region Regional Vice President: Anna M. Bjerde Country Director: Lilia Burunciuc Regional Director: Steven N. Schonberger Practice Manager/Manager: David Michaud Task Team Leader(s): Khairy Al-Jamal, Bakyt Arystanov The World Bank Alat and Karakul Water Supply Project (P118197) ABBREVIATIONS AND ACRONYMS DO Development Objective DWTP Dvoinik Water Treatment Plant ICR Implementation Completion and Results report IFR Interim Financial Report IRI Intermediate Results Indicator ISR Implementation Status Report MHCS Ministry of Housing and Communal Services MS Moderately Satisfactory OHS Occupational Health and Safety PCU Project Coordination Unit PDO Project Development Objective RVP Regional Vice President The World Bank Alat and Karakul Water Supply Project (P118197) BASIC DATA Product Information Project ID Financing Instrument P118197 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 13-Dec-2012 31-Dec-2020 Organizations Borrower Responsible Agency BUKHARA REGIONAL PRODUCTION ENTERPRISE Republic of Uzbekistan SUVOKOVA,Kommunkhizmat Agency,Project Coordination Unit Project Development Objective (PDO) Original PDO The project development objective (PDO) is to improve the coverage, quality and efficiency of public water supply service in the two districts of Alat and Karakul in the Bukhara region. The objective will be achieved through the rehabilitation and expansion of water production, transmission and distribution infrastructure in urban and rural areas. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-51890 13-Dec-2012 18-Jul-2013 13-Feb-2014 31-Dec-2020 82.00 64.17 10.24 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Alat and Karakul Water Supply Project (P118197) The World Bank Alat and Karakul Water Supply Project (P118197) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This restructuring paper seeks an eleven-months closing date extension for the Alat and Karakul Water Supply Project to complete critical contracts needed to achieve the PDO and deliver the project’s expected outcomes, following COVID-19 related delays to the project’s activities. This proposed closing date extension, if approved, will bring the cumulative project closing date extension to 47 months beyond the original closing date, necessitating approval by the Regional Vice President (RVP). A. Project Status 2. The Project experienced significant effectiveness delays combined with delays during the implementation due to sector reforms and institutional changes, contract management issues and finally by the spread of the global COVID-19 pandemic. Readiness and operational delays were addressed through the previous three restructurings that resulted in the closing date extension by 36 months. However, the COVID-19 impacts have limited the progress expected from the third restructuring which provided a 6 month closing date extension. While this last extension has helped in progressing some works contracts, others which required import of crucial goods (including material and equipment) are still lagging as the pandemic has resulted in severe restrictions on movement, manufacturing and import of necessary goods under the project. In particular, contract for Dvoinik Water Treatment Plant (DWTP), which is a strategic water treatment plant that would supply Alat and Karakul population (232,000 people) with good quality drinking water, has suffered extensively due to quarantine and lockdown not only in Uzbekistan but also in the manufacturing countries including Germany, Italy, India and Russia. With the recent reopening and ease of restrictions in these countries, pending goods have been manufactured, and shipping commenced. While the completion of the plant will need additional six months, the extra five months is needed to allow for testing and commissioning of DWTP, as well as serving as buffer against any unforeseen delay including the harsh weather during the winter season. 3. All undisbursed balance under the project have been committed with current disbursement at 85.4 percent. The project has been financing nine works contracts, three have been completed and four are at advanced stage with more than 90 percent completion and are expected to be completed by the current Project closing date (December 31, 2020). The remaining two contracts require more time to be completed: (i) AK/W/01 (construction of DWTP) re- started its implementation in late September 2019 (after the termination of the original contract with the first contractor in June 2019 due to poor performance) with new contractor showing high progress rate from 45 percent to 75 percent over the last six months; and (ii) AK/W/05 (construction of primary and secondary trunk mains, distribution network in western part of Alat district) has increased physical progress from 24 percent to 54 percent over the same period. Both contracts require around six working months beyond the current closing date in order to be completed, and an additional five months for testing. 4. One out of total four PDO indicators have been achieved. The remaining three PDO indicators are linked to the completion of the remaining two contracts, AK/W/01 and AK/W/05. Moreover, five out of eleven Intermediate Results Indicators (IRIs) have not been met yet. These indicators are directly related to the completion of DWTP The World Bank Alat and Karakul Water Supply Project (P118197) (service quality, quantity, coverage and continuity related indicators). All other indicators have already been achieved through the repair, replacement and expansion of distribution network and service reservoirs, as well as the construction of new efficient pumps. The proposed closing date extension will enable achievement of the remaining indicators. 5. Procurement, Environmental and Social Safeguards compliance are all consistently improving and rated Moderately Satisfactory (MS) from December 2019 onward. The project is regularly submitting quarterly progress reports. Directives and guidance provided by the World Bank (Bank) for the implementation of COVID-19 Pandemic related precautions and measures to ensure the safety of workers have been adopted by the Project Coordinating Unit (PCU), contractors and consultants in the workplace. An environmental safeguards specialist in the supervision consultant team regularly visits the project area. Gaps in the implementation of site-specific Environmental and Social Management Plans and safety risks at various active contracts, reported in June 2020 ISR, have been successfully addressed. No OHS accidents have been reported on any work site throughout the Project implementation. The Financial Management of the project is rated MS, quarterly IFRs are submitted timely, and the documentation of advances to the designated account are regularly updated. The project audit report for 2019 has been submitted in a timely manner with no qualification and found acceptable to the Bank. All six legal covenants have been met, and the project has no INT investigation. 6. This is the fourth Level 2 restructuring for the Project. The 1st restructuring was approved on November 23, 2017 and included an extension of the closing date by 18 months, from December 31, 2017, original closing date, to June 30, 2019, with a reallocation between disbursement categories. The 2nd restructuring was approved on November 7, 2018 and included an extension of the closing date by 12 months, till June 30, 2020, and change in the financial percentage of eligible expenditures to 100 percent from IDA proceeds. The 3rd restructuring was approved on June 2, 2020 and included an extension of the closing date by six months, till December 31, 2020. The proposed fourth (4) closing date extension of 11 months, if approved, will bring the cumulative closing date extension to 47 months, with a new project closing date of November 30, 2021. B. Rationale for Restructuring 7. The proposed closing date extension will allow the Borrower to complete planned project activities and fully achieve PDO and intermediate level indicators. The extension will also provide few months to (i) satisfactorily test and commission DWTP, and (ii) implement customer satisfaction surveys in both Alat and Karakul to assess the impacts of full completion of the project activities. This will better inform the project implementation completion and results report. 8. All concrete works for DWTP have been completed and and most of the required equipment has already been delivered to the site starting late November 2020. The remaining critical electrical and electromechanical equipment have been ordered, manufactured and shipped to Uzbekistan (expected delivery by the end of December 2020). This has eliminated further import risks which could occur in the event of a new wave of COVID-19. The requested closing The World Bank Alat and Karakul Water Supply Project (P118197) date extension will be complemented by the implementation of a comprehensive action plan for completion, agreed with the Ministry of Housing and Communal Services (MHCS), and Bukhara Water Utility. These actions include vigilant supervision and contract management and weekly meetings with the contractors and supervision consultants/engineer with frequent visits of representatives of the MHCS supported by regular monthly consultation meetings with the Bank team. 9. The Uzbek authorities including Ministry of Housing and Communal services, Ministry of Investment and Foreign Trade as well as the implementing entity (Uzkommunkhizmat) have put all efforts and measures in place to ensure satisfactory project closing. This includes but not limited to: (i) issuing special permits for movement of contracts' transportation to construction sites and organized charter flights from abroad to bring international service providing specialists. Due to to GoU’s efforts, implementation has continued to move forward albeit at slower pace given COVID constraints; and (ii) ensure the delivery of all remaining goods to the project sites by the end of December 2020. 10. As filed in the last ISR, the current Project’s DO and IP ratings are MS. However, without the proposed extension, the ratings will be downgraded. Table 1 below summarizes the likelihood of PDO targets achievement with and without the proposed closing date extension. Table 1. Status of PDO indicators till November 1, 2020 PDO Indicator Target Progress Achievement Achievement Status Status Likelihood Likelihood around Dec 31, 2020 9-11 months extension People provided with access to improved 191,500 19,000 Low High water sources Percentage of regulatory water samples 98% 55% Low High meeting potable quality standards, Bill collection ratio 80% 100% Achieved N/A Reliability of water supply service 20 hours/day 6 hours/day Low High II. DESCRIPTION OF PROPOSED CHANGES A. Closing Date Extension 11. The project closing date will be extended to November 30, 2021 and the deadline for withdrawal applications to March 31, 2022. B. Adjustment of Results Framework 12. The achievement dates of project targets will be adjusted from December 31, 2020 to November 30, 2021. The results framework remains relevant and no change will be introduced to the definition, wording or target of any indicator. C. Adjustment of Disbursement Estimates The World Bank Alat and Karakul Water Supply Project (P118197) 13. The disbursement estimates will be adjusted to reflect the extended implementation period and project progress as illustrated in Section III of this Restructuring Paper. The project approved amount is XDR53.2 million (US$82 million equivalent). However, due to the depreciation of the XDR against the US$, the current value depreciated to US$74.1 million as of November 30, 2020. Such depreciation has resulted in about $4.0 million over-commitment. As agreed, this will be financed from the recipient own resources. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Loan Closing Date(s) ✔ Disbursement Estimates ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ The World Bank Alat and Karakul Water Supply Project (P118197) Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 30-Jun-2019, 30-Jun- IDA-51890 Effective 31-Dec-2017 30-Nov-2021 30-Mar-2022 2020, 31-Dec-2020 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2013 0.00 0.00 2014 120,000.00 120,000.00 2015 630,000.00 630,000.00 2016 4,335,387.61 4,335,387.61 2017 11,862,050.72 11,662,050.72 2018 11,947,271.00 11,947,271.85 2019 10,900,365.11 10,900,365.11 2020 18,000,000.00 17,606,026.41 2021 16,000,000.00 11,898,898.30 2022 0.00 5,000,000.00 The World Bank Alat and Karakul Water Supply Project (P118197) . The World Bank Alat and Karakul Water Supply Project (P118197) . Results framework COUNTRY: Uzbekistan Alat and Karakul Water Supply Project Project Development Objectives(s) The project development objective (PDO) is to improve the coverage, quality and efficiency of public water supply service in the two districts of Alat and Karakul in the Bukhara region. The objective will be achieved through the rehabilitation and expansion of water production, transmission and distribution infrastructure in urban and rural areas. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 Improved coverage of public water supply service in the districts of Alat and Karakul Direct project beneficiaries 40,456.00 40,456.00 40,456.00 59,469.00 59,469.00 59,469.00 59,469.00 59,469.00 59,469.00 232,000.00 (Number) Action: This indicator has been Revised Female beneficiaries 50.68 50.68 50.68 50.65 50.68 50.70 50.70 50.70 50.70 50.70 (Percentage) Action: This indicator has been Revised Improved quality of public water supply service in the districts of Alat and Karakul Percentage of regulatory water 53.00 55.00 55.00 55.00 55.00 55.00 55.00 55.00 55.00 98.00 samples meeting potable quality The World Bank Alat and Karakul Water Supply Project (P118197) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 standards (Percentage) Action: This indicator has been Revised Percentage of regulatory water samples meeting potable quality 53.00 53.00 53.00 53.00 53.00 53.00 53.00 53.00 53.00 98.00 standards in Alat District (Percentage) Action: This indicator has been Revised Percentage of regulatory water samples meeting potable quality 57.00 57.00 57.00 57.00 57.00 57.00 57.00 57.00 57.00 98.00 standards for Karakul District (Percentage) Action: This indicator has been Revised Improved efficiency of public water supply service in the districts of Alat and Karakul Bill collection ratio 46.00 60.00 65.00 70.00 72.50 98.00 100.00 100.00 100.00 80.00 (Percentage) The World Bank Alat and Karakul Water Supply Project (P118197) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 Action: This indicator has been Revised Bill Collection Ratio - Alat 46.00 60.00 65.00 70.00 70.00 98.00 100.00 100.00 100.00 80.00 (Percentage) Action: This indicator has been Revised Bill Collection Ratio - Karakul 58.00 60.00 65.00 70.00 75.00 98.00 100.00 100.00 100.00 80.00 (Percentage) Action: This indicator has been Revised Reliability of water 4.00 4.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 20.00 supply service (Hours) Action: This indicator has been Revised PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 Component A: Improvement of Water Supply Infrastructure New piped household 0.00 0.00 0.00 0.00 0.00 0.00 7,235.00 7,235.00 26,459.00 35,400.00 water connections The World Bank Alat and Karakul Water Supply Project (P118197) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 that are resulting from the project intervention (Number) Action: This indicator has been Revised Piped household water connections that are benefiting 0.00 0.00 0.00 0.00 0.00 0.00 0.00 6,150.00 6,553.00 7,400.00 from rehabilitation works undertaken by the project (Number) Action: This indicator has been Revised Number of connections with 0.00 0.00 0.00 0.00 0.00 0.00 7,235.00 12,500.00 21,400.00 42,900.00 operating water meters (Number) Action: This indicator has been Revised Number of breakage per km of water 1.00 1.20 1.40 1.40 1.40 0.14 0.13 0.17 0.09 0.20 transmission mains (Number) Action: This indicator has been Revised Number of breakage 1.20 1.40 1.60 1.60 1.35 1.35 0.42 0.39 0.32 0.40 per km of water The World Bank Alat and Karakul Water Supply Project (P118197) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 distribution networks (Number) Action: This indicator has been Revised Component B: Institutional Strengthening and Capacity Building BVK Cash Working 1.45 1.53 1.53 0.68 0.62 0.48 0.90 Ratio (Number) Action: This indicator has been Revised BVK Cash Working Ratio - Alat 1.32 1.72 1.72 0.47 0.40 0.40 0.90 (Number) Action: This indicator has been Revised BVK Cash Working Ratio - Karakul 1.57 1.34 1.34 0.89 0.83 0.56 0.90 (Number) Action: This indicator has been Revised Percent of households for whom 85.00 85.00 85.00 85.00 83.00 83.00 65.00 42.00 35.00 20.00 water is a priority problem (Percentage) Action: This indicator has been Revised The World Bank Alat and Karakul Water Supply Project (P118197) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 Percent of households for whom water is a 75.00 75.00 75.00 75.00 83.00 83.00 65.00 42.00 35.00 20.00 priority problem - Alat (Percentage) Action: This indicator has been Revised Percent of households for whom water is a 85.00 85.00 85.00 85.00 83.00 83.00 65.00 42.00 35.00 20.00 priority problem - Karakul (Percentage) Action: This indicator has been Revised Number of water utilities that the 0.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 project is supporting (Number) Action: This indicator has been Revised Number of BVK staff recruited, and trained for Alat and Karakul 0.00 0.00 0.00 0.00 0.00 0.00 3.00 3.00 3.00 1.00 water supply service needs (Number) The World Bank Alat and Karakul Water Supply Project (P118197) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 8 Action: This indicator has been Revised Non revenue water 51.00 51.00 51.00 51.00 42.00 42.00 32.00 30.00 27.00 25.00 (Percentage) Action: This indicator has been Revised BVK Participation in IBNET for water and 0.00 0.00 0.00 0.00 1.00 1.00 1.00 1.00 1.00 1.00 sanitation utilities (Number) Action: This indicator has been Revised IO Table SPACE -- Revisions have to do with the end dates of the targets only. The World Bank Alat and Karakul Water Supply Project (P118197)