The World Bank
Industrial Waste Management and Cleanup Project (P122139)
REPORT NO.: RES47060
DOCUMENT OF THE WORLD BANK
RESTRUCTURING PAPER
ON A
PROPOSED PROJECT RESTRUCTURING
OF
INDUSTRIAL WASTE MANAGEMENT AND CLEANUP PROJECT
APPROVED ON SEPTEMBER 19, 2014
TO
MONTENEGRO
ENVIRONMENT, NATURAL RESOURCES & THE BLUE ECONOMY
EUROPE AND CENTRAL ASIA
Regional Vice President: Anna M. Bjerde
Country Director: Linda Van Gelder
Regional Director: Steven N. Schonberger
Practice Manager/Manager: Kseniya Lvovsky
Task Team Leader(s): Frank Van Woerden, Qing Wang
The World Bank
Industrial Waste Management and Cleanup Project (P122139)
I. BASIC DATA
Product Information
Project ID Financing Instrument
P122139 Investment Project Financing
Original EA Category Current EA Category
Full Assessment (A) Full Assessment (A)
Approval Date Current Closing Date
19-Sep-2014 30-Jun-2021
Organizations
Borrower Responsible Agency
Montenegro Environmental Protection Agency
Project Development Objective (PDO)
Original PDO
The Development Objective of the Project is to reduce contamination of Montenegro’s natural resources and public
health risks of exposure to this contamination from selected industrial waste disposal sites.
Summary Status of Financing (US$, Millions)
Net
Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed
IBRD-84280 19-Sep-2014 10-Oct-2014 17-Nov-2014 30-Jun-2021 61.60 24.14 32.69
Policy Waiver(s)
Does this restructuring trigger the need for any policy waiver(s)?
No
II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES
The World Bank
Industrial Waste Management and Cleanup Project (P122139)
1. This restructuring paper seeks a project closing date extension by one year from June 30, 2021 to June 30, 2022
for the Industrial Waste Management and Cleanup Project, to allow for completion of critical works needed to achieve
the Project Development Objectives and deliver the project outcomes. If approved, this will be the third and final
extension following the earlier two one-year extensions granted in 2019 and 2020. It would result in a cumulative
extension of 36 months from the original closing date of June 30, 2019, requiring Regional vice President (RVP)
approval. Project age at completion would be 91 months by June 2022. There are no other elements under this
restructuring.
A. Scope of the Project
2. Component 1 ‘Remediation of Selected Legacy Industrial Waste Disposal Sites’ of the Montenegro Industrial
Solid Waste Project aims to remediate three contaminated sites and halt pollution of the environment and related
risks to public health where these sites occur. The sites are: (i) a shipyard in Bijela with contaminated soil and
groundwater and stockpiles of solid waste; (ii) a mine-tailings disposal site in Gradac; (iii) and a coal ash disposal site in
Pljevlja/Majevac. Under this component, the project also supports preparation of technical documentation for
remediation works for two industrial waste disposal sites at KAP, the Aluminum Plant in Podgorica. Activities under
Component 2 ‘Future Industrial and Hazardous Waste Management’ support Montenegro with the management of
ongoing generation of industrial and hazardous waste in the country. Project Management is supported under
Component 3.
3. The Project is implemented by the National Environmental Protection Agency (NEPA) and the Ministry of
Ecology, Spatial Planning and Urbanism (MESPU, formerly Ministry of Sustainable Development and Tourism, MSDT).
NEPA has for this purpose established a Project Management Unit (PMU) and is supported by the Technical Services
Unit (TSU under Ministry of Finance) for Procurement and Financial Management tasks.
B. Project Status
4. Following Effectiveness in November 2014 and the Project launch workshop in February 2015, the first two
years of implementation, calendar years 2015-2016, were characterized by slow progress due to multiple causes.
Delaying factors were the bankruptcy of the state-owned Bijela shipyard in 2015; unresolved bankruptcy procedures
for KAP and changing circumstances in Maljevac that required a re-design of the remediation approach for the project
site in this location. In addition, implementation arrangements were not optimal with an under-staffed PMU and
lacking project coordination among key institutions.
5. Implementation progress picked up from January 2017 when the newly installed government confirmed to the
Bank the high importance of the Project and concerns about the accumulated delays. In the period February-April
2017, the Government made critical decisions to advance project implementation, particularly administrative
decisions to advance preparation of remediation works for the project sites, strengthening of the PMU and improved
coordination between key institutions, particularly between NEPA and the implementing Ministry (MSDT, at that
time).
6. Although implementation performance improved since late 2017 resulting in first works contracted and started
for the Bijela shipyard since late 2018, challenges remained with the bankruptcy procedures with the KAP assets and
thus the project sites at the KAP location. Also, the re-design of remediation works in Maljevac required an
amendment of the Loan Agreement and it became clear that works could not be completed by the original project
The World Bank
Industrial Waste Management and Cleanup Project (P122139)
closing date of June 30, 2019. Therefore, a comprehensive project restructuring was completed in June 2019 to (i)
continue with remediation preparations for the KAP project sites, but exclude financing of remediation works from the
project scope; (ii) cancel part of the Loan related to the reduced scope of activities for the KAP project sites; (iii)
amend the Loan agreement to align with re-design of remediation works at the Maljevac site; and (iv) extend the
closing date with one year to June 30, 2020 to allow for completion of the remediation works under Component 1 and
the Component 2 activities.
7. Since the first project restructuring, for the two sites (Maljevac and Gradac), works had been procured with
contracts signed and works started in July 2019 and September 2019 respectively, originally scheduled for completion
by June 2020. Works at the Bijela shipyard had started in late 2018 and were scheduled for completion by March
2020. However due to unexpected COVID-19 measures since March 2020 that hampered adequate staffing for site
works; bad weather conditions in the Fall of 2019 and the Spring of 2020 preventing on-site works in Maljevac and
Gradac from progressing as planned; and the fact that after August 2019, critical waste exports from the Bijela
remediation site to Spain had to be discontinued as renewal of the earlier permit was not granted by Spanish
authorities, the second project restructuring was requested by the Government of Montenegro and processed in June
2020 with the current closing date of June 30, 2021.
8. In March-April 2020, the Bank team agreed with the PMU on an Implementation Action Plan (IAP) to remove the
bottleneck for the remediation sites under Component 1 and for Component 2 activities. The following paragraphs
present the current status of the IAP in more detail.
9. Shipyard Bijela Remediation Site. A key focus of the IAP was to resume the waste export to Spain, which had
been held up in legal procedures since December 2019. After engaging with the Spanish authorities, in April 2021 the
permit for 30,000 tons of grit export was issued and in May 2021, the contractor secured the export permit from Spain
for 40,000 tons of contaminated soil. Since May 2021, grit exports have resumed, and soil exports are expected to
follow in June/July 2021. Based on these developments, the works planning for site remediation has been updated
and approved by the supervision engineer and the client. All exports should be completed by November 2021 with
substantial completion of remaining works on site by February 2022. Further export licenses are required for oily
materials, asbestos and contaminated big bags, though in significantly smaller quantities. The contractor received TFS
(Trans Frontier Shipment) consent for waste oil from the Greek authorities and applied for TFS consent in April 2021 to
Portugal national authorities for export of 500 tons of big bags (there are ca 250t of big bags on site) and to Germany
national authorities for the export of 150 tons of asbestos waste. It will apply for TFS in June 2021 from Austrian
national authorities for the export of 500 tons of solid oily waste materials and sludges. It is expected that remaining
permits will be issued by the end of the June 2021 or early July 2021. Export licenses for these materials are not
expected to be challenging, due to the nature of these materials and the limited quantities (as opposed to the
challenges that had to be overcome to secure licenses for soil and grit exports).The halting of (grit, soil) waste exports
from Bijela has been the key risk for project completion and resuming these export enabled to upgrade the PDO and
IP ratings of the project to MS.
10. The IAP does not yet present contingency plan for what will happen if export licenses cannot be secured for
remaining waste quantities (e.g. big bags, asbestos, soil beyond currently licenses quantities). This will be further
discussed with the client, but it is noted that the related risks are considered limited in view of the nature and
quantities of these materials and can be managed within the timeframe of the project if the closing date is extended
to June 2022.For this site, on-site works (cleanup, backfilling, groundwater cleanup, demolitions) are largely
completed, but some parts are still occupied with waste materials - contaminated grit and soil .
The World Bank
Industrial Waste Management and Cleanup Project (P122139)
11. Maljevac Coal Ash Disposal Remediation Site. Works started in September 2019 and by the end of April 2021
reached 90% completion (against contract volume). The spring of 2021 have been characterized by severe weather
conditions in the Pljevlja region that hampered the works. Nonetheless, works are currently reaching substantial
completion and can be finalized by the end of June 2021.In parallel to the remediation works at the Maljevac ash
disposal site financed from the project, the local power company EPCG is undertaking works at the same location to
build new ash storage capacity. Although the latter is not financed by the project, these are considered associated
investments and since they require land acquisition and resettlement, these must comply with World Bank safeguards
requirements and need to be monitored for this purpose. Compensation procedures for the project affected people
(PAPs) have been managed adequately, but many PAPs have filled procedures for additional compensation.
Procedures to settle these cases have been progressing but were halted since March 2020 due to COVID-19 measures.
Procedures have resumed in late 2020. At present (June 2021) only 6 appeal cases are still pending, and it is expected
that these will be settled by November 2021, or earlier.
12. Gradac Mine Tailings Remediation Site. Works on site started in November 2019 but faced important setbacks
due to the COVID measures in 2020 (affecting staff mobilization) and severe weather conditions (rain and snow) in
both the spring of 2020 and 2021, making the site near inaccessible for prolonged periods of time. Works have
resumed now after weather conditions approved this spring and by the end of April 2021 progress of 40% completion
can be reported. It is expected that works can be substantially completed by August 2021.
13. Overall assessment of remediation works implementation timeline. Considering the current status of
implementation and various challenges to the works schedules as described above, all three sites have faced delays.
Technically, only the Maljevac site can be substantially completed by the current project closing date of June 30, 2021.
The Gradac site is not far behind the original schedule but will need around two more months, until August 2021, to
reach substantial completion. Main challenges existed with the export of waste from the Bijela site, but these have
been resolved in the period April/May 2021 with the granting of the key export licenses for the large volumes of grit
and soil waste. The revised works schedule for the Bijela shi pyard is now realistic, with exports to be completed by
November 2021 and closure of the works in the following months until February 2021.
14. Component 2 activities. Component 2 covers technical assistance for managing hazardous and industrial waste
that is currently generated in Montenegro. Activities include improvements in waste registration and monitoring
systems and preparations for the development of a national waste management facility. These activities have not
been time-critical, have been developed satisfactorily and will be concluded by June/July 2021.
15. Project rating. One out of three PDO indicators has been achieved. The remaining two PDO indicators are linked
to the completion of the remaining remediation works at all three sites. Moreover, all five Intermediate Results
Indicators (IRIs) that have not been met yet are also directly related to the completion of the remaining remediation
works at the three sites. The proposed closing date extension would enable achievement of the PDO.
16. Main project ratings were upgraded in the latest ISR. The project rating for achieving the PDO has been
upgraded to moderately satisfactory (MS) as export of waste have been permitted and resumed for the Bijela site.
With COVID-19 measures now being eased and not further restrained by weather conditions, works at all three sites
are expected to move at unrestricted pace. It is noted that the project is high on the government agenda and that
project management and coordination among government institutions runs well, with regular internal updates among
all project parties and actions taken readily, also at government level, where needed.
C. Rationale for Restructuring
The World Bank
Industrial Waste Management and Cleanup Project (P122139)
17. In their letter to the Bank of May 14, 2021 (received May 18, 2021), the Government of Montenegro requested
a project extension of one year beyond the current closing date of June 30, 2021. The letter points at delays in project
implementation and additional delays from COVID-19 measures. In addition, The PIU prepared an Implementation
Action Plan (IAP) for completion of all work under the Project, largely presenting the milestones as presented in this
Restructuring Paper (Maljevac in June 2021, Gradac October 2021, Bijela waste exports by October 2021). The Team’s
assessment is that a one-year extension of the Project Closing Date to June 30, 2022 will allow for completion of the
agreed works and other required activities under Component 1 (KAP sites remediation design) and Component 2
(technical assistance for national hazardous waste management) and achieving the PDO. There is a risk that not all
export licenses can be secured for the remaining waste quantities (e.g. big bags, asbestos, soil beyond currently
licenses quantities); however, it is noted that that these risks are considered limited in view of the nature and
quantities of these materials and can be managed within the timeframe of the project, when the closing date would
be extended to June 2022. It is expected that all works will be substantially completed by the end of 2021. The period
until June 30, 2022 will be important to monitor the quality of the works and the effectiveness of after-care
arrangements for the remediation sites. Other than the one-year extension, there are no additional elements under
the proposed restructuring.
18. There are no outstanding project audits and previous audits were acceptable by the IBRD.
19. From the Loan amount of Euro 44.7 million, Euro 40.87 million has been committed in contracts, Euro 2.3 million
is required for contracts or works amendments to be signed in the period June-July 2021 and the remainder of Euro
2.9 million are works contingencies. Disbursements from the Loan stand at US$ 24.14 million (June 1, 2021). There are
no significant procurement actions remaining to be processed.
20. Risk of red-mud basins failure. One risk to note is that structural failure of the red-mud basins at the KAP
location can have dire consequences with hundreds of thousands of tons of materials that could flush out and risk
people living nearby. The physical condition of this privately-owned facility has been inspected as part of the design
work financed from the project and is considered adequate. However, maintenance is limited, and the impoundment
needs regular inspections and maintenance. This risk has been amply flagged in discussions with the Government and
Aide Memoires and will remain a key focus of attention under the project and the design work that is carried out,
seeking a sustainable solution. Part of the design work are comprehensive (geo-technical) investigations at the facility,
a detailed assessment of long-term risks, an action plan for monitoring, stabilization, and remediation, and bidding
ready documents for remediation works. During the project extension, the stability of the red-mud basins will
continue to be monitored and included in the project’s reporting on safeguards performance.
III. DETAILED CHANGES
LOAN CLOSING DATE(S)
Original Revised Proposed Proposed Deadline
Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal
Applications
The World Bank
Industrial Waste Management and Cleanup Project (P122139)
30-Jun-2020, 30-Jun-
IBRD-84280 Effective 30-Jun-2019 30-Jun-2022 30-Oct-2022
2021