Document of The World Bank Report No: 64694-AR RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ARGENTINA RENEWABLE ENERGY IN THE RURAL MARKET PROJECT (PERMER) ADDITIONAL FINANCING (AF), IBRD 76170-AR DATED NOVEMBER 11, 2008 IBRD LOAN IN THE AMOUNT OF US$50 MILLION TO THE ARGENTINE REPUBLIC SEPTEMBER 15, 2011 Latin American and Caribbean Energy Sector Sustainable Development Network This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Argentina Renewable Energy in the Rural Market Project Additional Financing (AF), IBRD 76170-AR PROJECT DATA SHEET PERMER (Original) Restructuring Status: Draft Restructuring Type: Last modified on date : 09/13/2011 1. Basic Information Project ID & Name P006043: AR RENEW.ENERGY R.MKTS Country Argentina Task Team Leader Xiaoping Wang Sector Manager/Director Philippe Charles Benoit / Laura Tuck Country Director Penelope J. Brook Original Board Approval Date 03/30/1999 Original Closing Date: 09/30/2005 Current Closing Date 12/31/2011 Proposed Closing Date [if applicable] EA Category B Revised EA Category EA Completion Date 09/17/1997 Revised EA Completion Date 2. Revised Financing Plan (US$m) Source Original Revised BORR 0.00 10.30 GEFU 0.00 10.00 IBRD 30.00 30.00 ZPCO 0.00 10.20 Total 30.00 60.50 3. Borrower Organization Department Location The Argentine Republic Argentina 4. Implementing Agency Organization Department Location Secretariat of Energy Argentina 2 5. Disbursement Estimates (US$m) Actual amount disbursed as of 09/13/2011 30.00 Fiscal Year Annual Cumulative 2012 0.00 30.00 Total 30.00 6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured project trigger any new safeguard policies? If yes, please select from N the checklist below and update ISDS accordingly before submitting the package. 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes The objectives of the Project are to: (a) provide the rural areas of the Participating Provinces with reliable electric supply in a sustainable manner through the use of renewable energy; (b) advance the reform of the Borrower’s energy sector in particular critical areas; (c) support the Borrower’s strategy to expand the participation of the private sector in the provision of electricity in the rural areas of the Participating Provinces, as well as strengthen the capacity of Participating Provinces to regulate such participation; and (d) support the creation of sustainable business operations for rural energy in Argentina. 7b. Revised Project Development Objectives/Outcomes [if applicable] 3 PROJECT DATA SHEET PERMER AF Restructuring Status: Draft Restructuring Type: Last modified on date : 09/13/2011 1. Basic Information Project ID & Name P006043: AR RENEW.ENERGY R.MKTS Country Argentina Task Team Leader Xiaoping Wang Sector Manager/Director Philippe Charles Benoit / Ethel Sennhauser (Acting) Country Director Penelope J. Brook Original Board Approval Date 11/11/2008 Original Closing Date: 12/31/2011 Current Closing Date 12/31/2011 Proposed Closing Date [if applicable] 12/31/2012 EA Category B Revised EA Category EA Completion Date Revised EA Completion Date 2. Revised Financing Plan (US$m) Source Original BORR 0.00 GEFU 0.00 IBRD 50.00 ZPCO 0.00 Total 50.00 3. Borrower Organization Department Location The Argentine Republic Argentina 4. Implementing Agency Organization Department Location Secretariat of Energy Argentina 4 5. Disbursement Estimates (US$m) Actual amount disbursed as of 09/13/2011 20.83 Fiscal Year Annual Cumulative 2012 30.47 48.53 2013 1.47 50.00 Total 50.00 6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured project trigger any new safeguard policies? If yes, please select from N the checklist below and update ISDS accordingly before submitting the package. Safeguard Policy Rating Environmental Assessment (OD 4.01) YES Natural Habitats (OP 4.04) Forestry (OP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP 4.11) Indigenous Peoples (OD 4.20) YES Involuntary Resettlement (OP 4.12) Safety of Dams (OP 4.37) Projects in International Waters (OP 7.50) Projects in Disputed Areas (OP 7.60) 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes The objectives of the Project are to: (a) provide the rural areas of the Participating Provinces with reliable electric supply in a sustainable manner through the use of renewable energy; (b) advance the reform of the Borrower’s energy sector in particular critical areas; (c) support the Borrower’s strategy to expand the participation of the private sector in the provision of electricity in the rural areas of the Participating Provinces, as well as strengthen the capacity of Participating Provinces to regulate such participation; and (d) support the creation of sustainable business operations for rural energy in Argentina. 7b. Revised Project Development Objectives/Outcomes [if applicable] 5 Argentina Renewable Energy in the Rural Market Project Additional Financing IBRD 76170-AR Restructuring Paper 1. The closing date for Argentina, Renewable Energy in the Rural Market Project Additional Financing (AF), IBRD 76170-AR will be extended from December 31, 2011 to December 31, 2012. 2. Overall, the implementation is on track to achieve the Project’s objectives. The Project Development Objectives (PDO) and Implementation Progress (IP) are rated satisfactory. While the project has encountered some operational difficulty in working with the provincial governments and concessionaires as required, as of September 13, 2011, US$47.7 million of US$50 million of the additional financing loans have been committed in 24 signed contracts, of which US$20.83 million have been disbursed. The extension would not affect the development objective, activities, indicators, or other aspects of the Project. The PDOs continue to be achievable. 3. Despite the strong performance in overall project implementation since the effectiveness of the AF, delays have made it impossible to complete implementation by the current closing date. Implementation of the AF loan has experienced delays because: (i) it took 16 months for the AF to become effective after Board approval, and (ii) significant time has been spent in amending the existing subsidiary agreements between the implementing agency Secretariat of Energy and participating provinces (the “participation agreement�) and between participating provinces and concessionaires/public utility (the “implementation agreement�), as well as in signing agreements in provinces new to the Project. Since these subsidiary agreements are part of the disbursement conditions as provided in Section IV.B.1.(b) in the Loan Agreement, execution of the signed contracts has been delayed until the disbursement conditions are met for the provinces involved. The delays in complying with the Project’s disbursement conditions are largely outside the control of the implementing agency, which is the major reason for this request. It is estimated that, with the extension, US$14 million of the US$50 million AF loan would not need to be cancelled because all of the contracts would be able to complete by the proposed new closing date, and that approximately 6,000 households and 30,000 people (approximately 1/3 of the Project target) would receive electricity services from the Project. With this objective, the Borrower has in place an action plan to complete the Project within the proposed extension date. 4. The original PERMER Project was approved by the Board on March 30, 1999, including $30 million of IBRD 4454-AR loan and $10 million of GEF TF020548 grants. The GEF portion was closed on December 31, 2009 and the IBRD portion was extended to December 31, 2011 along with the approval of AF. PERMER Additional Financing was approved by the Board on November 11, 2008. This will be the first extension for AF. 6