Document of The World Bank OFFICIAL USE ONLY Report No: 65139-RO RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF HAZARD RISK MITIGATION & EMERGENCY PREPAREDNESS PROJECT LOAN 4736 RO AND GEF TF 053472 BOARD APPROVAL DATE May 20, 2004 IN THE INITIAL AMOUNT OF LOAN US$ 150,000,000; GRANT US$7,000,000 AND A RESTRUCTURED AMOUNT OF LOAN US$143,324,463; GRANT US$7,000,000 TO ROMANIA December 20, 2011 Sustainable Development Department South Caucasus Country Department Europe and Central Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS EIRR Economic Internal Rate of Return EMIS Emergency Management Information System GEF Global Environment Facility LAPF Land Acquisition Policy Framework OP Operational Policies O&M Operation and Maintenance PDO Project Development Objective TMF Tailings Management Facility Regional Vice President: Philippe Le Houérou, ECAVP Country Director: Peter C. Harrold, ECCU5 Sector Manager / Director: Stephen Karam/Laszlo Lovei, ECSS6 Task Team Leader: Gabriel Ionita, ECSS1 ROMANIA HAZARD RISK MITIGATION & EMERGENCY PREPAREDNESS PROJECT P075163 TABLE OF CONTENTS Page A. SUMMARY ........................................................................................................... 1 B. PROJECT STATUS.............................................................................................. 1 C. PROPOSED CHANGES....................................................................................... 3 Restructuring Restructuring Type: Level two Last modified on date : 12/19/2011 1. Basic Information Project ID & Name P075163: HAZ MITIG Country Romania Task Team Leader Gabriel Ionita Sector Manager/Director Stephen George Karam Country Director Peter C. Harrold Original Board Approval Date 05/20/2004 Original Closing Date: 12/31/2009 Current Closing Date 12/20/2011 Proposed Closing Date [if applicable] 06/30/2012 EA Category B-Partial Assessment Revised EA Category B-Partial Assessment-Partial Assessment EA Completion Date 03/15/2003 Revised EA Completion Date 2. Revised Financing Plan (US$m) Source Original Revised BORR 46.66 46.66 IBRD 150.00 143.32 Total 196.66 189.98 3. Borrower Organization Department Location Ministry of Public Finance Romania 4. Implementing Agency Organization Department Location National Agency of Mineral PMU Romania Resources Ministry of Regional Development PMU Romania and Tourism Ministry of Administration and PMU Romania Interior Ministry of Environment and PMU Romania Forests i 5. Disbursement Estimates (US$m) Actual amount disbursed as of 12/19/2011 116.99 Fiscal Year Annual Cumulative 2011 5.00 121.99 2012 21.33 143.32 Total 143.32 6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured projects trigger any new safeguard policies? If yes, please select N from the checklist below and update ISDS accordingly before submitting the package. 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes The overall objective of the project is to assist the Government of Romania in reducing the environmental, social, and economic vulnerability to natural disasters and catastrophic mining accidental spills of pollutants through: (i) strengthening the institutional and technical capacity for disaster management and emergency response through upgrading communication and information systems; (ii) implementing specific risk reduction investments for floods, landslides and earthquakes; (iii) improving the safety of selected water-retention dams; and (iv) improving on a pilot basis the management and safety of tailings dams and waste dump facilities. 7b. Revised Project Development Objectives/Outcomes [if applicable] ii HAZARD RISK MITIGATION & EMERGENCY PREPAREDNESS PROJECT RESTRUCTURING PAPER SUMMARY This Project Paper seeks the approval of the Country Director to restructure the Romania Hazard Risk Mitigation and Emergency Preparedness Project (Loan no. 4736 RO and GEF TF no. 53472) and amend Project legal documents, as appropriate. Project restructuring is being undertaken primarily to (i) extend the current Closing Date for both the Loan and GEF Grant by about six months, from December 20, 2011 to June 30, 2012; (ii) increase the percentage of Loan and GEF Grant financing to 100% for all categories of expenditure; (iii) reallocate some of the Loan proceeds; and (iv) cancel an amount of $6,675,537 from the Loan. Since the Closing Date is extended beyond the period of two years from the date of the original Closing Date, the authorization of the RVP is being sought as well as per paragraph 7 of BP13.30. These modifications were requested by the Government through the letters dated June 17, December 7, and December 16, 2011sent by the Ministry of Public Finance (MPF) to the Bank. This is the second restructuring of the project. PROJECT STATUS The Project was approved on May 20, 2004 and became effective on October 20, 2004. Project implementation was slower than anticipated both at start-up (because the bidding detailed designs have been prepared after effectiveness) and during implementation (because of insufficient funds allocated to project activities) but commitment of Project funds gradually gained momentum and now over 90 percent of Project funds have been committed, about 78 percent of the Loan has been disbursed, and about 85 percent of Project activities have been completed. While performance was satisfactory most of the project’s lifetime, since the Mid-Term Review, the progress towards achievement of Project Development Objectives was rated only Moderately Satisfactory. This was due to the risk that the initial investment program would only be partially completed because of insufficient funding provided to the project from the state budget during the economic and financial crisis which affected Romania. At the last implementation support mission, the achievement of Project Development Objectives was also rated Moderately Satisfactory following substantial increase of project funding from the state budget in the second half of 2011. So far, the project has achieved seismic retrofitting of 28 public buildings, flood protection at all ten project sites, enhancing the safety of six large and small dams, and safety of six tailings management facilities (TMF) at three mines. Seismic retrofitting of 15 public buildings is underway; retrofitting of nine buildings will be completed by current Closing Date. The remaining six buildings would need up to six more months to be completed. The works for enhancement of safety of a seventh dam are at an advanced stage and would be completed by end-December 2011. All technical assistance activities for the Romania Catastrophe Insurance Program have been completed and the program has been up and running for over one year. 1 The Project was restructured in August 2009 (level 1) primarily to: (i) apply World Bank Safeguard Policy, OP 4.12, Involuntary Resettlement to all Project components involving execution of works; (ii) reduce the scope of envisaged Project investment programs due to increased construction costs and loan currency depreciation; (iii) restructure the Project output indicators for Component B (Earthquake Risk Reduction) and Component C (Flood and Landslide Risk Reduction) to adjust them to the revised scope of the investment program and revise the Results Framework; and (iv) extend the Project Closing Date from December 31, 2009 to December 20, 2011, to enable the Government to complete all activities envisioned under the Project. Further, the Project was restructured again in December 2010 (level 2) and November 7, 2011 to reallocate part of the Loan proceeds. On June 17, 2011, the Borrower requested a second extension of the Closing Date, by 12 months to allow: (i) finalization of development and implementation of the Emergency Management Information System (EMIS), (ii) completion of seismic retrofitting of all 48 public buildings in the investment program, (iii) finalization of the handbook for landslides monitoring, and (iv) development and installation of two computer-based systems for environmental monitoring and decision support in the mining industry (establishment of a baseline and an environmental monitoring system, and of a regional mine spill disaster response system). At the time of receiving the Borrower’s request, the funds allocated to project implementation were insufficient even to complete the existing contracts in 2011 and any allocation of additional funds to the project to cover the funding gap affecting the Components B and D was uncertain. In addition, EMIS implementation was, again, blocked by technical disputes between the Contractor and EMIS beneficiary (the General Inspectorate of Emergency Situations). Therefore, in its response to the Borrower, dated July 7, 2011, the Bank specified that a second extension would be considered only if additional funding were provided by the Government to Components B and D and significant progress was recorded in implementation of the EMIS contract. A budget rectification conducted by the Government in August 2011 resulted in allocation of additional funds to Components B and D which fully covered the needs for the remaining activities. In addition, progress was recorded in implementation of EMIS contract, under Component A: the software was substantially improved to address all flaws identified earlier by the General Inspectorate for Emergency Situations (the Beneficiary) and the operational testing was successfully completed in early October 2011. Therefore, the conditions specified in Bank’s letter dated July 7, 2011 have been met. The additional funding provided to Component B allowed signature and start-up of eight new works contracts for seismic structural retrofitting. Works under these new contracts will be completed by June 2012. Therefore, by June 30, 2012, it is expected that 43 public buildings would have safe structures, exceeding the revised target of 40 buildings set under the 2009 project restructuring. Although the investment program for seismic retrofitting of public buildings includes 48 buildings, the project target was revised to 40 buildings, given the uncertainties in works implementation and financing noted during project implementation. Designs for the remaining five buildings will be finalized under the project, but, since the works bidding documents were not prepared on time (by October 15), these buildings would no longer receive project financing and would remain to be retrofitted entirely with Government financing after project closing. 2 Two of the buildings in the program, Iasi City Hall and Headquarters of the General Inspectorate for Emergency Situations (GIES), were considered for retrofitting through innovative and cost-effective methods, which would demonstrate the feasibility and replicability of such an approach. For different reasons, the works did not start for either building. Retrofitting of the GIES building is too far behind schedule and will be dropped from the project. However, the process for retrofitting the Iasi City Hall is sufficiently advanced and the team recommends that it be included under the extended project. The bidding documents have been finalized and tendering will start by December 20, 2011. If launched as planned, the tendering should be finalized by end-February 2012 in time for works to start in March 2012. Although the works would not be completed by June 2012 (but by December 2012, as nine months are needed for completion of structural retrofitting), the project team still recommends staring the process under the project due to demonstration effect. Implementation of Component C, the most advanced, is in final stages, with works for improving the safety of one large dam (Dridu) about to be finalized and the contract for supply and installation of the equipment for landslides monitoring in the two pilot areas underway. It is expected that, weather permitting, the equipment installation would be completed by end-December 2011. However, no time will be left for development of manuals for data collection and pilot monitoring before the current Closing Date. Also, some additional works needed at Dridu Dam require reallocation of some funds from other project components. Under Component D, the additional funding allocated allowed to start the procurement of a Fixed and Mobile Laboratory for Environmental Monitoring (initiated in September 2011; the contract is expected to be signed in December 2011 and completed in June 2012). In addition, preparation of bidding documents for “Development of a Mine-specific IT-based Environmental Monitoring and Decision Support System�, “Environmental Monitoring of two TMF sites�, and “IT system for Mine Spill Disaster Response System� have well progressed and the tendering is expected to be completed by mid-January 2012. Implementation of these activities will create the link between the project activities and achievements and a sustainable, long term monitoring, care and maintenance program financed by the Government, and implemented by “Conversmin� (a national agency responsible for sustainable mine closure founded during project implementation) which will take over monitoring/analytical facilities, protocols and databases, and operate them beyond project closure). The Project’s Development Objectives (PDO) remain unchanged as follows: “to assist the Borrower in reducing the environmental, social, and economic vulnerability to natural disasters and catastrophic mining accidental spills of pollutants through: (i) strengthening the institutional and technical capacity for disaster management and emergency response; (ii) implementing specific risk reduction measures for floods, landslides and earthquake; (iii) improving the safety of selected water-retention dams; and (iv) improving the management and safety of tailings dams and waste dump facilities.� PROPOSED CHANGES • Financing o Disbursement arrangements 3 The percentage of financing from the Loan and GEF Grant proceeds are revised and increased to 100% for all categories of expenditure, as of December 7, 2011, in response to Borrower’s request dated December 7, 2011, as shown in the tables below. o Reallocations The Loan proceeds will be reallocated as follows: $3,085,000 from category (1)(a) to category (1)(b); $300,000 from category (1)(c) to category (2)(d); and $34,000 from category (1)(a) to category (4)(d)(ii). o Cancellations The amount of $6,675,537 will be cancelled from the Loan, as of December 7, 2011, in response to Borrower’s request dated December 7, 2011. The cancellation was requested because the time left for project implementation including the extended Closing Date does not allow for contracting and implementation of new project activities under component B. The respective project activities would be further implemented by the Government using the budget funds. The table below shows the revised allocation of Loan proceeds: Category of Expenditure Allocation % of Financing Current Revised Current Revised Current Revised (1)Works for: 100% of foreign 100% of foreign (a) Part B of the Project 47,888,000 40,306,000 expenditures expenditures and (b) Part C of the Project 66,509,769 69,594,769 and 78% of 78% of local (c) Part D of the Project 2,883,000 2,333,000 local expenditures (d) Part E of the Project expenditures incurred before 0 0 (incurred before March 7, 2007, (i) Part E.1 March 7, 2007) 78% of all 19,000 0 78% of all expenditures (ii) Part E.2 expenditures (incurred before the thereafter date of this (ii) Part E.3 26,646 26,646 amendment), and 100% of all expenditures thereafter (2) Goods for: 100% of foreign 100% of foreign (a) Part A of the Project 8,904,000 8,904,000 expenditures, expenditures, 100% (b) Part C of the Project 367,500 367,500 100% of local of local (c) Part E of the Project expenditures (ex expenditures (ex 69,091 69,091 factory cost) and factory cost) and (i) Part E.1 75% for local 75% for local (ii) Part E.2 235,000 134,000 expenditures for expenditures for (iii) Part E.3 246,241 246,241 other items other items procured locally procured locally (iv) Part E.4 23,000 23,000 (incurred before (incurred before 4 Category of Expenditure Allocation % of Financing Current Revised Current Revised Current Revised (d) Part D of the Project 1,700,000 2,000,000 (incurred before (incurred before March 7, 2007); March 7, 2007); 75% of all 75% of all expenditures expenditures incurred incurred before the thereafter date of this amendment; and 100% of all expenditures incurred thereafter (3) Technical Services for Part 0 0 100% of foreign expenditures C.5 of the Project and 75% of local expenditures 5 Category of Expenditure Allocation % of Financing Current Revised Current Revised Current Revised (4) Consultants' services, 75% of 75% of including audit and training, for expenditures expenditures (a) Part A of the Project 3,300,000 3,300,000 incurred by incurred by local (b) Part B of the Project 6,086,000 4,536,000 local consultants consultants and (c) Part C of the Project 5,853,369 5,853,369 and 85% of 85% of foreign (d) Part E of the Project foreign consultants before 100,000 100,000 consultants the date of this (i) Part E.1 amendment, and 100% of all (ii) Part E.2 2,372,000 2,406,000 expenditures (iii) Part E.3 28,875 28,875 thereafter (e) Part D of the Project 550,000 313,463 (5) Operating costs for: 75% of all expenditures (a) MAI PMU 100,909 100,909 75% incurred before the (b) MTCT PMU 328,000 272,000 75% date of this (c) MEWM PMU 1,927,600 1,927,600 75% amendment and (d) NAMR PMU 482,000 482,000 75% 100% of all expenditures thereafter (6) Unallocated for: (a) Part A of the Project 0 0 (b) Part B of the Project 0 0 (c) Part C of the Project 0 0 (d) Part D of the Project 0 0 Sub Total 150,000,000 143,324,463 (Amount Cancelled as of 6,675,537 December 7, 2011 TOTAL 150,000,000 150,000,000 The following table shows the revised percentage of financing from the GEF Grant: Category of Expenditure Allocation % of Financing Current Revised Current Revised Current Revised (1) Goods 1,200,000 1,200,000 100% of foreign 100% of foreign expenditures, expenditures, 100% 100% of local of local expenditures (ex expenditures (ex factory cost) and factory cost) and 75% for local 75% for local expenditures for expenditures for other items other items procured locally procured locally incurred before the date of this amendment, and 100% of all expenditures incurred thereafter (2) Works 2,700,000 2,700,000 100% of foreign 100% of foreign expenditures expenditures and 6 Category of Expenditure Allocation % of Financing Current Revised Current Revised Current Revised expenditures expenditures and and 78% of 78% of local local expenditures expenditures incurred before the date of this amendment, and 100% of all expenditures thereafter (3) Consultants’ Services 1,600,000 1,600,000 75% of 75% of expenditures expenditures incurred by incurred by local local consultants consultants and and 85% of 85% of foreign foreign consultants consultants incurred before the date of this amendment, and 100% of all expenditures thereafter (4) Training, workshops and 360,000 360,000 100% 100% study tours (5) Operating costs for: 75% of all (a) Part D of the Project 0 0 75% expenditures (b) Part E.4 of the Project 770,000 770,000 75% incurred before the date of this amendment and 100% of all expenditures thereafter (6) Unallocated 370,000 370,000 TOTAL 7,000,000 7,000,000 • Financial management The project is in compliance with the legal auditing and reporting financial covenants. The audit report for FY 2010 has been received before the June 30, 2011 due date, with a clean audit opinion and no internal control issues mentioned. • Closing date The Bank team assessed the likelihood of fulfilling the commitments made by the Borrower in its letter of June 17, 2011 and found them feasible with a second extension of the Closing Date of the Loan and GEF Grant from December 20, 2011 to June 30, 2012, with the following conditions: • No new tendering for works contracts under any of the project components, except for seismic retrofitting of City Hall Iasi for which tendering should start with priority and no later than December 20, 2011. Otherwise, tender launching for this contract should be stopped. The procurement plan has been revised accordingly. 7 • All procurement activities planned under Component D have already started and are expected to be finalized no later than February 28, 2012, to allow enough time for them to be completely implemented before June 30, 2012. • All project activities underway at the time of the extended Closing Date (June 30, 2012) will be completed by the Government with its own funds and without any project financing. • Closing of the project accounts and archiving of project documents will start as soon as possible, by component, so that these activities are in advance stage or completed at Closing Date and would require less activity afterwards. • The Bank team will initiate preparation of the Implementation Completion Report in January 2012 in order to collect most of the information and prepare an advanced draft ICR before June 30, 2012. The implementing agencies of the Borrower will also start preparation of the Borrower’s Implementation Report in January 2012 and submit the draft Report to the Bank by April 30, 2012. The final ICR will be completed shortly after the Closing Date. Given that very few of the activities described above would need to continue beyond the current Closing Date, the Bank project team discussed with the Borrower’s implementing agencies in charge for Components B (Ministry of Regional Development and Tourism) and D (National Agency of Mineral Resources), as well as with the Ministry of Public Finance and got their confirmation that these activities will be completed in 2012 and the funds required for their completion will be made available through the budget allocations for 2012. Through the extension proposed, the Project would achieve the following final results: 1. For Component A, all objectives will be met and the EMIS will be installed and operational in 48 locations, exceeding the target of 23 locations. 2. For Component B, seismic retrofitting of 43 public buildings would be finalized (exceeding the target of 40 buildings) and one building, where innovative and cost- effective seismic retrofitting solutions are applied, will be in advanced stage of execution (to be completed in 2012). These buildings included, the project would provide safety for over 28,500 people at direct risk in case of a severe earthquake (96% of the final target of 29,600 people) and also introduce innovative solutions for seismic retrofitting. 3. For Component C, flood protection and dam safety works will be completed in all sites (ten for flood protection and seven dams). Also, pilot data collection to monitor the two landslide prone sites will be conducted for 2-3 months and the manual for landslides monitoring completed and handed over to the authorities in charge with further use the equipment. Thus, the component objectives will be fully met. 4. For Component D, all development and global environment objectives will be met. The works to secure the safety of tailings management facilities (TMF) at six sites will be completed, exceeding the objective of three sites. The computer-based systems for mine spill disaster response, environment monitoring, and decision- support will be in place and operational. The activities regarding trans-boundary cooperation on integrated water resources management can be seen as largely achieved. 8 • Implementation schedule The revised draft project implementation schedule for the extended Closing Date has been reviewed by the project team and found acceptable. 9 10