Document of The World Bank FOR OFFICIAL USE ONLY Report No: RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ELECTRICITY DISTRIBUTION REHABILITATION PROJECT LOAN 4858-TU APRIL 19, 2007 TO THE TÜRKİYE ELEKTRİK DAĞITIM A.Ş. (TEDAŞ) DECEMBER 21, 2012 SUSTAINABLE DEVELOPMENT DEPARTMENT (ECSSD) ENERGY UNIT (ECSEG) 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 TEDAŞ Türkiye Elektrik Dağıtım A.Ş. (Turkish Electricity Distribution Corporation) Regional Vice President: Philippe H. Le Houerou Country Director: Martin Raiser Sector Manager: Ranjit Lamech Task Team Leader: Yesim Akcollu 2 TURKEY ELECTRICITY DISTRIBUTION REHABILITATION PROJECT CONTENTS Page A. SUMMARY ........................................................................................................................... 4 B. PROJECT STATUS .............................................................................................................. 4 C. PROPOSED CHANGE: CANCELLATION ....................................................................... 4 D. OTHER ISSUES ................................................................................................................... 5 3 TURKEY ELECTRICITY DISTRIBUTION REHABILITATION PROJECT RESTRUCTING PAPER A. SUMMARY 1. This Restructuring Paper for Turkey’s Electricity Distribution Rehabilitation Project (P096801; Loan 4858-TU) recognizes a cancellation in the amount of Euro 113 million from the undisbursed amount of the Loan, allocated to disbursement Category 1, “Goods (including supply and installation)� for the implementation of Group 3 and 4 sub- projects. The cancellation was made at the request of TEDAŞ (the Borrower) through a letter dated July 27, 2012 and in accordance with its right under the applicable General Conditions. The cancellation became effective as of the same date, on July 27, 2012. 2. This Restructuring Paper also acknowledges the removal of one sub-project due to the transfer of the relevant regional distribution company (Menderes) to the private sector; and the introduction of a disbursement grace period of four months after the loan closing date, until April 30, 2013. B. PROJECT STATUS 3. The Project was approved by the World Bank’s Board of Executive Directors on April 19, 2007, and is scheduled to close on December 31, 2012. The Project’s Development Objective is to help improve the reliability of power supply to consumers in Turkey by supporting the implementation of the electricity distribution network rehabilitation and expansion program. 4. The Project comprises four groups of sub-projects covering rehabilitation and distribution network expansion works in different cities in Turkey. Groups 1 and 2 sub- projects are under implementation. Due to the approaching loan closing date, persistent delays in the implementation of Group 1 and Group 2 sub-projects, and uncertainties over the on-going privatization process of regional distribution companies, the Borrower indicated that Group 3 and Group 4 sub-projects would not be completed within the Project’s time span. Procurement of Group 3 sub-projects had been initiated, subsequently cancelled; Group 4 sub-projects’ procurement process has not been started. As a result, the Borrower requested the Bank to cancel Euro 113 million, corresponding to the entire amount allocated to Group 3 and Group 4 sub-projects. C. PROPOSED CHANGE: CANCELLATION 5. In accordance with Paragraph 2 of BP 13.50, in a letter dated September 27, 2012, the Bank acknowledged the Borrower’s request and cancelled Euro 113 million, effective on July 27, 2012. Accordingly, loan category and component allocations have been revised (please see Annex I). In the same acknowledgement, the Bank highlighted that the procurement procedures followed by the Borrower with respect to Group 3 sub-projects 4 were not in accordance with the Loan Agreement and the World Bank Procurement Guidelines. 6. As Group 3 and Group 4 sub-projects are identified in the procurement plan but not in the Loan Agreement, no amendment is required to the Loan Agreement. D. OTHER ISSUES 7. A Group 2 sub-project that was planned to take place in the Menderes regional distribution company was removed from the Project Appraisal Document dated March 26, 2007 due to the transfer of the regional distribution company Menderes to the private sector just after the appraisal stage. 8. This restructuring would introduce a disbursement grace period of four months. In accordance with the current practice of the Bank, further disbursements from the Loan will be made for withdrawal applications received at the Bank's Zagreb Office by close of business on April 30, 2013 in respect of eligible expenditures made before the Closing Date (i.e., payments made or payments due for goods, works and services that have been provided prior to the Closing Date). 5 Annex I: Original and Revised Loan Category and Component Allocations Table 1- Original and Revised Category Allocations Amount of the Amount of the Loan Loan % of Expenditures Category Allocated Revised to be Financed (Expressed in (Expressed in Euro) Euro) 100% of foreign expenditures, Goods (including 100% of local expenditures (ex- 1 supply and 200,000,000 87,000,000 factory cost) and 85% of other installation) items procured locally Consultants' 2 4,487,500 4,487,500 100% services Amount payable pursuant to Section 2.03 of this Agreement 3 Front-end Fee 512,500 512,500 in accordance with Section 2.07 (b) of the General Conditions Amount cancelled as of - 113,000,000 July 27, 2012 TOTAL 205,000,000 205,000,000 Table 2- Original and Revised Component Allocations Project Allocations (Expressed in Euro) Components Current Proposed Distribution Network Rehabilitation and Expansion 172,000,000 87,000,000 (for Group I and Group II Sub-Projects) Technical Assistance for Supervision Consultants 5,000,000 4,487,500 1 Contingencies 28,000,000 512,500 TOTAL 205,000,000 92,000,000 1 Contingencies include the front-end fee at an amount of Euro 512,500. 6