Document of
                            The World Bank


                                                      REPORT NO: 62262-AL


                          Restructuring PAPER

                                 ON A

                    PROPOSED Project restructuring

                                   of

            Power Sector Generation AnD Restructuring Project

                            Credit 3872 ALB

                             March 16, 2004

                                  TO

                               ALBANIA


                             June 16, 2011




REGIONAL VICE PRESIDENT:                PHILIPPE LE HOUEROU
COUNTRY DIRECTOR:                       JANE ARMITAGE
SECTOR MANAGER / DIRECTOR:              RANJIT LAMECH
TASK TEAM LEADER:                       ARTURO S. RIVERA
                         Extension of Closing Date
 ALBANIA - POWER SECTOR GENERATION AND RESTRUCTURING PROJECT
                      PROJECT NO. P077526
                         cREDIT 3872 ALB

1.       The closing date for the Albania Power Sector Generation and Restructuring
Project, Credit 3872-ALB (P077526) will be extended from June 30, 2011, until
December 30, 2011.

2.       The project is nearing completion with disbursements at 90%. The project has
achieved substantial progress in facilitating sector reforms, thus paving the way for the
privatization of the distribution sector in 2009. Technical problems experienced during
the installation of the offshore water intake/outflow and fuel line pipes caused a delay in
the commissioning of the Vlore Power Plant – the project’s investment component. Given
the severity of the issues, a new management team was put in place at KESH, the project
beneficiary, and the Contractor, the latter including the involvement of senior management from
HQs in Italy. Furthermore, periodic monitoring meetings, involving KESH, the Contractor,
EBRD and EIB, have been taking place, the latest on May 2-3, 2011.

3.     As a result of these actions, substantial progress has taken place, including safe
restoration of the fuel line and ongoing replacement of the water intake/outflow pipes.

4.      The proposed extension will enable completion of the following critical tasks: (i)
Completion of water intake/outflow pipes installation, including testing. Based on 40 %
progress achieved so far, this process is scheduled to be completed by the end of July; (ii)
Testing/trial running and commissioning of the Vlore Power Plant immediately after
acceptance of offshore works. According to the Action Plan submitted by the borrower,
commissioning is likely to take place in July 2011. The contractor introduced the head of
the commissioning team during the last meeting at Vlore on May 30; and (iii) Contract
award to the Operating and Maintenance (O&M) firm which will operate the Vlore
Power Plant, and which has to be on site during the commissioning process. The selection
process has been completed and contract award will be completed this month.

5.     The requirements of OP13.30 have been met, namely, (a) the project objectives
continue to be achievable; (b) the performance of the Borrower and other project
implementing agencies is satisfactory; and (c) the borrower has prepared a specific
Action Plan acceptable to the Bank to complete the project within the proposed extended
timeframe. There are no outstanding audits. No new safeguards policies will be triggered
and there are no changes proposed to the environmental assessment category.
Disbursement is currently at 90%.

6.     This will be the second extension of the Closing Date and the proposed extension
will result in a cumulative extension of over two years.