$ Report No: RES00573 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF Matanza-Riachuelo Basin Sustainable Development Project APPROVED ON 09-Jun-2009 TO Argentine Republic Water Latin America And Caribbean Regional Vice President: Carlos Felipe Jaramillo Regional Director: Benoit Bosquet Country Director: Marianne Fay Practice Manager: David Michaud Task Team Leader(s): Maria Catalina Ramirez, Renato Nardello The World Bank Matanza-Riachuelo Basin Sustainable Development Project (P105680) ABBREVIATIONS AND ACRONYMS AF Additional Finance FM Financial Management PDO Project Development Objective PTELI Industrial Wastewater Treatment Plant (Planta de Tratamiento de Efluentes Líquidos Industriales) WWTP Wastewater Treatment Plant The World Bank Matanza-Riachuelo Basin Sustainable Development Project (P105680) @#&OPS~Doctype~OPS^dynamics@restrhybridbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name Matanza-Riachuelo Basin Sustainable Development P105680 Project Product/Financing Instrument Geographical Identifier Investment Project Financing (IPF) Argentina Approval Date Current Closing Date 09-Jun-2009 30-Sep-2025 Original EA Category Full Assessment (A) (PAD Approval Package-09 Jun 2009) Organizations Borrower Responsible Agency Ministry of Interior, Public Works and Housing, Unidad Argentine Republic Coordinadora General del Proyecto (UCGP) @#&OPS~Doctype~OPS^dynamics@restrhybridoperationstatus#doctemplate OPERATION STATUS Project Development Objective (DO) Original Development Objective The overall development objective of the proposed APL program supports the Government's Integrated Basin Cleanup while simultaneously improving sanitary conditions along the banks of La Plata River and providing a long-term and cost-effective solution for safe disposal of wastewater from the Buenos Aires Metropolitan Area (AySAs concession area). The two stage APL program that contributes to this objective and the allocation of works and activities under each APL has been specifically designed to ensure that APL-1 can be free-standing, with no stranded assets at the end of the first stage. i The World Bank Matanza-Riachuelo Basin Sustainable Development Project (P105680) The project (APL-1) development objectives contribute to the overall program development objective by (i) improving sewerage services in the M-R River Basin and other parts of the Province and City of Buenos Aires by expanding transport and treatment capacity; (ii) supporting a reduction of industrial discharges to the M-R River, through the provision of industrial conversion grants to small and medium enterprises; (iii) promoting improved decision-making for environmentally-sustainable land use and drainage planning, and piloting urban drainage and land use investments, in the M-R River Basin; and (iv) strengthening ACUMAR's institutional framework for ongoing and sustainable clean-up of the M-R River Basin. Disbursement Summary (in USD million) Source of Funds Net Commitment Disbursed Undisbursed % Disbursed IBRD 1,228.03 1,215.63 12.40 98.99 IDA -- -- -- 0 Grants -- -- -- 0 Policy Waivers Does this restructuring trigger the need for any policy waiver(s)? No @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate ii The World Bank Matanza-Riachuelo Basin Sustainable Development Project (P105680) TABLE OF CONTENTS I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING ........................................................................................1 II. DESCRIPTION OF PROPOSED CHANGES ....................................................................................................................2 III. PROPOSED CHANGES ................................................................................................................................................2 IV. DETAILED CHANGE(S) ...............................................................................................................................................3 The World Bank Matanza-Riachuelo Basin Sustainable Development Project (P105680) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This Restructuring Paper seeks the approval of the Country Director of a Level Two Restructuring, to modify the disbursement categories of the Loan Agreement of the First Additional Financing (AF) of the Argentina Matanza-Riachuelo Basin Sustainable Development Project. This sixth restructuring aims to allow flexibility in the use of funds for key infrastructure being built under the Project, hence facilitating the achievement of the Project Development Objectives (PDO), and duly addresses the official request submitted by the Borrower, dated October 28, 2024. 2. The Project consists of three IBRD loans, totaling US$1.228 billion - for a total project cost, including counterpart funding, of US$1.483 billion. The initial financing of US$840 million (IBRD Loan 7706), was approved by the Board of Executive Directors on June 9, 2009. A first AF for US$245 million (IBRD Loan 9008) was approved on September 5, 2019. A second AF of US$265 million (IBRD Loan 9252) was approved on June 1, 2021. The Project’s current closing date was recently extended, and it is September 30, 2025. A. OVERALL PROJECT STATUS 3. The Project has a Moderately Satisfactory rating for its progress towards achievement of the PDO, and a Moderately Unsatisfactory rating for overall implementation progress. The Project is expected to complete most of its activities before the current closing date and thus achieve most of PDOs. 4. The Project has already achieved three out of five of the PDO indicators. There are two critical outcomes that will allow the achievement of the PDO. These include (i) the completion of the Riachuelo preliminary Wastewater Treatment Plant (WWTP) (contract Lot 2) and operation of the sewerage system under Component 1, which is expected to allow 4.5 million people to connect to sewerage service, and (ii) the completion of the Industrial WWTP (or PTELI for its Spanish acronym) contract under Component 2, which would result in a significant reduction of the industrial pollution load in the M-R river. 5. Financial Management (FM) performance has been upgraded to Moderately Satisfactory thanks to the Project Implementation Unit’s efforts to address shortcomings in FM management arrangements. Procurement, and Environmental and Social Safeguards have been kept as Moderately Satisfactory. 6. Although the Project, and in particular the two key contracts under implementation (Lot 2 and PTELI) have suffered delays, there is slow but ongoing progress. The delays were mainly due to budget limited budget allocations and controls over foreign currency payments. Partial budget increments are allowing the contracts to continue advancing. B. RATIONALE FOR PROJECT RESTRUCTURING 7. The change in the disbursement table of the first AF will allow the use of loan proceed from the first AF for payments under Lot 2 contract for the construction of the Riachuelo preliminary WWTP that is described in the Loan Agreement as Part 1(a)(iii). In the current tight fiscal situation, the Borrower decided to prioritize financing of Lot 2; while finding suitable alternative financing sources for other non-core activities. Page 1 The World Bank Matanza-Riachuelo Basin Sustainable Development Project (P105680) 8. At the time of approval of the first AF, this piece of infrastructure was being financed by counterpart funding. It was then included for financing under the second AF. This being the case, it was not included in the first AF disbursement table. The proposed restructuring will have no impacts on other aspects of project implementation. 9. As mentioned in the second AF, expenditures related to Lot 2 contract are eligible for Bank’s funding only after the contract’s amendment dated November 23, 2021. 10. There are no overdue audit reports. All Project audit reports have been considered satisfactory to the World Bank. II. DESCRIPTION OF PROPOSED CHANGES 11. Currently the disbursement categories for first AF are: Category number Category name 1 Works under Part 1(a) of the Project (except for Parts 1(a)(iii) and 1(a)(v) of the Project), consultant’s services under Part 1(b) of the Project. 2 Eligible Expenditures for Parts 3(a) to 3(f) of the Project, and Works and consulting services under Part 3(g) of the Project 3 Front-end Fee 4 Premia for Interest Rate Caps and Interest Collars 12. Since the table under III “Proposed Changes” below does not include any option related to changes of Categories, the table shows “NO” for all Proposed Changes options. The proposed restructuring will modify the description of Category 1 to: Works under Part 1(a) of the Project (except for Part 1(a)(v) of the Project), consultant’s services under Part 1(b) of the Project. @#&OPS~Doctype~OPS^dynamics@restrhybridsummarychanges#doctemplate Summary changes III. PROPOSED CHANGES Operation Information Proposed Changes Operation Information Proposed Changes Development Objective No Loan Closing Date Extension No Safeguard Policies Triggered No Loan Cancellations No ISDS No Reallocations No MFD/PCE No Financial Management No Results No Procurement No Risks No Institutional Arrangement No Legal Covenants No Implementation Schedule No Conditions No Page 2 The World Bank Matanza-Riachuelo Basin Sustainable Development Project (P105680) Implementation Modalities No Disbursements Estimates No Disbursements Arrangements No DDO No Clients No Appraisal Summary No Components No @#&OPS~Doctype~OPS^dynamics@restrhybriddetailedchanges-disclose#doctemplate IV. DETAILED CHANGE(S) COSTS & FINANCING Private Capital Facilitation Is this an MFD-Enabling Project (MFD-EP)? Is this project Private Capital Enabling (PCE)? LOANS Page 3