The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) REPORT NO.: RES44686 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF UZBEKISTAN BUKHARA AND SAMARKAND SEWERAGE PROJECT APPROVED ON AUGUST 4, 2009 TO REPUBLIC OF UZBEKISTAN Water Global Pratice Europe and Central Asia Region Regional Vice President: Anna M. Bjerde Country Director: Lilia Burunciuc Regional Director: Steven N. Schonberger Practice Manager/Manager: David Michaud Task Team Leader(s): Khairy Al-Jamal, Bakyt Arystanov The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) ABBREVIATIONS AND ACRONYMS AF Additional Financing BOD Biochemical Oxygen Demand BSSP Bukhara and Samarkand Sewerage Project BWWTP Bukhara Wastewater Treatment Plant ESMP Environmental and Social Management Plan ICR Implementation Completion and Results report IFR Interim Financial Report INT World Bank Integrity Department IRI Intermediate Results Indicator ISR Implementation Status Report MS Moderately Satisfactory PCU Project Coordination Unit PDO Project Development Objective SWWTP Samarkand Wastewater Treatment Plant The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) BASIC DATA Product Information Project ID Financing Instrument P112719 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 04-Aug-2009 31-Dec-2020 Organizations Borrower Responsible Agency BUKHARA REGIONAL PRODUCTION ENTERPRISE SUVOKOVA,SAMARKAND REGIONAL PRODUCTION Ministry of Finance ENTERPRISE SUVOKOVA,Project Coordination Unit,Kommunkhizmat Agency Project Development Objective (PDO) Original PDO The project development objectives (PDO) are to mitigate the environmental impact from wastewater pollution and improve the efficiency and sustainability of wastewater management in Bukhara and Samarkand. This will be achieved through (a) rehabilitating select sections of the sewerage system that are deteriorated; (b) limited expansion of the sewerage system into currently unconnected central historical areas, (c) installing more energy-efficient equipment such as wastewater pumps and aeration systems at the wastewater treatment plants and pumping stations; and (d) improving the capacity of the water utilities (vodokanals) in the areas of management, communications and public outreach. Current PDO The proposed PDOs are to reduce wastewater pollution and improve the performance of utilities responsible for wastewater managementin Bukhara and Samarkand. OPS_TABLE_PDO_CURRENTPDO The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-56980 23-Jun-2015 13-May-2016 12-Aug-2016 31-Dec-2020 89.83 52.72 37.60 IDA-56990 23-Jun-2015 13-May-2016 12-Aug-2016 31-Dec-2020 .17 0 0 IDA-46330 04-Aug-2009 26-Nov-2009 01-Apr-2010 30-Jun-2019 53.45 50.89 0 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This restructuring paper seeks a project closing date extension by eleven months for Bukhara and Samarkand Sewerage Project, to provide additional time to complete critical contracts needed to achieve the Project Development Objective and deliver the project outcomes, following COVID-related delays. If approved, the proposed extension will be the project’s fourth restructuring, which will bring the cumulative closing date extension to 29 months, requiring Regional Vice President (RVP) approval. The 1st restructuring was approved on June 23, 2015 and included additional financing of US$105 million (with extension of closing date to June 30, 2019) and revision of the results framework. The 2nd restructuring was completed on November 2, 2018 and included an extension of the project closing date by 18 months, changes of disbursement percentage, and adjustments of the results framework. The 3rd restructuring was processed on May 9, 2020 and included cancellation of SDR10,864,713.42 (equiv. to US$15 million) and reallocation of funds between disbursement categories. Although there were delays in project implementation, the COVID-19 global pandemic has further exacerbated these delays, necessitating a project closing date extension. A. Project status 2. The parent Project was approved by the World Bank Executive Board of Directors on August 9, 2009 and became effective on April 1, 2010. The Project had original IDA credit (IDA-46330) of US$54.24 million and original closing date on December 31, 2015. An Additional Financing (AF) of US$105 million (around US$90 million from IDA- 56980 and US$15 million from IDA-56990) was approved on June 23, 2015 and became effective on August 12, 2016. The AF was designed to scale up activities under the Project, to modify its development objective (PDO), to revise results monitoring framework and to extend the Project’s closing date to June 30, 2019. The original credit (IDA-46330) had been fully disbursed and the credit was closed on June 30, 2019 3. Implementation of the activities financed under the Project’s additional financing (AF) experienced significant delay from the start (June 2015) due to low readiness for implementation, as well as operational delays due to The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) (i) sector reforms and institutional changes, (ii) issues in contract management and (iii) recently by the COVID- 19 pandemic. The AF experienced 14-month delay at the start of its implementation due to the need for compliance with Government internal requirements for investment projects requiring preparation of project national feasibility studies, issuance of Government decision for project implementation before signing the financing agreement and then, the fulfillment of effectiveness conditions. Moreover, by the time of declaration of effectiveness by the Bank, the detailed designs of all works were not ready. The following years of implementation were also affected by institutional sectorial reforms which resulted in the establishment of 14 regional Unitary Enterprise Suvokovas, the Ministry of Housing and Communal Services (MHCS) and the change in the status of the Project Implementing Entity. Moreover, waves of reforms on public procurement and international financed investment projects implementation procedures substantially impacted implementation across all Bank’s portfolio. The aforementioned issues have collectively led to delays of all AF works, where the earliest works contract was signed after February 2017 only. These delays were addressed through the 2nd restructuring that resulted in the closing date extension by 18 months. This extension has helped in progressing some delayed works contract. However, COVID-19 pandemic has significantly delayed the project’s implementation pace because of severe restrictions on movement, manufacturing and importation of necessary goods (pipes, pumps and equipment). Resulted delays have badly affected the completion of the rehabilitation of the second phase of Bukhara Wastewater Treatment Plant (BWWTP) and the second phase of Samarkand Wastewater Treatment Plant (SWWTP), as well as major wastewater collection sewerage networks in Bukhara that poses a significant risk to the achievement of the PDO. 4. With the recent reopening and ease of restrictions, pending goods have been manufactured and shipping to Uzbekistan commenced, with the expectation that all goods will be received by late December 2020. While the completion of the remaining works will need nine months, the extra two months, from the proposed extension, will allow for preliminary testing and commissioning SWWTP and BWWTP as well as serving as buffer against any unforeseen delay including the harsh weather during the winter season. 5. Undisbursed balance under the project AF has been almost fully committed (98 percent) with current disbursement at 58.3 percent. The Project is financing fifteen works contracts (eight in Samarkand and seven in Bukhara), nine completed (four are completed and closed and five have been amended for additional works), and two will be completed with slight delay by February 28, 2021. The remaining four contracts are behind implementation schedule and need special attention: (i) SOV/ICB/W-1, (2nd phase of rehabilitation of SWWTP) is showing very good physical progress 67 percent, and the plant commissioning is expected by March 31, 2021; (ii) BVK/ICB/W-1 (2nd phase of BWWTP reconstruction and upgrade) is at 28 percent physical progress, mainly due to disputes between the contractor and the employer which are at final settlement stage by appointed dispute board, and the plant commissioning is expected by September 30, 2021; (iii) BVK/ICB/W-3 (construction of sewer collection) - progress is around 75 percent, but it has suffered from very slow progress during the last 12 months (poor contractor performance). Hence, the contract was terminated on October 15, 2020, feasible alternative to complete the remaining works has been finalized and remaining works will be awarded to a well-performing contractor under the project, and the works will be completed by end of June 2021; and (iv) BVK/ICB/W-4 (replacement of sewer collection) has been terminated due to the consistent poor performance (32 percent progress) of the contractor which was exacerbated by COVID-19 pandemic. The remaining works have already been awarded to a good-performing contractor in similar contract under the project, and works are expected to be completed by September 30, 2021. 6. Three out of total ten PDO of the original project have been achieved, two substantially achieved and two (redundant) were dropped at the first restructuring. Nine out of total eleven PDO indicator targets (indicators plus sub-indicators), and four out of eleven Intermediate Results Indicators (IRIs) are yet to be achieved, with The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) high likelihood to be achieved. These indicators are directly related to the completion of Bukhara and Samarkand Sewerage Project, Bukhara Wastewater Treatment Plant and the sewerage network in Bukhara (BOD removal quantity and coverage related indicators). All other indicators have already been met through the rehabilitation, replacement, and expansion of the sewerage network including the construction of new efficient pump stations. 7. Procurement, Environmental and Social Safeguards compliance are all rated Moderately Satisfactory (MS). The project is regularly submitting quarterly progress reports. Directives and guidance provided by the World Bank for the implementation of COVID-19 Pandemic related precautions and measures to ensure the safety of workers have been adopted by the project coordination unit (PCU), contractors, and consultants in the workplace. An environmental safeguards specialist in the supervision consultant team regularly visits the project area. Gaps in the implementation of site-specific Environmental and Social Management Plans (ESMPs) and safety risks at various active contracts, reported in June 2020 ISR, have been successfully addressed. Furthermore, no accidents have been reported on any work site throughout the Project implementation. The Financial Management is rated MS, Quarterly IFRs have been submitted timely and the documentation of advances to the designated account has been regularly updated. The project audit report for 2019 has been submitted timely with no qualification and was found acceptable to the Bank. Legal covenants are substantially met (nine covenants have been met while the remaining two regarding the revenue to operating ratio and debt/revenue ratio are partially met). The project has an INT registered case prevented fraudulence. The final INT investigation report dated September 28, 2020 did not substantiate findings against the implementing entities but concluded fraud practice of a joint venture competing for works contract that was not awarded the contract and was finally debarred as a result of the full investigation. B. Rationale for Restructuring 8. The proposed eleven-months extension of closing date until November 30, 2021 will provide more time to complete outstanding project activities, which will enhance the prospects of achieving the PDO. The completion of sewerage network rehabilitation and installation of service connections will benefit 500,000 people, as well as enable achievement of all intermediate level targets. The extension will also allow for two months to preliminary testing and commissioning of the wastewater treatment plants and sewerage network as well as carrying out a meaningful customer satisfaction surveys in both areas to assess the impacts of full completion of the project activities. This will better inform the project implementation completion and results report. 9. There is a clear path to successful completion, primarily because the project finally has improved contract management, and all materials are in-route to the Project sites. All goods (equipment and material) related to the completion of the four delayed contracts have been ordered and paid for. While some goods have already been delivered to the site, the remaining electrical and electromechanical equipment as well as pipes are being shipped to Uzbekistan and are expected to be delivered by the end of December, 2020. This eliminates further import risks that can be imposed in the event a new wave of COVID-19 arises. In additon, contract management has been improved through the engagement of proven good performing contractors after the termination of theaforementioned contracts. The ongoing dispute related to BVK/ICB/W-1 for the 2nd phase of BWWTP rehabilitation is being settled through the appointed dispute board. The requested closing date extension will be complemented by a course of tailored actions included in the comprehensive action plan for completion that was agreed with the Ministry of Housing and Communal Servicesn(MHCS), and Bukhara Water Utility (BWU) to remedy the situation. These actions include vigilant supervision and contract management to ensure timely completion of on-going civil works. As agreed, PCU and BWU will conduct weekly meetings with the contractors and supervision consultants/engineer with frequent visits of representatives of the MHCS supported by regular monthly The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) consultation meetings with the Bank team. In addition, the action plan necessitated the update of the implementation schedule by all active contractors which showed that all remaining civil works will be completed and commissioned by end of November, 2021. 10. The Uzbek authorities including Ministry of Housing and Communal services, Ministry of Investment and Foreign Trade as well as the implementing entity (Uzkommunkhizmat) have put all efforts and measures in place to ensure satisfactory project closing. This includes but not limited to: (i) issuing special permits for movement of contracts' transportation to construction sites and organized charter flights from abroad to bring international service providing specialists. Due to to GoU’s efforts, implementation has continued to move forward albeit at slower pace given COVID constraints; (ii) ensure the delivery of all remaining goods to the project sites by the end of December 2020; and (iii) active monitoring the implementation of the action plan. The PDO remains acheivable. 11. As filed in the last ISR dated June 18, 2020, the current Project’s DO and IP ratings are MS and will be retained if the proposed extension is warranted. However, without the proposed extension, the ratings will be downgraded. Table 1 below summarizes the likelihood of PDO targets achievement with and without the proposed closing date extension. Table 1. Status of PDO indicators till November 1, 2020 PDO Indicator Target Progress Achievement Achievement Status Status Likelihood Likelihood around 9- Dec 31, 2020 11 months extension Direct project beneficiaries to Total (500,000) people 436,000 Substantial High improved sanitation Volume (mass) of BOD pollution BVK (2,000) tons/year 1,710 Substantial High loads removed by the treatment SVK (3,100) tons/year 2,450 Substantial High plant Energy efficiency at the BVK (3.0) kWh/kgBOD5 2.5 Achieved N/A treatment plant SVK (3.0) kWh/kgBOD5 4.0 Moderate High Operating cost coverage ratio of BVK: (1.45) 0.74 Low Moderate/Substantial utility subject to Tariff review SVK (1.40) 1.26 Substantial Substantial/High subject to Tariff review Number of sewer blockages per BVK (600) 659 Substantial High year SVK (700) 310 Achieved N/A Percent of customers satisfied BVK (60%) 30 Low High with the services SVK (60%) 30 Low High II. DESCRIPTION OF PROPOSED CHANGES The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) A. Closing Date Extension 12. The project closing date will be extended to November 30, 2021, and the deadline for withdrawal applications to March 31, 2022. B. Adjustment of Results Framework 13. The achievement dates of delayed targets will be adjusted from December 31, 2020 to November 30, 2021. The results framework remains relevant and no change will be introduced to the definition, wording or target of any indicator. C. Adjustment of Disbursement Estimates 14. The disbursement estimates will be adjusted to reflect the extended implementation period and project progress as illustrated in Section III of this Restructuring Paper. The AF approved amount is XDR67.9 million (US$95.44 million equivalent). However, due to the partial cancellation (XDR4,064,713.42) and XDR exchange rate fluctuation against the US$, the current value is US$89.89 million as of November 30, 2020. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Loan Closing Date(s) ✔ Disbursement Estimates ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 30-Jun-2016, 30-Jun- IDA-46330 Closed 31-Dec-2015 2019, 04-Feb-2020 IDA-56980 Effective 30-Jun-2019 31-Dec-2020 30-Nov-2021 30-Mar-2022 IDA-56990 Effective 30-Jun-2019 31-Dec-2020 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2010 0.00 0.00 2011 2,662,515.82 2,662,515.82 2012 4,616,567.65 4,616,567.65 2013 9,618,817.95 9,618,817.95 2014 9,417,830.60 9,417,830.60 2015 13,071,366.30 13,071,366.30 2016 15,612,901.68 15,612,901.68 The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) 2017 4,210,684.14 4,210,684.14 2018 10,390,336.51 10,390,336.51 2019 24,169,069.00 16,442,867.00 2020 44,153,273.00 13,441,882.39 2021 18,414,734.10 30,000,000.00 2022 0.00 11,000,000.00 . The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) . Results framework COUNTRY: Uzbekistan Uzbekistan Bukhara and Samarkand Sewerage Project Project Development Objectives(s) The proposed PDOs are to reduce wastewater pollution and improve the performance of utilities responsible for wastewater managementin Bukhara and Samarkand. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Reduced wastewater pollution in Bukhara and Samarkand Direct project beneficiaries 350,000.00 370,000.00 370,000.00 370,000.00 382,500.00 436,000.00 500,000.00 (CRI, Number) Action: This indicator has been Revised Female beneficiaries 52.00 52.00 52.00 52.00 52.00 52.00 52.00 (CRI, Percentage) Action: This indicator has been Revised Volume(mass) of BOD pollution load removed by 1,590.00 1,120.00 1,485.00 1,485.00 1,820.00 1,710.00 2,000.00 treatment plant under the project (CRI, Tones/year) Action: This indicator has been Revised Volume(mass) of BOD 2,450.00 2,450.00 2,450.00 2,450.00 2,450.00 2,450.00 3,100.00 pollution load removed by The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 treatment plant under the project (CRI, Tones/year) Action: This indicator has been Revised Improved performance of utilities responsible for wastewater management in Bukhara and Samarkand Energy efficiency at the WWTP in BVK (kWh/kg 4.10 4.30 4.10 1.70 2.30 2.50 3.00 BOD5) (Text) Action: This indicator has been Revised Energy efficiency at the WWTP in SVK (kWh/kg 4.00 4.00 4.00 4.00 4.00 4.00 3.00 BOD5) (Text) Action: This indicator has been Revised Operating cost coverage 1.28 1.29 1.33 0.81 0.83 0.74 1.45 ratio in BVK (Text) Action: This indicator has been Revised Operating cost coverage 1.08 1.20 1.36 1.20 1.08 1.26 1.40 ratio in SVK (Text) Action: This indicator has been Revised Number of sewer blockages 1,404.00 1,200.00 1,086.00 826.00 763.00 659.00 600.00 per year in BVK (Number) Action: This indicator has been Revised The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Number of sewer blockages 1,056.00 1,000.00 759.00 280.00 340.00 310.00 700.00 per year in SVK (Number) Action: This indicator has been Revised % of customers satisfied with the services received 0.00 30.00 30.00 30.00 30.00 30.00 60.00 in BVK (Percentage) Action: This indicator has been Revised of which female 0.00 30.00 30.00 30.00 30.00 30.00 60.00 (Percentage) Action: This indicator has been Revised % of customers satisfied with the services received 0.00 30.00 30.00 30.00 30.00 30.00 60.00 in SVK (Percentage) Action: This indicator has been Revised of which female 0.00 30.00 30.00 30.00 30.00 30.00 60.00 (Percentage) Action: This indicator has been Revised PDO Table SPACE The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Component A. Institutional Strengthening and Capacity Building Communication and Public Awareness Strategy for the None Draft ToR Developed Draft ToR Developed Draft ToR Developed Draft ToR Developed Draft ToR Developed Implemented BVK and SVK developed and implemented (Text) Action: This indicator has been Revised VK staff trained in utility management, O&M, finance, and 0.00 80.00 80.00 248.00 423.00 423.00 1,000.00 communications, procurement (Number) Action: This indicator has been Revised Number of people who participated in the public 0.00 0.00 0.00 0.00 0.00 0.00 2,000.00 outreach workshops conducted (Number) Action: This indicator has been Revised Of which female (%) 0.00 0.00 0.00 0.00 0.00 0.00 50.00 (Percentage) The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Action: This indicator has been Revised Pilot SCADA system installed and operational None Operational Operational Operational Operational Operational Operational (Text) Action: This indicator has been Revised Feasibility studies and detailed engineering design No No No No No Yes Yes for future investments completed (Yes/No) Action: This indicator has been Revised Component B. Physical Investments Cumulative length of sewer lines replaced in Bukhara 0.00 0.00 0.00 3.00 19.50 34.00 82.70 (Kilometers) Action: This indicator has been Revised Cumulative length of sewer lines replaced in Samarkand 0.00 27.75 34.35 34.35 34.35 35.35 34.35 (Kilometers) Action: This indicator has been Revised Cumulative length of new sewer lines constructed in 0.00 0.00 1.40 3.00 7.60 12.40 41.00 Bukhara (Kilometers) The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Action: This indicator has been Revised Cumulative length of new sewer lines constructed in 0.00 5.20 31.20 36.10 59.20 79,130.00 59.20 Samarkand (Kilometers) Action: This indicator has been Revised New household sewer connections constructed 0.00 0.00 1,700.00 1,700.00 2,382.00 2,930.00 4,500.00 under the project (CRI, Number) Action: This indicator has been Revised New household sewer connections constructed 0.00 2,675.00 4,327.00 5,938.00 7,780.00 8,000.00 14,000.00 under the project (CRI, Number) Action: This indicator has been Revised IO Table SPACE * 2015 is the referenced baseline year (when AF was processed). -- Revisions have to do with the end dates of the targets only. The World Bank Uzbekistan Bukhara and Samarkand Sewerage Project (P112719)