The World Bank Alat and Karakul Water Supply Project (P118197)

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1 Public Disclosure Authorized Public Disclosure Authorized RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ALAT AND KARAKUL WATER SUPPLY PROJECT APPROVED ON DECEMBER 13, 2012 TO REPUBLIC OF UZBEKISTAN REPORT NO.: RES41409 Public Disclosure Authorized WATER EUROPE AND CENTRAL ASIA Public Disclosure Authorized Regional Vice President: Country Director: Regional Director: Practice Manager/Manager: Task Team Leader(s): Anna Bjerde Lilia Burunciuc Steven N. Schonberger David Michaud Khairy Al-Jamal, Bakyt Arystanov

2 ABBREVIATIONS AND ACRONYMS

3 Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID P Original EA Category Partial Assessment (B) Approval Date 13-Dec-2012 Financing Instrument Investment Project Financing Current EA Category Partial Assessment (B) Current Closing Date 30-Jun-2020 Organizations Borrower Republic of Uzbekistan Responsible Agency BUKHARA REGIONAL PRODUCTION ENTERPRISE SUVOKOVA Project Development Objective (PDO) Original PDO The project development objective (PDO) is to improve the coverage, quality and efficiency of public water supply service in the two districts of Alat and Karakul in the Bukhara region. The objective will be achieved through the rehabilitation and expansion of water production, transmission and distribution infrastructure in urban and rural areas. Summary Status of Financing Ln/Cr/Tf Approval Signing Effectiveness Closing Net Commitment Disbursed Undisbursed IDA Dec Jul Feb Jun Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No

4 Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This restructuring paper seeks a six-month closing date extension for the Alat and Karakul Water Supply Project to complete critical contracts needed to achieve the PDO and deliver the project outcomes. This is the project s third extension and will mean a cumulative extension of 36 months, requiring RVP approval. A. Project Status 2. The Project experienced 14-month delay in implementation start due to the need for compliance with Government internal requirements for investment projects requiring preparation of project 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 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. The aforementioned issues have collectively led to delays of all works, where the earliest works contract was signed after June 2016 only. These were addressed through the first two restructurings that resulted in the closing date extension by 30 months. However, the delays along with poor performance of the first contractor (whose contract was terminated in May 2019) and recent COVID-19 pandemic restrictions jeopardized the completion of strategic Dvoinik Water Treatment Plant (DWTP) which poses a significant risk to the PDO achievement leading to downgrading the DO rating to MU. 3. All undisbursed balances under the project have been committed with current disbursement at 77.2%. The project has been financing nine works contracts, three have been completed and four are at advanced stage with about 90% completion. The remaining two contracts are at risk for timely completion: (i) contract AK/W/01 (construction of DWTP) re-started its implementation in late September 2019 with new contractor showing high progress rate of 45% as of March; and (ii) contract AK/W/05 (construction of primary and secondary trunk mains, distribution network in western part of Alat district) is on critical path due to underperforming contractor (physical progress is about 23%). The delays have been exacerbated by the current COVID-19 pandemic with severe limitation on movement and import of necessary goods and equipment. As per the revised implementation schedule, the two delayed contracts are expected to be completed by to-be-extended closing date, i.e. December 31, Three out of total four PDO indicators as well as five out of eleven Intermediate Results Indicators (IRIs) have not been met yet as they are directly related to the completion of DWTP (service quality, quantity, coverage

5 and continuity related). All other indicators have already been met through the repair, replacement and expansion of distribution network and service reservoirs, as well as the construction of new efficient pumps. 5. Procurement, Environmental and Social Safeguards compliance are all rated Moderately Satisfactory. The project is regularly submitting quarterly progress reports. 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 December 2019 ISR, have been successfully addressed as confirmed during the recent mission. Furthermore, no accidents have been reported on any work site throughout the Project implementation. On the other hand, the Financial Management was rated MU in December 2019 due to the lack of documentation of the project designated account expenditure. However, all expenditures under the designated account are documented up to date and the FM rating is likely to be upgraded to MS. There are no pending audit reports. All six legal covenants have been met and the project has no INT investigation. 6. This is the third Level 2 restructuring for the Project. The 1 st restructuring was made on November 23, 2017 and included an extension of the closing date by 18 months, till June 30, 2019, and reallocation between disbursement categories. The 2 nd restructuring was made on November 7, 2018 and included an extension of the closing date by 12 months, till June 30, 2020, and change in the financial percentage of eligible expenditures to 100% from IDA proceeds. B. Rationale for Restructuring 7. The 6-month extension of closing date until December 31, 2020 will allow the Borrower to complete planned project activities and fully meet PDO indicators (as DWTP is the prime water source for providing good quality water supply to the targeted population of 232,000 people), as well as IRI targets. This will be the last extension for this project. 8. The requested closing date extension will be complemented by a course of other actions included in the revised action plan that was agreed with the Kommunkhizmat and Bukhara Suvokova to remedy the situation. These actions include vigilant supervision and contract management to ensure timely completion of on-going civil works. Bukhara Suvokova holds weekly meetings with the contractor and supervision consultants/engineer with frequent visits from representatives of the MHCS supported by regular bi-monthly interim implementation support missions by the project s Task Team of the World Bank. In addition, the action plan necessitated the update of the implementation schedule by the DWTP contractor which showed good progress in the civil work (expected to be completed by end of June, 2020). Moreover, the delivery schedule of all equipment is expected to be accomplished by the end of coming September at latest, taking into consideration delays resulted from COVID-19 pandemic lockdown. All equipment have been ordered and are under manufacturing. On exceptional basis, the authorities allowed for the construction works to proceed and to be intensified even during the

6 country imposed quarantine. This was possible while the pandemic safety precautions were implemented on the site and monitored through the construction management consultant. 9. Despite the steady progress made since September 2019, the Project IP rating was kept MU while the PDO rating was downgraded to MU in December ISR. This is purely to reflect the extremely low likelihood to complete the DWTP by the prevailing closing date of June 30, However, progress in the last 6 months as well as the proposed extension of the closing date to December 31, 2020 will support the upgrade of both ratings to MS. This has been confirmed through the review of the progress presented during the recent Implementation Support mission (May 18-28, 2020). Moreover, the rating of the Project Management is expected to be upgraded to MS given the succeful implementation of the revised action plan, the satisfactory implemetation of ESMPs, physical progress and the improved Financial Management. II. DESCRIPTION OF PROPOSED CHANGES A. Closing Date Extension 10. The project closing date will be extended to December 31, B. Adjustment of Results Framework 11. The achievement dates of delayed targets will be adjusted from June 30 to December 31, The results framework remains relevant and no change will be introduced to the definition or wording of any indicator. C. Adjustment of Disbursement Estimates 12. 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 project approved amount is XDR53.2 million (US$82 million equivalent). However, due to the depreciation of the XDR against the US$, the current value depreciated to US$73.63 million as of May 28, III. SUMMARY OF CHANGES Changed Not Changed Results Framework Loan Closing Date(s) Disbursement Estimates Implementing Agency DDO Status Project's Development Objectives

7 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE 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 Procurement Implementation Schedule Other Change(s) Economic and Financial Analysis Technical Analysis Social Analysis Environmental Analysis IV. DETAILED CHANGE(S) LOAN CLOSING DATE(S) Ln/Cr/Tf Status Original Closing IDA Effective 31-Dec-2017 Closing(s) 30-Jun-2019, 30-Jun Proposed Closing Proposed Deadline for Withdrawal Applications 31-Dec Apr-2021 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes

8 Year Current Proposed , , , , ,335, ,335, ,862, ,862, ,947, ,947, ,957, ,900, ,000, ,000, ,000,

9 RESULT_FRAME_TBL_PDO. Results framework COUNTRY: Uzbekistan Alat and Karakul Water Supply Project Project Development Objectives(s) The project development objective (PDO) is to improve the coverage, quality and efficiency of public water supply service in the two districts of Alat and Karakul in the Bukhara region. The objective will be achieved through the rehabilitation and expansion of water production, transmission and distribution infrastructure in urban and rural areas. Project Development Objective Indicators by Objectives/ Outcomes Indicator Name PBC Baseline Intermediate Targets End Target Improved coverage of public water supply service in the districts of Alat and Karakul Direct project beneficiaries (Number) 40, , , , , , , , , has been Female beneficiaries (Percentage) Improved quality of public water supply service in the districts of Alat and Karakul Percentage of regulatory water samples meeting

10 RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target potable quality standards (Percentage) has been Percentage of regulatory water samples meeting potable quality standards in Alat District (Percentage) Percentage of regulatory water samples meeting potable quality standards for Karakul District (Percentage) Improved efficiency of public water supply service in the districts of Alat and Karakul Bill collection ratio (Percentage)

11 RESULT_FRAME_TBL_PDO RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target has been Bill Collection Ratio - Alat (Percentage) Bill Collection Ratio - Karakul (Percentage) Reliability of water supply service (Hours) has been PDO Table SPACE Intermediate Results Indicators by Components Indicator Name PBC Baseline Intermediate Targets End Target Component A: Improvement of Water Supply Infrastructure New piped household water connections that , , ,400.00

12 RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target are resulting from the project intervention (Number) has been Piped household water connections that are benefiting from rehabilitation works undertaken by the project (Number) , , has been Number of connections with operating water meters (Number) , , , has been Number of breakage per km of water transmission mains (Number) Number of breakage per km of water distribution networks (Number) Component B: Institutional Strengthening and Capacity Building

13 RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target BVK Cash Working Ratio (Number) has been BVK Cash Working Ratio - Alat (Number) BVK Cash Working Ratio - Karakul (Number) Percent of households for whom water is a priority problem (Percentage) has been Percent of households for whom water is a priority problem - Alat (Percentage)

14 RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target Percent of households for whom water is a priority problem - Karakul (Percentage) Number of water utilities that the project is supporting (Number) Number of BVK staff recruited, and trained for Alat and Karakul water supply service needs (Number) has been Non revenue water (Percentage) has been

15 RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target BVK Participation in IBNET for water and sanitation utilities (Number) has been IO Table SPACE.

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