Document of The World Bank Public Disclosure Authorized Report No: ICR00001144

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-32600)

ON A

Public Disclosure Authorized CREDIT

IN THE AMOUNT OF SDR19.7 MILLION (US$26.6 MILLION EQUIVALENT)

TO THE

REPUBLIC OF ARMENIA

FOR THE

DAM SAFETY PROJECT Public Disclosure Authorized

March 11, 2010

Sustainable Development Department Public Disclosure Authorized South Caucasus Country Unit Europe and Central Asia Region

CURRENCY EQUIVALENTS

(Exchange Rate Effective February 1, 2010)

Currency Unit = Armenian Dram 100.00 AMD = US$ 0.27 US$ 1.00 = 376.69 AMD

ABBREVIATIONS AND ACRONYMS

AMD Armenian Dram ARS Armenian Rescue Service ARSP Agriculture Reform Support Project CAS Country Assistance Strategy CPS Country Partnership Strategy DCA Development Credit Agreement DME Dam Maintenance Enterprise DSP Dam Safety Project EMA Emergency Management Agency EMP Environmental Management Plan ERR Economic Rate of Return EPP Emergency Preparedness Plan EWS Early Warning System FAO Food and Agriculture Organization FM Financial Management FMR Financial Management Report FSU Former Soviet Union GDP Gross Domestic Product GOA Government of Armenia ha Hectare I&D Irrigation and Drainage ICR Implementation Completion Report IDA International Development Association IDP Irrigation Development Project IDSP II Irrigation Dam Safety II Project IFAD International Fund for Agricultural Development IOI Intermediate Outcome Indicator IP Instrumentation Plan IREP Irrigation Rehabilitation Emergency Project IRP Irrigation Rehabilitation Project ISR Implementation Status Report KW Kilowatt KWh Kilowatt hour M&E Monitoring and Evaluation m meter m3 Cubic meter m3/s Cubic meter per second Mm3 Million cubic meters MASC Marz (Province) Agriculture Support Center MOA Ministry of Agriculture MTEF Mid-Term Expenditures Framework MTR Mid-Term Review NPV Net Present Value NWASP North West Agricultural Services Project O&M Operation and Maintenance PAD Project Appraisal Document PAR Population At Risk PDO Project Development Objective PIU Project Implementation Unit PMB Project Management Board POI Project Outcome Indicator RRP Risk Reduction Profile QER Quality at Entry Review SCWM State Committee for Water Management SCDS Summary Coefficient for Dams Sustainability SOE Statement of Expenses TA Technical Assistance TORs Terms of Reference TRP Title Registration Project USAID United States Department for International Aid WFP World Food Program WSA Water Supply Agency WSDP Water Sector Development Project WUAs Water Users Associations WUFs Water Users Federations XDR/SDR Special Drawing Rights

Vice President: Philippe H. Le Houerou Country Director: Asad Alam Sector Director: Peter D. Thomson Sector Manager: Dina Umali Deininger Project Team Leader: Giuseppe Fantozzi ICR Team Leader: Giuseppe Fantozzi

ARMENIA Dam Safety Project

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design...... 1 2. Key Factors Affecting Implementation and Outcomes ...... 5 3. Assessment of Outcomes ...... 8 4. Assessment of Risk to Development Outcome...... 13 5. Assessment of Bank and Borrower Performance ...... 14 6. Lessons Learned...... 15 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners...... 16 Annex 1. Project Costs and Financing...... 17 Annex 2. Outputs by Component...... 18 Annex 3. Economic and Financial Analysis ...... 24 Annex 4. Bank Lending and Implementation Support/Supervision Processes...... 28 Annex 5. Summary of Borrower’s ICR and/or Comments on Draft ICR ...... 29 Annex 6. List of Supporting Documents ...... 43 MAP A. Basic Information

Country: Armenia Project Name: Irrigation Dam Safety Project ID: P064879 L/C/TF Number(s): IDA-32600 ICR Date: 03/11/2010 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: SIL Borrower: ARMENIA Original Total XDR 19.7M Disbursed Amount: XDR 19.7M Commitment: Revised Amount: XDR 19.7M Environmental Category: B Implementing Agencies: State Committee for Water Management Cofinanciers and Other External Partners:

B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 09/02/1998 Effectiveness: 04/06/2000 12/01/2000 Appraisal: 03/22/1999 Restructuring(s): 03/29/2005 Approval: 06/24/1999 Mid-term Review: 12/10/2002 Closing: 03/31/2005 09/30/2009

C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Highly Satisfactory Risk to Development Outcome: Moderate Bank Performance: Highly Satisfactory Borrower Performance: Highly Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Highly Satisfactory Government: Highly Satisfactory Implementing Quality of Supervision: Highly Satisfactory Highly Satisfactory Agency/Agencies: Overall Bank Overall Borrower Highly Satisfactory Highly Satisfactory Performance: Performance:

i C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No Highly Satisfactory at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status:

D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 22 22 Irrigation and drainage 78 78

Theme Code (as % of total Bank financing) Infrastructure services for private sector development 28 28 Natural disaster management 29 29 Rural services and infrastructure 14 14 Water resource management 29 29

E. Bank Staff Positions At ICR At Approval Vice President: Philippe H. Le Houerou Johannes F. Linn Country Director: Asad Alam Judy M. O'Connor Sector Manager: Dina Umali-Deininger Joseph R. Goldberg Project Team Leader: Giuseppe Fantozzi Salem Gafsi ICR Team Leader: Giuseppe Fantozzi ICR Primary Author: Juan Bautista Morelli

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) The Project Development Objectives (PDOs) as stated in the Development Credit Agreement (DCA) dated October 7, 2000 were: (i) to increase safety of dams facing the highest risk of failure; (ii) to enhance sustainability of operation of dams.

ii Revised Project Development Objectives (as approved by original approving authority) The original PDOs were revised in the Amendment to the DCA dated December 1, 2000 to read as: #The objectives of the Project are: (i) to increase safety of dams facing the highest risk of failure; (ii) to enhance sustainability of operation of dams; and (iii) to provide critical agricultural inputs to the population affected by drought.#

(a) PDO Indicator(s)

Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Dams included under the project rehabilitated plus dams added to the project Indicator 1 : according to the Amendment to DCA rehabilitated. Value quantitative or 0 20 27 26 Qualitative) Date achieved 06/24/1999 10/07/2000 03/29/2005 09/30/2009 In the project documents 20 dams were originally planned to be rehabilitated. Six Comments plus one (rehabilitation of Marmarik dam is still underway) were added later (incl. % through amendment to be financed by cost savings). Currently, the target is achievement) achieved by 96.3%. Number of people protected downstream of dams (originally planned under the Indicator 2 : project plus additional) for which rehabilitation works are completed. Value quantitative or 0 353,600 537,900 373,900 Qualitative) Date achieved 06/24/1999 10/07/2000 03/29/2005 09/30/2009 The target is achieved by 70%. However, with the completion of Marmarik dam Comments in June 2010 the number of people protected downstream of rehabilitated dams (incl. % will be 537,900 - additional 182,300 people or by about 52% more than the achievement) originally planned target. Summary coefficient for Dam Maintenance Enterprise sustainability (SCDS) for Indicator 3 : the group of 20 dams originally included under the project. Value quantitative or 0.08 0.71 0.71 Qualitative) Date achieved 06/24/1999 10/07/2000 09/30/2009 This indicator takes into account sustainability of the Dam Management Comments Enterprise through availability of: (i) financing; (ii) transport units; and (iii) (incl. % machinery for operation and maintenance. For the group of 20 dams it has achievement) achieved the target by 100%. Summary coefficient for Dam Maintenance Enterprise sustainability (SCDS) for Indicator 4 : the group of seven dams (after the amendment). Value quantitative or 0.08 0.7 0.61 Qualitative) Date achieved 06/24/1999 03/29/2005 09/30/2009

iii Comments This is the same indicator as above but for the group of seven dams. Currently, (incl. % the achievement of the target is at 85.5% and will reach the target of 0. 61 after achievement) completion of rehabilitation works on the Marmarik dam in June 2010.

(b) Intermediate Outcome Indicator(s)

Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Number of villages for which Early Warning System is installed (originally Indicator 1 : planned plus additonal). Value (quantitative 0 151 182 156 or Qualitative) Date achieved 06/24/1999 10/07/2000 03/29/2005 09/30/2009 Current achievement of the target is at 87%. However with the completion of Comments rehabilitation of the Marmarik dam in June 2010, the target of 182 villages will (incl. % be reached and the achievement will exceed by 20% the originally targeted 151 achievement) villages. Indicator 2 : Summary Risk Coefficient for 20 dams Value (quantitative 0.63 0.07 0.07 or Qualitative) Date achieved 06/24/1999 10/07/2000 09/30/2009 Comments The target of 0.07 was reached in March of 2004 (100% achievement) after (incl. % completion of rehabilitation of all 20 dams originally included under the project. achievement) Indicator 3 : Summary Risk Coefficient for seven additional dams. Value (quantitative 0.55 0.10 0.23 or Qualitative) Date achieved 06/24/1999 03/29/2005 09/30/2009 Currently the target is achieved by more than 71%. The target of 0.10 will be Comments reached after completion of works on Marmarik dam, rehabilitation of which is (incl. % still underway through the Government of Armenia funds and expected to be achievement) over in June, 2010.

G. Ratings of Project Performance in ISRs

Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 06/30/1999 Satisfactory Satisfactory 0.00 2 12/23/1999 Satisfactory Satisfactory 0.00 3 02/02/2000 Satisfactory Satisfactory 0.00 4 07/18/2000 Satisfactory Satisfactory 1.30

iv 5 01/17/2001 Satisfactory Satisfactory 1.30 6 03/20/2001 Satisfactory Satisfactory 1.73 7 09/10/2001 Satisfactory Satisfactory 6.31 8 12/05/2001 Satisfactory Satisfactory 8.30 9 06/21/2002 Satisfactory Highly Satisfactory 10.19 10 12/26/2002 Satisfactory Highly Satisfactory 13.04 11 04/23/2003 Satisfactory Highly Satisfactory 14.42 12 08/07/2003 Satisfactory Highly Satisfactory 14.84 13 03/18/2004 Satisfactory Highly Satisfactory 15.57 14 05/06/2004 Satisfactory Highly Satisfactory 16.72 15 11/24/2004 Satisfactory Highly Satisfactory 17.31 16 04/02/2005 Satisfactory Highly Satisfactory 17.31 17 10/24/2005 Satisfactory Satisfactory 18.26 18 09/13/2006 Satisfactory Satisfactory 18.73 19 05/24/2007 Satisfactory Satisfactory 21.36 20 03/17/2008 Satisfactory Satisfactory 23.59 21 02/03/2009 Satisfactory Satisfactory 24.40 22 12/04/2009 Satisfactory Satisfactory 27.05

H. Restructuring (if any)

ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions 12/01/2000 Y S S 1.30 Another amendment to DCA, (signed by the Country Director for Armenia on February 16, 2005, and countersigned by the Minister of Finance and Economy of the Republic of Armenia on March 29, 2005), did not change the PDO. Only the number of dams to be rehabilitated was increased from 03/29/2005 N S HS 17.31 20 to 27, to be financed with the cost savings obtained during implementation. Additionally, as a repeater project # Irrigation Dam Safety II Project (IDSP II) - was approved in June 2004, as a byproduct of the DSP smooth implementation, the final objective of DSP together with IDSP II was expanded to bring

v ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions the technical state and operational conditions of the whole dam system in Armenia into compliance with international standards resulting in increased safety of downstream population and associated socio-economic activities and infrastructure. Although strictly speaking this is a different project, DSP resulted in a much larger scope than what was the original DSP PDO.

If PDO and/or Key Outcome Targets were formally revised (approved by the original approving body) enter ratings below: Outcome Ratings Against Original PDO/Targets Highly Satisfactory Against Formally Revised PDO/Targets Highly Satisfactory Overall (weighted) rating Highly Satisfactory

I. Disbursement Profile

vi 1. Project Context, Development Objectives and Design

1.1 Context at Appraisal Armenia is a land-locked country in the South Caucasus region with about three million inhabitants. At the time of project appraisal the Armenian economy was undergoing severe adjustments following the collapse of the Former Soviet Union (FSU), including the privatization of land. The early 1990s were marked by post-independence fiscal crises, hyperinflation, and the consequences of an armed conflict with Azerbaijan. During the late 1990s and early 2000s, the Government of Armenia (GOA) carried out a successful stabilization program and structural reforms that resulted in rapid economic recovery with macroeconomic stability and low inflation. At the end of the 1990s, agriculture was a dominant sector in the economy providing 50 percent of employment and contributing about 30 percent of the Gross Domestic Product (GDP). Out of a total of 420,000 hectares (ha) of cultivable area in the whole country (280,000 of which were potentially irrigable), only about 150,000 ha were irrigated while roughly 130,000 ha had reverted to dry land due to failure of irrigation pumping and conveyance systems designed during the Soviet era. To address these issues, the GOA had initiated a program to rehabilitate the irrigation systems and to give water users a stake in its management. Several emergency interventions aimed at keeping the system operational and slowing the rate of its deterioration, were implemented1. However, progress was slow. In this context the Irrigation Development Project (IDP) was conceived at the end of the 1990s as part of the ongoing national program supporting the rehabilitation and restructuring of the Irrigation and Drainage (I&D) systems in Armenia. At preparation it was foreseen to be a large project of about US$100 million, as stated by its original ambitious name: Water Sector Development Project (WSDP). One of its largest components - Dam Safety - became then a US$30.3 million stand-alone project, the Dam Safety Project (DSP) as the GOA and the Bank realized during preparation that there was an imminent threat of major loss of life and economic assets2. The Bank’s main country assistance goal in the agricultural sector as indicated in the Country Assistance Strategy (CAS) (August 26, 1997) was to facilitate private sector development by helping the GOA address basic infrastructure and institutional

1 The first phase of this long-term program consisted of emergency interventions to secure continuity of irrigation system operation, along with pilot/demonstration activities to develop a practical methodology for improving system management. Implementation was initiated under the Irrigation Rehabilitation Project (IRP), with financial support from the International Development Association (IDA) and International Fund for Agriculture Development (IFAD). It was followed by the IFAD-supported North West Agricultural Services Project (NWASP) and with the Dam Safety Project (DSP) it was expected to conclude the emergency intervention phase. The second phase of the program was expected to be the restructuring and development phase focusing on building a solid basis for system sustainability through physical upgrading of the infrastructure and empowerment of stakeholders to prevent its deterioration. 2 Three complete dam failures occurred in Armenia in 1974, 1979 and 1994. Considering the number of dams existing in Armenia in those years, the percentage of failures (number of failures/number of existing dams) can be estimated in the order of 2.1 percent (1974), 3.5 percent (1979) and 3.9 percent (1994). Two aspects were of concern: (a) the values were considerably higher than the world-average value of 0.5 percent for dams built after 1951 (ICOLD); and (b) the percentage values showed an increasing trend. From 1994 to 1998, six significant dam-related accidents occurred that might have as well led to complete dam failures. All reported accidents could have been avoided if proper surveillance and Operation and Maintenance (O&M) were in place.

1 constraints. This goal led to supporting critical investments to: (i) rehabilitate the irrigation infrastructure; and (ii) create the enabling conditions for greater private sector participation in the management, maintenance, and development of that infrastructure. With dams supplying over 25 percent of the irrigation water, 10 percent of the domestic water supply, and 20 percent of the power generation, their structural integrity was of great importance to the well being of the population as a whole, and of critical importance to those people living downstream of unsafe dams.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The primary objective of the DSP was to protect the population and the socioeconomic infrastructure downstream of the 20 dams facing the highest risk of failure. Achieving this objective would also enhance the sustainability of dam-based economic activities in Armenia. Progress towards the project objective would be measured in terms of: (i) the reduction of the risk, related to dam failure, to socially acceptable levels for 360,000 people living under threat of high probability of failure of the riskiest 20 dams; and (ii) the improvement of the risk profile for the totality of the dam system in Armenia.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The project was restructured in December 2000 as a response to the GOA’s request to assist in mitigating severe drought consequences. The original PDO was revised in the Amendment to the Development Credit Agreement (DCA) dated December 1, 2000 to read as: “The objectives of the Project are: (i) to increase safety of dams facing the highest risk of failure; (ii) to enhance sustainability of operation of dams; and (iii) to provide critical agricultural inputs to the population affected by drought.” However, the key indicators were not changed. Another amendment to DCA, (signed by the Country Director for Armenia on February 16, 2005, and countersigned by the Minister of Finance and Economy of the Republic of Armenia on March 29, 2005), did not change the PDO. Only the number of dams to be rehabilitated was increased from 20 to 27, to be financed with the cost savings obtained by an efficient Armenian implementation team. In this case, the key indicators didn’t change. However, the targets were revised to reflect the change in the number of dams to be rehabilitated. Additionally, as a repeater project – Irrigation Dam Safety II Project (IDSP II) - was approved in June 2004, as a byproduct of the DSP smooth implementation, the final objective of DSP together with IDSP II was expanded to bring the technical state and operational conditions of the whole dam system in Armenia into compliance with international standards resulting in increased safety of downstream population and associated socio-economic activities and infrastructure. This is much larger in scope than what was in the original PDO.

1.4 Main Beneficiaries DSP was an emergency type project aimed at addressing severe safety risks for a population of about 360,000 people living downstream of the 20 riskiest dams. The primary direct benefit from project interventions would be the reduction in the risk of

2 dam failure – at the time considered to be very high by international standards - that would affect the population and economic assets downstream. In addition, the project would contribute to building institutional capability for operation and maintenance (O&M) of the irrigation infrastructure. It would also have secondary benefits which were important to the economy by helping secure the dams' productive function in enhancing reliability of water supply for over 68,000 ha of irrigated agriculture (about 52 percent of the actually irrigated area in Armenia), for fisheries, and for domestic water supply to about 170,000 people. The project was largely national in scope as the 20 dams to be rehabilitated were located in nine out of the 10 Marzes (provinces). Moreover, the project impact would reach beyond the territory of Armenia as three of these dams were close to the border with Azerbaijan. The number of people who could potentially be affected in Azerbaijan was not known, but was thought to be substantial. The area which could potentially be affected by floods resulting from dam failure was estimated at close to 680 square kilometers.

1.5 Original Components (as approved) The project's total anticipated cost was US$30.3 million, and the credit from the International Development Association (IDA) amounted to US$26.6 million of this. Project activities were organized under three components: • Rehabilitation of 20 primary irrigation dams at high risk of failure. The cost of this component was estimated at US$22 million. This first component supported structural repair works on critical parts affecting dam safety of 20 riskiest dams in Armenia, including: design and supervision, field tests, civil works, and hydraulic steel structures. All the dams were of the embankment type (either earthfill or rockfill), and needed repairs were classified in four categories: (i) upstream protection works; (ii) spillway structural repairs, (iii) leakage reduction; and (iv) irrigation-bottom outlet repairs3. • Dam safety sustainability The cost of this component was estimated at US$7.3 million. It comprised of four subcomponents: (i) preparation of a Dam Safety Plan (US$0.2 million) for each dam to be rehabilitated, including an O&M plan and an Emergency Preparedness Plan (EPP); (ii) installation of dam safety equipment at each dam to be rehabilitated (US$1.7 million); (iii) improvement of the institutional capacity of the Dam Maintenance Enterprise (DME) (US$3 million); and (iv) further safety investigation and implementation of emergency interventions at Armenia's other dams: 54 irrigation dams and six energy dams (US$2.5 million). Because of lack of resources, no allocation was included under the DSP for the rehabilitation of these other dams, but provisions were made for their close monitoring, along with technical investigations to clarify the safety

3 At 11 of the dams (Arpilich, Khalavar, Vardakar, Sovietashen, David Beck, Aparan, Kamout, Mantash, Sarnakhpiur, Kakavadzor2 and Her-Her ) provisions were made for increasing the capacity of the spillways to allow the safe passage of the flood with a return period of 10,000 years. At seven of the dams (Aparan, Tavshud, Sovietashen, Kamout, Sarnakhpiur, Gegardalich and W.Bazmaberd) provisions considered improving the stability of the dams under earthquake loading.

3 status of each dam, together with an Emergency Fund (US$2 million) to allow DME to intervene if threats to human life would appeared. • Project management. The cost of this component was estimated at US$1 million. It provided for the incremental operating costs of the existing Project Implementation Unit (PIU) throughout the duration of the project, designing activities, the services of the international dam safety expert, auditing costs, training of local specialists and gaining of international experience (a study tour).

1.6 Revised Components In 2000, a severe drought hit Armenia. To revive production emergency support to the agricultural sector was requested by the GOA. It was important to include immediate provision, on a grant basis, of field preparation works for planting, including distribution, of appropriate seeds of wheat, barley and possibly potatoes for the spring planting season. In order to supplement the low water levels in reservoirs and rivers, the targeted repair of wells to access ground water was also required. The rural portfolio of the Bank at that time included three projects: Agriculture Reform Support Project (ARSP), Title Registration Project (TRP) and DSP, all implemented under the Ministry of Agriculture (the State Committee for Water Management was established later, on February 8, 2001, by the GOA Decree No. 92). Among these projects, DSP was the newest one and didn’t disburse much funds yet. Amending the DSP by adding a new component to the project and using the resources under the unallocated category offered the quickest method for providing Bank assistance. That approach was also supported by the Board, and the first amendment became effective on December 1, 2000 adding an Emergency Drought Component, budgeted to cost US$4.1 million, for rehabilitation of tubewells, provision of seeds and sowing services for an area of about 40,000 hectares.

1.7 Other significant changes Several months before the original closing date all rehabilitation works in the 20 dams, and all the activities foreseen by the original project, had been satisfactorily completed with significant cost savings. Disbursements amounted to about US$17.3 million, or 66.6 percent of the Credit amount. At the request of the GOA an amendment to DCA became effective on March 29, 2005 allowing to use the generated unused credit funds (about US$9 million) for financing a set of rehabilitation works in seven additional dams that were excluded from the scope of the DSP at appraisal owing to insufficient credit funds. These new works would complement others to be implemented under the repeater IDSP II which was effective since December 8, 2004. The final objective of DSP together with IDSP II would then be to bring the technical state and operational conditions of the whole dam system in Armenia into compliance with international standards resulting in increased safety of downstream population and associated socio- economic activities and infrastructure. This second amendment, besides adding among project activities the rehabilitation of seven additional dams, included the Marmarik dam, which was the biggest single rehabilitation investment to be made under both DSP and IDSP II. The rehabilitation of Marmarik was foreseen to last not less than two and a half years. Hence, the second amendment also arranged for some changes in the Schedule I Table of the

4 DCA, and provided a 30 months extension of the Closing Date until September 30, 2007. A third amendment, gave a second 15 months extension until December 31, 2008 with further reallocation of the Credit funds, which was agreed on August 15, 2006. The fourth amendment approved on December 12, 2008, granted a further nine months extension of the Closing Date until September 30, 2009. These two additional extensions were necessary in order to finalize the more than US$12 million works (including GOA cofinancing) in Marmarik dam that were behind schedule due to several reasons, including : (i) delays in obtaining the state expertise (further studies were required); (ii) delays in the tender process; and (iii) inclement weather conditions for the dam works.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry DSP investment was timely designed when the country’s dam system was disintegrating under the weight of management chaos and physical neglect following the collapse of the FSU. Recognizing the potential catastrophic consequences of dam failure, the GOA and the Bank agreed in 1999 to give priority to addressing urgent dam safety issues by proceeding with the rehabilitation of the most deteriorated dams as a separate DSP from the broader WSDP. The Bank response to the GOA for rapid interventions in rehabilitating the 20 riskiest dams was appropriate and the operation proved to be successful. Project design was pertinent to the issues at hand and targets were attainable. The background analysis that was prepared by an experienced international consulting firm and a local consulting company demonstrated clearly the need and urgency of this intervention. Such analysis proved to be important in the selection of dams and development of measures to be carried out under the project. Resource constraints at the time led to limiting the scope of this project to 20 irrigation dams known to pose the most severe safety risks out of a total of 87 dams (77 for irrigation, three for irrigation/drinking, six for energy and one for recreational purposes). However, recognizing the safety concerns associated with the other dams, provision was made under the DSP design for: (i) technical investigations and monitoring the safety status of the remaining dams; and (ii) creating an emergency repair fund to be used in case of unforeseen and urgent rehabilitation interventions. Also, it was clear that there was a need for strengthening the capacity of the dam agency to enable the GOA to manage and respond to emergency situations. Though the existing PIU was experienced, the project rightly envisaged to strengthen its capacity through training, as well as strengthening the dam management agency through providing it with technical assistance, training and O&M equipment. The innovation in this operation was that it was one of the few operations in the Bank to deal solely with dam safety, and that it involved well balanced structural and non-structural measures to improve dam safety. The proposed preparation of the dam safety plans and EPPs proved to be very useful in enabling the dam management agency and the PIU to respond appropriately and in a timely manner to emergency incidents such as the one that occurred in the Vardakar dam in June 2005 (see details in Annex 2).

5 The risks identified at the project appraisal and effectiveness of the mitigation measures were also pertinent. The risk of limited in-country construction capability proved to be minimal. At first the dam rehabilitation works attracted mostly foreign contractors; later the local firms, who gradually gained experience and requisite skills, could also compete and were qualified to carry out such works.

2.2 Implementation The project suffered a six months delay in becoming effective. Effectiveness was expected in October 1999 but the Armenian Parliament approved the operation later than was anticipated and the project was declared effective in April 2000. However, this delay was completely made up before the Mid Term Review (MTR) took place, as demonstrated by the fact that for all planned civil works except one (Sewaberd dam, for which investigations were still ongoing), contracts were already been procured. Completion of all works was anticipated for December 2003, which was more than one year ahead of the project’s originally planned closing date. The delay in effectiveness had even less influence on the other project activities since they were also ahead of schedule. At MTR, the cost savings and the implementation progress in achieving the objective of protecting the population within the 20 dams’ downstream areas were remarkable. There were two main reasons for savings: (i) at the time of project appraisal, the number of construction companies existing in the country that were capable of carrying out works on such a complicated hydraulic structure as a dam was limited and, as a consequence, the competition was not high and estimated costs were higher; and (ii) during the project implementation additional investigation works were carried out on all 20 dams and the initial designs were changed/adjusted, which resulted in a decrease of originally estimated rehabilitation works and costs. The parallel urgent need to reduce risks of dams’ failure elsewhere and to improve the safety of the dams not included in the original DSP design, together with the available detailed technical investigations and plans for extending the safety program to all dams in Armenia - completed under the third DSP component – led the GOA to request support for expanding the safety program country-wide. In 2004, the extension of the scope and closing date of the DSP and the approval of the repeater IDSP II re-launched the whole program. The envisaged extended targets were finally attained at both projects’ closing dates, though after some delays stemming from the magnitude and nature of the Marmarik dam rehabilitation works, process and uncertainties (see details in Annex 2).

2.3 Monitoring and Evaluation Design, Implementation and Utilization According to the project design, the Monitoring and Evaluation (M&E) Unit established under the IRP and reporting to the Project Management Board (PMB) was responsible for monitoring project inputs, outputs, and impact. This unit prepared the DSP quarterly progress reports including information, analysis, and recommendations on: (i) progress in the execution of various elements of the agreed work program, including institutional development; (ii) procurement; (iii) expenditures; (iv) difficulties encountered, proposed solutions or required assistance; (v) updated project cost estimates, procurement, and implementation schedule; and (vi) updated estimates of

6 performance indicators. An annual work plan and the associated budget was being prepared and agreed with IDA at the beginning of each project year. During project implementation, the M&E unit worked as a part of the PIU staff. The unit produced reports which included: (i) annual work plans; (ii) quarterly progress reports; (iii) annual progress reports; and (iv) updated procurement plans. This system provided accurate and timely information to management and Bank supervision missions. Day to day supervision of rehabilitation works was carried out by local consulting companies. The PIU engineers oversaw the work of the supervision companies and were involved actively in the supervision of the rehabilitation works and reported frequently to the PIU management. Also, as planned, an experienced international dam safety consultant was hired to work with the PIU supervision engineers and undertook, twice a year, an independent review of the scope and the quality of the dam safety program, and on that basis advised the PIU and Water Supply Agency (WSA) on necessary improvements.

2.4 Safeguard and Fiduciary Compliance The project showed no unresolved fiduciary, environmental or any other safeguard problems. The DSP activities did not involve any exceptions to Bank policies. The project was rated as environmental category “B” taking into account the nature of the planned activities (rehabilitation/reconstruction of existing infrastructure), expected environmental benefits that stemmed from the rehabilitation of the dams under danger of failure. The Environmental Management Plan (EMP) specifying the mitigation measures required was prepared and agreed between GOA and Bank. The original EMP prepared for the DSP was revised slightly in 2005 to include seven additional dams. The EMP was prepared in such a manner that environmental requirements (mitigation measures, disposal of the repair construction materials/debris, monitoring and technical specifications) related to the construction phase could be incorporated in the bidding/contract documents. The EMP was implemented and monitored during the construction phase by the contractor and the PIU. Overall, the PIU’s internal controls system was capable of providing timely information and reporting on the project. The quarterly reports on all the PIU implemented projects have always been received on time and were found to be satisfactory to IDA. The PIU’s auditing arrangements and findings have been consistently satisfactory. No significant issues have arisen in the audits of other IDA-financed projects implemented by the PIU. The significant strengths that provided the basis for reliance on the project financial management system included: (i) significant experience of PIU Financial Management (FM) staff in implementing IDA-financed projects; (ii) adequate accounting software utilized by the PIU, (iii) FM arrangements found to be adequate, (iv) the unqualified audit reports and positive management letters issued by the PIU managed projects’ auditors on the projects financial statements, and (v) timely received Financial Management Reports (FMRs) always found to be acceptable to IDA.

2.5 Post-completion Operation/Next Phase It is clear that the project surpassed its original objectives and even expanded the number of dams rehabilitated to 27 dams. Along with IDSP II which is also already

7 closed, the dam safety program in Armenia can be considered to be completed. However, adequate and regular maintenance of the rehabilitated dams is critical for the sustainability of project benefits. Such maintenance will require sufficient institutional and financial resources. Although, the capacity of the dam management agency has been strengthened, its performance and carrying out its job would depend on the allocations from the state budget and on the revenues they generate from selling water to users. The GOA is committed to support that but present or future budget constraints may affect it. Although a follow up operation is not envisaged at this stage because of the two dam safety projects have completed the work, it is clear that there is a need to optimize the operation and use of the water stored behind the dams, especially in those that are built as a cascade on rivers. Improvement of water management and implementation of a computerized management and decision support system is needed for optimization and may be part of a new operation for improving the water resource management. This might result in the revision of the role of some the existing dams or in building new dams.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation The primary objective of the project of protecting the population (about 360,00 people) and the socioeconomic infrastructure down- stream of the 20 dams facing the highest risk of failure was highly relevant given the deteriorating situation of dams in the country since the collapse of the FSU. Achieving this objective has also enhanced the sustainability of dam-based economic activities. It helped to secure the dams’ productive function by improving the reliability of water supply for over 68,000 ha of irrigated agriculture, for fisheries, and for domestic water supply to about 170,000 people. In addition, the project has contributed to building an institutional capability for O&M of the irrigation infrastructure, and supported the development of private sector capacity in consulting and contracting. As such the project was in line with the country strategy and the Bank CAS in supporting agriculture and facilitating private sector development. During the project design, the preparation team was aware that it was facing with difficult choices among dams to be rehabilitated, knowing that dams that had to be rejected might be the ones to actually fail and kill people, even though all the analysis was aimed at avoiding that. However, the project was designed and implemented so well that with major project savings and an active repeater minor operation, all dams in Armenia were upgraded to a status that can be considered as safe by international standards.

3.2 Achievement of Project Development Objectives The DSP was launched in 1999 to tackle the challenge of immediately rehabilitating the 20 dams considered to be at highest risk. Structural measures were completed including rehabilitation works such as attainment of dam body stability, increase of spillway capacity, construction or rehabilitation of equipment and structures, etc. It also implemented non-structural dam-safety measures, such as setting up instrumentation and monitoring devices, early warning systems (EWS), and

8 telecommunications systems. The attainment of the population at risk (PAR) or the dams’ risk reduction targets for the 20 dams was reached in 2004, several months before the project original closing date as illustrated in the Risk Reduction Profile indicator shown in Fig. 1.

As can be seen in the figure, the PAR (vertical axis) was reduced to the targeted levels with some delays (dates in horizontal axis) in the beginning of project implementation necessitated by the nature of dam rehabilitation process and uncertainties about that, however, it accelerated towards the end of the project original closing date, combined with significant cost savings, and the envisaged target was attained after some delays. The Figure clearly illustrates how that was achieved and the failure risks were reduced to acceptable levels. Moreover, successful performance led to increasing by seven the number of rehabilitated dams under the DSP credit and to a small (US$7.5 million) repeater project which extended the program to the entire country, including all other dams at risk. Since the emergency drought component had diverted US$3.77 million from the DSP in year 2000, it can be said that with only US$3.73 million in

9 addition to the original DSP cost, all dams needing rehabilitation in Armenia were upgraded to a safe status protecting downstream people and socio-economic assets. The 20 dams originally included under the DSP and six out of the seven additional dams were upgraded by 2006. About 375,000 people living downstream of these dams are since protected. Rehabilitation of the seventh additional dam – Marmarik (the biggest one) - is to be completed by June 2010, and about 164,000 additional people living downstream will be also safe4. The original target of about 360,000 people protected will be surpassed by more than 50 percent mainly due to efficient project implementation and the investment of the cost savings for rehabilitating additional dams. Implementation went through at a sustained pace without any major factor affecting outputs. Only the Marmarik dam suffered from significant delays due to the magnitude of the scheme. Annex 2 details the causes of the delays in Marmarik dam works. Annex 2 also details the June 2005 Vardakar dam accident, and how the quick response of the EWS worked to avoid any downstream damages. Progress was also remarkable in strengthening the evolving institutional agency managing the dams, enhancing the safety of the whole system. Dam Safety Plans, each comprising an O&M Plan, an Instrumentation Plan (IP) and an EPP, have been completed for the 27 rehabilitated dams. The dam safety site installations in all dams, together with the O&M and the IP have been found satisfactory, as well as the training activities that have been provided to dam operators of the relevant agency. The EPPs have been prepared in cooperation with the Emergency Management Agency (EMA)5, the agency tasked with response to all natural and technological hazards. EMA was authorized to prepare the EPPs by the decree of the GOA. The same decree provided for mandatory implementation of the EPPs by the agencies, organizations or local authorities identified therein. EPPs in general are not only dam- related; for example, there are plans for the nuclear power plant and other strategic infrastructures. They are prepared by EMA and submitted to the GOA for approval in packages every two to three years and, prior to the GOA's decision on approval, the plans are circulated among involved ministries and agencies. Early warning systems have been installed for 156 villages in the areas downstream of all dams where rehabilitation works have been completed. The number of sirens installed followed the preparation of inundation maps that refined the dam break analysis used during project preparation. The EMA continues to conduct awareness-raising campaigns by disseminating information and simulating situations in selected communities. Equipment provided for the Dam Maintenance Enterprise (DME) cost US$3.0 million and included monitoring equipment, vehicles and heavy equipment, as well as some operational costs. Training was organized for the DME operation staff of the 20 rehabilitated dams and for PIU staff. The purpose of the training was to make operational staff familiar with institutional changes that were taking place or would occur after

4 The rehabilitation of Marmarik dam has reached the final stage after four years of work. This final stage is under GOA financing, and the Bank continues to monitor its progress given the amount of funds provided under DSP and the importance of this dam for irrigation purposes in Armenia. 5 Since July 2008 EMA was incorporated into the Armenian Rescue Service (ARS) under the recently established Ministry of Emergency Situations.

10 rehabilitation works (construction of new structures, installation of new valves, etc.), and to learn operating procedures of new structures to ensure their safe O&M towards timely prevention of potential failures or emergency situations. The training target was also exceeded since 122 dam operators were trained instead of 111 foreseen under the Project. Training has been strengthened beyond the original design in light of the accident occurred at Vardakar dam in June 2005. Four PIU technical staff also participated in international training events, including on: (i) dam safety management in USA; (ii) financial management in Italy; and (iii) procurement management in Italy. Cost of investigations and emergency rehabilitation works was US$2.4 million and covered all the Armenian dams. Field and laboratory investigations were conducted for the 20 DSP dams plus all other dams in the country to assess their technical state and identify defects. As a result, the dams were prioritized based on the urgency of proposed rehabilitation works. Seven dams were added to the DSP rehabilitation plans and other 47 dams were selected for rehabilitation under IDSP II. The emergency fund in the amount of US$2 million was provided for emergency cases, should there be a need for urgent interventions. Rehabilitation works on Jajur and Upper Sasnashen dams were financed from that fund (being two of the seven dams added to DSP). The implementation of the fourth emergency component in response to the 2000 drought went according to the schedule. Since the amendment became effective on December 1, 2000, it was not possible to perform field preparation works in 2000 and that activity was shifted to the spring of 2001. Tender for importation of seeds (wheat and barley) was announced on February, 16, 2001, and opening of proposals took place on February 26, 2001. The first tranche of seeds (2,928.3 tons) entered the country on March 31 and April 1 of 2001. The second tranche of seeds (2,476.0 tons) arrived on April 9 and 10, 2001, and the last tranche (2,517.4 tons) on April 11, 2001. The national tenders for field preparation works, including plowing, other pre-planting works, planting of seeds were conducted under 48 lots, and as a result, contracts were signed with 28 contractors. The costs of these works were US$1.97 million. This fourth component’s activities were successfully completed on time, at a total cost of about US$3.77 million. 3.3 Efficiency The Economic Rate of Return (ERR) at the Implementation Completion Report (ICR) stage for the expanded DSP was estimated at 33.3 percent which is higher than the appraisal estimate of 32 percent. As considered in the PAD, an average dam failure rate of 7.5 percent was used for the without the project scenario, and a reduction of 6.75 percent in the dam failure rate to 0.75 percent due to the project investments. The higher ERR in this ex post exercise is reasonable since benefits estimated at appraisal are being attained with huge cost savings, which allowed to expand the DSP coverage to the seven additional dams including Marmarik dam, which is the biggest investment undertaken with the support of the DSP and its follow-up repeater project. The same criteria adopted for the Project Appraisal Document (PAD) estimation was used for the ICR assessment. As explained in Annex 3, costs and benefits were adjusted based on actual values and with the new benefits stemming from the rehabilitation of Marmarik dam (which required 93.5 percent of the cost savings invested

11 in the seven added dams). Benefits included: (i) the reduced risk for potential flooding and loss of 34 percent of total irrigated area in Armenia through guaranteed water supply (annual farm net income of about US$40.5 million); (ii) the reduced risk of potential destruction of 78,000 houses and damage to over US$2 billion worth of roads, irrigation structures, and other public and private assets; and (iii) the rehabilitation of Marmarik dam adding an expected benefit of US$3.4 million per year at maturity (year 2016) due to the incremental water to be used for generation of electricity. Benefits from lives protected (more than half a million people living downstream); and other benefits from the other dams added were not considered because it is difficult to value lives protected, and there is no data of assets under the six dams for its valuation. 3.4 Justification of Overall Outcome Rating Rating: Highly Satisfactory The original PDO, with complete fulfillment of all international safety standards and criteria, was achieved ahead of schedule and with significant cost savings. Alone, this represents an implementation success. Additionally, the project’s efficient implementation allowed for the expansion of its targets to upgrade seven additional dams that are now fully rehabilitated. Given the DSP success, a parallel repeater project - IDSP II - was also implemented which resulted in a joint outcome of all the 87 dams in the country being upgraded to an internationally acceptable dam safety status. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development Irrigation increases agricultural productivity and incomes, and help to reduce poverty significantly as it creates conditions for at least improving family income in rural irrigated farms. DSP was instrumental in creating conditions for irrigation modernization through improving the safety environment for private investment in previously high risk irrigable areas. Additionally, it is restoring or improving irrigation in about 68,000 ha as the storage capacity of the rehabilitated dams has increased from 380 million cubic meters (Mm3) to 404 Mm3 as Marmarik dam is completed. Some of this area is being incorporated to irrigation as water becomes available, and some other areas have yet to be developed with adequate water conveyance canals that are expected to be extended in the near future. Hence, since DSP improved the investment environment and/or secured a reliable source of irrigation water supply for about 3,000 downstream farmers that are increasing their incomes through irrigation, it can be said that it is contributing substantially to increasing incomes, creating jobs and ultimately, reducing poverty. (b) Institutional Change/Strengthening Institutional strengthening under the DSP was delayed during the first years due to the institutional changes that were being processed by the GOA. A Water Code and a Law on Water Users Associations (WUAs) have been enacted and regulations were adopted to support the implementation of the new legal framework. A Water Supply Agency (WSA) has been created that unified the previous existing five agencies dealing with I&D in the country, and it was given the responsibility, among the others, for the management of dams. The GOA implemented a very important additional improvement in March of 2006 abolishing the central administration of the WSA and transferring all water supply functions to four regional branches established on a regional basis. The

12 branches became separate legal entities and took the responsibility for O&M of respective river basin’s infrastructure and supply of irrigation water to WUAs of those areas. Currently, there are three regional branches of the WSA that are providing water to existing WUAs without requiring subsidies, and the introduction of Federations of WUAs, will remove further responsibilities from WSA, reducing its sphere of action and easing future efforts for its full restructuring. This is being addressed under the follow-up Irrigation Rehabilitation Emergency Project. Institutional reform in the irrigation sub-sector is still ongoing in Armenia, which could have implications for the country’s system of dams. It remains important for the government to continue allocating the necessary resources to managing and maintaining its dam system. The management of smaller dams should gradually be transferred to WUAs and Federations of WUAs as soon as they are geared up in terms of financial and technical capacities. Meanwhile, management capacity of the evolving water agencies has been strengthened, as also was the capacity of the Emergency Management Agency (currently Armenian Rescue Service under the recently established Ministry of Emergency Situations), which now conducts effective outreach campaigns. (c) Other Unintended Outcomes and Impacts (positive or negative) The project has contributed to building and supporting the development of private sector capacity in construction and construction supervision in the country. At the beginning of the project the capacity of those industries was weak. Local consultants benefited from working with international consultants and the advice they received from the PIU international dam specialist as well as the Bank team. Over time they gained experience and were able to effectively address design and supervision of dam safety measures. The same was the case with local contractors who gained a lot of experience in dam rehabilitation works and could compete successfully with international contractors. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops No beneficiary survey or stakeholder workshop was performed. However, there is ample evidence of the highly positive beneficiaries’ opinion. Hrahat Grigorian, Chief of Hydro Section, Zangakatun Dam, Ararat Marz (province) expressed: “I was born in this village. I live and work here, too. The construction of the dam started in the Soviet era and was left unfinished in 1986. We could hardly use it, as the dam was in disrepair. We have counted around 24-25 holes, the dam was close to destruction. It was an emergency situation until the 2004 spring flood. If the flood that spring had continued, the dam could have destructed at any minute. We even had to evacuate the residents living across the river. In 2004 the dam’s reconstruction started. We have no further problems, and people are now safe.”

4. Assessment of Risk to Development Outcome Rating: Moderate The case of Vardakar dam accident on June, 4 2005, illustrates how well the preventive non-structural measures of the DSP respond in an emergency situation and hence, why the risk to development outcome is considered to be modest. Rehabilitation works of Vardakar dam were completed 18 months before the accident, which included

13 small rehabilitation of the dam body, rehabilitation and enlargement of the existing spill way and of the irrigation outlet. However, since zero risk is non-existent in dam safety issues, damage to some parts of the spillway and the appearance of sinkholes next to the spillway occurred due to a big flood that caused the water level in the dam reservoir to rise quickly which could not be stopped or released due to the limited capacity of the irrigation outlet. Since there was a danger that the dam would be breached, a quick and appropriate response by the local authorities and the PIU averted that and dealt with the situation by drawing down the reservoir water level and filling the sinkholes. Simultaneously, the warning system was put into operation and the population below the dam were informed of the incident and evacuated to safe grounds. The technical solution for repairing the damage and ensuring non-occurrence of such incident in the future included strengthening the spillway foundation, the spillway walls, providing drainage in spillway slaps and installing a sliding gate in the spillway wall to allow evacuation of reservoir water. Since, then the reservoir was filled several times without any incidents.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Highly Satisfactory The Bank fielded an experienced preparation team that included individuals with relevant experience in dam engineering and in preparation and supervision of previous Bank-funded projects that included dams. The team performed several field inspections and safety assessments and provided balanced and effective elements for upgrading the institutional capacity for monitoring the state of all dams and for ensuring preparedness and timely interventions to allow their sustainable use. Though available credit funds were insufficient, the design included resources not only for rehabilitating the 20 most endangered dams, but also for close monitoring of all the other dams in Armenia, as well as establishment of an emergency fund for urgent interventions. Implementation of the strategy allowed for improving the safety of all dams in the country as 74 dams were rehabilitated under the DSP and the repeater IDSP II prepared in 2004, which could be considered as an unforeseen positive output of the DSP. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Highly Satisfactory The Bank support has helped in identifying and introducing best practices in: (i) assessing the hazards of dam failure, prioritizing dams for rehabilitation, and selecting appropriate approaches to the actual rehabilitation of dams; (ii) monitoring of dam safety and establishing a system for emergency preparedness; (iii) the development and introduction of sustainable O&M systems; and (iv) the creation of the necessary conditions for increasing beneficiaries’ interest and welfare as well as participation in securing the safety of dams. Bank supervision was proactive in scaling up the scope of this successful project to all dams that were excluded from the original design due to lack of availability of credit funds at the time, and at the same time, in supporting a number of emergency works which had arisen during implementation. The quality and supportive

14 attitude of the supervision team allowed the GOA to consolidate and extend the outputs and development impact of the DSP. (c) Justification of Rating for Overall Bank Performance Rating: Highly Satisfactory Overall, Bank performance is rated highly satisfactory. 5.2 Borrower Performance (a) Government Performance Rating: Highly Satisfactory The GOA showed continued ownership and commitment towards achieving the PDO. It complied with most of the agreed actions to make the dam safety policy in Armenia a clear success story. A highly committed team has been maintained in the PIU which has been highly effective in implementing the project. The GOA has been active in adjusting the institutional framework to enhance its effectiveness in managing the I&D structures of the country and trying to go beyond dam safety targets. (b) Implementing Agency or Agencies Performance Rating: Highly Satisfactory An effective PIU with a strong local staff have contributed to a well-designed and well-run program. The PIU was responsible for an exemplary implementation and management role that included the DSP and other projects, all of which were instrumental for a successful sector policy reform process. It effectively managed the structural and non-structural components of the project that centered on the rehabilitation of unsafe dam structures that allowed for protecting people and improving the downstream economic sector base where most of the poor lived. The PIU has also managed to established a successful track record of sound handling of fiduciary requirements. The financial management arrangements have been reviewed periodically and found satisfactory: it had adequate and competent staff and a sound accounting system. It has been also positively assessed regarding its procurement function and proved to be experienced with IDA procurement policies and procedures. (c) Justification of Rating for Overall Borrower Performance Rating: Highly Satisfactory

6. Lessons Learned

9 Assessment of dam safety is complicated. For countries such as Armenia, to identify a problem in a dam, assess its potential impact, and propose measures to improve dam safety are difficult. It needs a deep level of experience which most often can be provided largely by international experts. There is also a need to carry out detailed geotechnical investigations and field inspection and testing. However, it is usual that some of the proposed design solutions may change during construction as a result of more detailed investigations and due to the actual conditions and dam structure as happened in the case of Marmarik dam or due to simpler and less costly solutions as was implemented for several other dams which resulted in big cost savings.

15 9 Training is essential for the staff of the PIU and WSA on dam safety aspects especially as this is a very specialized field. Also, it is prudent to include the communities in the training program especially on the use of the EPP and on EWS. 9 Establishing a separate dam agency for O&M or a separate unit within the WSA is recommendable because dam O&M is a very specialized task which requires significant experience and high professional skills. 9 Improving dam safety promotes private investment downstream the rehabilitated dams as result of potentially more reliable water supply and more effective safety structures. 9 Improvement of dam management and optimization of water utilization is still needed in the country. This would involve – among other things - computer based O&M and may be construction of new dams especially on the rivers which have the potential for cascade dams. This can be addressed in a new follow up project which could examine the optimization aspects of operation and management of existing dams and further strengthen the management of the country dams.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Borrower/implementing agencies The adequate project preparation and selection of components and targets had crucial importance in achieving designed results at all the stages of DSP implementation, and this would be impossible without the input of Bank experts. The best alternative, which was selected for improving dams’ stability and reducing their risk, namely the proper combination of structural and non-structural measures, enabled to achieve DSP goals with minimal investments and in possibly short time. By solving the issues of immediate improvement of dam safety, the Project also enabled to ensure the future safe operation of dams through strengthening of Dam Operation Agency. The investigation of remaining Armenian dams that were not included in the original project enabled to get comprehensive view of all Armenian dams and their reservoirs, to assess their risk and group them by intervention priorities. In addition to dam assessment, priority dams with required measures were identified, and this served as a basis for preparation and implementation of a repeater project – IDSP II, which continued and developed further the achievements reached under DSP project. Another major achievement of the Project is the rehabilitation of Marmarik dam, where the Bank had essential input at all stages. The rehabilitation of incomplete Marmarik dam is a good example how the solution to safety issues may be best combined with high economic return of investments. (b) Cofinanciers Not applicable (c) Other partners and stakeholders Not applicable

16 Annex 1. Project Costs and Financing

(a) Project Cost by Component (in US$ Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Rehabilitation of Irrigation Dams 18.50 24.081/ 1.301/ Dam Safety Sustainability 6.50 2.702/ 0.422/ Project Management 0.90 2.04 2.273/ 3.77 Total Baseline Cost 25.90 32.61 1.26 Physical Contingencies 3.30 0.00 0.00 Price Contingencies 1.10 0.00 0.00 Total Project Costs 30.30 32.61 1.17 Front-end fee PPF 0.00 0.00 .00 Front-end fee IBRD 0.00 0.00 .00 Total Financing Required 30.30 32.61 1.08 1/ Rehabilitation of Irrigation Dams component includes some emergency works done under the Emergency Fund subcomponent of the Dam Safety Sustainability component. 2/ Works under subcomponent B.1 (Dam Safety Plans) and B.2 (Dam Safety Site Installation) were carried out under subcomponents A.1 (Design Works) and A.2 (Rehabilitation Works) through installation of monitoring equipment, radio stations and sirens 3/ Because the project was extended three times for a total of 54 months, obviously the project management costs exceeded the estimated at the project appraisal amount.

(b) Financing in US$ million Appraisal Actual/Latest Percentage Type of Source of Funds Estimate Estimate of Cofinancing (US$ millions) (US$ millions) Appraisal International Development 26.60 (27.78)1/ 27.78 100 Association (IDA) in SDR million Appraisal Actual/Latest Percentage Type of Source of Funds Estimate Estimate of Cofinancing (SDR millions) (SDR millions) Appraisal International Development 19.7 19.7 100 Association (IDA) 1/ US$27.78 million amount was estimated at the latest exchange rate of XDR and US$.

17

Annex 2. Outputs by Component

Component 1. Rehabilitation of Dams Design and supervision. The cost of this subcomponent was US$1.3 million. It provided for preparation of rehabilitation designs for the 20 dams rehabilitated and technical supervision of construction works by specialized firms. Rehabilitation works. The cost of the rehabilitation works was US$20.7 million. The following table shows the works and cost budget proposed in the PAD for the original 20 riskiest dams and the actual costs incurred.

Dam name Main types of works proposed under Project PAD cost Actual cost (M US$) (M US$) 1 Arpilich Increase of spillway capacity to accommodate 10,000 year flood, 0.381 0.083 re-installation of monitoring equipment (ME) 2 Aygedzor Rehabilitation of irrigation outlet, re-installation of ME 1.171 0.224 3 Halavar Increase of spillway capacity to accommodate 10,000 year flood, 0.895 0.219 re-installation of ME 4 Azat Reduction of seepage, re-installation of ME 0.720 0.769 5 Vardakar Increase of spillway capacity to accommodate 10,000 year flood, 1.290 0.397 re-installation of ME 6 Tavshut Rehabilitation of the dam and spillway, re-install. of ME 3.154 0.471 7 Sovetashen Increase of spillway capacity to accommodate 10,000 year flood, 1.913 0.889 reduction of seepage, re-installation of ME 8 David-Bek Increase of spillway capacity to accommodate 10,000 year flood, 1.599 0.188 re-installation of ME 9 Sevaberd Re-installation of ME & rehabilitation of irrigation outlet 0.596 0.189 10 Aparan Increase spillway capacity for accommodation of 10,000 year 1.706 1.008 flood, rehabilitation of spillway and irrigation outlet 11 Karnut Increase spillway capacity to accommodate 10,000 year flood, 0.885 0.686 dam rehabilitation 12 Mantash Increase of spillway capacity for passing 10,000 0.805 0.355 13 Sarnakhbjur Dam stability and increase of spillway capacity to accommodate 1.057 0.348 10,000 year flood 14 Hakhum Seepage reduction, rehabilitation of irrigation outlet, re- 2.147 0.396 installation of ME 15 Tavush Rehabilitation of irrigation outlet, re-installation of ME 0.526 0.256 16 Gegardalich Rehabilitation of the dam, dam stability 1.044 1.032 17 Gegarkunik-2 Rehabilitation of the dam, seepage reduction 0.332 0.257 18 Kakavadzor-2 Increase of spillway capacity to accommodate 10,000 year flood, 0.239 0.142 reduction of seepage losses 19 Upper Bazmaberd Dam stability 0.225 0.267 20 Herher Increase of spillway capacity to accommodate 10,000 year flood, 1.310 0.312 reduction of seepage, re-installation of ME 21 Jajur The contractor hired by operation agency breached the dam without permission to 0.463 access to the reservoir and clean sediments. The contract was terminated and works were completed before flood season. Dam rehabilitated under emergency fund. 22 Lower Sasnashen Construction of missing spillway, rehabilitation of irrigation outlet 0.281 23 Brnakot Urgent rehabilitation 0.020 24 Gndevaz Spillway was blocked by stones and loose soil. It was necessary to open the spillway 0.046 inlet or ensure the required freeboard. Rehabilit. of diversion canal. 25 Karahunj Cleaning of the diverting canal of spillway 0.022 26 Lanjakhbyur Rehabilitation of the existing section of spillway, construction of a chute until influx 0.051 with the river, replacement or rehabilitation of valves of irrigation outlet,

18 construction of new gate house. 27 Marmarik Rehabilitation of previously failed dam, construction of new spillway, construction 12.582 of irrigation outlet, rehabilitation of dam body, installation of monitoring and EWE 28 Vardakar (2nd interv) Elimination of aftermaths of events of June 4, 2005 0.178 29 Mantash (2nd interv.) Measures to eliminate large seepage observed on the downstream slope of dam 0.196 Total 21.995 22.327

The type and quantity of the works performed in each scheme was determined during the preparation of detailed designs based on field investigations, analysis of alternatives and selection of the best options. Preliminary investigations showed that the stability of some dams did not comply with the requirements of revised seismic construction standards. Hence, under DSP, the slope stability of those dams was increased and other required activities were also implemented. The bodies of all 20 dams needed rehabilitation (replacement of protective slabs, rehabilitation of drainage, etc.). On all dams where the spillway capacity was considered not sufficient based on revised spillway calculations, the capacity was increased. Experience evidences that overtopping is the main reason for the failure of earth dams. Outlet structures are intended to ensure the reliable water delivery or rapid drawdown of the reservoir in case of emergency. To this end, outlet structures (galleries, towers) were rehabilitated and/or reconstructed on over 10 dams. Mechanical equipment was rehabilitated on all 20 dams. Rehabilitation works in general progressed rapidly, and if small delays occurred in some cases, it was due to the need to undertake further investigations to enhance the safety. This was the case of Sewaberd dam for which technical issues delayed the works that were, anyway, completed by September 2004. In the PAD, the anticipated works for this dam were estimated to cost about US$596,000. However, during preparation of final designs and considering the problems of this dam, the overall cost was re-estimated to be US$4.5 million. Based on further examination and investigation of the leakage problems in the dam, and the assessment that the leakage would not affect the safety of the dam, the whole concept of works was re-revised and a new approach for the reparation works was recommended by the consultant. This rehabilitation, on the grounds of dam safety criteria alone ended having a cost of only US$189,342. In the case of Vardakar dam, rehabilitation works were completed in December 2003, and included small rehabilitation of the dam body, rehabilitation and enlargement of the existing spillway, and rehabilitation of the irrigation outlet. However, on June 4, 2005, damages occurred in parts of the spillway together with the appearance of sinkholes near the right side of the dam next to the spillway. It was due to a big flash flood that caused the water level in the reservoir to rise very quickly6, which could not be stopped or evacuated given the limited capacity of evacuation of the irrigation outlet. Accordingly, there was a danger that the dam could be breached. A quick and appropriate response by the local authorities and the PIU averted that, and immediately started dealing with the situation by drawing down the reservoir water level and filling the sinkholes. Simultaneously, the early warning system was put into operation and the population below the dam was informed of the incident and evacuated to safe grounds.

6 Quickly filling dam reservoir is not recommended especially for newly constructed or rehabilitated dams.

19 Later, it was established that the spillway weak foundation and the rapid filling of the reservoir were the main reasons for the above incident. The technical solution for repairing the damage and ensure non-occurrence of such incident in the future included mainly strengthening the spillway foundation, strengthening the spillway walls, providing drainage in spillway slaps and installing a sliding gate in the spillway wall to allow evacuation of the reservoir water at lower level, and thus, increasing the capacity of evacuation of the excess water from flash floods. These measures were implemented successfully in January 2006 at a cost of US$178,000, and since then the reservoir was filled several times without any other incident. Marmarik dam7 rehabilitation was added to the DSP because it was posing significant risk downstream to about 164,000 people. Its diversion tunnel represented the greatest risk among the structures of the reservoir. The tunnel operated for 35 years although it was designed as a temporary structure with a useful period of only 5-6 years. It was calculated to support a river flow of about 50 cubic meters per second (m3/sec). However, the discharge for a 0.01 percent probability flood could reach to about120 m3/sec. In case of failure of the diversion tunnel, the river flow would accumulate in the reservoir causing overtopping and washing of the dam. Given this assessment, the GOA decided to make use of the cost savings being obtained from the implementation of the DSP to protect downstream life and assets. After assessment of alternative options (including removing the dam by breaching the embankment), it was decided to proceed with the selected alternative which involved finalizing construction to a safe impounding level, including repair and rehabilitation works, cutting 20 meter of the dam top section, cutting part of the dam downstream body section, providing a clay core, filters and filling the dam downstream body section, repair the irrigation tunnel and outlet, reconstruction of the spillway and provide needed instrumentation. The works would allow for filling the dam reservoir to store 23 -25 Mm3. After several investigations and design works, the contract was signed at a cost of 4.6 billion AMD and the construction period began in September 2006, and was supposed to last 30 months. However, and as the excavation of the downstream section progressed, it was clear that more cutting of the dam body was needed since the material found was not suitable, and drainage works were deemed necessary at the toe of the dam. Though detailed investigations and drilling were carried out during the design phase, it appeared that the original material used in the dam constructions varied from section to section which was not safe and had to be removed. Accordingly, the cost of the contract was increased and the construction period had to be extended. Also, the unusual wet and cold weather was another factor causing delays in construction works and prompted the GOA to request two additional extensions of the project closure until September 30, 2009. By that date rehabilitation of the dam was still not complete, but since the Credit proceeds were fully disbursed, the Bank decided to close the project after receiving confirmation from the GOA that the rehabilitation works will continue, and remaining payments would

7 Initially Marmarik dam was designed as a reservoir with a 64 m high dam, total storage of 36.9 Mm3 and useful storage 34.0 Mm3. Construction of the reservoir was completed in November 1974. The downstream slope of the dam failed right after completion of civil works, several days prior to planned filling of the reservoir with water. As a result, the dam crest settled by 13.5 m over the length of 350 m. About 500,000 m3 of soil slid downstream.

20 be covered by the GOA. Rehabilitation works have continued at a good pace after closing and are expected to be completed by June 2010. The Bank will follow up to make sure that this activity is completed and will send a mission in the summer of 2010 to visit Marmarik dam and report on the final status of the construction. Component 2. Dam Safety Sustainability Preparation of safety plans subcomponent cost was US$0.2 million. Since even after complete rehabilitation, there is still some risk of dam failure due to many reasons (extraordinary high precipitation, earthquake, etc.), inundation areas in case of dam break was determined and respective action plans prepared to ensure the safety of the downstream population (for planning of evacuation, etc.). Field installation of safety equipment cost was US$1.7 million. This subcomponent provided for measures related to safety non-structural measures and operation of dams (installation of metering equipment and early warning system, power and communication equipment, guard houses, repair workshops, etc). Equipment of Dam Operation and Maintenance Agency cost was US$3.0 million. It included equipment aimed at enabling the Dam O&M Agency to carry out its function of safe operation of already rehabilitated dams. The support included procurement of monitoring equipment, vehicles and heavy equipment, as well as operational costs. Training was organized for the dam operation staff of all 20 rehabilitated dams and for PIU staff. The purpose of the training was to make operation staff familiar with institutional changes that were taking place or would occur after rehabilitation works (construction of new structures, installation of new valves, etc.) and to learn operation procedures of new structures to ensure their safe O&M and timely prevention of potential failures or emergency situations. Another purpose was to give information about the assessment of dangerous situations and the actions to take in such situations. The target was exceeded: 122 dam operators were trained instead of 111 foreseen under the Project. PIU technical staff participated in international training events, including: (i) on dam safety management, USA, August 2000; (ii) on financial management, Italy, September 2001; (iii) on procurement management, Italy, September 2001. Investigations and emergency rehabilitation works cost was US$2.4 million and covered all the Armenian dams. Therefore, field and laboratory investigations were conducted for the 20 DSP dams plus the remaining 54 irrigation and six energy dams to assess their technical state and identify defects. As a result of the investigations, the dams were prioritized based on the urgency of proposed rehabilitation works. Seven dams were added to the DSP rehabilitation plans and other 47 dams were selected for rehabilitation under IDSP II. The emergency fund in the amount of US$2 million was provided for emergency cases, should there be a need of urgent interventions. Rehabilitation of Jajur and Upper Sasnashen dams was financed from that fund (being 2 of the 7 dams added to DSP). Component 3. Project management

21 The estimated cost of this component was US$1 million. It covered PIU operation costs, designing activities, the services of the international dam safety expert, auditing costs, training of local specialists. Component 4. Emergency Drought Background: The component was added to deal with an emergency. The summer months of 2000 were unusually dry and hot over almost all parts of Armenia: total rainfall in the May-August period was nearly 70 percent below average. Furthermore, temperatures rose to unprecedented levels, up to five degrees centigrade higher than normal, accelerating the level of evapo-transpiration and causing deep ruptures in the soil. As a result, yields of rainfed crops have been drastically reduced, and vast areas of cultivated land left un-harvested. The most affected areas were the rainfed areas in Tavush, Lori, Shirak, Gegharkunik, Aragatsotn, and Kotayk Marzes (provinces). Rainfed wheat and potato production in these areas had declined by 60-70 percent, thereby contributing to the national reductions in grain and potato production of 27 and 40 percent, respectively, compared to 1999 production levels. This represented localized reductions of roughly 100,000 tons of grain and 150,000 tons of potato. The GOA made an urgent appeal to all international donors to provide assistance. An assessment by the Food and Agricultural Organization (FAO) and the World Food Program (WFP), subsequently verified by an IDA mission in September 2000, has confirmed the need for emergency assistance. FAO and WFP have launched international appeals for drought assistance and, together with other donor agencies, provided relief grain supplies of 70,000 tons (to cover both the grain and potato deficits). In order to revive production in the following spring, emergency support to the agricultural sector required immediate support, on a grant basis, of field preparation works and distribution of appropriate seeds of wheat, barley and potatoes. Additionally, in order to supplement the low water levels in reservoirs and rivers, repair works of tubewells to access ground water was also needed8. Amending the DSP by adding a new component to the project and using the resources under the unallocated category offered the quickest method for providing Bank assistance. That approach was also supported by the Board, and the amendment became effective on December 1, 2000. Component description: The component included provision of field preparation works to be executed at the end of 2000 to enable accelerated planting of spring grains in April 2001. It also included the rehabilitation of tube wells (to be financed retroactively) to allow provision of supplemental irrigation water to facilitate germination of winter grains. The estimated area to be covered was about 38,000 ha farmed by about 50,000 households with a total population of about 180,000. The package included procurement of field preparation works through private agricultural machinery enterprises at an expected cost of US$34 per hectare (US$1.3 million), and retroactive financing of US$150,000 for tube well rehabilitation works (done in September 2000), with a cost of US$1.45 million. The field preparation works would be provided to beneficiaries meeting

8 The rural portfolio of the Bank at that time included three projects: Agriculture Reform Support Project (ARSP), Title Registration Project (TRP) and DSP, all were implemented under the Ministry of Agriculture (the State Committee for Water Management was established later, on February 8, 2001, by the GOA Decree N92). Among these projects, DSP was a relatively new one, which was declared effective in April of 2000 and hadn’t disbursed many funds.

22 the following criteria: (i) residents in the areas defined as drought affected marzes (provinces) and obtain their livelihood through farming, which should be confirmed by the local village administration; (ii) farmers who have lost more than 40 percent of their rainfed grain and potato crop during the spring and summer of 2000 as a result of the drought; and (iii) not receiving the same inputs from other donors or relief agencies. Implementation arrangements: The "Irrigation Systems Rehabilitation" PIU (name of the PIU in 2000), which was in charge of DSP was given the responsibility for coordinating the activities of this component. A working group, headed by the Minister of Agriculture (MOA), and including the Director of the DSP PIU, the Director of the ARSP PIU, and one representative each from the Ministry of Finance and Economy, Marz Administrations, and Marz Agricultural Support Centers (MASCs) was set up. This group was responsible for the preparation of the list of beneficiaries, in cooperation with the Heads of Village Councils, and for ensuring the timely execution of tenders with private agricultural machinery enterprises for the provision of the emergency assistance. Results achieved: Implementation of the component went on schedule. Since the amendment became effective on December 1, 2000, it was not possible to perform field preparation works in 2000 and the activity was shifted to spring of 2001. Tender for importation of seeds (wheat and barley) was announced on February, 16, 2001, and opening of proposals took place ten days later. On March 2, 2001, the Project Management Board (PMB) announced the winner with which four days later, a contract was signed for the amount of US$1.8 million. The transportation of seeds from the Russian port Novorossijsk to Armenia was done with assistance of the US Department for International Aid (USAID). With MOA assistance, the commission comprised of 10 MOA experts and specialists from the Center for Seeds Quality Assurance and Protection was send to Russia to check the quality of 7,837.8 tons of seeds before shipping to Armenia. The first tranche of seeds (2,928.3 tons) entered the country on March 31 and April 1 of 2001. The second tranche of seeds (2,476 tons) entered Armenia on April 9 and 10, 2001, and the last tranche of 2,517.4 tons - on April 11, 2001. Additionally, national tenders were conducted for field preparation works, including plowing, other pre-planting works, and planting of seeds. Overall there were 48 lots, and contracts were signed with 28 contractors for carrying out the mentioned works. The total amount of the costs of the works comprised US$1.97 million. Overall, the field preparation works were carried out in 611 communities with a total population of about 180,000 and the beneficiaries of the project component were about 50,000 households.

23 Annex 3. Economic and Financial Analysis

Introduction: The same criteria adopted for the PAD analysis was used for this ICR economic analysis. Costs and benefits were updated based on actual values and new projections estimated on what was really done under the DSP. Prices of the expected benefits or avoided losses were also updated. As benefits the PAD and this ICR analysis considered the following: (a) For the PAD analysis, severe safety risk would be reduced for about 360,000 people living downstream of the 20 highly risky dams. For this ICR analysis, safety risk was reduced for 537,900 people, the increase being mainly due to Marmarik dam; (b) For the PAD the risk for potential flooding and loss of 34 percent of total irrigated area in Armenia would be reduced, through the guaranteeing of water supply to an area of 68,000 ha, which produces annual farm net income of US$35 million. For the ICR, with updated values and additional 3,500 ha from Marmarik dam the annual farm net income was estimated in US$40.5 million. (c) For the PAD the risk of potential destruction of 78,000 homes and damage to over US$2 billion worth of roads, irrigation structures, and other public infrastructure and enterprises would be reduced. The same value was considered for this ICR analysis. (d) Rehabilitation of Marmarik dam incorporated to the DSP using the cost savings from the original 20 dams, adds an expected benefit of US$3.4 million per year at maturity (year 2016) for the ICR evaluation, mainly due to the incremental water to be used for generation of electricity. Benefits from the other six dams added to DSP were not considered because there is no data of existing assets downstream for supporting its valuation. Cost-Benefit Indicators: A base level of economic rate of return (ERR) of 32 percent was estimated at appraisal. For the ICR analysis, an ERR of 33.3 percent was estimated considering the updated benefits of the original 20 dams plus the benefits of Marmarik dam amount of works undertaken under the DSP. The methodology used for estimating this ICR ERR is as follows: The potential losses of farm net income was derived using the weighted average net income data estimated for the 2009 Irrigation Development Project (IDP) ICR, and given the existing cropping pattern in the IDP area, which is assumed to be similar to the downstream areas of the rehabilitated dams. This average net income per ha was multiplied by the 48,900 ha of agricultural area which would lose access to water from dams and therefore be unable to withstand the summer period in case of all dams collapsing, thereby going out of agricultural production. With an average annual net farm income per hectare of US$829, the total potential losses associated with agricultural area going out of production would be US$40.5 million over the twenty year period considered for this evaluation (Table 1 in this Annex 3). Potential losses of household assets were estimated for the PAD by taking the average size of rural households (100 square meters – m2) at a replacement cost of

24 US$250 per m2, adding another roughly US$5,000 of household and farm assets (consumer durables, livestock, etc.). Losses from flooding were taken at 60 percent of the household total of US$30,000 in dwelling and other assets, and then multiplied by the number of households expected to be affected in each dam’s inundation area. The same values were considered for this ICR analysis (Table 1 in this Annex 3). Potential losses of non-household assets was estimated at appraisal by taking an inventory of the various structures in each of the 20 original dam’s inundation zone and estimating the replacement cost of roads and irrigation structures (per km) and other infrastructure. Given the rough estimate that was reached, a 30 percent damage rate was used for estimating the potential value of losses from dam breaks. This is reasonable, as structures such as roads and canals which would be damaged are likely to be damaged to a degree greater than 30 percent of replacement value. The same values were taken for this analysis, and value of assets downstream the added seven dams was not considered as information was not available (Table 1 in this Annex 3). The potential losses were summed across all dam inundation areas for the three categories and then integrated into a 20 year calculation considering benefits of foregoing these losses by reducing the rates of expected dam failure. To these benefits, the value of incremental energy generated or saved through the rehabilitation of Marmarik dam was added (Table 2 in this Annex 3). The reductions of dam failure rates were calculated by the PIU to be on the order of 90 percent, from 7.5 percent to .75 percent, for the 20 year period. This amounts to reducing the dam failure rate for a single dam in a single year by an order of magnitude, but to a rate which is still above the internationally observed rate of 0.5 percent for dams built since 1951 ("Dam Failures Statistical Analysis", International Commission for Large Dams, Bulletin 99, 1995). Results: As done for the appraisal estimated ERR, when the reduction of the dam failure rate is distributed over the twenty years and multiplied out by the three different types of losses, a stream of benefits is generated from the original 20 dams. Adding to these expected avoided losses from the original 20 dams the benefits from Marmarik dam (value of incremental energy produced or saved), the total benefits are compared with the stream of project investments which are similar or even less than foreseen at appraisal (costs of the emergency fourth component introduced after the 2000 drought are not included in the ICR analysis). The resulting ICR ERR for the DSP is 33.3 percent, using an average dam failure rate of 7.5 percent, which corresponds to a reduction of 6.75% in the dam failure rate to 0.75 percent owing to project investments (Table 2 in this Annex 3). The higher ERR estimated in the ICR exercise as compared with the PAD estimation (32 percent) is due to the cost savings which allowed to expand the DSP impact to the benefits expected from the Marmarik dam which is the biggest investment undertaken with the support of the DSP.

25

Table 1. Summary of Potential Losses from Dam Breaks – Agricultural Areas, Associated Incomes, Homes and Household Assets, and Other Non-household Assets

Potential Potential Potential Potential losses annual lost Number of Rehabilitated Dam hectares household from other farm net households name loss losses damaged assets income (000’ (000’) (000’ha) (000’$US) (000’ $US) USD) Arpilich 19 15.751 1.348 24.455 0.36 Aygedzor 0.9 0.7461 1.391 25.244 0.633 Halavar 0.6 0.4974 0.413 7.494 1.881 Azat 2.7 2.2383 19.174 347.891 259.5 Vardakar 1.1 0.9119 2.522 45.754 0.45 Tavshut 1.5 1.2435 0.348 6.311 0 Sovetashen 0.4 0.3316 0.13 2.367 0.06 David-Bek 0.6 0.4974 0.152 2.761 27.21 Sevaberd 1.2 0.9948 1.826 33.133 3.42 Aparan 3.5 2.9015 40.348 732.071 429.9 Karnut 7 5.803 2.5 45.36 24 Mantash 3.7 3.0673 3.174 57.587 30 Sarnakhbyur 1.1 0.9119 1.674 30.371 0 Hakhum 2.4 1.9896 0.065 1.183 0.12 Tavush 1.2 0.9948 0.043 0.79 0.81 Gegardalich 0.2 0.1658 0.587 10.65 3.09 Gegarkunik-2 0.1 0.0829 0.587 10.65 0.222 Kakavadzor-2 0.5 0.4145 0.152 2.761 0.42 Upper Bazmaberd 0.1 0.0829 0.152 2.761 0.18 Herher 1.1 0.9119 1.739 31.555 30 Total 48.9 40.5381 78.325 1421.149 812.256

26

Table 2. Reduction of Losses from Investments under the Dam Safety Project and Benefits from Marmarik Dam Rehabilitation – Calculation of Net Benefits and Economic Rate of Return

Net benefits Reduction Reduction Reduction Reduction from of loss of of losses of of losses of Investment Net Year of loss Rehabilitation farm household other costs benefit probability of Marmarik income assets assets dam

2001 0.23% 4,892 -4,892 2002 0.23% 5,448 -5,448 2003 0.23% 93 3,328 1,902 4,002 1,321 2004 0.24% 97 3,463 1,979 1,314 4,225 2005 0.25% 101 3,604 2,060 869 4,896 2006 0.26% 105 3,751 2,144 1,662 4,338 2007 0.27% 109 3,903 2,231 2,579 3,664 2008 0.29% 118 4,062 2,320 3,457 3,043 2009 0.30% 122 4,227 2,416 6,404 361 2010 0.31% 126 4,399 2,514 1,233 5,806 2011 0.32% 130 4,578 2,617 1,977 9,302 2012 0.34% 138 4,764 2,723 2,043 9,668 2013 0.35% 142 4,958 2,834 2,418 10,352 2014 0.36% 146 5,160 2,949 2,897 11,152 2015 0.38% 154 5,370 3,069 3,383 11,976 2016 0.39% 158 5,588 3,194 3,410 12,350 2017 0.41% 166 5,815 3,324 3,422 12,727 2018 0.43% 174 6,052 3,459 3,432 13,117 2019 0.44% 178 6,298 3,600 3,432 13,508 2020 0.46% 186 6,554 3,746 3,432 13,918 2021 0.48% 195 6,821 3,899 3,432 14,347 Total 2,639 92,695 52,980 33,278 31,860 ERR 33.3% NPV $35,033

27 Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members Responsibility/ Names Title Unit Specialty Lending Salem Gafsi Sr. Operations Officer ECSSD Team Leader Mark Lundell Sr. Agricultural Economist ECSSD Economics Giuseppe Fantozzi Operations Officer ECSSD Financial Analysis Alessandro Palmieri Dam Specialist OPCQC Dam Safety Ezedine Hadj-Mabrouk Environmental Specialist ECSSD Env. Issues Jagdish Jassal Procurement Specialist ECSPS Procurement Abdul Haji Financial Management Specialist ECSPS Fin. management Supervision/ICR Giuseppe Fantozzi Sr. Operations Officer ECSSD Team Leader Usaid I. El-Hanbali Water Resources Engineer ECSSD Engineer Alessandro Palmieri Lead Dam Specialist OPCQC Dam Safety Arman Vatyan Sr. Financial Management Specia ECSPS Fin. management Yingwei Wu Senior Procurement Specialist ECSPS Procurement Gayane Minasyan Operations Officer ECSSD Env. Issues Arusyak Alaverdyan Operations Officer ECSSD M&E

(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY99 106.26 FY00 0.38 Total: 106.64 Supervision/ICR FY99 0.55 FY00 12 37.21 FY01 21 64.54 FY02 17 86.41 FY03 19 69.96 FY04 25 89.90 FY05 18 52.03 FY06 25 69.82 FY07 18 42.06 FY08 14 38.92 FY09 15 0.00 Total: 184 551.40

28 9 10 Annex 5. Summary of Borrower’s ICR and/or Comments on Draft ICR

1. Background

Armenia is a small, mountainous country with an area of 29,743 km2. Its average altitude is 1,830 m above the sea level. About 90 percent of the territory is at an altitude above 1,000 m. The population of Armenia is about 3.0 million. In the FSU, Armenia occupied a relatively favorable position, owing to the production of high-valuable agricultural products (grapes, fruit, tobacco, geranium etc.), and light industrial products (machine tools, electric engines and military products). The economy was, thus, driven by export. At the end of the 1980s, Armenia had a prospering industry and one of the highest living standards in the FSU. The collapse of the economic, financial and trade links with the former Soviet republics led to a rapid deterioration of the production infrastructure, which translated into a rapid decrease in national production. Currently (as well as during the project preparation and implementation), agriculture remains a dominant sector in the economy. It provides varying levels of productive employment to about half of the households, and contributes about 30 percent of GDP. Agricultural lands cover about 1.4 million ha, of which about 500,000 ha (35 percent) are plough lands. Of this latter area, about 280,000 ha are irrigated or potentially irrigable. The irrigation infrastructure comprises 81 reservoirs (in total there are 87 reservoirs of which six are energy dams) with a total capacity of 774 Mm3, about 3,000 km of main and secondary canals, about 18,000 km of tertiary canals, 400 medium and large pumping stations, about 2,220 tubewells and artesian wells, and about 2,000 km of drainage-collectors. All 87 reservoirs in Armenia were built about 30-50 years ago. Ten of them were built before 1960. Most of the reservoirs (50) were built between 1960 and 1980. Another 20 reservoirs were built after 1980, and only two reservoirs were commissioned in 1990- ies – David-Bek (1990) and Herher (1994). After collapse of FSU (years after 1991), the technical state of structures ensuring safe dam operation deteriorated due to insufficiency of O&M funds. This inevitably would cause dam failures and breaches endangering the lives of downstream population. There were some design issues with low capacities of spillways and irrigation outlets as well. There were also dam stability issues emerged after devastating Spitak earthquake in 1988. That earthquake forced to revise the seismic standards. The dam stability had to be re-calculated under new seismic requirements, and in some cases the dam slope grade had to be reduced.

9 The Borrower’s ICR was prepared by the PIU in both Armenian and English languages and submitted to the Bank on January 31, 2010. Annex 7 presents brief summary of the Borrower’s completion report.

10 The comments from the Borrower on the ICR in the form of a letter from the SCWM were received by the Bank on March 11, 2010. An unofficial English translation of the letter signed by Andranik Andreasyan, Chairman of the SCWM, is attached at the end of this Annex.

29 Three large dam failures took place in the past in Armenia (Agarak – 1974, Marmarik – 1975, and Artik – 1994) caused by settlement, seepage and leakage processes in dam body. The failure of Artik Dam inundated two settlements, caused two human losses and large property damage. Another 10 serious dam failures occurred within 1989- 1998. Although these failures did not cause human losses, they bring to long-term interruption of irrigation, reservoir drawdown and in some cases to population evacuation11. Yet at the end of 1990s it became clear from the studies conducted by local and international experts that rehabilitation works should not be delayed, so it became necessary to develop a comprehensive program of interventions ensuring dams safety. To this end, the GOA decided to proceed with the dam safety component of a bigger Water Resources Management Project (WRMP) as a separate project on an emergency basis with the primary objective to protect the population of about 360,000 people and the socio-economic infrastructure downstream of the dams facing the highest risk of failure. In addition, there were a significant number of endangered people in Azerbaijan as several reservoirs are located in the bordering regions. Through achieving its objective the Project also helped to enhance the sustainability of the dam-based economic activities in Armenia.

2. Description of the project

The Project was a five year program aimed at improving the safety of 20 priority dams and at establishing effective dam safety monitoring system for all Armenian dams. It was decided to utilize both structural and non-structural measures to achieve that goal. Structural measures included rehabilitation works such as attainment of dam body stability, increase of spillway capacity, construction or rehabilitation of equipment and structures, etc. Non-structural measures included O&M Plans, EPP, instrumentation and monitoring devices, telecommunication and early warning equipment. Structural measures were more costly than non-structural ones however the best result in improvement of dam safety was achieved by joint implementation of these two activities. Originally the Project included three components, and later a fourth was added: Component A: Rehabilitation of 20 irrigation dams Component B: Dam safety sustainability Component C: Project management Component D: Emergency drought assistance

The following is a detailed summary of the Project by components. Component A. Rehabilitation of 20 Irrigation Dams

11 The downstream population of Aygedzor dam had to be evacuated for a month due to intense soil erosion observed in a gallery located in the body of the dam.

30 Sub-component A.1. Design and supervision. The estimated cost of this sub- component was US$1.3 million. This sub-component provided for preparation of rehabilitation designs for 20 dams and technical supervision of construction works by specialized firms. Sub-component A.2. Rehabilitation works. The estimated cost of this component was US$20.7 million. According to the results of preliminary investigations, the stability of some dams did not comply with the requirements of the revised seismic construction standards. Under DSP, the slope stability of those dams was increased and other required activities were implemented. The bodies of all 20 dams were in need of rehabilitation (replacement of protective slabs, rehabilitation of drainage, etc.). Component B. Dam Safety Sustainability Sub-component B.1. Preparation of Dam Safety Plans. The estimated cost of this component was US$0.2 million. Even after complete rehabilitation, there is still some risk of dam failure due to any reason (extraordinary high precipitation, earthquake, etc.). To this end, inundation areas in case of dam break should be determined and respective action plans prepared to ensure the safety of downstream population (evacuation, etc.), which was done under the Project. Sub-component B.2. Site Installation of Dam Safety Equipment. The estimated cost of this component was US$1.7 million. This component provided for measures related to safe operation of dams (installation of metering equipment and early warning system, power and communication equipment, guard houses, repair workshops, etc). Sub-component B.3. Strengthening of Dam Maintenance Enterprise. The estimated cost of this component was US$3.0 million. In included measures aimed at enabling Dam Maintenance Enterprise to carry out its function of safe operation of already rehabilitated dams. These included procurement of monitoring equipment, vehicles and heavy equipment, operation costs. Sub-component B.4. Investigations and Emergency Repair Fund. The estimated cost of this component was US$2.4 million. DSP covered all the Armenian dams. Therefore, field and laboratory investigations were envisaged for the remaining 54 irrigation and six energy dams to assess their technical state and identify defects. As a result of investigations, the dams were prioritized based on the urgency of proposed rehabilitation works. 47 dams were selected for rehabilitation. The actual rehabilitation of those dams was carried out under Irrigation Dam Safety II Project (IDSP II). The Emergency Repair Fund in the amount of US$2.0 million was provided for emergency cases, should there be a need of emergency intervention. Component C. Project management The estimated cost of this component was US$2.0 million. In included Project Management Unit (PIU) operation costs, designing, services of international dam safety expert, Project audit, training of local specialists and gaining of international experience. Component D. Emergency Works The Emergency Drought Assistance component was added almost in the beginning of project implementation at the request of the GOA in order to mitigate the

31 consequences of drought that hit the country in 1999-2000. This component included provision of field preparation works to be executed at the end of 2000 to enable accelerated planting of spring grains in April 2001. It also included the rehabilitation of tubewells (to be financed retroactively) to allow provision of supplemental irrigation water resources to facilitate germination of winter grains. The estimated area to be covered is about 40,000 ha. The total package involved the procurement of field preparation works through private agricultural machinery enterprises (at a cost of US$1.3 million), and the retroactive financing of US$150,000 of tube well rehabilitation works (executed in September 2000), with an estimated total cost of US$1.45 million. The field preparation works were supposed to be provided to beneficiaries who would meet the following criteria: (i) should be residents in the areas defined as drought affected Marzes (provinces) and obtain their livelihood through farming, which should be confirmed by the local village administration; (ii) should be farmers who have lost more than 40 percent of their rainfed grain and potato crop during the spring and summer of 2000 as a result of the drought; and (iii) should not receive the same inputs from other donors or relief agencies.

3. Achievement of Objectives and Outputs

To achieve the Project objective, safety measures were implemented for the most endangered 20 dams, and the safety status was investigated on the remaining 60 dams. Based on investigation results, rehabilitation measures were developed and implemented on the dams having safety problems. The project was also aimed at improvement of technical capacity of Dam Maintenance Enterprise (DME). The following table shows Project components and sub-components with original and actual costs. Table 1. Project Costs by Components Original cost Final cost Name (million US$) (million US$) A. Rehabilitation of 20 Irrigation Dams 21.995 24.083*) A.1. Design and Supervision 1.258 1.756*) A.2. Rehabilitation Works 20.737 22.327*) B. Dam Safety Sustainability 7.334 2.718 B.1. Dam Safety Plans 0.184 - B.2 Dam Safety Site Installation 1.685 - B.3 Strengthening of DME 2.993 1.666 B.4 Investigation and Emergency Repair Fund 2.472 1.052 C. Project management 0.971 2.040 D. Emergency Works - 3.769 Total 30.300 32.610

32 *) These costs include expenses for 27 dams and emergency rehabilitation works on Vardakar and Mantash dams.

Component A. Rehabilitation of 20 Irrigation Dams Although at early stages of Project implementation rehabilitation works were completed later than anticipated, the overall Project dates were maintained and in 2003- 2004 the Project exceeded targets in respect of rehabilitation of dams. Eventually, at the end of implementation, instead of planned 20, the Project rehabilitated 26 plus one – Marmarik dam, for which works are still underway and will be completed in June, 2010. Some additional issues were taken into consideration during the rehabilitation works. The international dam construction experience evidences that overtopping is the main reason for the failure of the earth dams. All the dams covered by the Project were earthfill dams except for Arpilich dam. Spillways are the essential structures of such dams. The spillway capacity of some of the 20 dams was several times less than the design capacity (e.g. Karnut, Sarnakhbyur, Aparan, Aygedzor, etc.). The spillway capacity of those dams was increased or they were rehabilitated under Project. In general, outlet structures are intended to ensure the reliable water delivery or rapid drawdown of the reservoir in case of emergency. To this end, outlet structures (galleries, towers) were rehabilitated and/or reconstructed on over 10 dams. Mechanical equipment had to be rehabilitated on all 20 dams. Savings generated during DSP implementation. For all the dams that had to be rehabilitated, several preliminary alternatives were considered at the design stage prior to selection of the final design solution, which had to be economically the most feasible one. Such approach enabled saving of large amounts. Rehabilitation of only Sevaberd dam allowed saving of about US$4.0 million. That amount was provided for implementation of anti-seepage measures within reservoir bottom. Initially it was thought that seepage directly affects dam stability. However, more detailed investigations showed that seepage flows do not impact dam stability, hence it became possible to avoid those costly measures and implement only required rehabilitation works. Some savings were generated during construction tender as increase competition among constructing companies forced them to quote prices less than the estimated costs were. The total savings generated during DSP implementation amounted to about US$9.0 million only from credit proceeds. That amount was used mainly for rehabilitation of Marmarik dam and of four small dams (Gndevaz, Brnakot, Karahunj and Lanjakhbyur-1). The following table shows main rehabilitation works performed under the Project with estimated and actual costs. Table 2. Summary of Rehabilitation works Cost according to Actual cost Dam name Main types of works proposed under Project original design (million US$) (million US$) 1 Arpilich Increase of spillway capacity to accommodate 10,000 year flood, re- 0.381 0.083 installation of monitoring equipment 2 Aygedzor Rehabilitation of irrigation outlet, re-installation of monitoring 1.171 0.224 equipment

33 3 Halavar Increase of spillway capacity to accommodate 10,000 year flood, re- 0.895 0.219 installation of monitoring equipment 4 Azat Reduction of seepage, re-installation of monitoring equipment 0.720 0.769 5 Vardakar Increase of spillway capacity to accommodate 10,000 year flood, re- 1.290 0.397 installation of monitoring equipment 6 Tavshut Rehabilitation of the dam and spillway, re-installation of monitoring 3.154 0.471 equipment 7 Sovetashen Increase of spillway capacity to accommodate 10,000 year flood, 1.913 0.889 reduction of seepage, re-installation of monitoring equipment 8 David-Bek Increase of spillway capacity to accommodate 10,000 year flood, re- 1.599 0.188 installation of monitoring equipment 9 Sevaberd Re-installation of monitoring equipment and rehabilitation of 0.596 0.189 irrigation outlet 10 Aparan Increase of spillway capacity for accommodation of 10,000 year 1.706 1.008 flood, rehabilitation of spillway and irrigation outlet 11 Karnut Increase of spillway capacity to accommodate 10,000 year flood, 0.885 0.686 dam rehabilitation 12 Mantash Increase of spillway capacity for passing 10,000 0.805 0.355 13 Sarnakhbjur Dam stability and increase of spillway capacity to accommodate 1.057 0.348 10,000 year flood 14 Hakhum Seepage reduction, rehabilitation of irrigation outlet, re-installation 2.147 0.396 of monitoring equipment 15 Tavush Rehabilitation of irrigation outlet, re-installation of monitoring 0.526 0.256 equipment 16 Gegardalich Rehabilitation of the dam, dam stability 1.044 1.032 17 Gegarkunik-2 Rehabilitation of the dam, seepage reduction 0.332 0.257 18 Kakavadzor-2 Increase of spillway capacity to accommodate 10,000 year flood, 0.239 0.142 reduction of seepage losses 19 Upper Bazmaberd Dam stability 0.225 0.267 20 Herher Increase of spillway capacity to accommodate 10,000 year flood, 1.310 0.312 reduction of seepage, re-installation of monitoring equipment 21 Jajur The contractor hired by operation agency breached the dam without 0.463 permission to have access to the reservoir and clean sediments. The contract with contractor was terminated and works should have been completed before flood season. The dam and other structures were rehabilitated under funds of DSP emergency fund. 22 Lower Sasnashen Construction of missing spillway, rehabilitation of irrigation outlet 0.281 23 Brnakot Urgent rehabilitation 0.020 24 Gndevaz Spillway was blocked by stones and loose soil. It was necessary to 0.046 open the spillway inlet or ensure the required freeboard. Rehabilitation of diversion canal. 25 Karahunj Cleaning of the diverting canal of spillway 0.022 26 Lanjakhbyur Rehabilitation of the existing section of spillway, construction of a 0.051 chute until influx with the river, replacement or rehabilitation of valves of irrigation outlet, construction of new gate house. 27 Marmarik Rehabilitation of previously failed dam, construction of new 12.582 spillway, construction of irrigation outlet, rehabilitation of dam body, installation of monitoring and early warning equipment 28 Vardakar (failure of Elimination of aftermaths of events of June 4, 2005 0.178 elimination) 29 Mantash (anti-seepage Measures to eliminate large seepage observed on the downstream 0.196 measures) slope of dam Total 21.995 22.327

Rehabilitation works of Jajur and Upper Sasnashen dams were financed from the Emergency Repair Fund. An additional construction contract with a cost of US$0.138 million was executed for Vardakar dam to eliminate the consequences of the event that took place on June 4, 2005. Discussion of the Event Occurred at Vardakar Dam and Lessons Learned

34 Several discussions were conducted by WB and local specialists to find out the reasons and see what lessons may be learned from such events. The members of Bank Supervision Mission, in particular Senior Dam Expert Alessandro Palmieri, Water Resources Senior Engineer Usaid El Hanbali, visited the dam and provided their comments and advice. A meeting was organized during the visit of international expert of DSP Gary Salmon in January, 2005 to discuss the event occurred on Vardakar dam on June 4, 2005 and to learn lessons from it. The meeting was attended by representatives of operation agency, Emergency Management Agency (EMA), design and construction enterprises, PIU. The meeting prepared «Thoughts on Improvement of Emergency Preparedness Plans», which were submitted to EMA to take into consideration in further works. Following the instruction of Mr. Palmieri, the PIU organized a workshop at the dam site with participation of representatives of the operation agency, EMA and managers of marz (province) government. The aim of that workshop was to analyze once again Vardakar dam event and discuss the possibilities to prevent such events in future and how to improve the cooperation between various agencies in case of such events. The workshop also discussed the document «Some Thoughts on Safe Operation of Dams and on Actions to Be Taken in Emergency Cases on the Example of Vardakar Dam» prepared by PIU. The idea of having a rapid drawdown facility in form of a gate on spillway’s wall was not implemented in Armenian dam designs previously. Meantime the issue of rapid drawdown of the reservoir and especially of its higher elevations is very essential for those dams where there is no irrigation pipeline with a large diameter (and there are many such cases in Armenia). This solution was applied also at Marmarik dam thus increasing safety level at once problematic dam. Component B. Dam Safety Sustainability Sub-component B.1. Dam Safety Plan includes instrumentation plan of equipment that was installed at the dam during rehabilitation, O&M plan, Emergency Preparedness Plan. Safety plans were prepared or updated for all 27 rehabilitated dams at the design stage. Sub-component B.2. Dam safety equipment includes monitoring equipment (piezometers, benchmarks, flowmeters for seepage measurement), sirens, radio stations, generators, facilities for operation staff, etc. New equipment was installed or the existind was repaired on all 27 rehabilitated dams. Sub-component B.3. The following equipment was procured and transferred to the agency responsible for the dams O&M: • monitoring equipment that will be used at all irrigation dams in addition to 20 dams rehabilitated under the project to increase their operation safety; • vehicles; • heavy equipment; Following is the list of equipment and machinery.

35

Table 3. Monitoring Equipment N Name Number Cost ($US) 1. Mechanical water gauge, CPR 6-150PM 1 825.00 2. Movable flow meter 4 l, CAP 4 1 530.00 3. Movable flow meter 10 l, CAP 10 1 509.00 4. Convergence meter, Distomatic 1 11,890.00 5. Inductive water level measurement device, Nivoflo 1 6,112.00 6. Soil pressure measurement device, G-200 1 11,987.00 7. Bi-axial inclinometer, Geocline 1 2,753.00 8. Depth water sampler, Sisgeo 1 6,779.00 9. Inflatable motor boat, Yamaha 9,9HP 1 6,882.00 10. Theodolite electronic, Trimble 3600 DR 1 217,43.16 11. Laser distance meter, DISTO 1 6,128.58 12. Electronic distance meter, DI 2002 1 19,225.00 13. GPS, SR 530 1 32,928.27 14. Sonic depth meter, Navisound 210 1 25,060.30 15. Concrete strength meter, 50- 4 1 1,951.80 16. Device for measurement of chlorine content in concrete, 1 2,968.23 17. Concrete pH-meter 1 571.42 18. Ultrasonic device for measurement of concrete thickness, DIO 1 3,068.34 19. Device for measurement of reinforcement thickness and location 1 2,477.68 20. Device of visual inspection of pipes, 1 25,960.33 21. Ultrasonic tester for measurement of concrete thickness and 1 1,992.28 Total 192,342.39

Following is the list of vehicles provided to dam sites. Table 4. Vehicles Dam name Main dam Number of vehicles Arpilich Karnut 1 Tavshut Karnut Vardakar Vardakar 1 Mantash Sarnakhbyur Azat Azat 1 Sovetashen Aygedzor Tavush 1 Tavush Hakhum Gegarkunik- 2 Gegarkunik- 2 1 Sevaberd Sevaberd 1

36 Dam name Main dam Number of vehicles Gegardalich Kakavadzor- 2 Kakavadzor- 2 1 Upper Bazmaberd Aparan Aparan 1 Halavar Herher Herher 1 David-Bek Mechanical workshop 1 Central office 3 TOTAL 13

Following is the list of heavy equipment provided to the DME. Table 4. Heavy Equipment Heavy equipment name Number of procured units Under 1st tender Under 2nd tender Total pcs Bulldozer, 75-80 h.p. 3 2 5 Bulldozer, 140-160 h.p. 3 2 5 Excavator 70-80 h.p., bucket 0.5 m3 3 3 6 Excavator 60-70 h.p., bucket 0.25 m3 1 0 1 Compressor 1 0 1 Electrical welding device 1 2 3 Trailer 1 0 1 Dump truck 1 1 2 Movable workshop 1 0 1 Total 15 10 25

The 15 units of heavy equipment under Stage 1 were procured in 2005 at a cost of US$462,499.0. The Stage 2 tender was carried out in 2009 after the revision of types and quantities envisaged originally under Project. As a result, three units of truck cranes (crane-manipulators) were procured at a cost of US$274,371.0 instead of 10 units of heavy equipment envisaged under Project for Stage 2. In total, 18 units of heavy equipment were procured under DSP at a cost of US$736,870. In order to secure safe O&M of dams, in addition to equipment procured and provided to DME, training was organized under the Project for dam operation staff of all 20 rehabilitated dams and PIU staff. The purpose of training was to make operation staff familiar with institutional changes that have been occurring or would occur after rehabilitation works (construction of new structures, installation of new valves, etc.) and to learn operation procedures of new structures to ensure their safe operation and maintenance and timely prevention of failures and potential emergency cases. Another purpose of the training was to give information about the assessment of dangerous situations and the actions of dam operators in such situations. The target set for this activity of the Project was exceeded: 122 dam operators were trained instead of planned 111.

37 Sub-component B.4. Investigations of the remaining 60 dams in the country included laboratory and field studies, calculation of spillway capacities, calculation of dam slopes’ stability, etc. Based on the investigation results, priority rehabilitation works were selected and cost estimated for all the dams. As a result, 47 dams were selected where urgent rehabilitation works were carried out later under the DSP II repeater project.

Component C. Project Management This component covered: (i) incremental operating costs for the PIU, including audit services; (ii) carrying out of monitoring and evaluation activities for the Project; (iii) the services of the international dam safety expert; and (iv) training of local specialists.

Component D. Emergency Works Implementation arrangements The "Irrigation Systems Rehabilitation" PIU (name of the PIU in 2000), which was in charge of DSP was given the responsibility for coordinating the activities of this component. A working group, headed by the Minister of Agriculture (MOA), and including the Director of the DSP PIU, the Director of the ARSP PIU, and one representative each from the Ministry of Finance and Economy, Marz Administrations, and Marz Agricultural Support Centers (MASCs) was set up. This group was responsible for the preparation of the list of beneficiaries, in cooperation with the Heads of Village Councils, and for ensuring the timely execution of tenders with private agricultural machinery enterprises for the provision of the emergency assistance. Results achieved The implementation of the component went according to the schedule. Given the emergency nature of the component the schedule of works implemented is interesting to follow. Since the amendment became effective on December 1, 2000, it was not possible anymore to perform field preparation works in 2000 and that activity was shifted to spring of 2001. Tender for importation of seeds (wheat and barley) was announced on February, 16, 2001, and opening of proposals took place on February 26, 2001. On March 2, 2001, the Project Management Board (PMB) announced a winner - Yeghvard factory for compound foods, with which on March 6, 2001 a contract was signed for the amount of US$1.816 million. The transportation of seeds from the Russian port Novorossijsk to Armenia was done with assistance of the US Department for International Aid (USAID). With MOA assistance, the commission comprised of 10 MOA experts and specialists from the Center for Seeds Quality Assurance and Protection was send to Russia to check the quality of 7,837.8 tons of seeds before their transportation to Armenia. The first tranche of seeds in the quantity of 2,928.3 tons (47 carriages) entered the country on March 31 and April 1 of 2001. The second tranche of seeds in the quantity of 2,476.0 tons entered Armenia on April 9 and 10, 2001, and the last tranche of 2,517.4 tons - on April 11, 2001 (82 carriages in total). The distribution of seeds among affected Marzes is presented in the table: Table 5. Distribution of Seeds

38 The railway station Name of the Marz Quantity of seeds distributed (in tons) 1 Vanadzor Lori 470.4 Tavush 203.0 2. Gyumri Shirak 1,862.1 3. Sevan Gegharkunik 1,843.6 4. Eghvard factory Syunik 1,006.9 Kotayk 809.6 Aragatsotn 1,334.7 Ararat 307.5 TOTAL 7,837.8 ( 129 carriages)

The national tenders were conducted for field preparation works, including ploughing, other pre-planting works, planting of seeds. Overall there were 48 lots, and as a result contracts were signed with 28 contractors for carrying out the mentioned works. The total amount of the costs of the works comprised US$1.974 million. The following table shows distribution of ha according to marzes as of April 19, 2001. Table 6. Distribution of Works among Marzes Name of the Marz Total area (ha) Ploughing (ha) Pre-planting Planting (ha) works (ha) 1 Aragatsotn 6,575 4,550 4,550 2,730 2 Ararat 600 580 100 60 3 Armavir 800 400 70 4 Gegharkunik 9,082 4,600 3,400 2,110 5 Lori 2,317 1,564 1,564 1,150 6 Kotayk 3,988 2,140 1,880 1,800 7 Shirak 9,173 5,184 4,797 4,164 8 Syunik 4,960 4,500 2,600 2,500 9 Vayots Dzor 915 603 539 489 10 Tavush 1,000 770 671 521 TOTAL 39,410 24,891 20,171 15,524

Overall, the field preparation works were carried out in 611 communities with a total population of about 180,000 and the beneficiaries of the project component were about 50,000 households.

4. Major Factors Affecting Implementation and Outcome

The original Closing Date of the Project was set as March 31, 2005, but was extended three times: to September 30, 2007, to December 31, 2008 and finally to September 30, 2009 respectively. All extensions were due to completion of one activity: rehabilitation of Marmarik Dam.

First extension of the Project The WB Supervision Mission that took place in March 2004 assessed the works carried out under the Project. The mission stated that the works implemented under DSP

39 had large impact in terms of risk reduction and long-term sustainability. However, there were still essential activities that had to be implemented in order to develop further and consolidate the achievement of goals set forth by the Project. Following discussions with the GOA, it was agreed to divide the activities subject to funding into two groups: activities to be implemented through saved funds generated during DSP implementation, and activities to be implemented under funds to be provided for the repeater project (Irrigation Dam Safety Project II). The first group of activities included activities of relatively higher priority. The unused funds were allocated for financing the rehabilitation of five dams, including Marmarik dam. According to the assessments, a 30-months extension was required for implementation of rehabilitation works. Initially Marmarik dam was designed as a reservoir with a 64 m height dam, a total storage of 36.9 Mm3 and useful storage 34.0 Mm3. Construction of the reservoir was completed in November 1974. The downstream slope of the dam failed right after completion of civil works, several days prior to the planned filling of the reservoir. As a result, the dam crest settled by 13.5 m over the length of 350 m. About 500,000 m3 of soil slid downstream. The reservoir posed significant risk to population of about 142,000 people living downstream. The diversion tunnel represented the greatest risk among structures of the reservoir. The tunnel operated for 35 years although it had been designed as a temporary structure with a useful period of five-six years only. The tunnel was calculated to pass the river flow of 50 meters per second (m3/s), meantime the discharge of 0.01 percent probability flood makes up to 120 m3/s. In case of failure of diversion tunnel, the river flow will accumulate in the reservoir causing overtopping and washing of dam. This was one of the main reasons for inclusion of rehabilitation of the Marmarik Reservoir into DSP. Construction is still underway and is carried out by the consortium of Sahakyanshin CJSC - Horizon 95 LTD –Arkhmonstroy LTD for the contractual cost of 4,568.8 million AMD or about US$10.0 million. Technical supervision is carried out by Hayjrnakhagits Institute CJSC. Second extension of the Project There were two reasons for delays of rehabilitation works on the Marmarik Reservoir: (i) late receipt of Conclusion of the State Expert Examination Commission, and (ii) the tender process. Furthermore, the implementation schedule was 30 months (partially according to Conclusion of State Expert Examination) which was by six months more than it was proposed after completion of investigations. Delays due to Conclusion of State Expert Examination The design of hydraulic structures in Armenia (like in many other countries) may be prepared only after the receipt of a positive conclusion of the State Expert Examination Commission on the Preliminary Design. Marmarik dam also underwent expert examination however it was more thorough taking into account the importance and the previous failure of the dam.

40 First, the Commission required to strengthen and to re-calculate dam slope stability. Furthermore, the Commission required additional data on geological and seismic conditions at the site which required new field investigations. The Commission also required carrying out special internal erosion calculations for the dam foundation. Even more, the results of those calculations were sent to the Vedeneev Scientific- Research Institute of Hydraulic Structures for analysis. This is the best institute in the CIS countries and has a world-wide reputation. Over seven months was spent on various discussions, implementation of new field investigations and the analysis of internal erosion calculations in Moscow. These took one moth longer than it was planned during the first extension of the Project. Delays accumulated during tender process First of all, taking into account the complexity of the project, the tender documents had to be checked by WB Dam Expert in addition to a technical expert of the team. However the main delay during the tender process came from the complaint of one firm which participated in the tender for technical supervision over construction of the Marmarik Dam. The firm argued that they were the only firm among tender participants that had its own soil laboratory and the contract should be awarded to them according to the provisions of the Terms of Reference (TORs). The complaint was rejected after consideration, however this issue froze both tenders (civil works and technical supervision) and caused 3-4 months delay compared to the schedule that was planned during the first extension of the DSP. As a result, the Project was extended by 15 months until December 31, 2008. Third extension of the Project According to the rehabilitation design, about 1,800,000 cubic meters (m3) of loam-clay soil and sand soil was to be removed from the dam body. The suitable part of that excavated soil with the total volume of 800,000 m3 was to be brought back as a new fill. However, laboratory investigation of soil implemented during excavation of the dam (such investigations were provided under the rehabilitation design) identified that the excavated soil was not good to be used as a fill. It actually was represented by crushed rock and crushed rock-sand soil with up to 20 percent of rock fragments. Therefore it became necessary to introduce changes into the design, and it was decided to place pebble-gravel soil into the dam shells. Additional geological and topographic surveys, stability re-calculation were conducted during investigations. The cross-sections of shells and core, the drainage layer between old and new dam bodies were changed. All the above factors, together with the advert weather, caused works delay and about US$3.0 million would remained undisbursed if the Project Closing Date, i.e. December 31, 2008, remained unchanged. Therefore GOA applied to the Bank with a request to set September 30, 2009 as a new Closing Date and the Bank satisfied that request.

41

Non official translation from Armenian

STATE COMMITTEE OF WATER MANAGEMENT OF THE RA MINISTRY OF TERRITORIAL ADMINISTRATION

CHAIRMAN ______

N 10- AA07/382 March 09, 2010

To: Mr. Aristomene Varoudakis Country Manager World Bank, Armenia Country Office

Dear Mr. Varoudakis,

In response to your letter of February 26, 2010 I would like to inform you that the State Committee of Water Management of the RA Ministry of Territorial Administration does not have comments or recommendations in respect to the Dam Safety Project Implementation Completion Report.

Sincerely yours, (signature) A.Andreasyan

42

Annex 6. List of Supporting Documents

1. Country Assistance Strategy for Armenia. July 31, 1997, N16988-AM 2. Country Assistance Strategy for Armenia. April 25, 2001, N22111-AM 3. Country Assistance Strategy for Armenia. June 30, 2004, N28991-AM 4. Country Partnership Strategy for Armenia. June 11, 2009, N48222-AM 5. Project Appraisal Document for the Dam Safety Project, May 25, 1999, N19362-AM 6. Project Appraisal Document for the Irrigation Development Project, August 7, 2001, Report N 22599-AM 7. Project Appraisal Document for the Irrigation Dam Safety II Project, May 10, 2004, N29000-AM 8. Project Paper for Additional Financing for the Irrigation Development Project, July 2, 2007, Report N40171-AM 9. Project Paper for the Irrigation Rehabilitation Emergency Project, July 9, 2009, N49331-AM 10. Implementation Completion Report for the Irrigation Development Project, December 15, 2009, N:ICR00001145 11. Government Decree N92, dated February 8, 2001, on establishment of the State Committee of Water Management. 12. Government Decree N577, dated December 15, 1994, on establishment of the Water Sector Development and Institutional Improvements Project Implementation Unit. 13. Republic of Armenia Construction Norms. 14. Environmental Management Plan for the Dam Safety Project. 15. Economic Analysis Working Files 16. Aide Memoires of the Supervision Missions 17. Project Status Reports and ISRs 18. PIU Progress reports 19. Consultants field studies/reports 20. Borrower’s Completion Report

43 MAP