Document of The World Bank FOR OFFICIAL USE ONLY Report No: RES15150 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SERBIA ROAD REHABILITATION AND SAFETY PROJECT LOAN IBRD-82550 APRIL 26, 2013 TO THE REPUBLIC OF SERBIA – December 23, 2014 Transport and ICT Global Practice Europe and Central Asia This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS DLI Disbursement Linked Indicator DLP Defects Liability Period EBRD European Bank for Reconstruction and Development EIB European Investment Bank EIRR Economic Internal Rate of Return EMP Environmental Management Plan FY Fiscal Year GoS Government of Serbia PAD Project Appraisal Document PDO Project Development Objective PERS Public Enterprise Roads of Serbia PBMC Performance Based Maintenance Contract WB World Bank Regional Vice President: Laura Tuck Country Director: Ellen A. Goldstein Senior Global Practice Director Pierre Guslain Practice Manager: Juan Gaviria Task Team Leader: Moustafa Baher El-Hefnawy 2 SERBIA Road Rehabilitation and Safety Project CONTENTS DATASHEET Page 4 ANNEX 1: RESULTS FRAMEWORK AND MONITORING Page 9 ANNEX 2: REVISED IMPLEMENTATION PROGRAM Page 12 ANNEX 3a: ORIGINAL DLI TARGETS Page 18 ANNEX 3b: REVISED DLI TARGETS Page 20 ANNEX 4: SYSTEMATIC OPERATIONAL RISK RATING TOOL Page 22 3 DATA SHEET Serbia SERBIA ROAD REHABILITATION AND SAFETY PROJECT (P127876) EUROPE AND CENTRAL ASIA ECCU4 Report No: RES15150 Basic Information Project ID: P127876 Lending Instrument: Specific Investment Loan Regional Vice President: Laura Tuck Original EA Category: Partial Assessment (B) Country Director: Ellen A. Goldstein Current EA Category: Partial Assessment (B) Senior Global Practice Pierre Guislain Original Approval Date: 26-Apr-2013 Director: Practice Juan Gaviria Current Closing Date: 31-Oct-2018 Manager/Manager: Moustafa Baher El- Team Leader: Hefnawy Borrower: Republic of Serbia Responsible Public Enterprise Roads of Serbia Agency: Restructuring Type Form Type: Full Restructuring Paper Decision Authority: Country Director Approval Restructuring Level 2 Level: Financing ( as of 05-Dec-2014 ) Key Dates Approval Effectiveness Original Revised Project Ln/Cr/TF Status Signing Date Date Date Closing Date Closing Date P127876 IBRD-82550 Effective 26-Apr-2013 27-Nov-2013 24-Oct-2014 31-Oct-2018 31-Oct-2018 Disbursements (in Millions) % Cancelle Disburse Undisbur Project Ln/Cr/TF Status Currency Original Revised Disburse d d sed d P127876 IBRD-82550 Effective USD 100.00 100.00 0.00 0.23 99.75 Policy Waivers 4 Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects? Does the project require any policy waiver(s)? Yes [ ] No [ X ] A. Summary of Proposed Changes The proposed Level Two restructuring of the Road Rehabilitation and Safety Project (IBRD 8255-YF) is based on a request from the Borrower (letter dated November 28, 2014) to address the needs resulting from the massive floods which occurred during the period May 11-17, 2014 creating large devastation in the country and to revise the priorities for road network rehabilitation after the floods. The restructuring involves the following: (i) change in the project implementation schedule due to the flood damage and consequently the change in the rehabilitation priorities to reflect the network condition; (ii) extension of the Loan Closing Date by 14 months to December 31, 2019, to compensate for the multiple delays in Project effectiveness associated with government changes and parliamentary elections and the need to prioritize works as part of flood rehabilitation; (iii) update of the Results Framework to reflect the revised Project implementation schedule; (iv) changes to the Disbursement Linked Indicators (DLIs) to reflect the revised Project implementation schedule; (v) changes to the annual financing percentages for particular road segments, to reflect the reduced availability of financing from Public Enterprise Roads of Serbia (PERS) during Year 1 of implementation due to the floods; Government of Serbia (GoS) will increase its financing percentage during later years to achieve the originally-defined counterpart funding participation by the end of the project; and (vi) additional procurement methods to allow for the use of Design and Build for first year program which covers priority works contracts under Component 1. Change in Implementing Agency Yes [ ] No [ X ] Change in Project's Development Objectives Yes [ ] No [ X ] Change in Results Framework Yes [ X ] No [ ] Change in Safeguard Policies Triggered Yes [ ] No [ X ] Change of EA category Yes [ ] No [ X ] Other Changes to Safeguards Yes [ ] No [ X ] Change in Legal Covenants Yes [ ] No [ X ] Change in Loan Closing Date(s) Yes [ X ] No [ ] Cancellations Proposed Yes [ ] No [ X ] Change to Financing Plan Yes [ ] No [ X ] Change in Disbursement Arrangements Yes [ X ] No [ ] Reallocation between Disbursement Categories Yes [ ] No [ X ] Change in Disbursement Estimates Yes [ X ] No [ ] Change to Components and Cost Yes [ X ] No [ ] Change in Institutional Arrangements Yes [ ] No [ X ] Change in Financial Management Yes [ X ] No [ ] Change in Procurement Yes [ X ] No [ ] 5 Change in Implementation Schedule Yes [ X ] No [ ] Other Change(s) Yes [ ] No [ X ] Appraisal Summary Change in Economic and Financial Analysis Yes [ X ] No [ ] Appraisal Summary Change in Technical Analysis Yes [ X ] No [ ] Appraisal Summary Change in Social Analysis Yes [ ] No [ X ] Appraisal Summary Change in Environmental Analysis Yes [ ] No [ X ] Appraisal Summary Change in Risk Assessment Yes [ ] No [ X ] B. Project Status The project was approved in April 2013, and became effective on October 24, 2014. Effectiveness delays resulted from multiple Government changes and substantial flood damage of project roads. Implementation is about to start, although the procurement process for Year 1 Works (the priority works) is well advanced, contractor selection processes are completed, and works are expected to start shortly after the re-structuring. The selection of the supervision consultant and technical assistance to the Project Implementation Team (PIT) is also well advanced. The supervision consultant is expected to be in place by January 2015. Project Objectives continue to be achievable. C. Proposed Changes Development Objectives/Results Project Development Objectives Original PDO The proposed PDO is to improve the condition and safety of the National Road Network for road users by supporting the Republic of Serbia in the implementation of the first phase of its National Road Network Rehabilitation Program. Change in Project's Development Objectives Change in Results Framework Explanation: The target values for the intermediate outcome indicators have been revised to reflect the revised implementation schedule and closing date of Dec 31, 2019. Target dates for the PDO indicators and intermediate indicators, dependent on civil works completion, have been revised to reflect the new priority delivery schedule. In addition, the baseline value and target value for the indicator: Roads in good and fair condition as a share of total National Roads were added; and the baseline and target values for the core indicator: Size of total classified network were revised to reflect new network definitions. Financing Change in Loan Closing Date(s) Explanation: The Loan Closing date will be extended from October 31, 2018 to December 31, 2019, reflecting delays in effectiveness and the need to prioritize works as part of flood rehabilitation. The extension will also allow the inclusion of part of the Defects Notification Period under the extended project implementation period. Ln/Cr/T Status Original Closing Current Closing Proposed Closing Previous Closing 6 F Date Date Date Date(s) IBRD- Effective 31-Oct-2018 31-Oct-2018 31-Dec-2019 31-Oct-2018 82550 Change in Disbursement Arrangements Explanation: Due to the large demands on the government’s budgetary resources following the floods, GoS will not co- finance the first year priority works under Component 1 of the Project. So for the first year priority works, only loan funds will be used. The revised counterpart contribution from GoS will be increased during later years in the Project so that the originally defined counterpart participation is achieved by the end of the project. Disbursement Estimates Change in Disbursement Estimates Explanation: The change in the disbursement estimates is to reflect the delays in Loan Effectiveness and consequently implementation; and the change in the first year program due following the severe May floods. Fiscal Year Current (USD) Proposed (USD) 2013 0.00 0.00 2014 4,000,000.00 0.00 2015 25,000,000.00 2,000,000.00 2016 24,000,000.00 30,000,000.00 2017 21,000,000.00 28,000,000.00 2018 15,000,000.00 20,000,000.00 2019 11,000,000.00 20,000,000.00 Total 100,000,000.00 100,000,000.00 Components Change to Components and Cost Explanation: A minor change is proposed to Component 1 to reflect the change in priorities for the road sections to be rehabilitated as a result of the flood damage. The proposed cost for Component 1 will not change, and 37 sections will be co-financed by the Bank and EIB (within the range of 35 – 40 sections identified during appraisal), with a total length of 795 km (instead of 800 – 810km). The total length of sections of 795 km co-financed by the Bank and EIB include125 km of priority