Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 66277-AM PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN Public Disclosure Authorized IN THE AMOUNT OF US$15 MILLION TO THE REPUBLIC OF ARMENIA FOR A MUNICIPAL WATER PROJECT January 27, 2012 Public Disclosure Authorized Sustainable Development Department South Caucasus Country Department Europe and Central Asia Region 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 Public Disclosure Authorized Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective January 27, 2012) Currency Unit = AMD 387.04 AMD = US$1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AMD Armenian Dram (currency) AWSC Armenian Water and Sewerage Company CMB Company Management Board CMU Contract Monitoring Unit CPS Country Partnership Strategy EMC Enhanced Management Contract EMF Environmental Management Framework EMMP Environmental Management and Monitoring Plan ESW Economic Sector Work FDI Foreign Direct Investment GoA Government of Armenia GDP Gross Domestic Product IDA International Development Association IFRs Interim Financial Reports MC Management Contract NRW Non-revenue Water O&M Operation and Maintenance OM Operations Manual ORAF Operational Risk Assessment Framework MWWP Municipal Water and Wastewater Project PAD Project Appraisal Report PDO Project Development Objective PFM Public Finance Management PIU Project Implementation Unit PMU Project Management Unit PPP Public-Private Partnerships SCWE State Committee of Water Economy TMP Total Management Plan Vice President: Philippe H. Le Houerou Country Director: Asad Alam Sector Director: Laszlo Lovei Acting Sector Manager: Pier Mantovani Task Team Leaders: Ahmed A. R. Eiweida and Zaruhi Tokhmakhian ARMENIA MUNICIPAL WATER PROJECT TABLE OF CONTENTS Page I. STRATEGIC CONTEXT .................................................................................................1 A. Country Context ............................................................................................................ 1 B. Sectoral and Institutional Context ................................................................................. 1 C. Higher Level Objectives to which the Project Contributes .......................................... 4 II. PROJECT DEVELOPMENT OBJECTIVES ................................................................4 A. PDO............................................................................................................................... 4 Project Beneficiaries ..................................................................................................... 4 PDO Level Results Indicators ....................................................................................... 5 III. PROJECT DESCRIPTION ..............................................................................................5 A. Project Components ...................................................................................................... 5 B. Project Financing .......................................................................................................... 6 Lending Instrument ....................................................................................................... 6 Project Cost and Financing ........................................................................................... 6 C. Lessons Learned and Reflected in the Project Design .................................................. 6 IV. IMPLEMENTATION .......................................................................................................8 A. Institutional and Implementation Arrangements .......................................................... 8 B. Results Monitoring and Evaluation .............................................................................. 9 C. Sustainability................................................................................................................. 9 V. KEY RISKS AND MITIGATION MEASURES ............................................................9 A. Risk Ratings Summary Table ....................................................................................... 9 B. Overall Risk Rating Explanation ................................................................................ 10 VI. APPRAISAL SUMMARY ..............................................................................................10 A. Economic and Financial Analyses .............................................................................. 10 B. Technical ..................................................................................................................... 11 C. Financial Management ................................................................................................ 11 D. Procurement ................................................................................................................ 11 E. Social (including Safeguards) ..................................................................................... 12 F. Environment (including Safeguards) .......................................................................... 13 ANNEXES Annex 1: Results Framework and Monitoring .........................................................................14 Annex 2: Detailed Project Description .......................................................................................16 Annex 3: Implementation Arrangements ..................................................................................21 Annex 4: Operational Risk Assessment Framework (ORAF) .................................................32 Annex 5: Implementation Support Plan ....................................................................................34 Annex 6: Team Composition.......................................................................................................37 Annex 7: Procurement Plan ........................................................................................................38 Annex 8: Economic and Financial Analysis ..............................................................................41 Annex 9: Map of Armenia ...........................................................................................................48 PAD DATA SHEET REPUBLIC OF ARMENIA Municipal Water Project (P126722) PROJECT APPRAISAL DOCUMENT . EUROPE AND CENTRAL ASIA ECSS6 . Basic Information Date: 27-Jan-2012 Sectors: Water supply (80%), Public administration- Water, sanitation and flood protection (20%) Country Director: Asad Alam Themes: Urban services and housing for the poor Acting Sector Pier Mantovani/Laszlo (65%), Rural services and infrastructure Manager/Director: Lovei (35%) Project ID: P126722 EA B - Partial Assessment Category: Lending Instrument: Specific Investment Loan Team Leaders: Ahmed A. R. Eiweida and Zaruhi Tokhmakhian Does the project include any CDD component? No Joint IFC: No . Borrower: Republic of Armenia Responsible Agency: State Committee of Water Economy, Ministry of Territorial Administration Contact: Mr. Andranik Andreasyan Title: Chairman Telephone No.: 37410-540909 Email: [email protected] i . Project Implementation Start Date: 1-June-2012 End Date: 31-Dec-2014 Period: Expected Effectiveness 21-May-2012 Date: Expected Closing Date: 30-Jun-2015 . Project Financing Data(US$M) [ X Loan [ ] Grant [ ] Other [ ] Credit [ ] Guarantee Proposed Terms: Variable spread with 10 year grace period and 25 year repayment period. For Loans/Credits/Others Total Project Cost (US$M): 18.00 Total Bank Financing (US$M): 15.00 . Financing Source Amount(US$M) Borrower 3.00 International Bank for Reconstruction and 15.00 Development Total 18.00 . Expected Disbursements (in USD Million) Fiscal Year 2012 2013 2014 2015 Annual 2.00 5.00 6.00 2.00 Cumulative 2.00 7.00 13.00 15.00 . Project Development Objective A. Proposed PDO The Project Development Objective is to support improvement of the quality and availability of water supply in selected service areas of the Armenian Water and Sewerage Company. ii Components Component Name Cost (USD Millions) Component 1: Investments in Water Supply Systems 8.60 Component 2: AWSC Investments 1.80 Component 3: AWSC Management Strengthening 4.60 . Compliance Policy Does the project depart from the Country Assistance Strategy (CAS) in content Yes [ ] No [ X ] or in other significant respects? . Does the project require any exceptions from Bank policies? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ ] No [ ] Is approval for any policy exception sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] . Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X iii . Legal Covenants Name Recurrent Due Date Frequency Borrower December 31, 2012 Description of Covenant The Borrower shall cause the Project Implementing Entity in coordination with the CMU to recruit not later than December 31, 2012 consultants required for Parts A, B and C.2 of the Project implementation, and