RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF NATIONAL HYDROMET MODERNIZATION PROJECT LOAN NO RU
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1 Document of The World Bank RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF NATIONAL HYDROMET MODERNIZATION PROJECT LOAN NO RU Date of Board Approval: MARCH 17, 2005 TO THE RUSSIAN FEDERATION {July 8, 2011} DRAFT Report No:
2 Regional Vice President: Country Director: Acting Sector Manager / Director: Task Team Leader: Philippe Le Houérou Pedro Alba Aziz Bouzaher Adriana J. Damianova 2
3 RUSSIA: NATIONAL HYDROMET MODERNIZATION PROJECT LEVEL TWO RESTRUCTURING RESTRUCTURING PAPER SUMMARY 1. This Restructuring Paper proposes an amendment to the Project description involving the creation of a new category of expenditure against which Loan proceeds may be disbursed, a reallocation of Loan proceeds and an extension of the Project s Closing Date from October 31, 2011 (the present Project Closing Date) to August 31, This is a level two restructuring which is necessary to allow savings of the IBRD loan proceeds to be utilized for preparing the proposed Second National Hydrometeorological (Hydromet) Modernization Project. It also reflects more accurate funding needs by each category of expenditure based on the latest disbursements and commitments. The proposed restructuring does not involve any change to the Project development objectives or associated outcome targets. Since this restructuring involves changing the Project description and adding a category of expenditure in the disbursement table in addition to the reallocation and extension of the Project s Closing Date, an amendment to the Loan Agreement will be required. The restructuring is based on a request from the Borrower via a letter dated April 11, 2011 from the Ministry of Finance (MoF). PROJECT STATUS 2. Currently, implementation progress is maintained on all Project components. The Project s Implementation Progress and Development Objectives are rated satisfactory. Most of the key outcome indicators were already met. So far, US$ million or over 87% of the Loan proceeds have been disbursed. With commitments and payments against contracts under implementation, 96% of the Loan will be utilized. 3. The progress to date is being measured by the following: (a) supercomputer complex is fully functioning, with research, testing and pilot activities underway to introduce new forecasting models and techniques; (b) the quality of forecasting of the main meteorological fields and spatial resolution of the models has significantly improved; (c) several meso-scale models of atmospheric circulation (COSMO-RU, WRF ARW) have been tested and used for operational needs in Moscow and in a few regions (Novosibirsk, Khabarovsk, and Vladivostok); (d) a pilot testing of COSMO-RU and WRF ARW models with spatial resolution of 2.8 km and 3 km, respectively, for the European part of Russia is ongoing; and (e) RosHydromet (RHM) center is actively developing global forecasting methods. All four supercomputer complexes in World 3
4 Meteorological Center (MC) of the World Meteorological Organization (WMO) in Moscow, in the WMO Regional MCs in Novosibirsk and Khabarovsk, and in the Main Geophysical Observatory (GGO) in St. Petersburg are operational. 4. There are no issues with counterpart funds, financial management, monitoring and reporting. There are no outstanding audit reports for the project. Discussions on the Second Hydromet Modernization Project proposed for Bank financing started in November 2010, and RosHydromet submitted a concept for review and endorsement by the Government. RosHydromet proposes to use the proceeds of this ongoing National Hydromet Modernization Project for project preparation of the Second National Hydromet Modernization Project, which will increase the hydro meteorological security and the effectiveness of protection from natural disasters and the effects of climate change. The proposed Project will provide the population and the authorities with timely and reliable hydrometeorological information. To that effect, the attached letter from the Ministry of Finance (MoF) dated April 11, 2011 requests an amendment of the Loan agreement and reallocation of the proceeds of the Loan as described in section C below. During the recent Bank June 2011 mission, further agreements were reached with MoF on the new closing date, the new category, and reallocation amounts. 5. All originally-planned activities under the Project will be completed by the current closing date of October 31, 2011, except one item (installation of automated meteorological complexes and equipment), which is expected to be completed by December 31, There have been two cancellations of US$ 19, dated June 21, 2010 and US$ 75, dated November 18, These cancellations are related to one case of misprocurement of consultancy services. The Bureau for Economic Analysis (BEA) refunded in full the cancelled amount of US$ 95, before the agreed deadline of May 30, BEA is assisting the RosHydromet to carry out the Project. All agreed items in the procurement plan dated March 2011 have been procured. The main reason for the loan savings is effectiveness of timely and competitive procurement, which has resulted in the lower spending of the physical and price contingencies than anticipated. 7. There are no changes to the Project safeguards category and no environmental or social safeguards issues with regards to the proposed restructuring. Procurement will continue to be carried out in accordance of the provisions of Schedule 4 of the Loan Agreement dated August 11, 2005, i.e., in accordance with the Procurement and Consultant Guidelines of PROPOSED CHANGES 8. The proposed changes are as follows: (a) amend the Project description to include preparing the proposed Second National Hydromet Modernization Project as an activity under Part D of the Project; (b) introduce a new category of expenditure Preparation of the proposed Hydromet-2 Modernization Project ; (c) reallocate funds for preparation of the proposed Project; and (d) extend the Project s Closing Date from October 31, 2011 to August 31,
5 9. Revised Project Description: Part D of the Project will be amended to include the preparation of the proposed Second National Hydromet Modernization Project as follows: Part D: Project Management, Training, Monitoring Evaluation and Preparation of the Second National Hydromet Modernization Project Provision of goods, consultants services, training, and operating costs to RHM and BEA to support Project implementation management, Project audit, and preparation of the Second National Hydromet Modernization Project. The following definition will be added: Second National Hydromet Modernization Project means the Second National Hydromet Modernization Project intended to be a follow-on to this Project with the objective of further improving Russia s national capacity to deliver weather, water and climate information to its people and economy in a reliable and timely manner. The proposed restructuring does not involve any change to PDOs as the addition of the new activity under Part D, i.e., preparation of the proposed Second National Hydromet Modernization Project is consistent with PDOs. 10. New Category of Expenditure: A new category of expenditure will be added to the disbursement to allow disbursements for the new activity to be added to the Project description, i.e., preparation of the proposed Second National Hydromet Modernization Project. 11. Reallocation: The reallocation of Loan proceeds between the different categories of expenditure shall be as follows: (i) reallocate the amounts of US$624,650, US$8,540 and US$200,000 from the category Goods including inland transportation and related insurance and technical services to the category Works, the category Consultants Services, and the new category Preparation of the proposed Second National Hydromet Modernization Project respectively; (ii) reallocate the amount of US$379,560 from category Training to the category Works ; and (iii) reallocate US$257,790 from the category Capacity Building to the category Works. A significant increase in the Works category can be justified as one relatively large procurement item changed from Goods to Works to allow installation of the equipment instead of just supplying the equipment. 12. The following table shows the current and revised categories, allocation, and financing percentage. Category Amount of the Loan % of Expenditures to 5
6 Allocated be Financed (Expressed in Dollars) Current Revised Current Revised Current Revised 1.Goods, 72,252, ,418, including inland transportation and related insurance and technical services 1.Goods, including inland transportation and related insurance and technical services 2. Works 2. Works 431, ,693, Consultants Services 3.Consultants Services 2,786, ,795, Training 4. Training 1,285, , Capacity Building Program Payments 6. Operating costs TOTA L 5. Capacity Building Program Payments 6. Operating costs 7. Preparation of the proposed Second National Hydromet Modernization Project 310, , ,840, ,840, ,904, ,904, , % 6
7 13. Extension of Closing Date: A new closing date of August 31, 2012 is proposed. This is the second extension of closing date for this Project. This new closing date was agreed upon with both MoF and RosHydromet to allow sufficient time for preparation of the proposed Second National Hydromet Modernization Project. The cumulative extension of the closing date does not exceed two years. The requirements for an extension of the Closing Date are being met: (i) the Project objectives continue to be achievable; (ii) the performance of the Borrower continues to be satisfactory; (iii) the Borrower has prepared an action plan acceptable to the Bank to complete the Project in time; and (iv) there are no outstanding audit reports for the Project. 14 Implementation schedule: The preparation of the proposed Second National Hydromet Modernization Project includes mainly consultancy services and training. Procurement for the new activities introduced as part of the Project description will be carried out in accordance of the Procurement and Consultant Guidelines of The proposed consultancy services include development of technical designs of various hydro-meteorological systems and analysis of critical decision support systems such as computer infrastructure. It is expected that procurement of these consultancy services will start in July
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