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1 Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY Report No: DO Public Disclosure Authorized PROJECT PAPER ON A PROPOSED ADDITIONAL LOAN IN THE AMOUNT OF US$20 MILLION Public Disclosure Authorized TO THE DOMINICAN REPUBLIC FOR AN EMERGENCY RECOVERY AND DISASTER MANAGEMENT PROJECT October 6, 2011 Public Disclosure Authorized Sustainable Development Department Caribbean Country Management Unit Latin America and the Caribbean 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.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective September 23, 2011) Currency Unit = Dominican Peso (DOP) US$1 = 38 DOP DOP 1 = US$ FISCAL YEAR January 1 December 31 AF CAASD CNE CPS CDEEE COPRE DPL DR EGEHID EIA EMSP ERL IBRD ICB IFR INDRHI MEEPyD MoF OECD ONAMET OP/BP ORAF PDO PIU MoH TA UEPEX WB WBG BBREVIATIONS AND ACRONYMS Additional Financing Corporación de Acueducto y Alcantarillado de Santo Domingo (Aqueduct and Sewerage Corporation of Santo Domingo) Comisión Nacional de Emergencia (National Emergency Commission) Country Partnership Strategy Corporación Dominicana de Empresas Eléctricas Estatales (Dominican Corporation of State Electrical Companies) Comité de Operación de Presas y Embalses Development Policy Loan Dominican Republic Empresa de Generación Hidroelécrica Dominicana (Dominican Corporation for Hydro-electric Generation) Environmental Impact Assessment Environmental and Social Management Plan Emergency Recovery and Disaster Management Loan (L-7546) International Bank for Reconstruction and Development International Competitive Bidding Unaudited Financial Report Instituto Nacional de Recursos Hidráulicos (National Institute of Hydraulic Resources) Ministry of Economy, Planning and Development Ministry of Finance Organisation for Economic Co-operation and Development Oficina Nacional de Meteorología (National Meteorological Office) Operational Policies / Bank Procedures Operational Risk Assessment Framework Project Development Objective Project Implementation Unit Ministerio de Estado de Hacienda Technical Assistance National Integrated Financial Monitoring Information System World Bank World Bank Group Vice President: Country Director: Acting Sector Director: Sector Manager: Task Team Leader: ii Pamela Cox Françoise Clottes Ethel Sennhauser Karin Kemper Javier Zuleta

3 DOMINICAN REPUBLIC EMERGENCY RECOVERY AND DISASTER MANAGEMENT PROJECT CONTENTS Project Paper Data Sheet... iv I. Introduction... 1 II. Background and Rationale for Additional Financing... 1 III. Proposed Changes IV. Appraisal Summary Annexes Annex 1. Revised Results Framework and Monitoring Annex 2. Operational Risk Assessment Framework Annex 3. Detailed Costs by Project Component iii

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5 DOMINICAN REPUBLIC EMERGENCY RECOVERY AND DISASTER MANAGEMENT PROJECT ADDITIONAL FINANCING DATA SHEET Country Director: Françoise Clottes Sector Manager: Karin E. Kemper Team Leader: Javier Zuleta Project ID: P Expected Effectiveness Date: February 15, 2012 Lending Instrument: SIL Additional Financing Type: Cost Overrun Project ID: P Project Name: Emergency Recovery and Disaster Management Project in the Dominican Republic Lending Instrument: ERL Basic Information - Additional Financing (AF) Sectors: Irrigation and Drainage (AI), Environment, Disaster Risk Management, Sustainable Development. Themes: Environmental Category: B Expected Closing Date: December 31, 2013 Joint IFC: No Joint Level: Basic Information - Original Project Environmental category: B Expected Closing Date: December 31, 2012 Joint IFC: Joint Level: AF Project Financing Data [X ] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: Proposed terms: The additional loan would be a Fixed Spread Loan repayable in 30 years, including a grace period of 4.5 years. AF Financing Plan (US$m) Source Total Project Cost: US$20 million Cofinancing: 0 Borrower: Total Bank Financing: IBRD US$20 million Total Amount (US$m) US$20 million Client Information Recipient: Ministerio de Estado de Hacienda (Ministry of Finance) Responsible Agency: Ministerio de Estado de Hacienda (Ministry of Finance) Implementing Agencies: INDRHI Contact Person: Francisco T. Rodríguez, Director Ejecutivo Telephone No.: Fax No.: diereccion@indrhi.gov.do CDEEE Contact Person: Celso Marranzini, Vicepresidente Ejecutivo Telephone No.: Fax No.: cmarranzini@cdeee.gob.do AF Estimated Disbursements (Bank FY/US$m) iv

6 FY Annual Cumulative Project Development Objective and Description Original Project Development Objective: The project seeks to: (i) restore and strengthen priority irrigation, electricity, water and sanitation infrastructure damaged by Tropical Storms Olga and Noel or at risk of damage from future storms, and (ii) strengthen INDRHI s and CDEEE s capacity for disaster risk management. Revised Project Development Objectives: Project development objectives are unchanged from the original project. Project description: Components (1) Rehabilitation and Risk Management in Water Resources Sector: Rehabilitation of irrigation infrastructure and strengthening of risk management capacity in the water resources sector, and (2) Rehabilitation and Risk Management in the Electricity Sector: Rehabilitation of hydropower infrastructure and strengthening of risk management capacity in the electricity sector. Safeguard and Exception to Policies Safeguard policies triggered: Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waterways (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) Does the project require any waivers of Bank policies? Have these been endorsed or approved by Bank management? Conditions and Legal Covenants: [X ]Yes [ ] No [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [X] No [X]Yes [ ] No [X]Yes [ ] No [ ]Yes [X ] No [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [X] No v

7 Financing Agreement Reference Article V, 5.01 The Additional Conditions of Effectiveness: 1) The CDEEE Subsidiary Agreement and the INDRHI Subsidiary Agreement have been signed on behalf of the Borrower and CDEEE and INDRHI, respectively 2) The Operational Manual has been updated and adopted in a manner satisfactory to the Bank Date Due Effectiveness Schedule 2, E,1. and 2 Safeguards: 1. The Borrower shall cause the Project to be carried out in accordance to: (i) the Environmental and Social Management Plan; and (ii) the Abbreviated Resettlement Plan. 2. The Borrower shall take, or cause to be taken, all necessary actions to implement the measures identified in the Evaluation of the Safety of Dams Report, all in a manner acceptable to the Bank. vi

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9 I. Introduction 1. This Project Paper seeks the approval of the Executive Directors to provide an additional loan in an amount of US$20 million to the Dominican Republic for the Emergency Recovery and Disaster Management Project. This additional loan includes an extension of the closing date of the first Loan LN#7546-DO and the Parent Project (P109932) by one year to December 31, The loan amount for the original project totaled US$80 million. This included US$8 million in unallocated resources, with the remainder allocated among project components and front-end fees. After a thorough review of project requirements, coupled with the assignment of the US$8 million in unallocated resources, the project faces a US$17.8 million shortfall in funding. This represents a total increase in project costs of 22 percent. Including a US$2.2 million contingency, an additional US$20 million are required in order to complete the original project objectives. 3. The proposed additional financing (AF) would allow completion of the original project activities by filling an unanticipated financing gap caused by cost overruns. AF is specifically sought to complete original project activities related to the rehabilitation and repair of damaged infrastructure in the water (irrigation, hydrology) and electricity sectors and to strengthen institutional capacity for disaster mitigation and risk reduction. 4. The Parent project consists of three components. Two operational components are managed by two national agencies: Component 1, Rehabilitation and Risk Management in the Water Resources Sector, is managed by INDRHI (Instituto Nacional de Recursos Hídricos) and Component 2, Rehabilitation and Risk Management in the Electricity Sector, is managed by CDEEE (Corporación Dominicana de Empresas Eléctricas Estatales). Component 3, Retroactive Financing of Emergency Relief and Urgent Rehabilitation of Water and Sanitation Infrastructure in Santo Domingo and Santiago, provided financing to reimburse the costs of emergency works that were completed immediately after the storms. This component has been fully disbursed. 5. In accordance with OP/BP Additional Financing, this AF request falls under the category of Cost increases due to inflation, exchange rate changes, and design changes that were not anticipated at appraisal of the ongoing project. No new project activities are included but the implementation of this additional loan will require an extension of the first Loan and of the Parent Project (Project ID: P109932) by one year to accommodate procurement and construction activities. II. Background and Rationale for Additional Financing in the Amount of US$20 million Background 6. On October 28, 2007, Tropical Storm Noel struck the Dominican Republic and produced major rainfall that affected much of the country, about 6,000,000 people, or 70 percent of the population. Five weeks later, on December 10, 2007, Tropical Storm Olga also produced heavy rainfall throughout the country and displaced some 62,000 people. In both cases, national 1

10 infrastructure suffered significant damages, particularly in the irrigation, water supply/sanitation, and electricity sectors. 7. In response to the disaster, the Government of the Dominican Republic (GoDR) requested Bank assistance, which resulted in the preparation and approval of the Dominican Republic Emergency Recovery and Disaster Management Project (Project ID: P109932), in the amount of US$80 million. The project was prepared in accordance with OP/BP 8.00 Rapid Response to Crises and Emergencies and focused on rehabilitation and repair of damaged infrastructure in the water, irrigation and electricity sectors. The project includes a subcomponent that is designed to strengthen institutional capacity in INDRHI and CDEEE in order to improve disaster management and response. The project was approved by the Bank Board in April 2008 and became effective in May The one-year delay in effectiveness was due to the requirement under Dominican law for Congressional approval. The three project components of the parent project are: Component 1: Rehabilitation and Risk Management in the Water Resources Sector, US$34.35 million 8. Executed by INDRHI to (i) rehabilitate irrigation water supply systems through the reconstruction and stabilization of a wide range of critical physical infrastructure such as water control and storage facilities, headworks, and canal systems, and (ii) support institutional strengthening activities to improve INDRHI s capacity to manage and respond to risks from natural disasters and improve water resources management. Component 2: Rehabilitation and Risk Management in the Electricity Sector, US$33.95 million 9. Executed by CDEEE to (i) restore, rehabilitate and strengthen priority electricity infrastructure to improve disaster resilience, and (ii) strengthen the sector s ability to reduce risk from natural disasters and improve risk management capacity. Component 3: Retroactive Financing of Emergency Relief and Urgent Rehabilitation of Water and Sanitation Infrastructure in Santo Domingo and Santiago US$3.5 million 10. This component has been fully disbursed. 11. With respect to Additional Financing, the AF is sought to complete existing activities under the original ERL project. All retroactive financing under the project has been disbursed and remaining activities to be funded fall under categories 1 and 2 of the original project. Current implementation status 12. Under Component 1, a detailed survey of works requirements has been completed and procurement of consultancies and works is under way. Engineering designs for irrigation works have been produced or are in process. Works contracts for three construction lots are currently in the tender process and are expected to be signed in October Designs for dam repairs are expected to be completed by the end of calendar year Institutional capacity assessments for 2

11 disaster risk management have been conducted. Key activities to improve the hydrometeorological (early warning) network and institutional strengthening activities are under way. 13. Under Component 2, the majority of works are under contract. According to the procurement plan, all remaining contracts are scheduled for signing over the next 12 months. 14. INDRHI and CDEEE are undertaking other complementary initiatives to improve hydrometeorological databases and access to information in order to better forecast and prevent natural disasters. These activities include the implementation of an automated supervisory control and data acquisition system (SCADA) in CDEEE for remote operations and hydrological monitoring, and the implementation of an Internet-based data acquisition and information distribution system within INDRHI to collect, manage and distribute meteorological and early warning data. These improvements are coupled with the rehabilitation of the INDRHI hydro-meteorological observation network. Additional Financing Project Description 15. Consistent with the original ERL, the objectives of the Project are to: (i) restore and strengthen the Borrower s irrigation, electricity, water, and sanitation infrastructure damaged by the tropical storms Olga and Noel in October and December 2007 or at risk of damage from future storms; and (ii) strengthen INDRHI s and CDEEE s capacity for future risk management. The Project consists of the following components: Component 1: Rehabilitation and Risk Management in Water Resources Sector 16. Under this component the project will finance the completion of activities planned under component 1 of the original project. Specifically, the rehabilitation of the Borrower s principal water management systems damaged by tropical storms Noel and Olga and strengthening of the Borrower s institutional capacity for risk management. Activities include: Reconstruction and rehabilitation of: (i) damaged water control structures, including the rehabilitation of water diversion and conveyance structures; (ii) canal systems; and (iii) water distribution, control, and drainage structures; Restoration of ancillary dam infrastructure, including access roads and monitoring equipment; Carrying out of works and provision of goods and services to repair the dams of Maguaca, Villarpando, Dique de Barracote, Tavera, Jiguey, Aguacate, Hatillo, Rincon, Sabana Yegua, Mijo, Sabaneta, Rio Blanco, Arroyon, and Tireito; Removal of flood debris; and Repair and replacement of damaged flood control structures. 3

12 17. The Project will also fund the provision of technical assistance, goods and services to INDRHI to: (a) improve its capacity to model watershed behavior and identify watershed attributes contributing to increased risks associated with the water sector; (b) support the Borrower s maintenance, preparedness and emergency response capabilities, including the provision of technical assistance to develop the Borrower s proposed water law bill; (c) repair damaged stations to monitor river flow data and weather observations and install new stations for watershed monitoring and early warning of potential disaster conditions; (d) review and update the operating procedures of dams; (e) carry out a technical audit of the works under Component 1 of the Project; and (f) carry out the financial audit for Component 1 of the Project. Component 2: Rehabilitation and Risk Management in the Electricity Sector 18. To address the financing gap identified under component 2 of the original ERL, this component focuses on the restoration of priority electricity infrastructure in the Borrower s territory affected by the tropical storms Noel and Olga and strengthening of the electricity sector s capacity to respond to natural disasters. Activities to be financed under the project include: The rehabilitation of hydroelectric generation facilities operated by EGEHID, including: (a) the rehabilitation of the power generation plants of Aguacate, Nizao- Najayo and Aniana Vargas, Valdesia, Jiguey, Sabana Yegua, Rio Blanco, Los Anones y Las Barias; and (b) the restoration of ancillary dam works, including access roads; and (c) carrying out of works to repair the dams of Las Barias and Valdesia; The rehabilitation of at least 152 km of transmission lines operated by ETED, including in the following sectors: (a) Azua-Sabana Yegua; (b) Cruce Cabral-Las Damas; (c) Sabana Yegua-San Juan; (d) Cruce Cabral-Vicente Noble; and (e) Haina-Galeria Infiltracion CAASD Manoguayabo; The rehabilitation of electricity distribution facilities carried out by EDENORTE and EDESUR and, (a) the revision and updating of the technical specifications and quality control methods for the acquisition of materials and equipment for power transmission and distribution facilities; (b) the updating of the contingency plans in case of severe meteorological occurrences; (c) the strengthening of the CDEEE s procurement capacity; (d) the carrying out of a technical audit of the works under Component 2 of the Project; and (e) the carrying out of the financial audit for Component 2 of the Project. Additional Financing Requirement 19. During the mid-term review in November 2010, the need for additional financing to complete project activities was identified. During subsequent missions in February, April and June 2011 project activities were evaluated and financial resources of US$17.8 million were 4

13 estimated as needed to complete originally planned project activities. The results of this evaluation are presented in Table 1. Project Component Table 1. Tropical Storms Olga and Noel Project Finance Summary Original Allocation (US$ Million) Distribution from Unallocated funds *Current Allocation FY 2011 Current Cost Estimates (US$ Million) Difference (US$ Million) Component 1, INDRHI (11.7) Funding gap Component 2, CDEEE (6.1) Funding gap Component 3, Disbursed Retroactive Financing 1.54 Unallocated project Available funds 0 under the original project Front-end fee Disbursed Totals (17.8) Total Funding Gap *Revised to reflect the current distribution from unallocated funds without additional financing 20. The funding gap includes US$11.7 million identified under Component 1 (INDRHI), and US$6.1 million under Component 2 (CDEEE), for a total of US$17.8 million. To fill this gap, the GoDR is seeking additional financing in the amount of US$20.0 million for project activities. The additional financing will provide US$17.8 million to close the remaining financing gap and US$2.15 million (or 12 percent) of non allocated funds to cover contingencies commonly associated with construction projects. Table 2 presents the distribution of the additional financing funds. Table 2. Distribution of Additional Financing: Categories of Eligible Expenditures Category (1) Goods, works, non-consulting services, consultants services and Operating Costs for Component 1 of the Project (2) Goods, works, non-consulting services, consultants services and Operating Costs for Component 2 of the Project (3) Unallocated 2,150,000 (4) Front-end Fee 50,000 Amount of the Loan Allocated (expressed in USD) 11,700, % 6,100, % Note Percentage of Expenditures to be financed (inclusive of Taxes) Amount payable pursuant to Section 2.03 of Loan Agreement in accordance with Section

14 (5) Interest Rate Cap or Interest Rate Collar premium TOTAL AMOUNT 20,000,000 0 (b) of the General Conditions Amount due pursuant to Section 2.07(c) of Loan Agreement Rationale for Additional Financing 21. Additional financing is sought to achieve the project s Development Objectives by completing originally planned project activities. The financing gap resulted from a combination of factors. For works in Components 1 and 2, cost overruns were caused by low initial project cost estimates. They were based on preliminary estimates that were developed soon after the storm events. These costs increased due to revised construction requirements that were identified during the detailed engineering design. In addition, costs increased because works awaiting construction suffered additional damages from storms that occurred after project effectiveness. Improved designs have been made to increase the resilience of infrastructure. Finally, an estimated 21 percent accumulated inflation since project inception had repercussions on all project components. 22. In the case of Component 1.2 on strengthening disaster risk management capacity in INDRHI, cost increases were associated with repair and rehabilitation of the hydrometeorological monitoring network, based on requirements identified in consulting studies that were conducted during project execution. A detailed assessment that was conducted during project implementation identified repairs and improvements required to support a functional Early Warning System. Cost increases include the replacement of select conventional stations with telemetric stations to improve automated monitoring coverage and fill critical information gaps. 23. Under Component 2, the AF will finance cost overruns of US$6.10 million due to: a) higher costs of transmission lines because of price increases; b) higher costs of rehabilitating the Aguacate Hydroelectric Plant to address hidden damages discovered during the execution of the works contract; c) higher costs in the contract for rehabilitation of the Las Barias Dam because of damages discovered during the execution of the current works contract; and d) costs of other works yet to be contracted. Government Response to Financing Gap and Funding Alternatives 24. INDRHI and CDEEE have responded to the need to control cost increases and have attempted to remain within the original project budget. INDRHI, as a government institution, does not have access to additional resources and has responded by cutting works activities from its portfolio. CDEEE responded by providing internal funds to offset funding gaps. Although CDEEE has been able to partially address the funding gap, both institutions have indicated that no other financing resources are available. 6

15 Impact of Additional Financing 25. The AF and the closing date extension to December 31, 2013 will permit the project to achieve its Development Objectives. Without AF, works under the project will be significantly reduced. 26. In the case of Component 1 (INDRHI), restoration of irrigation services is the primary focus of the project. The original Project Development Objective (PDO) indicator called for the restoration of services to 12,000 hectares of agricultural land. To address the financing gap, INDRHI has eliminated two works activities, cutting 433 hectares from the project. Without additional financing, further reductions will be required and INDRHI will only achieve about 60 percent of the original objective. With additional financing, the project is expected to achieve 96 percent of the original goal of 12,000 hectares with services restored. 27. In the case of Component 2, implemented by CDEEE, the PDO includes the rehabilitation of four dam facilities. The PDO indicator of restoring 242 km of transmission lines has been revised to 152 km to make it consistent with the length of the lines to be rehabilitated as stipulated in the Loan Agreement and with the actual size of ongoing contracts. Likewise, the PDO indicator calling for the rehabilitation of 200 MW of hydroelectric generation capacity has been updated to 254 MW, including 52 MW financed by the Bank loan. Due to cost increases realized during execution, additional financing is required to complete these activities. 28. Partial rehabilitation of system components as a means to reduce project costs is not an option. Such an approach would not result in fully restoring needed services. For example, in irrigation, the reconstruction of headworks without repair of the downstream canal will not restore services to the user communities. Similarly, restoring generator capacity without providing transmission capacity suffers the same fault. Project modifications and Relationship to CAS objectives 29. Apart from the need to close the financing gap, no other modifications to the project are anticipated. Project activities remain unchanged with respect to scope and objectives. The project fully supports Bank objectives and promotes the The World Bank Group s Country Partnership Strategy (Report #49620-DO) discussed by the Executive Directors on September 17, 2009 with respect to disaster risk management and sector development. Project Rating and Safeguard Status Project Ratings 30. The project is currently rated as moderately satisfactory (MS) with respect to achievement of Development Objectives, and project activities are currently progressing as planned. With respect to Component 1, INDRHI has committed 41 percent of the funds of Component 1 (20 percent executed, 1 percent committed, and 20 percent in pipeline). In Component 2, CDEEE has 98 percent of the current project funds committed (27 percent already executed, 63 percent under execution, and 8 percent in the pipeline). 7

16 31. The Project was restructured in order to accommodate the triggering of Involuntary Resettlement OP/BP This was necessary to acquire the rights-of-way required to realign certain transmission lines away from locations vulnerable to natural disaster hazards. Procurement 32. Considering the improvement in the implementation of all procurement activities, reported in a detailed review conducted in May 2011, the Procurement rating was upgraded to moderately satisfactory. There have been some advances on the procurement side: a) CDEEE restructured its PIU with the creation of a centralized unit and the inclusion of new procurement staff; b) in INDRHI, the internal communication between the PIU and the agency's Procurement Department has improved. 33. Given the above considerations, the procurement rating was updated to Moderately Satisfactory. Procurement arrangements under the AF will follow the procedures described in the Bank s Guidelines for procurement of works, goods and non-consulting services, and selection of consultants, issued in January The updated procurement plan will specify the procurement methods to be applied, including those procurement processes to be carried out with reduced duration, and prior and ex-post review conditions. Financial Management (FM) 34. The Bank has conducted a comprehensive Project financial management (FM) assessment and closely monitored key FM issues at the Instituto Nacional de Recursos Hidráulicos (INDRHI) and the Corporación Dominicana de Empresas Eléctricas Estatales (CDEEE). For accounting, reporting and internal control purposes, both PIUs have implemented of the DR National Integrated Financial Monitoring Information Sub-System (UEPEX), which is properly in place and operational. With minor adjustment in the accounting classification and the budgeting module, this sub-system will be used for the additional financing (AF) as well. The frequency and format of the unaudited financial reports (IFRs) will be kept harmonized with those already in place for the Original Project. The project s FM system has been upgraded from moderately unsatisfactory and is currently rated as moderately satisfactory. The overall FM risk associated with the project is classified as moderate. 35. An external firm performed the audit for the funds handled by both entities for the period from May 6, 2009 (date of Project effectiveness), through December 2010, and most audit opinions were unqualified (clean). There was a qualified with exception opinion on the audit for CDEEE due to duplicate; therefore ineligible, expenses for retroactive financing. CDEEE made a thorough review of expenses and concurred with audit findings. To address the issue, the Bank sent the CDEEE a request to refund the amount of the ineligible expenditure identified by the audit on September 6, The Borrower refunded the amount of US$90,364 in September 29, On the other hand, audit reports were untimely submitted. Submission delays were associated with changes in management for both entities. To have audit reports timely submitted 8

17 for future fiscal years, the audit work was contracted for the whole life of Project. The terms of reference (ToRs) of the audit work, including its scope, do not need to be expanded with the AF. Approved ToRs specify that annual audits to be performed for the Project should cover all sources of funds. 37. The total disbursed amount for the Project as of August 31, 2011 is US$33,143,218, representing 41% of the original amount, US$80,000,000. During the last year both, INDRHI and CDEEE, have shown implementation progress as measured by their Components Disbursement pace. This progress is not yet reflected in actual Project financial data, mainly because there are large commitments pending to be processed for activities already started. 38. The disbursement arrangements under the AF remains the same as the original financing. This includes the same disbursement methods reimbursement, advance and direct payment and supporting documentation requirements including Statement of Expenditures (SOEs). The current Designated Accounts (DA) will continue to receive funds from the original financing and once this financing is fully disbursed, will begin to receive funds from the AF. This modality responds to the MOF s request to avoid comingling funds from the original financing with the funds from the AF. The authorized signatures for the AF will be the same the Bank has already recorded for the original Project and any further authorization/cancellation will be applicable for the AF. The disbursement deadline will be four months after the closing date. Further disbursement instructions for the AF are included in the Disbursement Letter. 39. Retroactive Financing, up to an aggregate amount not to exceed US$4,000,000 equivalent may be made for payments for eligible expenditures under Categories 1 and 2 activities incurred on or after November 19, 2010, but in no case more than one year before the signature of the Loan Agreement. Safeguard Status Environmental OP/BP Since the Additional Financing does not involve any new project components or activities, this Project retains the Category B of the original project (partial assessment) and OP 4.01 is triggered. 41. All works to be completed under the Project pertain to the rehabilitation and reconstruction of damaged infrastructure. The original ERL project and this AF do not involve the construction of new facilities. No significant change in location, service level or function will be made to infrastructure rehabilitated under the Project. Typical activities include: repair of power transmission lines, repair and rehabilitation of irrigation canals, replacement of damaged water control structures, and repair of hydropower generating facilities. 42. Works are of small to medium size and will be executed within existing right-of-ways and at existing service sites. Impacts are limited to those typical of construction repair activities and are temporary in nature, limited in scope to the period of construction. The Project-related environmental and social impacts are those typical of small scale infrastructure construction 9

18 activities and are limited to direct impacts to the work site during actual construction. Positive impacts include the restoration of basic services such as electricity and irrigation, and risk reduction of future infrastructure impact due to disasters. 43. An Abbreviated Resettlement Plan (RAP) was prepared as part of the original ERL restructured in November 2010 to address potential acquisition of transmission line right-of-way access for some limited transmission line sections that were altered to reduce disaster risk vulnerability (see OP/BP 4.12 discussion below). 44. An Environmental Management Framework was included in the original ERL project and is still applicable and being implemented. The client has prepared a revised Environmental and Social Management Plan (ESMP), based on an environmental review conducted during AF preparation and disclosed in the Bank's Infoshop on September 27, This plan requires the inclusion of environmental management clauses in Project civil works contracts. Specific Environmental Assessments has been developed for component 2 transmission line rehabilitation works and environmental permits have been requested to environmental authorities. 45. Based on the requirements of the ESMP, the Borrower will revise the project Operations Manuals to incorporate any changes in safeguard management requirements identified under this plan. Involuntary Resettlement (OP/BP 4.12) 46. During the execution of the original ERL project, CDEEE identified transmission line locations that were determined to be unacceptably vulnerable to potential disaster related damages. Based on this assessment, CDEEE elected to relocate these lines to more secure locations in the vicinity of the original alignments. 1 Because these new alignments required the purchase of right-of-way access, the project was restructured in November 2010 to include Bank Safeguard OP/BP 4.12, Involuntary Resettlement. The impact of these right-of-way realignments is relatively minor and will not require the physical relocation of affected persons or their land use activities. Affected landowners will be able to use their land and have access as usual. Likely social impacts from the construction of new transmission lines will be minimal and those typically associated with this type of activity. An Abbreviated Resettlement Action Plan has been developed and disclosed in accordance with Bank policies in July 2010 and remains in effect. Safety of Dams (OP/BP 4.37) 47. Both CDEEE and INDRHI works have components relating to dams. INDRHI is the agency responsible for the maintenance of dams and CDEEE is the entity responsible for the operation of those dams used for the generation of hydroelectric power. The Bank reviewed relevant dam safety procedures and found them to be compliant with the OP 4.37 Safety of Dams. 1 Short sections of two transmission lines (TL) were re-located: TL Cruce de Cabral Duvergé: 7.8 km and LT Sabana Yegua - San Juan: 6 km. Total 13.8 km.. 10

19 48. Specific recommendations included the requirement that activities relating to the structure of dams be reviewed by the International Committee of Experts in accordance with procedures established for large dams under internationally accepted best practices. A Memorandum of Understanding with respect to dams has been executed between INDRHI and CDEEE requiring joint review of all activities relating to dams to assure proper coordination and application of safeguard requirements. Project performance with respect to this safeguard has been satisfactory. Activities recommended by the Bank specialist have been implemented by INDRHI and CDEEE, or are in the planning stages. Specifically: Institutional Strengthening of the Dams Department at INDRHI. 49. In 2010, an international expert has been appointed as Senior Adviser at the Dams Department and continues to work with INDRHI in the preparation of ToRs, identification of consultants, assist in the supervision of studies, provide technical assistance to the International Panel of Experts, provide technical advice to the Director of INDRHI and to the Comite de Operacion de Presas (COPRE) and related activities. International Panel of Experts 50. The International Panel of Experts on the safety of dams has been constituted with highly qualified international experts and in their last visit (May 2011), were able to review all works conducted by INDRHI with respect to Dams rehabilitation. CDEEE participated in the sessions and they presented the status of the rehabilitation of the power stations included in the ERL. Monitoring of Safety of Dams. 51. INDRHI has moved forward the procurement of accelerograph to monitor, in real time, the seismic conditions in 7 main dams. Limnological studies to assess sediment transport and current capacity of dams. 52. The ToR and technical specifications of a large ICB to hire an international consultant firm to conduct bathymetric, limnology and hydrological studies have been finalized and the procurement initiated. Rehabilitation of Dams 53. The consultancy for designing the rehabilitation of dams (ICB) proposed by this project is in advanced stage. INDRIH is conducting the negotiations with the best qualified bidder and the contract will be under implementation soon. Revision of Operation Manuals of Dams 54. The ToR and RFP for hiring an international consultant firm for updating the Operation Manuals and procedures in critical dams in DR has been prepared and is moving through the procurement process. 11

20 Foreseen risk factors Congressional Ratification 55. Foreseen risk factors relate primarily to the timeliness of Congressional ratification with respect to the project s implementation schedule. Although the Bank s options are limited in controlling this risk, active outreach by concerned decision makers, including INDRHI, CDEEE and MEEyP as well as the Bank, is expected to expedite the ratification process. Elections is an election year in the Dominican Republic. A change in administration will take place in August 2012 and may result in changes of the management within water and the electricity sector. Natural Hazards 57. The island of Hispaniola is subject to recurring droughts, tropical storms, heavy rains and hurricanes. As such, there is a continuing risk of further damages to infrastructure from extreme weather events, particularly during the hurricane season (June to November). Although these events cannot be controlled, project scheduling can be organized to allow construction activities to take place during the low-risk periods to avoid damages to works under construction. To the extent possible, the works program, particularly for INDRHI, will be scheduled to advance designs with current project funds in order to allow timely procurement of works when AF funds become available. III. Proposed Changes 58. No changes in institutional arrangements are anticipated or required. The project will continue with the current arrangement of two implementing agencies INDRHI and CDEEE and Bank guidelines and arrangements currently in force continue to apply. Inter-agency agreements between government institutions will remain in force and have been updated to accommodate the requirements of the AF. 59. Although the project s development objectives, components and activities will remain the same, with the AF, the project results framework was updated to better reflect expected project results. 12

21 Project Outcome Indicators Indicator Original target Changes with AF hectares with irrigation services restored. Revised target ,577 dam facilities rehabilitated with revised operational procedures to minimize impacts of future disasters kilometers of transmission lines restored to improve disaster-resistant standards. MW of hydroelectric generation capacity restored Operation of Santiago wastewater treatment plant Plant restored no changes Plant restored Institutional Strengthening No indicator/target existed Real time, operational hydrometeorological data system in place transmitting processed and interpreted data to Disaster Risk Management Institutions (ONAMET, COPRE and CNE) Real time, operational hydro-meteorological data system in place transmitting processed and interpreted data to Disaster Risk Management Institutions (ONAMET, COPRE and CNE) 13

22 Costs by Component Component Original cost Changes with AF Revised cost 1 Rehabilitation and Risk Management in Water Resources Sector 2. Rehabilitation and Risk Management in the Electricity Sector 3 Retroactive Financing of Emergency Relief and Urgent Rehabilitation of Water and Sanitation Infrastructure in Santo Domingo and Santiago Non-Allocated Front-end fee Total IV. Appraisal Summary 60. Although no economic assessment was conducted in support of the ERL, the restoration of priority infrastructure damaged by Tropical Storms Noel and Olga is a necessary condition for maintaining economic growth. Agricultural production is critically dependent on the availability of water for irrigation, and the entire economy depends on reliable power supply. The restoration of reliable access to these basic services remains economically justified. 61. Updated costs for individual components have been analyzed and adequately reflect the current needs in order to complete project objectives. These are presented in Annex III. A revised financing plan has been prepared and is reflected in the current procurement plans for Components 1 and 2. These plans are designed to schedule project activities using current funds and integrate additional financing in a manner that maintains continuity in the overall execution of the project. The ongoing activities will continue without interruption, and works entering the design phase will continue to use existing funds, while the AF will provide funds for the construction phase. 14

23 62. No changes are planned with respect to project management. Institutional arrangements currently in place will continue without change. No change in safeguard status is required and no exceptions or waivers to Bank procedures or policy are required. 15

24 Annex 1: Results Framework and Monitoring Dominican Republic: Emergency Recovery and Disaster Management Project Results Framework Revisions to the Results Framework Comments/ Rationale for Change PDO The project seeks to: (i) restore and strengthen priority irrigation, electricity, water and sanitation infrastructure damaged by Tropical Storms Olga and Noel or at risk of damage from future storms, and (ii) strengthen INDRHI s and CDEEE s capacity for disaster risk management Current (PAD) Project development objectives are to: (i) restore and strengthen priority irrigation, electricity, water, and sanitation infrastructure damaged by Tropical Storms Olga and Noel or at risk of damage from future storms, and (ii) strengthen INDRHI s and CDEEE s capacity for future risk management. PDO indicators Current (PAD) 12,000 hectares with irrigation services restored. 4 dam facilities rehabilitated with revised operational procedures to minimize impacts of future disasters 242 kilometers of transmission lines restored to improve disaster-resistant standards. 200 MW of hydroelectric generation capacity restored Operation of Santiago wastewater treatment plant restored. Proposed No change in development objectives is proposed. Proposed change* 11,577 hectares with irrigation services restored. No change Additional financing is to be applied to address the financing gap identified during project execution with no change in project design or objectives. Due to the financing gap, INDRHI has already eliminated 3 works activities, cutting 433 hectares from the project. 152 km The PDO indicator of restoring 245 km of transmission lines has been revised to 152 km to make it consistent with the length of the lines to be rehabilitated as stipulated in the Loan Agreement and with the actual size of ongoing contracts. 254 Mw PDO indicator calling for the rehabilitation of 200 MW of hydroelectric generation capacity, has been updated to 254 MW, including 60 Mw in Aguacate power station (52 MW financed by the Bank loan). No change Completed The current PAD has no PDO indicator related to institutional strengthening. The 16

25 Revisions to the Results Framework Intermediate Results indicators Current (PAD) Component 1. 6,000 ha of irrigation services restored by end of Year Two Component 1. Operations and Maintenance (O&M) study contracted by Year Two Component 1. Revised dam operations procedures by end of Year Two Component 2: At least 90 of 242 km of transmission lines restored by end of Year One Component 2: At least 200 MW capacity restored by Year Two Component 2: Decrease in generation and transmission unavailability (as measured by hours out of service) Component 3: Operation of Santiago wastewater treatment plant restored following indicator is proposed to address this issue: Real time, operational hydrometeorological data system in place transmitting processed and interpreted data to Disaster Risk Management Institutions (ONAMET, COPRE and CNE) Proposed change* 1,933 ha to be completed by calendar year 2012, assuming additional financing. The study has been reoriented to an evaluation of the costs of water at dam level. Evaluación de costos del agua en los embalses, y costo del uso del agua para riego, energía y agua potable. Study prepared in Revised dam operations procedures by end of calendar year At least 152 km of transmission lines restored by end of calendar year 2012 No change This indicator has been eliminated due to lack of baseline reference data No change Rehabilitation of accelerographs in 7 dams Comments/ Rationale for Change There was no indicator to reflect the outcomes from the different activities in the Institutional Strengthening sub component. The hydro-meteorological weather observation network is being upgraded. By the end of the project it is expected to be transmitting data (weather and flows) in real time. INDRHI staff will be trained to process and interpret the data to issue warnings Due to the financing gap, the study has been reoriented to an evaluation of the costs of water at dam level. The results of this study will generate important basic information for analysis and decisions on costs of O&M and their implication in each sector. The study, included as Activity 3.4, is currently in the contracting process. A 1-year delay in Congressional approval, coupled with a change in institutional administration in 2010, delayed this international consultancy. Study currently in the contracting process using international competitive bidding (ICB) procedures. A 1-year delay in Congressional approval delayed completion until Completed Completed The rehabilitation and repair of 17

26 Revisions to the Results Framework At least two training sessions conducted for 5 staff from the Hydrology Department on building and managing hydroplatform/database and hydro-modeling at the basin level. Hydrological model calibrated in at least two pilot basins. Six Regional Centers operational Comments/ Rationale for Change accelerographs are necessary in compliance with Safeguard OP4.37 Dam Safety. Training is a key part of the capacity-building strategy for disaster risk management. A new hydro-platform and database are being developed to systemize all the hydro-climatic historical data in INDRHI. Training will be also provided on running and calibrating new hydrological models. As a consequence of the training, and as a key part of an Early Warning System, two selected basins will be modeled and calibrated in order to have the necessary return periods to draft flood maps at the basin level. Operational Regional Centers will improve day to day operation and maintenance of the hydrometeorological network 18

27 Core REVISED PROJECT RESULTS FRAMEWORK Project Development Objective (PDO): PDO Level Results Indicators ,577.hectares with irrigation services restored 2. Four dam facilities rehabilitated with revised operational procedures to minimize impacts of future disasters km of transmission lines restored to improve disaster-resistant standards MW of hydroelectric generation capacity restored 5. Operation of Santiago wastewater treatment plant restored 6. Real time, operational hydro-meteorological data system in place transmitting processed and interpreted data to Disaster Risk Management UOM 3 Baseline Original Project Start (2008) Progress To Date (2011) 4 Cumulative Target Values 5 (calendar year) Frequency ha 0 1,933 11,577 quarterly N Km MW Gl 100% Data System 0 systems 1 system quarterly quarterly quarterly Data Source/ Methodology Referenced from Project Dept. and Planning Dept. Referenced from Dam Dept. and Planning Dept. Responsibi lity for Data Collection INDRHI INDRHI CDEEE CDEEE INDRHI Comments Contracts for 3/13 lots are ready to be signed and in remaining 10/13 lots the procurement of design and surveys is underway Procurement of works is underway 19

28 Core Institutions (ONAMET, COPRE and CNE) Beneficiaries 6 Project beneficiaries (with irrigation services restored) Of which female (beneficiaries) Number Number N/A N/A Intermediate Results and Indicators Intermediate Results Indicators Unit of Measur ement Baseline Original Project Start (2008) Progress To Date (2011) Target Values Frequen cy Data Source/ Methodology Responsibi lity for Data Collection Comments Intermediate Result Component ,933 ha to be completed by year 2012, assuming additional financing 2. Evaluation of the costs of water at dam level. Evaluación de costos del agua en los embalses, y costo del uso del agua para riego, energía y agua potable. Study prepared in Revised dam operations procedures by end of 2012 Ha Nu. 0 Nu 0 Nu. Dam 1 100% Referenced from Project Dept. and and Planning Dept. Referenced from Planning Dept. Referenced from Dam Dept. and Planning Dept. Referenced from Dam Dept. and Planning Dept. INDRHI INDRHI INDRHI INDRHI 6. Rehabilitation of accelerographs in 7 dams 20