Document of The World Bank FOR OFFICIAL USE ONLY Report No: 73699-XK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ENERGY SECTOR CLEAN-UP AND LAND RECLAMATION PROJECT IDA GRANT NO. H2340-KOS (BOARD APPROVAL DATE: JUNE 13, 2006) AND IDA GRANT NO. H3190-KOS (BOARD APPROVAL DATE: JUNE 26, 2007) TO THE REPUBLIC OF KOSOVO November 21, 2012 SUSTAINABLE DEVELOPMENT 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 Bank authorization. ABBREVIATIONS AND ACRONYMS CLRP Cleanup and Land Reclamation Project IDA International Development Association KEK Kosovo Energy Corporation MESP Ministry of Environment and Spatial Planning MFE Ministry of Finance and Economy PCC Project Coordination Committee PMU Project Management Unit Regional Vice President: Philippe H. Le Houérou Country Director: Jane Armitage Sector Manager: Kulsum Ahmed Task Team Leader: Frank Van Woerden 2 KOSOVO ENERGY SECTOR CLEANUP AND LAND RECLAMATION PROJECT (P096181) GRANT NUMBERS H2340 AND H3190 RESTRUCTURING PAPER 1. The closing date for Kosovo, Energy Sector Clean-up and Land Reclamation Project (P096181), IDA Grant Nos: H2340 and H3190 will be extended from December 15, 2012 until June 30, 2013. 2. The project has met most of the agreed outcome indicators of the Project Development Objectives and these objectives continue to be achievable. The targets of the remediation of 55% of the Kosovo A ash dump, reclamation of 55% of the total overburden area and removal of the highest priority hazardous substances from the storage tanks at the gasification site have been met. The objective of complete elimination of ash dumping of open land will be met when the new hydraulic ash system will be put into operation (expected by April 2013). The hydraulic ash system is under construction and remainder of works are fully funded by counterpart financing, The original IDA Grant (number 2340) disbursed 94% of the Grant funds and the additional IDA Grant (number 3190) has disbursed 88%. The original co-financing Trust Fund from the Government of the Netherlands to the Project has been fully disbursed. A second self-standing Trust Fund from the Government of the Netherlands will provide an additional EURO 0.89 million grant to finance environmental monitoring and management at the Ministry of Environment and Spatial Planning, repairing a slurry pump, project management, and removal of the additionally found tar sludges/deposits at the gasification site of KEK. 3. Kosovo has requested a second Additional Financing which is envisaged to be implemented with a Closing Date of December 2014, needed to complete the proposed new component F: Environmental Monitoring and Management; to be implemented by the Ministry of Environment and Spatial Planning (MESP). For the proposed Closing Date for the Additional Financing which will be four years after the original Closing Date, approval of a policy waiver for OP13.20 will be sought from the Bank Board of Executive Directors. The policy waiver for OP13.20 has already been approved by Bank Management on November 12, 2012. The expected Board approval date of the Additional Financing is February 7, 2013. 4. The process of negotiations, approval of the additional IDA Credit by the World Bank and subsequently the parliamentary approval process is envisaged to take several months. Therefore, in order to ensure Project continuity until the additional IDA Credit under the Additional Financing is expected to be effective, the current Closing Date of the CLRP is proposed to be extended until June 30, 2013. In addition, the current extension is required to allow the implementing agency KEK to sign the contract extension with the Contractor in charge of removal and appropriate disposal of the 3 hazardous chemicals from the gasification site to already start removal and arranging for appropriate disposal of some of the additional chemicals which were found and which still can be financed under the original Project and the additional Grant from the Government of the Netherlands. 5. Based on the overview of the remaining activities under the Project and the action plan which has been agreed between the World Bank and the Implementing Agency, the Project Development Objectives continue to be achievable. The overall rating of the Project is satisfactory. The extension would be sufficient to allow for further removal of additionally found hazardous chemicals on the Gasification site of the mining and energy company KEK and initiate further hazardous chemicals removal to be financed under the grant of the Government of the Netherlands. 6. This will be the fourth extension of the project; the new proposed Closing Date of June 30, 2013 would represent a cumulative extension of two-and-a-half years from the original Closing Date. There are no outstanding audits under the Project. The Board Package for the Additional Financing for the CRLP will foresee a further extension of the Closing Date until December 31, 2014. 4