OFFICIAL The World Ban k . DOC4*AL (380-44) 490-6671 NTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Kyiv 01010 (380-44) 490-6672 NTERNATIONAL DEVELOPMENT ASSOCIATION vaile (380-44) 490-6673 REGIONAL OFFICE UKRAINE, BELARUS AND MOLDOVA July 18, 2012 His Excellency Yuriv Kolobov Minister Ministry of Finance 12/2, Hrushevskogo Str. Kyiv 01008 Ukraine Your Excellency: Re: Ukraine Urban Infrastructure Project (Loan No. 4869-UA) Amendment to Loan Agreement We refer to the Loan Agreement dated May 26, 2008 as amended to date, between International Bank for Reconstruction and Development (the "Bank") and Ukraine (the "Borrower") for the above referenced Project, and to the three (3) Project Agreements between the Bank and Agency for Development Programs of Odessa and Odessa, the Bank and Chernihivvodokanal Utility and Chernihiv, and the Bank and Ivano-Frankivskvodoecotechprom Utility and Ivano-Frankivsk, each of tFe same date. We also refer to the letters from the Deputy Minister of Finance dated March 20, 2012 and April 10, 2012, and the letter from the First Deputy Minister of Regional Development, Construction and Municipal Economy of Ukraine requesting the Bank to extend the Closing Date of the Loan and revise the performance monitoring indicators. After due consideration, I am pleased to inform you that the Bank concurs with your request and hereby amends the Loan Agreement as follows: 1. Section 1.02 (b) is amended to read as follows: (b) "Chernihivvodokanal Utility" means the municipal enterprise Chernihivvodokanal, operating under the Charter aparoved by decision No. 12 dated January 27, 2009 of the Executive Committee of the Chemihiv City Council, Identification Number 03358222, or any successor thereto; 2. Any reference to "MHCS" or "M"inistry of Housing and Communal Services" in the Loan Agreement, including in Section 1.02(i), is hereby amended to read "MRDCHCS" or "Ministry of Regional Develooment, Construction, Housing and Communal Services" respectively. H.[ YuriyKolobov July 18, 2012 3. The Closing Date of the Project as set out in Section 2.03 is hereby extended to December 31, 2013. 4. The Project development objective as set out in Schedule 2 to the Loan Agreement is amended to read as follows: "The objective of the Project is to improve the quality of water and wastewater services and to increase energy efficiency of select water and sanitation utilities." 5. Parts A and B of the Project as described in Schedule 2 to the Loan Agreement ar. amended to read as follows: "Part A Institutional Strengthening 1. Preparing and implementing business plans for water and wastewater utilities, including performance targets and annual production of updated financial statements. 2. Further strengthening the MRDCHCS's capacity to monitor and ensure accountability, supervision capacity and improved efficiency of the water and wastewater sector, through the carrying out of procurement and financial management training. 3. Further strengthening the Utilities' capacity to monitor and ensure accountability, supervision capacity and improved efficiency of the water and wastewater sector, through the carrying out of procurement and financial management training. Part B Rehabilitation Investments Mitigation of health and environmental risks and improvement of water and wastewater utilities' operational efficiency through selected infrastructure investment and upgrading of equipment, including: (i) rehabilitation of a wastewater treatment plant; (ii) construction of a water disinfection plant; (iii) rehabilitation of networks and pumping systems; (iv) installation of sewer pipes; and (v) supply of equipment and machinery for the operation and maintenance of water and sewerage systems." 6. The performance monitoring indicators set out in the attachment to Supplemental Letter No. 2 dated May 26, 2008 are replaced by the indicators set out in the Attachment to this amendment letter. Except as amended hereby, all other provisions of the Loan Agreement shall remain in full force and effect. The Project Agreements are being amended separately. Please confirm the agreement of Ukraine to the amendments set forth above by countersigning and dating both co.3ies of this amendment letter and returning one of the 2 H.E Yuriy Kolobov July 18, 2012 countersigned copies to us. This amendment letter shall be effective as of the date of countersignature. Sincerely, Qimiao Fan Country Director Ukraine, Belarus and Moldova Europe and Central Asia AGREED: UKRAINE Tile: Mifister of Finance Date: C O . /- Al1achment Performance Monitoring Indicators for Supplemental Letter No. 2 to the Loan Agreement. 3 H.[; Yuriy Kolobov July 18, 2012 Copied to: H. E. Petro Poroshenko, Minister, Ministry of Economic Development and Trade of Ukraine H.E. Anatolii Blyzniuk, Minister, Ministry of Regional Development, Construction, Housing and Communal Services Mrs. Olena Kucherenko, Director, Department for International Technical Assistance and Coop.-ration with International Financial Organizations, Ministry of Economic Development and Trade of Ukraine Ms. Galyna Pakhachuk, Director, Debt and International Financial Policy, Ministry of Finance of Ukraine Mr. Gennadiy Latiy, Director, Department for Foreign Economic Affairs and Bilateral Commissions, Cabinet of Ministers of Ukraine Mr. Rudolf Jan Treffers, Executive Director, World Bank Ms. Tamara Solyanyk, Senior Advisor to Executive Director, World Bank 4 H.E. Yuriy Kolobov July 18, 2012 ANNEX 1 Results Framework and Monitoring Ukraine: Urban Infrastructure Project Project Development Objective (PDO): The Project objective is to assist utilities in moving towards higher quality and reliability of services and towards reducing the costs of service through a series of institutional improvements and rehabilitation of water supply, wastewater and solid waste systems. Revised Project Development Objective: The Project objective is to improve the quality of water and wastewater services and to increase energy efficiency of select water and sanitation utilities. |ICumulative Target Values** I I vatas mNpmassuu Source/ lity for PDO Level Results Indicators* Baseline YR1- YR2- YR3- YR4- YR5- YR6- Frequency Methodo Dta 2008 2009 2010 2011 2012 2013 logy Collection Indicator One: % of non- Semi- MRDCHC d of compying 24%Semi- Anua S, CPMU Improved bacteriological quality of created t 24% 5% annually Annual and treated drinking water - Repo RPMU's Ivano-Frankivsk sampe Indicator Two: . MRDCHC % of non- Sm- Semi- S,CM Reduction of pollution loads complying 35% 35% 25% 10% 5% Semi- Annual S CPMU discharged to the environment treated water Report RPMU's from WWTP - Ivano-Frankivsk sample RPMU's Indicator Three: . MRDCHC Semi- MDH Semi- S, CPMU Reduced discharge of untreated 137 137 0 an ual Annualnd wseaeduigdyweather kg BOD /day annually Reot and wastewater during dry weather RPMU's conditions - Odessa (Arkadia) RPMU's Indicator Four: Annually Annual MRDCH 5 H.E. Yuriy Kolobov July 18, 2012 Renort CS. Improved energy efficiency of IVIU water and sewerage pumping % reduction and systems in energy use RPMU's Borispyl from current W 1,06 >15% level >15% Cherkassy (measured in >15% kWh per m3 W 0,46/WW 0,20 0% 0% 0% 0% 0% Chernihiv pumped) W 021 >15% Drohobych W - Water W&WW 1,43 >15% >15% Kalush Utility W 075 0% >15% Kamyanets-Podylskiy WW - >15% wastewater W 0,466/WW 0,63 >15% Kharkiv Utility WW 0,31 0% >15% Kolomiya W 0,91 >15% >15% Kremenchuk W 0,23 0% >15% Nova-Kakhovka W 0,58/WW 0,40 >15% >15% Novorhad- Volynskyy W 0,97/WW 0,41 >15% >15% Slovyansk W 0,56/WW 0,39 >15% >15% INTERMEDIATE RESULTS Intermediate Result (Part A): Institutional Capacity Revised Intermediate Result (Part A): Institutional Capacity Improved Intermediate Result indicator One: 0 0 1 Semi- Semi- MRDCH l Number 0 1 Annually Annual CS, 6 H.E. Yuriy Kolobov July 18, 2012 Number ouiI Report CPMU completed business plans and wid update annually performance RPMUs targets Intermediate Result (Part B): Rehabilitation Investments Revised Intermediate Result ( Part B): Quality of water and wastewater services improved Intermediate Result indicator One: MRDCH Sei Semi- CS, SemimCs Water losses reduction in city % 0 0 1% 1% 1% 2% 3% Semi- Annual CPMU water distribution network - Report and Chernihiv RPMUs MRDCH Intermediate Result indicator Two: SmiC Sei Semi- CS, .Number 0 0o 0 0 2 2 2 IAnnual CPMU Number of blockages in sewers annually Report and eliminated per month in Odessa Report anR RPMU's Intermediate Result ( Part C): Energy Efficiency Investments Revised Intermediate Result ( Part C): Energy Efficiency of Utilities increased Intermediate Result indicator One: Number of km of water and sewerage pipelines laid/replaced Borispyl 0 3,5 3,5 MRDCH . Semi- CS, Chernihiv 0 0,0 5,0 Semi- Annual CPMU annually Anul CM Drohobych 0 4,8 4,8 ann Report and Kamyanets-Podylskiy 0 0,0 6,6 RPMU's Kolomiya Km 0 4,7 4,7 Nova-Kakhovka 0 0,6 0,6 7 H.E. Yuriy Kolobov July 18, 2012 I I | r . . Novorhad- VolynskY 0 - 5-7 Slovyansk 0 11,0 11,0 Intermediate Result indicator Two: Number of pumping/booster stations rehabilitated Borispyl 0 30 30 Cherkassy 0 0 12 Chernihiv 0 12 12 Drohobych 0 28 28 MRDCH Semi- Semi- Cs, 0 0 25 e Annual CPMU annually Report and Kamyanets-Podylskiy 0 31 31R RPMU's Kharkiv Number 0 0 25 Kolomiya 0 10 10 Kremenchuk 0 0 32 Nova-Kakhovka 0 30 30 Novorhad-Volynskyy 0 21 21 Slovyansk 0 28 28 Intermediate Result indicator MRDCH Three: D Semi- CS, Semi- Annual CPMU N um ber of utilities w hich annually R ep ort and completed energy efficiency Number 0 0 0 0 0 > 5 12 RPMU's investment subprojects Number_0_0_0_0_0_>_5_12_RPMU's 8