Document of
                                       The World Bank

                                                              Report No: 68206-ME




                                  RESTRUCTURING PAPER

                                             ON A

                             PROPOSED PROJECT RESTRUCTURING

                                              OF

                               ENERGY EFFICIENCY PROJECT

                                        LOAN 7637-ME

                                      DECEMBER 9, 2008

                                              TO

                                        MONTENEGRO

                                         JUNE 13, 2012




Regional Vice President:        Philippe Le Houerou
Country Director:              Jane Armitage
Sector Manager / Director:     Ranjit Lamech/Laszlo Lovei
Task Team Leader:              Jari Vayrynen
                                     MONTENEGRO
                     ENERGY EFFICIENCY IN PUBLIC BUILDINGS PROJECT
                                        P107992
                                   LOAN NO. 7637-ME

                                          Restructuring Paper

1.      The Closing Date for the Montenegro Energy Efficiency in Public Buildings, Loan 7637-ME
will be extended from December 31, 2012, until June 30, 2013.

2.       The project was approved on December 9, 2008, and became effective on February 24, 2009.
The project consists of two components: Component I – Energy Efficiency Improvement in Public
Sector Buildings across Montenegro. This component will focus on financing energy efficiency
retrofitting in public sector buildings. The investment packages for the candidate buildings will finance
energy efficiency measures designed to have demonstrable energy savings including, among others,
retrofitting for improvement of heating systems, insulation, thermostatic valves and other installations in
these buildings as well as heat substations and networks. Component II – Technical Assistance for
Project Implementation. This component includes providing technical assistance to support project
implementation.

3.       Subsequent to Effectiveness, the start of implementation was delayed by about 12-18 months
due to the lack of: (i) an approved Government budgetary provision for the project; and (ii) inadequate
procurement capacity in Government’s Technical Services Unit (TSU), responsible for handling all
procurement for several Bank-funded projects. These issues were addressed following funding in the
Government budget and continuous improvement in the operation of the TSU through training and
learning on the job. Implementation got back on track and is progressing well and the objectives
continue to be achievable. As of now, out of 15 targeted buildings, retrofitting of 5 buildings (3 schools
and 2 hospitals) was completed, works on 5 more schools is currently underway, and bidding is almost
completed for works on 3 schools. Some activity is starting on remaining two buildings, a Student
Dormitory in Podgorica and a Clinic Center in Podgorica (the largest building). Energy saving results,
thus far, are encouraging. The Ministry of Economy estimates the energy savings attributable to the
project as 22% with a payback period of only 7 years. Social surveys have shown very high satisfaction
among end-users in the two surveyed buildings. While the works at the largest of the targeted buildings,
the Clinic Center of Montenegro, will be well underway by the end of the year, completion by the
current Closing Date is unlikely. Also, in view of the delayed project start-up, additional time would be
required to enable more accurate measurements to be taken and surveys to be completed so as to fully
assess and demonstrate project impacts and outcomes.

4.      The proposed extension will be the first for the project, and is necessary to enable completion of:
(i) the works at the Clinic Center of Montenegro; and (ii) more precise measurements and the conduct of
additional end-user surveys. The Borrower has prepared an action plan and timetable for the completion
of the works by the revised Closing Date and the Bank deems it acceptable.




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