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Document o f The World Bank
FOR OFFICIAL USE ONLY
Report No: 42 122-BG
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF EURO 8 1 .OO MILLION (US$ 1 18.70 MILLION EQUIVALENT)
TO THE
REPUBLIC OF BULGARIA
FOR A
MUNICIPAL INFRASTRUCTURE DEVELOPMENT PROJECT
November 2,2009
Sustainable Development Department Central Europe and the Baltic Countries Europe and Central Asia Region
This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
Exchange Rate Effective (September 30,2009)
1 Euro (e) = BGN 1.96 Currency Unit = BGN - Bulgarian Lev
CFAA CoM CPAR CPS DA DO EC
EDD EIA EMF EMP ERDF ERR EU FMIS ha IBRD IDA IFA IF1 IFR ISPA Km 11s LA LAPF LEGEN MDE MIDP MoEW MoF MoH MoU MRDPW NCB O&M OBE OPCQC PA PFM PHARE PHRD PIU PMF PPIAF ROP SDD SEWRC
EC-DG
FISCAL YEAR January 1 - December 31
ABBREVIATIONS AND ACRONYMS Country Financial Management Assessment Council o f Ministers Country Procurement Assessment Report Country Partnership Strategy Designated Account Development Objective European Commission European Commission - Director General Region Environment Due Diligence Environmental Impact Assessment Environmental Management Framework Environment Management Plan European Regional Development Fund Economic Rate o f Return European Union Financial Management Information System hectares International Bank for Reconstruction and Development International Development Association International Fiduciary Assessment International Financial Institutions Interim Financial Reports Instrument for Structural Policies for Pre-Accession Kilometers litershecond Loan Agreement Land Acquisition Policy Framework Environmentally and Socially Sustainable Development and International Law Unit Maximum Design Earthquake Municipal Infrastructure Development Project Ministry o f Environment and Water Ministry of Finance Ministry of Health Memorandum o f Understanding Ministry o f Regional Development and Public Works National Competitive Bidding Operations and Maintenance Operating Basis Earthquake Operational Policy Committee Quality Assurance and Compliance Unit Protected Area Public Financial Management Poland Hungary Assistance for the Reconstruction o f the Economy Population and Human Resource Development Project Implementation Unit Portable Maximum Flood Public Private Infrastructure Advisory Facility EU Regional Operating Program Social Due Diligence State Energy and Water Regulatory Commission
FOR OFFICIAL USE ONLY
SOE SOP SSA TSA UFW VAT ViK WCRMP
Statement o f Expenditures EU Sector Operational Program Sanitary and Security Area Treasury Single Account Unaccounted for Water Value Added Tax Vodosnabdiavane i Kanalizacia (water and wastewater utility) Water Companies Restructuring and Modernization Project
Vice President: Acting Country Director:
Philippe L e Houerou, ECAVP Theodore 0. Ahlers, ECCUS
Country Manager Florian Fichtl, ECCBG Sector Manager: Wael Zakout, ECSSD
Gabriel Ionita, ECSSD Task Team Leader:
This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.
BULGARIA MUNICIPAL INFRASTRUCTURE DEVELOPMENT
CONTENTS Page
STRATEGIC CONTEXT AND RATIONALE .................................................................. 1 Country and sector issues .................................................................................................... 1
Rationale for Bank involvement .......................................................................................... 2 Higher level objectives to which the project contributes .................................................... 2
I . A . B . C .
I 1 . PROJECT DESCRIPTION .................................................................................................. 2 A . B . C . D . E . F .
I11 . A . B . C . D . E . F .
I V . A . B . C . D . E . F . G .
Lending instrument.. ............................................................................................................ 2
Program objective and phases ............................................................................................. 3 Project development objective and key indicators .............................................................. 3 Project components., ........................................................................................................... -3 Lessons learned and reflected in project design .................................................................. 4
Alternatives considered and reasons for rejection. .............................................................. 4
Partnership arrangements (if applicable) ............................................................................. 5 Institutional and implementation arrangements .................................................................. 5 Monitoring and evaluation o f outcomeshesults .................................................................. 6 Sustainability ....................................................................................................................... 6 Critical risks and possible controversial aspects ................................................................. 6 Loan conditions and covenants ............................................................................................ 8
APPRAISAL SUMMARY ................................................................................................ 9
IMPLEMENTATION ....................................................................................................... 5
. .
Economic and financial analysis ......................................................................................... 9
Technical ........................................................................................................................... 10
Fiduciary ............................................................................................................................ 11 Social ................................................................................................................................. 12
Environment ...................................................................................................................... 15
Safeguard policies .............................................................................................................. 17 Policy exceptions and readiness ........................................................................................ 19
Annex 1: Country and Sector Background ............................................................................... 20
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies .................. 24
Annex 3: Results Framework and Monitoring ......................................................................... 25
Annex 4: Detailed Project Description ...................................................................................... 28
Annex 4.1: List of Regional and Urban Water and Wastewater Utilities covered by the Master Plans ................................................................................................................................. 35
Annex 5: Project Costs ................................................................................................................ 38
Annex 6: Implementation Arrangements .................................................................................. 39
Annex 7: Financial Management and Disbursement Arrangements ..................................... 40
Annex 8: Procurement Arrangements ....................................................................................... 47
Annex 9: Economic and Financial Analysis .............................................................................. 56
Annex 10: Safeguard Policy Issues ............................................................................................. 58
Annex 11: Project Preparation and Supervision ...................................................................... 68
Annex 12: Documents in the Project File .................................................................................. 69
Annex 13: Statement of Loans and Credits ............................................................................... 70
Annex 14: Country at a Glance .................................................................................................. 71
Annex 15: Maps ........................................................................................................................... 73
BULGARIA
Development Total:
MUNICIPAL INFRASTRUCTURE DEVELOPMENT
108.30 40.00 148.30
PROJECT APPRAISAL DOCUMENT
EUROPE AND CENTRAL ASIA
ECSSD
Date: November 2,2009 Acting Country Director: Theodore 0. Ahlers Sector Director: Peter D. Thomson Sector Manager: Wael Zakout Project ID: PO99895
Team Leader: Gabriel Ionita Sectors: General water, sanitation and flood protection sector (1 00%) Themes: Other urban development (P) Environmental screening category: Full Assessment
Lendinn Instrument: SDecific Investment Loan " _. . 1
[XI Loan [ ] Credit [ ] Grant [ 3 Guarantee [ ] Other:
For Loans/Credits/Others: IBRD Total Bank financing (US$m.): 1 18.70 (equivalent). The loan wi l l be denominated in Euros for an amount o f €8 1 million.
Borrower: Republic o f Bulgaria The Ministry o f Finance 102 Rakovski Street Sofia; Bulgaria Fax: 359 2 9806863 Responsible Agency: Ministry o f Regional Development and Public Works Kiril and Methodius Street 17-1 9 Sofia 1202; Bulgaria Tel: 359 2 9405 455 Fax: 359 2 987 2517
i
:Y 10 innual 2.00 hmulat ive 2.00
Expected closing date: December 3 1,201 5
11 12 13 14 15 16 6.00 15.00 25.00 25.00 25.00 20.70 8.00 23.00 48.00 73.00 98.00 118.70
Does the project depart from the CPS in content or other significant respects?
ReJ PAD I.B.5
No
Does the project require any exceptions from Bank policies? Re$ PAD I K G. 62
I s approval for any policy exception sought from the Board?
Does the project include any critical risks rated “substantial” or “high”? Re$ PAD III.E.26
[]Yes [XINO
Have these been approved by Bank management? [ ]Yes [ IN0 []Yes [XINO
[x]Yes [ ] N o
[x]Yes [ ] N o Does the project meet the Regional criteria for readiness for implementation? Re$ PAD I K G. 63
Project development objective Re$ PAD II.C.10, Technical Annex 3
The project objectives are to: (a) Improve the reliability and quality o f water provision to the communities in selected settlements in the project area, and (b) Assist municipalities to improve investment-planning capacity. These objectives are in line with Bulgaria’s National Strategy on Environment (2005-2014) which has a goal to ‘provide good quality and sufficient quantity o f water for various purposes.
Project description Re$ PAD 11.0.12, Technical Annex 4
The project has three components:
0 Component 1 (Total Cost €5.12 million): Project Implementation Support to carry out activities under Component 3 o f the project and other consultant services for project support.
0 Component 2 (Total Cost €20.88 million): Preparation o f forty-eight (48) regional Master Plans for Water Supply and Sewerage systems (ViK systems), including forty (40) Master Plans for urban settlements, within the six (6) economic development regions.
0 Component 3 (Total Cost €75.00 million): Completion o f three water supply dams and
* . 11
rehabilitation o f a fourth dam that i s currently operational. This component wi l l also support the completion o f water treatment plants preparation work included in the dam investments.
Which safeguard policies are triggered, if any? ReJPAD I I K F. 61, Technical Annex 10
OP/BP 4.0 1 on Environmental Assessment; OP/BP 4.12 on Involuntary Resettlement; OP/BP 4.37 on Safety o f Dams; OP/BP 7.50 Projects on International Waterways; OP/BP 4.04 on Natural Habitats, and OP 17.50 on Disclosure Policy.
Significant, non-standard conditions, if any, for:
Board presentation: None
Loan effectiveness: None
Covenants applicable to project implementation: Key loan conditions and covenants are:
Overall Implementation
0 Ministry o f Regional Development and Public Works (MRDPW) will submit to the Bank semestrial Project Reports, including environmental monitoring results, no later than one month after year end.
MRDPW will prepare and submit quarterly reports on environmental monitoring and implementation o f Environmental Management Plans (EMP) for each dam.
The MRDPW will undertake all measures necessary to provide resources needed to complete all project activities. This provision addresses the risk that the costs may be higher than anticipated.
0 The MRDPW wi l l ensure effective implementation by maintaining a Project Implementation Unit (PIU) comprising o f competent staff in adequate numbers for the duration o f the project.
The MRDPW will maintain a financial management system acceptable to the Bank. It will prepare and furnish to the Bank quarterly interim un-audited financial reports (IFRs) for the Project covering the calendar quarter, in form and substance satisfactory to the Bank. The project financial statements, withdrawal applications, and designated accounts will be audited by independent auditors acceptable to the Bank under terms o f reference acceptable to the Bank. The annual audited financial statements and audit reports wi l l be provided to the Bank within six months o f the end o f each fiscal year.
0
0
0
Dam Investments
These steps would be followed for works in the Luda Yana, Neikovtsi, Plovdivtsi, and Studena dams:
Complete feasibility studies in a manner satisfactory to the Bank to determine costs and benefits and confirm the viability o f the proposed dam investments;
a.
b. Complete site investigations to review the integrity o f existing construction and the current hydrogeology o f the area;
If necessary, update the Environment Impact Assessment and Environmental Management Plan, based on updated feasibility study findings relevant to each dam;
Obtain Bank ‘no objection’ prior to i t s financing, based on satisfactory appraisal o f technical, economic, financial, environmental, social, and dam safety issues according to Bank policies; and
Review and update designs and costs for the most viable option.
c.
d.
e.
For completion o f water supply dams, two additional conditions apply.
Government will relocate the cemetery in the Neikovtsi dam site, prior to tendering for works for the Neikovtsi dam.
Government shall retain the ownership o f the dams and the water treatment plants constructed under the Project and shall constitute, after the completion o f works, a right o f use, for operation purposes, in the benefit o f the operators defined by the Borrower’s Water Act. To that extent, the above mentioned operators shall be involved in the review o f design and supervision o f works.
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iv
I. STRATEGIC CONTEXT AND RATIONALE
A. Country and sector issues
1. Water shortages in internal river basins have become critical over the last 15 years due to increased incidence o f dry years - 1993, 1997, 2000, 2003, 2007 were very dry years, and extreme drought was recorded in 2000 and 2007. As a result, water supply delivery has been unreliable and there have been many days o f water supply rationing and restrictions due to long dry summers and lack o f sufficient rainfall. Given the frequency and geographic distribution o f long droughts and high temperatures, the Government o f Bulgaria has declared that securing a water source to supply domestic and non-domestic users i s a priority. This will require dams that facilitate management and regulation o f annual and multi-annual water runoff, and provide a safe water supply. For example, in 2008, after more than 30 days without rainfall, residents o f Panagyurishte town located near Luda Yana dam, had to secure their water supply from another town, and had water for two hours twice a week, through water tanks, for about one month.
2. Securing the water source to supply domestic and non-domestic users i s o f paramount importance given the frequency and territorial distribution o f long periods o f drought and high temperatures. These periods also fit the pattern o f a larger process o f climate change that requires both adaptation and mitigation actions, including reliable water management infrastructure such as dams to manage and regulate annual and multi-annual runoff and provide a safe source for water supply.
3. The Government o f Bulgaria prepared and endorsed the Strategy for Water Supply and Sewerage Management and Development (March 2004) during preparation for EU accession to meet requirements for the EU Directive on Environment. Therefore, as an EU member since January 1, 2007, rehabilitation and construction o f water supply and sewerage networks to improve service delivery and reduce health risks, and wastewater treatment are in l ine with the EU directives and are Government priorities.
Issues
4. Key sector issues are summarized below; see also Annex 1 :
Investment needs are high. Overcoming water shortages by securing the water source for Bulgaria's domestic and non-domestic needs i s a key driver for the Government Strategy for Water Supply and Sewerage Management and Development. Strategy estimates for total sector investment needs are about €6.9 bi l l ion for water supply, improved water efficiency, sewerage, and wastewater treatment. Investments include completing eight water supply dams that were under construction but stopped due to lack o f funds. Three o f the eight dams-Luda Yana, Neikovtsi, and Plovdivtsi-are included in this project. The Strategy outlines plans to replace about 70 percent o f Bulgaria's existing water transmission and distribution networks to reduce the Unaccounted for Water (UFW),' estimated to be around 60 percent. In addition, Government plans to increase coverage o f sewerage connections from 50 percent to 85 percent and wastewater treatment coverage from 35 percent to 85 percent.
' UFW i s expressed as (water volume produced - volume billed)/ water volume produced, as a percentage.
1
a Improvements are needed in water and wastewater to meet EU Directives. Bulgaria’s water and wastewater utilities, Vodosnabdiavane i Kanalizacia, (ViKs) must improve operational efficiency and Bulgaria must prepare sector-related investment programs to meet EU commitments. To reduce pressure to increase tariffs, the ViKs, with government support, are making targeted efficiency improvements such as decreasing administrative water losses to reduce the overall levels o f UFW; increasing bill collection rates, which are now between 65-95 percent; implementing a comprehensive leak detection program; and implementing a financial management program that would enable the ViKs to evaluate economic options for operations and investments. In addition, M R D P W i s preparing investment Master Plans for al l Bulgarian water utilities. The Master Plans, supported under this project, will help identify needs in each utility and provide recommendations for meeting EU directives.
B. Rationale for Bank involvement
5. The 2006-09 Country Partnership Strategy (CPS) between the Bank and the Government o f Bulgaria outlines the role o f Bank support for EU integration. Project activities are fully consistent with this CPS objective.
6. The project draws upon Bank water sector knowledge in Bulgaria and other countries in the region. The Government and the Bank, in consultation with the EU, worked together to prepare an April 2005 paper, ‘Bulgaria-Financing the Water and Wastewater Sector,’ that outlined sector issues and reviewed the government financing plan to meet EU directives. During 2000-01 , the Bank, through a grant from Public Private Infrastructure Advisory Facility (PPIAF), provided advice to the Government on drafting legislation to establish the water regulatory framework and include the water regulator in the State Energy and Water Regulatory Commission (SEWRC). Further, between October 1995 and December 2002, the Bank supported the development o f 2 1 ViKs through the Water Companies Restructuring and Modernization Project (WCRMP, see Annex 2). The proposed activities related to preparing Master Plans in ViKs under the Municipal Infrastructure Development Project are similar to this earlier project. In all prior activities mentioned above, the MRDPW was the Bank’s primary sector partner. This long-standing partnership, Bank familiarity with the sector, and MRDPW familiarity with Bank procedures will facilitate project implementation.
C. Higher level objectives to which the project contributes 7. Apart from meeting the project objectives, the preparation o f Master Plans in the ViKs will lead to investments (funded by the EU and other sources) that will help Bulgaria meet EU directives in the water and wastewater sector and facilitate Bulgaria’s economic and social integration with the EU. Thus, the project will significantly assist Bulgaria in meeting i t s commitments made under the aquis on environment and also meet the Mil lennium Development Goals.
11. PROJECT DESCRIPTION
A. Lending instrument
8. This project will be processed as a Specific Investment Loan.
2
B. Program objective and phases
9. Not applicable.
C. Project development objective and key indicators
10. The long-term development objective o f the project i s to provide uninterrupted supply o f water to the communities in the project area. However, because this objective would not be possibly met during implementation, the specific project objectives are to: (a) Improve the reliability and quality o f water provision to the communities in selected settlements in the project area; and (b) Assist municipalities to improve investment-planning capacity. These objectives are in l ine with Bulgaria’s National Strategy on Environment (2005-2014), which has a goal to “provide good quality and sufficient quantity o f water for various purposes.” These objectives would be met through the key indicators listed below. Details are provided in Annex 3.
0 Water intakes completed in Luda Yana, Plovdivtsi, Neikovtsi dams and refurbished in Studena dam, and operational in al l project sites;
Quality o f water delivered to population towards meeting the EU and Bulgarian standards, whichever i s higher;
Completion o f Master Plans for 48 water and wastewater utilities, o f satisfactory quality for acceptance by Bulgaria and EC, to support investments for improvement o f service delivery.
Mechanisms to measure the satisfaction o f benefitting population with the reliability and
0
1 1. quality o f water provided by the water utilities in the project area and provide feedback to the respective uti l i t ies through SEWRC wi l l be put in place during project implementation but would become operational after project completion.
D. Project components 12. The components o f the project, their costs and the financing plan are summarized below. The total cost i s €101,199,375, which includes a project cost o f €100,996,875 (with value added tax (VAT)) and the Front-end Fee due to the Bank loan o f €202,500. The Government (€20,199,375) and the Bank (€81,000,000) w i l l finance the total cost. The project has the following three components and additional details are provided in Annex 4.
Component 1 (Total Cost €5.12 million): Project Implementation Support to carry out activities under Component 3 o f the project and consultant services associated with project implementation. These would include preparation o f feasibility studies, updates o f design and Environmental Management Plans, preparation o f bidding documents, construction supervision and other consulting assignments needed for project support, including audit, development and implementation o f the communication plan to help ensure people are aware o f the status o f project-related land issues, training o f P IU and MRDPW staff.
Component 2 (Total Cost €20.88 million): Preparation o f forty eight (48) regional Master Plans for Water Supply and Sewerage systems (ViK systems), including forty
0
3
(40) Master Plans for urban settlements, within the six (6) economic development regions, as described in the Operational Manual, in order to support the Borrower, through MRDPW, to: (i) identify investment needs for rehabilitation o f water supply networks and construction o f sewerage networks and wastewater treatment plants and (ii) meet the applicable EU water and wastewater directives commitments. The Master Plans will also include corporate development plans and any other related documents and activities promoting improved service delivery and greater efficiency.
Component 3 (Total Cost €75.00 million): Completion and rehabilitation o f water supply dams will include completion o f Luda Yana, Neikovtsi, and Plovdivtsi dams and rehabilitation o f the Studena dam that i s currently operational and supplies water to the town o f Pernik. This component will also support the completion o f water treatment plants. The feasibility studies for the dams will be completed during project implementation so cost estimates are based o n an earlier assessment and physical contingencies.
13. The current project design differs from the design finalized in February 2008, for which the Bank issued a negotiations package in March 2008. The earlier proposed project included a component to rehabilitate water supply networks in six regional water utilities, and Technical Assistance to uti l i t ies to implement the project and increase operational efficiency. Negotiations for the above-mentioned project did not take place and in December 2008, the Government requested changes to project design that are reflected in the current project.
E. Lessons learned and reflected in project design
14.
e
The following lessons have been incorporated in project design:
A project should limit the number o f objectives and success factors should be defined during preparation: The objectives under the Municipal Infrastructure Development Project (MIDP) are streamlined and linked to activities carried out by a single entity-the MRDPW, which facilitates implementation. Further, the Results Matr ix (Annex 39 outlines expected project outputs and outcomes that will facilitate a goal-oriented approach during project implementation.
T o ensure sustainability, it i s important to support institutions that will implement the project: The project could have been prepared and implemented through consultants hired by the MRDPW. However, project design emphasizes working with the M R D P W staff that will prepare and implement the project, to underpin project sustainability by developing the institutional capacity needed to monitor project progress and ensure that the objectives are being met. To this end, project implementation support i s being provided to M R D P W (Component 1).
e
F. Alternatives considered and reasons for rejection 15. The investments supported under the project could have been supported through commercial financing sources. However, commercial financing for the investments would cost more than Bank financing. The project investments are important public services and in line with the Government strategy to improve water and wastewater services. Thus, the Council o f Ministers decided to finance the project through i t s public expenditure program, with Bank
4
support. Bank participation also supports MRDPW institutional strengthening, which i s relevant to EU integration.
16. The possibility o f using a two-phased Adaptable Program Loan was considered; the first phase would have included a feasibility study for the dam construction and the second phase Bank loan would have supported the investments. However, the Government declined this option as the Council o f Ministers had approved the project concept with an understanding that project preparation and implementation would be carried out under a single (non-phased) Bank project.
111. IMPLEMENTATION
A. Partnership arrangements (if applicable)
17. Both the Government o f Bulgaria and the Bank have held discussions o f the project with the European Commission (EC) because the project aims to help Bulgaria meet EU directives in water and wastewater. The EC supports the project and especially the preparation o f the Master Plans, which would identify specific needs in each utility. The interaction among the Government, E C , and the Bank will continue during project implementation.
B. Institutional and implementation arrangements 18. The Borrower will be the Republic o f Bulgaria; on behalf o f Government, MRDPW, will implement the project and be responsible for al l aspects, including managing Bank loan funds under al l the components. To this end, the Government has created a Project Implementation Unit (PIU) within the Water and Sewerage Department, headed by the Director o f the Department. The P I U comprises nine other staff members-a technical coordinator, a chief accountant, an accountant, a financial management specialist, three technical experts, a procurement expert, and a safeguards specialist to ensure proper implementation o f the EMP for dams and Land Acquisition Policy Framework (LAPF). Prior to negotiations, MRDPW has updated the Operational Manual that outlines the roles and responsibilities o f al l parties involved in project implementation. The Manual was approved by the management o f MRDPW.
19. The State Commission o f Dams Safety, established under the MRDPW, supervises implementation o f legislation on dam safety, reviews periodic reports on dam inspections, licenses dam operation, and authorizes impoundment when construction works are complete, including installing instrumentation, early warning systems, and enacting the emergency preparedness plan.
20. After completion o f works, the dams will be handed over for management, operation and maintenance to specialized operators defined by the Borrower’s Water Act. To that extent, the above mentioned operators shall be involved in the review o f design and supervision o f works.
21. The Ministry o f Environment and Waters (MoEW) sets policies, manages water resources and water quality, and implements the Environment Sector Operational Program for which EU Cohesion grants would be made available to finance the investment projects in water supply and sewerage identified through the Master Plans developed under the project.
22. The Ministry o f Health (MoH) monitors the quality o f potable water provided by the ViKs. When the dams are completed, local MoH units will test the quality o f water to be supplied to the population and issue the license for distribution.
5
C. Monitoring and evaluation of outcomeshesults 23. The Results Framework and Monitoring Arrangements (Annex 3) presents' the intermediate and final outcomes o f the project. M R D P W will work towards timely achievement o f these outcomes and will submit to the Bank annual Project Progress Reports no later than one month after the end o f each year. The Project Progress report will provide the status o f project implementation and recommend any measures necessary to meet project objectives, including the status o f E M P implementation. Annual work programs will be prepared and submitted to the Bank together with Project Progress Reports, and included in the Operational Manual as a revised basis for project monitoring.
D. Sustainability 24. Sustainability o f the investments under the project i s likely as the project supports basic service provision o f water. Project activities aim to meet the critical basic demand for water supply, thereby meeting EU directives, so support from policy makers has been strong and i s expected to continue during the operational phase.
25. The operation and maintenance (O&M) o f the dams will be funded from water tar i f fs charged to users. The operators (currently ViK util i t ies) responsible for O & M o f the dams will enhance the existing collection rates, not only by improving the quality and reliability o f service provision, but also by enforcing mandatory payment o f water charges. Since some ViKs in the project area are owned by local administrations (exclusively or together with MRDPW), municipal authorities will undertake to raise awareness o f project benefits among local people with the aim o f improving willingness to pay for water services.
E. Critical r isks and possible controversial aspects
26. significant (S).
Project risks and mitigation measures are summarized below. The average risk i s rated as
Risk
There i s a risk that, under the current economic and financial conditions, the updated studies would not con fm the (technical and/or economic) feasibility o f completion of any dam included in the project. The construction wil l resume after a gap of more than 10 years in al l three dam sites, under substantially changed economic and financial conditions. Hence, the risk that not all dams will be completed under the'project.
There i s an implementation risk for Component 3 that the updated costs for completion and rehabilitation o f the dams, which will be available only after the updated feasibility studies, wil l exceed the current financing plan.
issues will be satisfactorily addressed through the updated feasibility studies before the Bank confirms financing for each dam. Site investigations wil l be conducted to c o n f m the integrity of constructions carried out so far. Technical Assistance will provide technical support to MRDPW before, during, and after construction. A dam safety panel o f experts was established to advise on the quality of designs, dam construction and operations. The Bank will carry out independent review o f the feasibility studies and designs. The Government i s aware of the risk and if the costs under component 3 wil l exceed the financial resources, additional hnding wil l be provided or activities scaled down from the project.
M
S
6
attention i s not paid to strengthening and maintaining the PIU team that will implement the project in MRDPW.
The overall financial management risk of the project i s moderate. There are no significant weaknesses in the project financial management system but there are risks in Bulgaria’s public financial management system.
The procurement risk i s rated as high since it i s difficult to retain qualified people in MRDPW. Significant staff turnover i s expected and staff may lack procurement knowledge and skills, which could delay preparation or update of designs and eventually delay contracting and completion o f works under component 3. Most land required for the dams and reservoirs was acquired by Government between 1978-2000. The Land Acquisition Policy Framework for the project does not apply to these actions, which were not carried out for, or in anticipation of, a Bank-financed project, There i s a risk o f people challenging the proposition that the past actions are not linked to the project, and trying to bring new claims for land restitution or to seek additional compensation for past expropriations. Such challenges or claims could bring negative publicity to the project and/or cause delays in implementation
Construction o f dams o f this height inevitably carry risks o f substantial environmental damage including inundation of habitat upstream and changes in ‘quantity and timing o f water flows downstream. There i s also the risk o f disastrous flooding resulting from dam
implementation by maintaining a PIU comprising competent staff and in adequate numbers throughout the duration o f the project. In addition, the Operational Manual and the Project Progress Reports would be used as tools to support effective implementation. Fund flows will be streamlined with the MRDPW managing al l the funds. Project funds would be separately accounted for and an independent audit o f the use of the project funds would be conducted on an annual basis. To mitigate risks against misuse o f funds, adequate measures are incorporated in the project through financial management covenants that would be monitored during project implementation. Details of risk migration measures are in FM Annex 7 of the PAD MRDPW wil l retain adequate and qualified procurement staff in the PIU. Further, an Operational Manual will be prepared prior to negotiations that will define MRDPW roles and responsibilities. Training on Bank procurement procedures was provided in February 2009 to MRDPW ahd will be repeated during project implementation
4 number of steps were taken during preparation to :larify the process and outcomes of the past :xpropriations including: “Social Due Diligence” *eports prepared by a local legal fm, repeated local iublic consultations, site visits by the project team to )bserve current land use, and written confirmation from LlRDPW that the deadline for land restitution claims ias passed and that there are no challenges or iutstanding claims. No specific unresolved cases or lissatisfied parties were identified. A communication ,Ian will be prepared and put in place before project mplementation starts to provide information, reduce the iotential for misperception regarding linkage with the iroject, and provide a channel for communication. If :laims or complaints emerge regarding past land :xpropriation and/or restitution, the Government will nform and discuss with the Bank the measures to find in equitable resolution to such potential claims or :omplaints. However, the residual risk i s rated as Substantial because o f some remaining information ;aps regarding past restitution and :xpropriation/compensation process, and in part due to :xperience in similar situations elsewhere. The Environmental Management Framework prepared for the project sets out the general principles and processes to be followed for environmental assessment, mitigation, management and monitoring. Wh i le they will be updated based on final detailed designs, the EIAs with EMPs prepared for the completion of the three incomplete dams have been reviewed and
S
M
7
Environmental Impact Assessments/ Environmental Management Plans have been prepared to identify, quantify and mitigate environmental risks, they are based to some extent on outdated or inexact information and do not fully reflect the details of the dam designs which will be determined through updated feasibility studies after project effectiveness.
H - High; S - Substantial; M - Moderate; a1
F. Loan conditions and covenants
Mitigation Measures
approved by the Bank and found to provide sufficient information to indicate that completion o f the dams will not cause serious or irreversible environmental damage. The dam sites are already substantially altered by the previous construction and other anthropogenic influences, and the EIAs indicate no protected areas, critical habitats or endangeredthreatened species will be adversely affected. The EMPs provide adequate measures to mitigate negative impacts. The amount o f environmental flow to be maintained through the dams at al l times has been determined through detailed modeling to be sufficient to maintain environmental quality downstream, and the EMP includes provisions for good construction practices, site restoration following construction and environmental protection and monitoring during operation, consistent with EU Water Framework Directives and Bulgarian legislation. The WB will review and approve the updated EIAsEMPs prior to commencement of procurement o f works for completion of each of the three dams. The Government’s provisions for dam safety are in accordance with WB policy. 1 . - I nw
Conditions
27. Board Presentation: None
28. Loan Effectiveness: None
Legal Covenants
29. Key legal covenants in the Loan Agreement are presented below.
Overall Implementation
M R D P W will submit to the Bank semestrial Project Reports, including environmental monitoring results, no later than one month after year end.
M R D P W will prepare and submit quarterly reports on environmental monitoring and implementation o f EMPs for each dam.
The M R D P W will undertake al l measures necessary to provide resources needed to complete all project activities. This provision addresses the risk that the costs may be higher than anticipated.
The M R D P W will ensure effective implementation by maintaining a P I U comprising competent staff in adequate numbers for the duration o f the project.
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e The M R D P W will maintain a financial management system acceptable to the Bank. I t will prepare and furnish to the Bank quarterly interim un-audited financial reports (IFRs) for the Project covering the calendar quarter, in form and substance satisfactory to the Bank. The project financial statements, withdrawal applications, and designated accounts will be audited by independent auditors acceptable to the Bank under terms o f reference acceptable to the Bank. The annual audited financial statements and audit reports will be provided to the Bank within six months o f the end o f each fiscal year.
Dam Investments
30. Studena dams:
These steps would be followed for works in the Luda Yana, Neikovtsi, Plovdivtsi, and
a. Complete feasibility studies in a manner satisfactory to the Bank to determine costs and benefits and confirm the viability o f the proposed dam investments;
b. Complete site investigations to review the integrity o f existing construction and the current hydrogeology o f the area;
Update the Environment Impact Assessment and Environmental Management Plan, as necessary, based on updated feasibility study findings relevant to each dam; Obtain Bank ‘no objection’ prior to i t s financing, based on satisfactory appraisal o f technical, economic, financial, environmental, social, and dam safety issues according to Bank policies; and
Review and update designs and costs for the most viable option.
c.
d.
e.
For the completion o f water supply dams, two additional conditions apply.
Government will relocate the cemetery in the Neikovtsi dam site, prior to tendering for works for the Neikovtsi dam.
Government shall retain the ownership o f the dams and the water treatment plants constructed under the Project and shall constitute, after the completion o f works, a right o f use, for operation purposes, in the benefit o f the operators defined by the Borrower’s Water Act. To that extent, the above mentioned operators shall be involved in the review o f design and supervision o f works.
3 1. e
e
IV. APPRAISAL SUMMARY
A. Economic and financial analysis
32. Economic Analysis: For the Master Plans, economic benefits are difficult to quantify and therefore were not estimated. However, through these Master Plans, investments would be prepared that will allow Bulgaria to meet EU directives, which will result in significant positive external benefits from environmental improvements. For the dams, prior to updating designs for the works, feasibility studies would have to be completed, in a manner satisfactory to the Bank, to analyze investment viability against economic, financial, and technical criteria. Benefits accruing from the dams and associated water treatment plants include an uninterrupted adequate
9
supply o f quality water, which i s now lacking. Due to water scarcity, demand i s low in these areas and there are coping costs related to low water quality and inadequate supply. Existing intermittent water supply reduces system pressure, increasing the risk o f infiltration from contaminated groundwater; and associated large pressure fluctuations increase system deterioration and maintenance costs.
33. Financial Analysis: All project costs wi l l be borne by the Government o f Bulgaria through the MRDPW budget (including the Loan) for the duration o f the project. Thus, the financial viability o f the components has not been assessed. After completion, the dams and water treatment plants will be handed over to the util i t ies that provide water and wastewater services in the region-ViK Panagiurishte for Luda Yana, ViK Gabrovo for Neikovtsi, and ViK Smolian for Plovdivtsi. The dam and water treatment plant operational costs will be supported through tariffs. The State Electricity and Water Regulatory Commission (SEWRC) will ensure that the tariffs meet the operating costs, in line with applicable Bulgarian legislation.
B. Technical
34. Preparation o f designs and bidding documents wi l l have two phases: in Phase 1, designs and bidding documents wi l l be prepared for Luda Yana and Plovdivtsi dams, which are in a more advanced stage o f construction; in Phase 2, designs and bidding documents will be prepared for Neikovtsi and Studena dams. The Government chose to fund the preparation o f feasibility studies for the two dams included in Phase 1 before project approval, to advance preparation activities towards an early start o f construction works. However, preparation o f designs and bidding documents for Phase 1 dams wi l l remain funded under the project. Preparation o f feasibility studies, update o f detailed designs and preparation o f technical sections o f bidding documents will be contracted based on Terms o f Reference reviewed by the Panel o f Experts on Dam Safety and the World Bank. The project wi l l finance dam construction works only if feasibility studies confirm viability o f completing these dams.
35. The quality control systems applicable to designing and construction o f dams in Bulgaria were found in l ine with international standards. Therefore, all quality control systems provided for by the Bulgarian legislation and regulations on constructions safety wi l l be applied. Under the project, the feasibility studies and detailed designs will be reviewed and endorsed by the POE. The World Bank will also conduct independent review o f the feasibility studies and detailed designs, including the results o f the filed investigations carried-out for each dam.
36. Construction permits for all dams will be issued or renewed when detailed designs are finalized, in accordance with the Bulgarian legislation and regulations applicable. Supervision o f works on site w i l l be assigned to qualified, independent site supervisors experienced in dam construction and instrumentation, in compliance also with the requirements o f the Bulgarian legislation applicable.
37. Proposed activities under the project have been well tested in other projects in the Region and were considered before construction had started in the three dams. Further, prior to updating the designs, the planned feasibility studies would review and address technical issues as needed. Further, in Luda Yana, water demand may be reduced if the irrigation o f 6,200 hectares o f land i s not considered. In the original design, water demand for irrigation was considered but i s now uncertain; therefore, the dam should be designed for water supply only. In addition, the water
10
treatment plant in Neikovtsi may require redesign to meet existing reduced demand. These issues will be reviewed during the preparation o f feasibility studies.
38. The Master Plans to be prepared under the project will assess the needs for water supply, sewerage, and treatment, and technical options to address these needs in a planning horizon year o f 2030. The Plans will allow and then initiate preparation o f feasibility studies for individual investment projects decided by the local administrative bodies in charge with decision making on investment in public utilities, in accordance with the EU directives. The new Water Act, as amended and complemented on June 23, 2009, sets the stage to implement a new water sector policy framework in general, and a framework for water supply and sanitation, in particular.
39. To support institutional strengthening in the water sector, the Master Plans will include preparation o f corporate development plans that will comprise review and recommendations for improvement o f practices o f the water utilities covered under the Master Plans. Implementation o f the recommendations will be further monitored by the European Commission as part o f the sector alignment to EC standards.
40. Construction o f the Luda Yana dam started with funds from the Municipality o f Panagyurishte and State Enterprise Mine Dressing Plant Asarel-Medet. When the mining company was privatized, its contribution to dam construction was included on the books o f the newly privatized company with a pro-rata estimate o f 70 percent o f total past costs. Once completed, the dam will be a state-owned asset ex lege. Although the Municipality o f Panagyurishte and Asarel-Medet AD could claim monetary compensation for the past financial means only if they can provide evidence o f their investment in dam construction, the two entities confirmed in writing that they have no claims for property rights over the construction works performed so far.
C. Fiduciary 4 1. Procurement: Procurement for the Municipal Infrastructure Development Project will fo l low World Bank's "Guidelines: Procurement under International Bank for Reconstruction and Development (IBRD) Loans and International Development Association (IDA) Credits" dated May 2004 and revised in October 2006 (Procurement Guidelines); and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated M a y 2004 and revised in October 2006 (Consultant Guidelines) and the provisions stipulated in the Loan Agreement (LA). Procurement activities will be carried out by the P I U under Water and Sewerage Department o f MRDPW. The major risks related to procurement are associated with staffing the PIU, and i t s capacity to implement the project. To mitigate this risk, the Loan Agreement includes a covenant that M R D P W will retain adequate and competent staff in the PIU. The following additional measures are to be adopted: (a) al l project procurement activities will be carried out fol lowing Bank procurement procedures, including the related ex ante or ex post reviews; (b) further procurement training will be provided; and (c) Bank good governance and anticorruption guidelines will be implemented. See Annex 8 for project procurement arrangements.
42. Financial Management: The M R D P W has established a satisfactory financial management system for the project. Overall project financial management risk i s moderate and details are presented in Annex 7. There are no significant weaknesses in the project financial management system, and fund flows are streamlined with the MRDPW department responsible
11
for the management o f EU funds. The M R D P W would disburse funds from the Designated Account (DA), or request that the Bank make direct payments to suppliers. Project funds would be separately accounted for and an independent audit o f the use o f project funds would be conducted on an annual basis. To mitigate risks against misuse o f funds, adequate measures are incorporated in the project through financial management covenants that would be monitored during project implementation. These mitigation measures include: (a) the project will establish a tight internal control framework, including appropriate internal control over the management o f project funds; and (b) procurement o f works and goods, accounting for a large part o f the loan proceeds, would be subject to Bank prior review, fol lowing Bank procurement guidelines, and post review o f procurement processes would also be carried out during supervision; (c) audits will be performed by independent auditors, selected from a l i s t o f f i r m s that have been approved by the Bank, working under Terms o f Reference acceptable to the Bank. The formats o f the agreed Interim Financial Reports (IFRs) and the audit Terms o f Reference will be attached to the minutes o f negotiations; (d) overall supervision, including financial management aspects o f the project, will be undertaken periodically by the Bank; and (e) an appropriate complaints handling mechanism will be in place. All complaints f rom bidders, observers, or other parties will be forwarded to the M R D P W for consideration and follow-up action.
D. Social
43. The project will result in social benefits due to the provision o f adequate good quality water where the dams would be completed. The construction activities planned under the project will benefit the local economy and new jobs are expected to be created due to the operations and maintenance o f the three dams and the associated water treatment plants.
44. Local and national consultations - where the three dams will be completed - were carried out in October and December 2007, respectively. In these local consultations, the population in al l three sites mentioned that they are aware o f the plans o f the Government to complete the construction and would l ike the dams to be functional so that the much awaited benefits o f adequate and good quality water materialize. A new round o f consultations was carried out, at the national and local level in February 2009 in the context o f presentation o f the new Environmental Impact Assessments (EIAs).
45. As construction o f the dams had started in the past, the Government had acquired land for where the dam construction would take place and where water would be retained. The bulk o f the land required for the main dam wall, dam lakes and corresponding submerged area, ancillary structures and adjacent infrastructure has previously been acquired by the Government o f Bulgaria in the years 1978-1982, 1986, and 1998-2000. According to OP 4.12, the policy is triggered when activities resulting in involuntary resettlement are (a) directly and significantly related to the Bank-assisted Project, (b) necessary to achieve i t s objectives and (c) carried out, or planned to be carried out, contemporaneously with the Project. In this project, the land acquisition was completed between 1978-2000, before initial discussions between Government and the Bank about financing completion o f the dams. Therefore while the previous land acquisition i s linked to construction o f the dams, it i s not linked to the project. O n this basis, the Operational Policy Committee Quality Assurance and Compliance Unit (OPCQC), Environmentally and Socially Sustainable Development and International Law Unit (LEGEN) and the Region concluded that the past land acquisition i s a legacy issue and not a current issue, and OP 4.12 does not apply to past land acquisition.
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46. However, as good practice for social risk management, during preparation the Bank sought information on these past land acquisitions including the legal framework for land restitution and expropriation, the parcels and total areas o f land acquired, the number o f people affected, the type and amount o f compensation provided, etc., and whether there were any disputes or legal challenges brought by the affected parties. A Social Due Diligence (SDD) report for each o f the three dam locations was prepared by a local legal firm under the PHRD grant to clarify these issues. A summary o f these reports can be found in Annex 10. The SDD reports were publicly disclosed and local consultations were held in October-December 2007 (and the consultations on the EIAs in February 2009 also touched on these issues). The Government (Ministry o f Regional Development) has confirmed that there have been no appeals contesting the land restitution or expropriation procedures at the dam sites. The project team visited each o f the sites on several occasions and did not see any evidence o f settlements or agricultural use o f the land other than occasional grazing.
47. However, there inevitably remains a risk that land owners whose land was expropriated in the past might seek retroactive application o f OP 4.12, claiming that there i s a direct linkage between past expropriations and the project. There i s also a risk that people whose lands were acquired during the Communist period when individuals’ rights were limited could perceive an opportunity to re-open past cases and seek higher compensation. In either case, people could raise protests, which could affect implementation or create negative publicity for the project. An additional potential issue is that many o f the landowners to whom the court awarded restitution rights received compensatory notes rather than cash payments. These compensatory notes are tradable financial instruments, regulated by the Transactions in Compensation Instruments Act, and have a monetary value but cannot be directly exchanged for cash from the government. It has not been possible to determine to what extent people who received these notes have been able to realize their financial value (as the notes have no term limit, some may s t i l l be held by the recipients). However, during the repeated local public consultations no complaints were raised concerning the use or value o f these compensatory notes.
48. Land that has been or may in future need to be acquired includes the site o f the dams, their respective reservoir areas, and the area o f the Sanitary and Security Area Belt I (SSA-Belt 1) sanitary zones. In SSA Belts 2 and 3, some land use restrictions may apply but land would not need to be acquired. An LAPF has been prepared to address these issues. For c iv i l works associated with MIDP, it i s l ikely that limited acquisition may result in the loss o f land or the loss o f sources o f income. People are not expected to lose their residences or other structures.
49. According to the Agricultural Land Ownership and Use Act 199 1 , and the Ac t Restoring Ownership on Forests and Forest Stock Land Tracts from the Forestry Fund, 1997, the last date for people to initiate claims for restitution o f agricultural or forest land was M a y 14, 2007. Therefore, this LAPF does not include provisions for addressing new claims o f restitution/ ownership o f land, which may be required for construction or operation o f the three dams or i s otherwise linked with the project. However, although the situation i s not expected to arise, the LAPF does cover any cases in which the init ial claim was made prior to this deadline and in accordance with the law, but which have not yet been resolved.
50. Component 2 will support preparation o f Master Plans to help identify investment priorities for water supply and wastewater management. The outputs o f Component 2 are expected to be only at a pre-feasibility level o f detail, with feasibility studies, detailed designs and investment to fol low later and be financed separately, possibly with assistance from EU.
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However, the Master Plans prepared under Component 2 involve preparation o f site assessments including specific recommendations for situating o f facilities which if implemented could involve expropriation o f land. The Master Plans will, therefore, provide al l information needed to apply the processes outlined in LAPF to the acquisition o f any such land. The World Bank has reviewed the Terms o f Reference for preparation o f Master Plans under Component 2 to ensure that this aspect i s appropriately addressed. Based on this understanding, the LAPF applies to Component 2 o f the project.
51. Based on the SDD reports, the following potential resettlement issues have been identified. These would be addressed in accordance with the L A P F developed for the project and which will ensure that Bulgarian laws and Bank policies are met.
a. Luda Yana: additional land may need to be acquired for the water treatment plant as i t s location has not been determined and two options will be considered during the feasibility study. The options include placing the treatment plant on land owned by the Panagyurishte municipality or a private entity. If the latter i s chosen, land would have to be acquired fol lowing the process outlined in the LAPF. I t i s not expected that any additional land will be required for the reservoir or the sanitary zones.
b. Neikovtsi: Most o f the land for the water treatment plant, dam site, reservoir, and Belt 1 sanitary zone has been previously acquired. The final design could result in the need for a small amount o f additional land acquisition, which would be done in accordance with the LAPF. An old graveyard with about 15 burial sites (based on visual inspection) has to be removed, as it would fal l in the area that would be flooded. This issue was discussed in the public meeting and the central and local authorities agreed to relocate the graveyard, fol lowing appropriate Bulgarian laws, as part o f site preparation and prior to the start o f the construction for the site. This will be addressed appropriately through the EMP; and
c. Plovdivtsi: Most o f the land for the water treatment plant, dam site, reservoir and Belt 1 sanitary zone has been previously acquired. The final design could result in the need for a small amount o f additional land acquisition, which would be done in accordance with the LAPF. There i s one known case in which some land parcels were restituted to claimants under a court judgment and an expropriation process was initiated in 1998, but because the State failed to provide the details o f the dam project to be added to the map o f restored properties, it was not possible to determine whether the land f e l l within the area required for the dam. If the detailed design indicates that, any o f this land falls within the reservoir or within SSA belts, any expropriation that i s required will be carried out in accordance with this LAPF.
52. Based on the information available it i s not expected that people might (in the context o f this project) seek to revive previously rejected restitution claims or seek additional compensation for past expropriation. A communication plan will be put in place under Component 1 to clarify that the LAPF is applicable to future land acquisition, not to past actions, and thereby to reduce the risk o f perception o f linkage between past expropriations and the project, and provide a channel o f communication. The Government and Bank agreed to inform each other on any claim or complaint regarding past land expropriation and/or restitution that may arise in relation to the
14
Project sites. While such claims will not be subject to the provisions o f LAPF, the Government will inform and discuss with the Bank the measures to be taken to find an equitable resolution to such potential claims or complaints in accordance with the Bulgarian laws and regulations.
53. The Government o f Bulgaria has also undertaken supplementary measures under the Project to ensure that al l affected people are notified in a timely way regarding their lands that are expected to be expropriated. Furthermore, under the Project, the Government o f Bulgaria will al low appeals by interested owners to be submitted to the Supreme Administrative Court within 30 days (rather than the usual 14 days) after the Council o f Ministers decrees a decision on the proposal for expropriation.
54. In al l three dams, there is informal use o f the land that will likely be flooded and in the expected Sanitary and Security zones (Belts I, I1 and 111) that would be designated after the dam designs are updated. The informal land use i s primarily for grazing animals and the local authorities have agreed - evidenced through letters included in the LAPF - that alternative land for grazing purposes would be provided to the affected people. However, the government wants to prevent false claims for assistance appearing after disclosure o f project plans. Therefore, October 26, 2007 [the last date o f the survey] has been chosen as a cut-off date after which any person carrying out illegal informal activities in the area is not eligible to receive any assistance as a result o f project activities. This cut-off date is the date the consultants carried out the land- use survey to examine public lands allocated for the project for evidence o f private use. Additionally, the Government has also a photographic f i l e showing the current conditions in al l three dams, The Bank and M R D P W will closely monitor implementation o f LAPF and the communication plan.
E. Environment 55. The project will bring about environmental benefits due to the proposed improvements in water supply services. The preparation o f Master Plans in utilities (Component 2) will lead to investments in the water and wastewater sector that will improve services and increase operational efficiency in service delivery. The completion o f the three dams and the associated water treatment plants (Component 3) will also lead to environmental benefits because people will have access to an unintempted supply o f safe treated water. Furthermore, the risk o f contamination that occurs in the networks when intermittent water supply reduces water pressure will be reduced by securing water supply through dam completions.
56. In line with Bank policies, the overall project has been rated as environmental assessment category A due to the works related to completion o f the dams and the possible environmental effects during dam construction and operation. As requested by the Bank’s OP/BP 4.01, and as par? o f preparatory activities, an Environmental Management Framework (EMF) was developed in September 2007 to outline procedures to be undertaken during project implementation when the feasibility studies and detail designs for the respective dams are updated. Additionally, Environmental Due Diligence (EDD) reports were prepared in October 2007 for Luda Yana, Neikovtsi, and Plovdivtsi dams to describe the existing environmental situation at the partially constructed sites. First-round consultations on the EMF and EDDs were held at national level, and three local-level locations earlier in December 2007 and October 2007, respectively and the documents were disclosed in the Bank Infoshop in January 2008. Earlier consultations and the EDDs indicate that environmental risks will not be high and are manageable. In September 2008, draft EIA were prepared for the Luda Yana and Neikovtsi
15
dams based on information collected in the EDDs and on-site observations, in line with existing designs. For the Plovdivtsi dam, in 2000, the Borrower prepared an EIA in accordance with Bulgarian EIA legislation that was approved by the Ministry o f Environment and a construction permit was issued at that time. Based on national legislation, this EIA does not require an update in case the revised detail design proposes any changes. However, to comply with the OP/BP 4.01 , this EIA was supplemented with more detailed information and analysis regarding aspects such as possible environmental risk for downstream ecosystems and the nature o f environmental flows, which need to be maintained to protect them. The environmental mitigation and monitoring plans were also consolidated and strengthened. The Client prepared the draft EIAs for Luda Yana and Neikovtsi dams and the supplemental information for the Plovdivtsi EIA as a condition for project appraisal. Public consultations were carried out on the EIAs on February 2, 2009 (national level) and during February 11-13, 2009 at each project site based on the draft EIAs prepared in January 2009 Luda Yana and Neikovtsi EIAs, and on the EIA o f 2000 for Plovdivtsi dam. An Environmental Management Plan (EMP) was completed for the rehabilitation works proposed for the Studena dam, and publicly disclosed in December 2007. The three draft EIAs were finalized by the Borrower in accordance with World Bank’s comments during Apri l-May 2009 and publicly disclosed in Bulgaria and at the World Bank Infoshop before project appraisal. Furthermore, letters to riparian countries including information from these final EIAs have been submitted by the Bank to Turkey, Greece and Danube Commission by appraisal. The riparian countries have been requested to reply to the information provided in the letter by June 15, 2009. The EIAs (including EMPs) for Luda Yana, Neikovtsi and Plovdivtsi dams will be updated as needed based on the feasibility studies and detailed designs to be carried out at the beginning o f project implementation, and the updated versions will be reviewed and receive N o Objection f rom the Bank prior to tendering for construction to complete the dams. 57. Activities financed by Component 2 have no environmental impacts since they include only preparation o f Master Plans documentation and do not involve c iv i l works or engineering designs proposed by these Plans. Potential environmental impacts are associated with Component 3 investments; most impacts are temporary and related to construction works, but potential long-term impacts could result from the reservoir and dam and their overall operations. Construction-related environmental impacts are l ikely to be localized, temporary, and efficiently mitigated by applying good international construction practice and planning: (a) air pollutioddust, noise, vibration, and access restriction; (b) improper disposal o f construction related waste; (c) temporary pollution o f soil and surface waters due to accidental spillage o f fuel and o i l from construction activities; (d) safety hazards including worker safety; (e) damage to trees and existing vegetation; and ( f ) chance finds o f physical cultural resources. All impacts will be properly managed during the construction phase by the contractor and closely supervised by P I U and designated supervisor engineer.
58. Potential environmental effects due to dams and reservoirs may be related to: (a) changes in downstream morphology o f riverbeds and banks due to altered river sediment loads that could increase local erosion; (b) changes in downstream hydrology (total flows, seasonal flows, short- te rm fluctuations); (c) changes in downstream water quality (e.g., nutrient load, heavy metal concentration, temperature); (d) reduced biodiversity in river ecosystems due to blocked movement o f local species (e.g., fish), and f lood elimination; and (e) impacts on existing infrastructure, such as roads and bridges. These potential impacts during construction and
16
operation are addressed through mitigation measures set out, together with impact monitoring requirements, in the Environmental Management Plans.
59. The downstream ecosystems wi l l be maintained in acceptable condition through environmental flows, which represent between 10-20% o f the original flow, increased seasonally to reflect natural seasonal variations. This minimum flow wi l l be maintained during summer months, when the streams previously experienced l i t t le or no flow, likely resulting in increased fish and other aquatic populations immediately downstream o f the dams. The upstream areas that would be flooded are Luda Yana 142 hectares (ha); Neikovtsi 32 ha; and Plovdivtsi 16 ha. There are no critical natural habitats or endangeredkhreatened species within the inundation areas, which have already been significantly impacted during the earlier construction phase (removal o f most trees and o f topsoil in some areas; quarries opened). Completion o f the dams with associated site restoration and water regulation wi l l result in a significant improvement over existing environmental conditions.
60. To ensure that environmental issues are properly handled, a Loan Agreement covenant stipulates that prior to tendering for works and goods contracts, for each dam, the MRDPW will carry out the following steps: (a) complete feasibility studies, satisfactory to the Bank, that would justify the investments on economic, financial, and technical grounds; (b) if necessary, based on the completed feasibility studies, update the EMP and EIA, satisfactory to the Bank.
F. Safeguard policies Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP 4.01) [XI [I Natural Habitats (OP/BP 4.04) [X I [I Pest Management (OP 4.09) [I [XI Physical Cultural Resources (OP/BP 4.1 1) [I [XI Involuntary Resettlement (OP/BP 4.12) [X I [I Indigenous Peoples (OP/BP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety o f Dams (OP/BP 4.37) [ X I [I Projects in Disputed Areas (OP/BP 7.60)* [I [XI Projects on International Waterways (OP/BP 7.50) 1x3 [I
6 1. The constructions o f the three dams will trigger the following Bank policies:
8 OPBP 4.01 Environmental Assessment: because o f activities carried out for the completion o f the dams, the project i s rated as Category A. For Luda Yana and Neikovtsi dams, EIAs were not required under Bulgarian law but were prepared in compliance with OP/BP 4.01. For Plovdivtsi dam, an EIA was approved by MoEW in 2000, and a supplemental document was prepared by the Client with some additional information and analysis in order to meet the requirements o f OP/BP 4.01. These EIA documents were disclosed in draft form for public consultations, finalized, and disclosed prior to appraisal. Furthermore, these documents will be updated as part o f the feasibility studies to be completed at the beginning o f project implementation. For the Studena dam, a
' By supporting the proposedproject, the Bank does not intend to prejudice thefinal determination of the parties' claims on the disputed areas
17
stand-alone E M P has been prepared, discussed and disclosed. Overall, the environmental r isks o f the project are not considered high and are manageable (Annex 10).
OP/BP 4.12 Involuntary Resettlement: i s triggered due to land acquisition that may be needed to complete the dams and restriction on the use o f land in sanitary zones for the dams. The bulk o f the land required for the main dam wall, dam lakes and corresponding submerged area, ancillary structures and adjacent infrastructure has previously been acquired by the Government o f Bulgaria in the years between 1982 and 2000, before initial discussions between Government and the Bank about financing completion o f the dams. Therefore, while the previous land acquisition i s linked to construction o f the dam, it i s not linked to the project. On this basis, the past land acquisition i s regarded as a legacy issue and not a current issue, and therefore OP 4.12 does not apply. Land that has been or may in future need to be expropriated includes the site o f the dams, their respective reservoir areas, and the area o f the Sanitary and Security Area Belt I (SSA-Belt 1) sanitary zones. A Land Acquisition Policy Framework (LAPF) has been prepared to address these issues. For c iv i l works associated with MIDP, it is likely that limited acquisition may result in the loss o f land or the loss o f sources o f income. People are not expected to lose their residences or other structures. In al l three dam areas, there i s informal use o f the land, primarily for grazing animals, and the local authorities have agreed that alternative land for grazing purposes would be provided to the affected people. The Component 2 will support identification o f investment priorities for water utilities including specific recommendations for location o f facilities which if implemented could involve expropriation o f land. The Master Plans will, therefore, provide al l information needed to apply the processes outlined in the Policy Framework to the acquisition o f any such land. The World Bank has reviewed the Terms o f Reference for preparation o f the Master Plans under Component 2 to ensure that this aspect is appropriately addressed. Based on this understanding, the LAPF applies to Component 2 o f the project. The SDD and the LAPF were publicly discussed at the national and local levels in October-December 2007 and February 2009 and have been publicly disclosed on March 24 2009.
OP/BP 4.37 Safety o f Dams: due to the completion o f the Luda Yana, Neikovtsi, and Plovdivtsi dams, and the rehabilitation o f the Studena dam, the policy will be triggered. Bulgarian dam safety requirements are in line with those o f the Bank (Annex 1) and for the project design, construction, and operation, the Bulgarian legislation and Bank policies will be followed. Government appointed a panel o f three national experts on dam safety to comment on the Terms o f Reference for feasibility studies related to the dams; the panel will review the feasibility studies and engineering designs and provide guidance during implementation o f works.
OP/BP 7.50 Projects on International Waterways: due to the completion o f the four dams included in the project because they are located on streams that eventually discharge to riparian countries or international waterways, the pol icy i s triggered. The works financed under the Project would cause no adverse downstream effects to international waterways given the relatively small volume o f the water retained in the dams compared to the f low o f the rivers that exit Bulgaria. However, at the request o f the Government o f Bulgaria, the World Bank notified the riparian countries, Turkey and Greece, and the International Commission on Danube River Protection, about the project, in accordance with the
0
0
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Bank’s OP 7.50, on March 19, 2008. Updated information on project design and impact on international waterways was sent to the riparian’s following finalization and public disclosure o f the EIAs on the websites o f the Ministry o f Regional Development and Public Works and the World Bank’s Infoshop, on May 13, 2009. The riparian countries have been requested to reply to the information provided in the letter by June 15, 2009. On June 15, the Government o f Greece informed that the EIAs were not found on the websites indicated and requested more time to review the documents. Therefore, the deadline for response was extended until July 15, 2009. On July 2 1 , the Government o f Greece requested additional information on the project; the information was sent on July 22,2009 and a new deadline for response was on August 27,2009. N o further comments were received by the deadline or since then. Details are provided in Annex 10. Further, the Borrower and the riparian countries will coordinate their actions through the early warning systems and data communication channels agreed.
OP/BP 4.04 Natural Habitats wi l l apply since small areas o f one or more o f the dam sites may fall within Protected Areas (also Natura 2000 sites). Based on existing information it i s expected that only the protective sanitary zones o f the dams wi l l overlap with Protected Areas (PAS), and the management regime for such protection zones are compatible with PA management. This will be confirmed during preparation o f the feasibility studies and detailed designs, and the updated EMPs wi l l include any required mitigation measures to ensure that local biodiversity i s not adversely affected.
OP/BP 4.36 Forestry i s not triggered, although a few trees must be removed from the future reservoir basins once civil works begin, these trees are sparse and scattered, left over from vegetation clearing years ago during the initial dam construction, and do not constitute a forest. Near the crest o f Luda Yana dam, about 0.6 ha o f trees will be removed when dam construction resumes.
e OP/BP 4.11 Physical Cultural Resources Policy i s not triggered because the investigations conducted during EDD and EIA preparation process raised no concerns regarding potential chance finds o f cultural properties at the proposed dam sites. However, the EMPs include provisions for cultural heritage and archeology if chance finds occur during construction works.
e
a
G. Policy exceptions and readiness
62. N o policy exceptions are being sought.
63. Project readiness i s demonstrated by the following: (a) the Borrower’s Council o f Ministers approved the previous project concept and design. The revised, simplified project scope, confirmed by Government in December 2008, does not conflict with the previous design; (b) Government committed to use i t s own financial resources to hire consultants to prepare updated feasibility studies for Luda Yana and Plovdivtsi dams; the Consultant delivered the feasibility studies for the two dams before the project Board date; (c) the process o f recruiting consultants to prepare Master Plans i s under way and a request for Expressions o f Interests was advertized during pre-appraisal and the Terms o f Reference have been drafted; (d) the project fiduciary and safeguard arrangements were clarified and agreed to by the Borrower.
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Annex 1: Country and Sector Background BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT
1. Strategy: Water shortages in internal river basins have become critical over the last 15 years due to increased incidence o f dry years-1993, 1997, 2000, 2003, 2007-were very dry years, and extreme drought was recorded in 2000 and 2007. As a result, water supply delivery has been unreliable and there have been many days o f water supply rationing and restrictions due to long dry summers and lack o f sufficient rainfall. Given the frequency and geographic distribution o f long droughts and high temperatures, the Government has declared that securing a water source to supply domestic and non-domestic users i s a priority. This wi l l require dams that facilitate management and regulation o f annual and multi-annual o f water runoff, and provide a safe water supply. For example, in 2008, after more than 30 days without rainfall, residents o f Panagyurishte town located near Luda Yana dam, had to secure their water supply from another town, and had water for two hours twice a week, through water tanks, for about one month.
2. Securing the water source to supply domestic and non-domestic users i s o f paramount importance given the frequency and territorial distribution o f long periods o f drought and high temperatures. These periods also fit the pattern o f a larger process o f climate change that requires both adaptation and mitigation actions, including reliable water management infrastructure such as dams to manage and regulate annual and multi-annual runoff and provide a safe source for water supply.
3. The Government o f Bulgaria prepared and endorsed the Strategy for Water Supply and Sewerage Management and Development (March 2004) during preparation for EU accession to meet requirements for the EU Directive on Environment. Therefore, as an EU member since January 1, 2007, rehabilitation and construction o f water supply and sewerage networks to improve service delivery and reduce health risks, and wastewater treatment in line with the EU directives are Government priorities.
4. Cost and Financing: Government’s March 2004 Strategy for Water Supply and Sewerage Management and Development presents a comprehensive cost and financing plan for the sector. Further Government and Bank analysis completed jointly and presented in an April 2005 Financing the Water and Wastewater Sector Report analyzed sector investment and operating costs between 2004 and 2014 and outlined a corresponding financing plan that would include grants from the EU and financing from the budget, International Financial Institutions, and commercial banks. Projected tariffs would also support investments and operating costs. Cost estimates for rehabilitating the sector and meeting EU directives by the end o f the compliance period in 2014 are about €6.9 billion, which includes €2.8 billion for rehabilitation.
5. To help Bulgaria comply with sector legislative requirements and support municipal investments, the EU wi l l provide grants through the Cohesion Fund and European Regional Development Fund (ERDF). For the planned use o f EU grants, Bulgaria has prepared an Environment Sector Operational Program and a Regional Operational Program, both endorsed by the EU in 2007. However, the EU grants-xpected to be around €3.3 billion-would be inadequate to cover all costs so Government plans to raise funds from all possible sources, including the International Financial Institutions (IFIs) and commercial banks, if feasible.
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6. and financing the sector:
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Central-level institutional structure: Four ministries are responsible for setting policy
Ministry o f Finance (MoF) plans and manages the public investment framework for the sector, including the use o f budget and external funds;
Ministry o f Regional Development and Public Works (MRDPW) supervises the water and wastewater utility Vodosnabdiavane i Kanalizacia (ViK). MRDPW coordinates the use o f water resources, including the operations o f dams, and discharge and treatment o f wastewater, and develops and implements the EU Regional Operational Program;
Ministry o f Environment and Waters (MoEW) sets policies and manages water resources and quality; it implements the Environment Sector Operational Program for which EU Cohesion grants would be made available;
Ministry o f Health (MoH) monitors the quality o f ViK-provided potable water.
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7. Set-up for the utilities: About 98 percent o f people are served by 50 ViKs, which are commercial uti l i t ies providing water supply, wastewater collection, and wastewater treatment (if applicable) services. Water supply coverage i s very high in Bulgaria due to the existence o f regional ViKs that serve multiple municipalities, covering about 75 percent o f the population. The ownership structure o f the V iKs varies. There are 13 regional ViKs, fully owned by the central government and serving multiple municipalities; another 16 regional ViKs are owned joint ly by the central government (51 percent share) and multiple municipalities where the remaining shares are distributed based on population; another 20 municipal ViKs are owned by the single municipality that they serve. A privately owned concessionaire and the municipality serve the city o f Sofia. In fully or partially central government-owned ViKs, the M R D P W represents government. Under the project, 48 regional and 40 urban ViKs are expected to benefit from preparing Master Plans, and four ViKs associated with the dams will benefit from improved water supply.
8. Regulatory set-up: The Bulgarian water sector i s wel l positioned to make significant institutional reforms and improve services: commercial utilities serve most o f the population and are regulated by the State Energy and Water Regulatory Commission (SEWRC), created in January 2005; the entire sector i s metered, which promotes economic water consumption and leads to economic investment decisions; the SEWRC regulates al l ViK operations and reports to the Council o f Ministers (CoM); the SEWRC approves tariffs adequate to cover operating and investment costs; and tariff proposals are made by ViKs through their annual business plans that include operations costs and consider investment needs. Apart from setting tariffs, the SEWRC also helps establish service standards, benchmarks ViK performance, approves terms and conditions o f contracts between the uti l i t ies and the customers, and provides information on the ViKs to the public and the pol icy makers. As a national regulator is involved through established methodologies, SEWRC creates uniform application o f cost recovery tariffs and service standards and reduces local influence in tari f f setting.
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Issues
9. The key issues o f the sector are summarized below:
10. Investment needs are high: The Strategy for Water Supply and Sewerage Management and Development estimated sector investment needs at €6.9 billion, in the following four major categories: e
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Water Supply (€1.1 billion): to establish a secure water supply from surface and ground water sources, Government plans to upgrade 42 water treatment plants and about 3,500 pumping stations. Investments specify completing eight water supply dams for which construction had ceased earlier. Three o f the eight dams, Luda Yana, Neikovtsi, and Plovdivtsi, are included in this project, and the fourth (Studena) i s included for rehabilitation needed to ensure security o f supply.
Water Efficiency (€2.8 billion): to prevent physical leakages o f water due to deteriorated network pipes. Routine network section replacements have been deferred over the last 15-20 years due to funding shortages, leading to high physical losses-Unaccounted for Water (UFW)2 in Bulgaria i s estimated to be around 60 percent. The Strategy plans to replace about 70 percent o f existing V i K s water transmission and distribution networks, about 70,620 kilometers (km).
Sewerage (€2.0 billion): to increase sewerage connection coverage and upgrade deteriorated sections o f sewerage networks. About 50 percent o f the population is connected to the 9,000 km sewerage system. Government plans to upgrade the existing system and build an additional 16,000 km o f sewers to connect another 2.4 mi l l ion people and increase sewerage coverage to 85 percent.
Wastewater Treatment (€ 1 .O billion): to construct wastewater treatment plants and upgrade existing plants. Wastewater collected from 35 percent o f the population i s now treated through 6 1 treatment plants. Government intends to extend wastewater treatment coverage to about 85 percent o f the population.
Operational efficiency needs to be improved: ViKs must focus on operational efficiency--equally important as investment needs. Optimally efficient operations would reduce pressure to increase tariffs needed to support the non-grant portions o f sector financing. Further, operations and maintenance (O&M) costs are expected to increase to meet requirements o f the EU directives, especially for wastewater treatment. Given the paucity o f funds over the last fifteen years, the V iKs were unable to allocate sufficient resources towards O&M o f the assets, which now run around €0.35/m3 o f water, a cost that i s expected to double by 2014. Consequently increased efficiency i s crucial and the ViKs are taking the following measures with support from Government and the SEWRC: decreasing administrative water losses (to reduce the overall levels o f UFW); increasing bill collection rates; implementing a comprehensive network leak detection program including pressure management; and implementing a financial management program that would allow the ViKs to make economic decisions on operations and investments.
* UFW i s expressed as (volume o f percentage terms.
water produced - volume o f water billed)/volume o f water produced, in
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12. Preparation o f investment programs i s critical to meet EU directives: Government intends to meet i t s EU commitment by improving the Bulgarian water and wastewater sector, which requires effective planning, and strengthening institutions that prepare and implement projects, to maximize the benefit o f EU grants and meet EU directives. To this end, Government i s elaborating detailed utility investment needs. The MRDPW intends to prepare 48 regional Master Plans for water supply and sewage systems, including 40 Master Plans for urban settlements within the six economic development regions, to define priority investments in the water and wastewater sector. The Master Plans will be discussed among other ministries and institutions to facilitate preparing utilities investments and financing arrangements, including those from the EU. The project will help prepare Master Plans, which will be developed in co- ordination with the EC, and help define improvements necessary for efficient operation o f water and wastewater utilities.
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Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT
Project Amount FY Sector Issues Addressed IEG Rating for in USD Bank Projects
Bank Financed Water Companies 1 98 million I FY94 To increase the corporate
autonomy and commercial orientation o f VIKs and make their management accountable to local
Implementation Completion Report (ICR) rated DO satisfactory.
I I
Restructuring and Modernization Project (WCRMP) (Closed 2002)
equivalent
I
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Annex 3: Results Framework and Monitoring
BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT
PDO
Improve the reliability and quality o f water provision to the communities in selected settlements in the project area
Assist Municipalities to improve investment planning capacity
Intermediate Outcomes
Component 2; Investment needs for rehabilitation o f the water supply and construction of sewerage network and wastewater treatment plants have been identified in the Master Plans.
water treatment plants
Results Framework
Project Outcome Indicators
Water intakes completed in Luda Yana, Plovdivtsi, Neikovtsi dams and refurbished in Studena dam, and operational in al l project sites. Quality o f water supplied by the water treatment plants
Completion o f 48 regional Master Plans for water supply and sewage systems including 40 urban Master Plans, of satisfactory quality for acceptance by Bulgaria and EC, to support investments in service delivery
Intermediate Outcome Indicators
Diagnosis o f the present situation and requirements completed in all six regions under the Master Plans and submitted to the MRDPW for review.
i) Preparatory work3 for dams and water treatment plants completed in a timely manner ii) Construction works for water treatment plants completed and equipment installed iii) Construction works for dams completed timely
Use of Project Outcome Information
The process used to complete and operationalize the water intakes and dams would be followed for other dams that need to be completed in Bulgaria. Monitoring of selected water quality parameters versus the EU and Bulgarian standards, whichever i s higher, and feedback to water utilities Information from the Master Plans will be used by Bulgaria for investment planning (including with EC financial support)
Use of Intermediate Outcome Monitoring
Information will be used to develop possible technical solutions for water systems.
Ensure that project i s being implemented satisfactorily to meet i t s objectives
3Completion o f Preparatory Work includes : Feasibility studies completed, Designs updated, EMPs updated, Bidding documents prepared
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Annex 4: Detailed Project Description BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT
1. dam safety procedures carried out in Bulgaria and findings are presented below.
The project has three components, which are summarized below. The Bank reviewed
COMPONENT 1: Project Implementation Support (Cost €5.12 million)
2. This component comprises Project implementation support to carry out activities under Component 3 o f the project and consultant services associated with project implementation. These would include preparation o f feasibility studies, updates o f design and Environmental Management Plans, preparation o f bidding documents, construction supervision and other consulting assignments needed for project support, including a communications plan to help ensure people are aware o f the status o f land issues. The preparation o f feasibility studies will include an assessment o f site conditions-the existing unfinished structure and the geology and hydrogeology o f the area. Preparation o f updated feasibility studies, detailed designs and preparation o f bidding documents for Luda Yana and Plovdivtsi dams will not be financed from the project; the Government o f Bulgaria decided to finance these activities from i t s own resources, prior to project approval.
COMPONENT 2: Preparation o f Master Plans (Cost €20.88 million)
3. This component comprises preparation o f forty eight (48) regional Master Plans for Water Supply and Sewerage systems (ViK systems), including forty (40) Master Plans for urban settlements, within the six (6) economic development regions, as described in the Operational Manual, Information from the Master Plans would be used to prepare investments to help Bulgaria meet the relevant EU water and wastewater directives. The l i s t o f the regional and urban water supply and sewage uti l i t ies to be covered by the Master Plans i s attached as Annex 4.1.
4. Master Plans will be developed for each o f the six economic development regions, as agreed with the EC and the Bank, and will include two main sections: the first section will comprise the investment planning while the second section will include the corporate development plan.
5. The Master Plan for investment will include a diagnosis o f the current situation, diagnosis o f management practices, general planning criteria for both water supply and sanitation, assessment o f water demand and sanitation requirements, identification and definition o f possible technical solutions for water supply and sanitation, comparison o f options, development o f medium and long-term investment programs.
6. The corporate development plans will promote improved service delivery and greater efficiency in the water ut i l i t ies covered under the Master Plans. These corporate development plans will include organizational and institutional arrangements, assets control and management, budgeting, accounting and cost control, tar i f f setting methodologies, revenue collection procedures, operational performances. The Borrower should also develop and implement a public information campaign to increase public awareness o f the development programs envisaged for water supply and sanitation, possibly building upon the previous campaign designed and implemented in 2007-2008.
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7. M R D P W launched the consultant selection process to seek candidates to perform the services for al l six regions under the draft Terms o f Reference prepared by the Borrower and submitted for review and comments to the EC-DG Region And the Bank. Based on the comments received, M R D P W finalized the TORS together with the short list o f consultants for each region / contract.
COMPONENT 3 - Dam Investments (Cost €75.0 million)
8. The Water Strategy o f Bulgaria defines a need to complete and rehabilitate water supply dams to reduce or eliminate water rationing where water i s not available 24 hours a day for the entire year. The Strategy lists dams requiring this work and from the l i s t the M R D P W has proposed that the Bank finance the rehabilitation o f the existing Studena dam and the completion o f the Luda Yana, Neikovtsi, and Plovditsi dams, which were included in project documentation approved by the Council o f Ministers.
9. Eligible activities under this component would comprise completion o f three water supply dams and associated water treatment plants-Luda Yana, Neikovtsi, and Plovdivtsi-and rehabilitation o f the Studena dam, which is operational and supplies water to the town o f Pernik. The proposed completion o f the dams is based on priorities established in Government Strategy for Water Supply and Sewerage Management and Development, because local resident around these three dams have inadequate water supply and their services are often interrupted. Construction o f the dams had begun but was stopped due to lack o f funds. This project aims to restart construction after a feasibility study confirms viability o f investments on economic, financial, and technical grounds. This component also supports completion o f water treatment plants preparation work needed for the dam investments and construction supervision. The project will also support the rehabilitation o f the 50-year old Studena dam. Feasibility studies for the dams will be completed during project implementation.
Rehabilitation of Studena Dam
Description
10. Studena Dam i s a 50-year old, concrete buttress, hol low gravity dam.’ The lake created by the dam provides water to seven settlements, including the town o f Pernik with 91,000 people. The dam structure i s 53m high; the reservoir has a maximum operating capacity o f 25.2 mi l l ion m3; the foundations are in massive bedded limestone. Maximum global movements o f the concrete structure have been in the order o f lmm, both vertically and horizontally; maximum joint openings vary from 0.4 to 3.4 mm; instrumentation i s in good operating condition; drain holes show uplift pressures within design limits; piezometers indicate seepage patterns comparable with design assumptions. Maximum observed leakage flows are l o w and stable, totaling less than 3 l/s8.
11. The spillway i s on the crest o f the dam, and controlled by three vertical sliding gates, which were added in 1992 to increase storage capacity from 20.7 to 25.2 mi l l ion m3. Maximum discharge capacity i s 400m3/s, which corresponds to a 1:1,000 year event. Spillway gates are wel l maintained and regularly operated to ensure rapid response in case o f flooding. Flood
Also known as “Noetzli” named after the engineer who first developed this type o f structure in 1927-28. Details as follows: a) 0.6 I/s from drainage gallery; b) 0.7 from downstream drains; c) 1 Vs from right dam side,
7
8
through some construction joints when reservoir i s at maximum level.
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warnings are issued by the national weather forecast center as the catchment area i s too small’ to establish an effective, dedicated, flood warning system.
12. A bottom outlet, with a maximum discharge capacity o f 18m3/s, allows lake level management. The system comprises two parallel steel conduits controlled by Johnson type valves (installed in 1992). Needle-type valves are located upstream o f the Johnson valves to allow maintenance o f the latter. The needle valves can no longer be serviced due to upstream sliding gates at the intake o f the conduits, which are out o f service.
13. There i s a hydroelectric plant at the toe o f the dam, consisting o f two horizontal-axis Francis turbine-generators o f 350 k W each. The plant, built in 1953, i s very well maintained but debris i s entering from the intakes at the lake and may have damaged the rotating turbines parts, significantly impairing their performance.
14. Local staff operates the facilities in accordance with well-established procedures covering surveillance, annual safety assessment, and periodic independent safety review o f performance at three-year intervals. An Emergency Preparedness Plan and communication arrangements are in place that involve relevant authorities, including those responsible for managing natural disasters.
15. Deterioration i s evident, the concrete surfaces have been significantly affected by freezing and thawing, and the hydro-mechanical and electrical equipment i s showing signs o f wear and tear, especially in the intake tower. The operators are concerned about on-going leaching o f salts from the upstream wall o f the foundation gallery, which i s reported to have increased in the last seven years. Their concern i s related to potential suffusion and or dissolution o f calcareous rocks from the foundation rock-mass, which i s common in limestone formations and generally progress slowly. Nevertheless, good practice would suggest investigating and quantifying the progression o f this phenomenon.
Next Steps
The feasibility study that defines investments should consider the following:
0 Hydrological safety should be re-appraised based on updated hydrological data, to update the design o f the flood handling facilities. The dam should be capable o f passing the PMF (Probable Maximum Flood) without breaching. A flood level that peaks at the nominal crest level i s acceptable (that is, zero freeboard during the passing o f the PMF i s tolerable), provided the crest resistance to erosion i s satisfactory and the structure i s stable for the increased hydraulic loading.
Seismic safety o f the dam and ancillary works should be re-appraised. The dam and i t s outlet works should be checked for two earthquake events, the Operating Basis Earthquake (OBE) and the Maximum Design Earthquake (MDE). The dam and i t s outlet works should suffer only minor damage during the OBE and remain operational. Extensive damage to the dam and i t s outlet works may occur during an MDE, but uncontrolled release o f water from the reservoir i s not expected.
The project should cover the following: (a) site investigations from inside the drainage gallery (geophysical surveys, some boreholes, laboratory testing); (b) treatment o f foundations based on site investigation results; (c) surface treatment o f concrete
a
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Concentration time i s around 30 minutes.
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structures where they are eroded by freezing and thawing; and (d) rehabilitation o f hydro mechanical works, including upstream gates to bottom outlets, and installation o f screens at the intake tower.
16. Feasibility studies will also assess needs and investment costs for rehabilitating the deteriorated dam wall; rehabilitating and upgrading the intake tower hydro-mechanical equipment; and preventing salt leaching in the foundation gallery.
Net water storage
Completion of Luda Yana, Neikovtsi, and Plovdivtsi dams 17. The project proposes to complete construction o f these partially constructed dams. Thorough feasibility studies and site investigations must be carried out before construction resumes, particularly to review the integrity o f the existing structures that have been exposed to wear and tear, and the site conditions (including groundwater flow), which may have changed since the original design was completed. Also, for a non-operational partially completed dam, the water control facilities are designed to handle l o w to medium flood events" and the flood risks during construction should be reviewed. The following table summarizes the essential elements o f the three dams in terms o f safety and operational reliability o f the assets.
17.70 4.30 1.80
Parameter I Luda Yana Dam I Neikovtzi Dam I Plovdivtsi Dam
volume (mln. i3) Flood handling facilities Design flood, return period, years Reservoir level control
movements in all h different areas
Free-crest ogee spillway with chute and ski jump chute and ski jump glory typeI2
Free-crest ogee spillway with Orifice spillway, morning
10,000 10,000 10,000
Steel pipe inside concrete Steel pipe inside concrete Steel pipe inside concrete
lo The return period used for design of river diversion works i s in the order of 25 years; that of the operating dams ranges from 1,000 to 10,000 years. I' A granite rock, in which hornblende replaces the mica. I' The hydraulic performance of this type of spillway features a discontinuity when the flow regime in the tunnel transits from free to pressure conditions; dam crest elevation must be checked for adequate freeboard under those conditions.
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People at risk in case o f dam failure Reservoir conservation
Luda Yana dam and water treatment plant
18. in 2000 due to lack o f funds. Key features include the following:
Dam construction began in 1986 and stopped in 1990, restarted in 1995 but stopped again
Spillway capacity i s 280m3/s; flood return period i s 1:10,000; energy dissipater wi l l be a ski jump type and design should check i t s appropriateness.
Foundation permeability from drainage gallery should be checked to see if additional grouting i s necessary.
Footbridge i s foreseen to access intake tower. Design features cylindrical gate inside intake tower. Currently two intakes are planned.
Location o f bottom outlet i s inside a tunnel in a rock. This design i s appropriate as the dam features a clay core.
19. The dam would provide water to the ViK Panagiurishte, which currently needs to produce water at about 105 literdsecond for the population it serves (30,000), and for estimated unaccounted for water o f 40 percent. The ViK could serve another 15,000 people if water production was 160 l/s. Existing water sources yield about 68 l/s, which explains water shortages in the region. Since current water sources are inadequate for 30,000 people, many households have their own wells but water quality i s not assured. Thus, apart from completing the dam to secure the water supply, authorities also plan to build a water treatment plant to ensure water quality. The original planned dam net water storage volume was 17.7 million m3, calculated with the assumption that the reservoir would also supply irrigation water for 6,200 ha. Views regarding the need for irrigation differ and agreement on water use i s needed to complete the economic analysis and viability o f the investments. The original dam was planned to be 51 m high from foundation level - the existing construction i s at 30 m; concrete works for the water intake towers are partially completed, and the dam spillway has been cut into the rocks but concrete needs to be poured. However, there may be no need to build another 21 m. The feasibility study wi l l determine the optimal height required to make the dam operational for water supply; ensure that completing the dam i s the least-cost option to provide water. The water treatment plant i s an addition to the original design, which would have to be included under this project. Neikovtsi dam and water treatment plant
20. dam include the following: 0
0
Construction began in 1986 and ceased in 2001 due to lack o f funds. Key features o f the
Drainage and inspection gallery are at the base o f the core, an appropriate choice given the complex foundation conditions.
Water pressure tests must be carried out inside the gallery to check permeability and carry out any necessary grouting operations.
0
conduit conduit conduit Panagiurishte (>28,000 Tryavna (>11,000 people) 3 villages (>5000 people) people) Some logging activities in Forested catchment area, very the catchment, must be l i t t le erosion expected l i t t le erosion expected regulated before impounding
Forested catchment area, very
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0 A geophysical survey must be carried out inside the conduit, holes drilled to check the concrete and foundation contact, and necessary grouting carried out.
0 Three intakes at different elevations wi l l have self-cleaning screens.
21. Authorities plan for ViK Gabrovo to use Neikovtsi dam water to serve the 14,000 people o f Tryavna soon after the dam and water treatment plant are completed. Later it i s anticipated that Neikovtsi dam wi l l also serve the 10,000 people o f Dryanovo. Existing regional water sources yield 25-90 l/s, depending on the season, but this i s inadequate as the demand for Tryavna i s about 50 l/s, which creates water shortages in drier months. The combined water demand for Tryavna and Dryanovo i s around 90 l/s, which could be met by the completed Neikovtsi dam, because it has a planned net water storage volume o f 4.3 million m3 and a height o f 42 m. So far, about 16 m o f the dam wall has been built and concrete works for the water intake tower were begun but not completed; the water treatment plant i s about 80 percent complete and can treat water at 200 Us, a capacity that i s not required given the current water demand in Tryavna and Dryanovo. Feasibility studies will determine if completing the dam i s the least-cost option to provide water for Tryavna and Dryanovo; recommend measures to reduce water treatment plant capacity to correspond to demand.
Plovdivtsi dam and water treatment plant
22. the dam include the following:
Construction began in 1998 but ceased in 2001 due to lack o f funds. The key features o f
A morning glory spillway tower was built; the horizontal seismic coefficient i s 0.15; the dam i s designed to handle a 1 : 1000 year flood or flow o f 167 m3/s; downstream conduit i s also used for river diversion and intake works.
Three intakes at different elevations with self-cleaning screens have been built.
Concrete box conduit founded on sound rock, detail o f core crossing i s critical when reviewing the design.
Emergency preparedness training i s essential for downstream populations. The project scope wi l l include an automatic warning system; the final design should incorporate features to increase dam resistance to overtopping.
23. Authorities plan ViK Smolyan to use Plovdivtsi dam water to serve 21,000 people in Rudozem and Madan, and later to serve 30,000 more people in Smolyan town. Madan and Rudozem combined water demand i s about 75 l/s, which cannot be met by local springs because water shortages occur during June to September. Supplying, water for part o f Smolyan will require around 200 l/s, which Plovdivtsi dam can supply. The planned net water storage volume o f Plovdivtsi dam was 1.8 million m3 and the height was 47 m. About 17 m o f the dam wall has been built and the concrete work for the intake and spillway tower i s completed; the water treatment plant site was cleared but construction had not started. Feasibility studies will determine whether completion o f the dam and treatment plant represent the least-cost option for providing water to Rudozem, Madan, and parts o f Smolyan.
Next Steps
24. Studena dams:
0
0
0
0
These steps would be followed for works in Luda Yana, Neikovtsi, Plovdivtsi, and
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Complete feasibility studies (details provided below) to determine cost/ benefit and viability o f proposed dam investments and assess updated costs; complete site investigations to review integrity o f existing construction, and area hydrogeology.
Review and update designs and costs for the most viable option.
Update Environmental Management Plan and Environment Impact Assessment based on feasibility studies.
Ensure that any land acquired for dam construction and operations conforms to the process outlined in the Land Acquisition Policy Framework.
Seek Bank ‘no objection’ to financing upon satisfactory appraisal o f economic, technical, environmental, social, and dam safety related to Bank policies.
Prepare bidding documents.
Select a contractor for the construction.
25, Feasibility studies to define investments wi l l include the following:
0 Carry out baseline surveys o f existing works condition, including site investigations on which design o f completion works should be based.
Carry out static stability analysis o f embankments on actual soil parameters measured from representative samples o f existing works.
0 Evaluate condition o f drainage galleries and the bottom outlet conduits, which may need additional foundation treatment.
0 Rehabilitate, recalibrate, and integrate instrumentation as necessary.
0 Re-appraise hydrological safety based on updated hydrological data, and perform corresponding updates to design o f flood-handling facilities. All three dams should pass the PMF (Probable Maximum Flood) without breaching; a flood level that peaks at the nominal crest level i s acceptable (that is, zero freeboard during the passing o f the PMF i s tolerable), provided the crest has satisfactory resistance to erosion, and the embankment i s stable for the increased hydraulic loading.
Re-appraise seismic safety o f dams and ancillary works by checking for the Operating Basis Earthquake (OBE) and the Maximum Design Earthquake (MDE). Dams and outlet works should suffer only minor damage during the OBE and remain operational; extensive and possibly irreparable damage to the dam and i t s outlet works i s permissible during the MDE, provided this does not lead to uncontrolled release o f reservoir water.
Carry out site investigations, additional studies, and final design in parallel with pre- qualification o f f i r m s for construction works.
0
0
0
34
Annex 4.1: List of Regional and Urban Water and Wastewater Utilities covered by the Master Plans
458 392 I 158
35
36
2. I ViK Petrich
I 1 TOTAL REGIONAL ViK MASTER PLANS - 48 I 6 515 744 I 5 463
57 307 I57 3. 1 ViK Kresna
37
5 918 I 1 0
----
TOTAL URBAN ViK MASTER PLANS - 40 --_I
TOTAL FOR THE SIX REGIONS 6 5157441 5483
Annex 5: Project Costs BULGARIA: MUNICIPAL INFMSTRUCTURE DEVELOPMENT
38
Annex 6: Implementation Arrangements BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT
IMPLEMENTATION ARRANGEMENTS
1. A Loan Agreement will be signed between the Bank and the Republic o f Bulgaria, represented by the Ministry o f Finance. The Ministry o f Regional Development and Public Works (MRDPW), on behalf o f Government, will implement the project. The MRDPW will be responsible for a l l aspects o f the project, including management o f Bank loan funds under al l components. To this end, Government has created a Project Implementation Unit (PIU) within the Department for Water and Sewerage o f MRDPW, headed by the Department Director and comprising nine other staff members. A technical coordinator, a chief accountant, an accountant, a financial management specialist, three technical experts, procurement specialist, and safeguards specialist to ensure proper implementation o f the EMPs for dams and L A P F were formally appointed by the Minister o f Regional Development and Public Works. Among the staff, the technical co-coordinator, technical experts, procurement expert, and safeguards specialist are full-time PIU staff and the other staff will work on the project as needed.
2. tariffs will include operating costs for the dams and water treatment plants.
The applicable Bulgarian legislation will be followed through the SEWRC to ensure that
3. The State Commission o f Dams Safety established under the MRDPW, i s responsible for supervising implementation o f legislation on dam safety, review o f periodic reports on inspection o f dams, licensing the operation o f dams and authorizing the impoundment after completion o f construction works, including installation o f instrumentation, early warning systems, and enactment o f emergency preparedness plans.
4. After completion o f works, the dams will be handed over for management, operation and maintenance to the operators (currently ViKs) defined by the Borrower’s Water Act. To that extent, the above mentioned operators shall be involved in the review o f design and supervision o f works.
5. The Ministry o f Environment and Waters (MoEW) is responsible for setting the policies and management o f water resources and water quality, and implementing the Environment Sector Operational Program for which EU Cohesion Fund grants would be made available to finance investment projects in water supply and sewerage identified in the Master Plans developed under the project.
6. The Ministry o f Health (MoH) i s responsible for monitoring the quality o f ViK-provided potable water; and when the dam are completed, the local M o H units will sample and test water quality supplied by ViKs and issue the distribution license.
39
Annex 7: Financial Management and Disbursement Arrangements
BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT
Country Issues 1. The Bank has extensive knowledge o f the country’s Public Financial Management (PFM) system. A 2003 Country Financial Management Assessment (CFAA) highlighted Bulgaria’s significant achievements in PFM, including: (a) a well developed PFM system relying heavily on IT, (b) sound legislation and well functioning external oversight institutions such as the National Audit Office and the Parliament; (c) comprehensive budget process covering several previously extra-budgetary funds; (d) well-developed Treasury Single Account (TSA) to service all budgetary institutions; (e) adequate realism o f budget estimates; ( f ) closely monitored cash management system; (8) and an adequate internal control framework.
2. While the overall financial management risk to Bank funds was deemed low, the CFAA made recommendations that the Government implemented, including under PAL-2 and PAL-3, and with continued technical assistance from other development partners. An update o f recent reform activities and their impact was carried out in 2007 as part o f the Bank’s continuous dialogue with Bulgaria. Progress and challenges since the 2003 CFAA are detailed below.
3. Bulgaria’s financial control and oversight have improved substantially. The country has made steady progress in developing PFM systems and institutions, and the medium-term budget framework; program budgeting has been progressively rolled out in l ine ministries. Budgetary control has improved and al l major budget institutions and agencies are now incorporated within the treasury system. Government has implemented a modem financial management information system (FMIS). The initial project design was scaled back and the successfully implemented system now ensures adequate resources and staff. In addition, continuing changes to the legal framework during strategy implementation led the Government to introduce FMIS into the whole system o f the Ministry o f Finance and l ine ministries related to accounting information linked to managing EU financial instruments. As a result, an internet-based FMIS system was introduced across MoF, all MoF second-level spending units, all EU PHARE and Instrument for Structural Policies for Pre-Accession (ISPA) Implementing Agencies, all Managing Authorities o f the Operational Programs under the EU Structural Funds and Cohesion Fund, and all territorial offices o f the National Revenue Agency. Elements o f a modem public sector audit function (both internal and external audit) have developed in accordance with best EU and international practice and coordination between inspection and audit agencies has improved.
4. Some public financial management challenges remain. Program budgeting s t i l l has to be rolled out across al l first-line spending ministries and municipalities. When this work i s completed and fully embedded in the budgeting system the full impact on policy planning and prioritization across Government will be achieved. Government also needs to build a more comprehensive picture o f fiscal risks into budget documents. Finally, while the main building blocks o f an internal control and internal audit function are in place, considerable work i s needed to ensure managers understand the basic concepts and that sufficient certif ied internal auditors are in place to implement these reforms.
40
Risk Assessment and Mitigation Measures 5. The overall financial management risk for the project i s moderate. Adequate mitigation measures are in place to ensure that the residual risk i s acceptable. The table below summarizes the financial management assessment and risk ratings.
Well developed PFM structures (additional information included in country issues section)
RISKS RISK MITIGATION MEASURES I RESIDUAL
L Borrower to maintain independent financial L management system, use of private auditors and use o f BNB for designated account.
Independence o f entity management, appropriateness o f the organizational structure, impact o f civil service rules
S The MRDPW will ensure that the PIU i s M staffed with adequate and capable personnel that will be able to implement the project. PIU staff wil l be trained to become fully familiar with Bank financial management, procurement and disbursement procedures.
41
Proiect i s medium-sized, but not I M I Implementation activities wil l be monitored M
Strengths and Weaknesses 6. Significant strengths provide a basis for relying on the project financial management system including the simple funds f low and good internal controls developed for the project; no significant weaknesses exist in the project FM system.
Implementing Entity
7. The Government has established a Project Implementation Unit (PIU) under the existing Department for Water and Sewerage within the Ministry o f Regional Development and Public Works (MRDPW); the P I U i s responsible for project financial management. The Loan Agreement would be signed between the World Bank (IBRD) and Republic o f Bulgaria, represented by the Ministry o f Finance (MoF), who will transfer the implementation responsibilities to MRDPW.
Budgeting and Planning 8. The M R D P W staff under the department for water and sewerage has experience preparing annual budgets for EU funded projects. Project budget estimates were prepared and will form the basis for including project annual expenditures in the M R D P W budget. Annual budgets are prepared according to Bulgarian economic classifications, and the project budget will fo l low the same procedures as l ine ministries for approval, reporting o f budget execution, approval o f variances, and budget rectification. The approved annual budget is entered into the project accounting system and periodically compared with actual results as part o f interim reporting. Budget data compilation and approval will continue accordingly, with the annual detailed project implementation budget broken down by quarters. Risk associated with planning and budgeting i s assessed as moderate.
Accounting Staffing 9. The P I U includes three financial management (FM) experts. While the staff has extensive experience with Bulgarian regulations and managing EU-funded projects, the MRDPW staff assigned to the project has insufficient experience with Bank-financed projects. However, the proposed PIU staff has some experience with Bank disbursement and financial management procedures through implementation o f the previous PHRD grant, and training will be provided during project implementation. The risk associated with staffing i s assessed as moderate.
Accounting Policies and Procedures 10. Project accounting books and records will be maintained on an accrual basis and denominated in Bulgarian Levs (BGN) except for the DA books and records, which will be maintained in the currency o f the Bank loan (Euro). The project unit will build upon the existing accounting procedures and internal control framework to ensure that al l project procedures and controls are adequately documented, contract monitoring and invoice payment procedures are consistently adhered to and documented. The main controls relate to existing standard checklists that have to be f i l led out for each budget engagement and payment, and approved by M R D P W financial controllers. The P I U has instituted appropriate accounting procedures and internal controls, including authorization and segregation o f duties. Project accounting policies and procedures are specified in the draft financial manual, which will be updated regularly. The
42
existing draft financial manual will be updated prior to negotiations to reflect changes in project structure, P I U and staffing, and implementation arrangements. Risk associated with accounting policies i s assessed as moderate.
11. Additional accounting policies that will be applied for the project (besides standard accounting policies used for Budget entities) will include the following major assumptions:
Accrual accounting will be the basis for recording transactions. Reporting will be done in BGN and in Euro (Designated Account). Consolidated IFRs will be prepared for al l components. All counterpart funds will be reflected in the financial reports.
Information Systems
12. Existing software used for ISPA projects is designed only for EU grant funds and cannot be used for the new project, so initially, MRDPW will use an Excel-based financial management, accounting and reporting system, with adequate password protection and restricted access, until an appropriate project software system can be put in place. Additional software procedures include timely archiving o f the monthly files and weekly information back up. Specific ledgers will allow the project unit to distinguish records for new project operations using the existing chart o f accounts. The risk associated with information systems i s assessed as moderate. To strengthen further the financial management arrangements, an appropriate project financial management software system would be developed by end-2009 and M R D P W committed to provide the source o f funding for the new software system to be developed.
Internal Controls and Internal Audit
13. The P I U has documented in i t s draft financial management manual internal control mechanisms for the application and use o f funds and project implementation. The main internal controls are for contract approval mechanisms and invoice verification procedures, including obtaining appropriate evidence that the goods delivered, works completed and services rendered adhere to technical specifications. The project will use checklists to ensure that procedures are performed and data are recorded during invoice processing, including checking invoices for mathematical accuracy, legal conformity, agreement with the corresponding contract, matching goods received notes or other evidence o f completion o f work, debit account no., credit account no., etc. The project will require that the goods received notes, works completion certificates, consultant reports and outputs, or other evidence o f satisfactory completion be attached to the invoice and signed by the officials responsible. In addition to M R D P W project officers, the project site inspectors would certify confirmation o f satisfactory receipt o f the goods, works, or services. Each invoice will be entered in a contract monitoring sheet and recorded in the accounting system as an accounts payable liability. The project requires a contract monitoring sheet to be kept for each contract, initially Excel-based, but later combined with the accounting system. The financial management manual specifies procedures for financial management and administration, accounting, record-keeping, f low o f funds, reporting, and auditing; and reflects the structure o f the entity, administrative arrangements, internal control procedures, including procedures for authorization o f expenditures, maintenance o f records, safeguard o f assets (including cash), segregation o f duties to avoid conflicts o f interest, regular reconciliation o f bank account statements, signing rights (authorized signatories), regular reporting to ensure close
43
monitoring o f project activities, and f low o f funds to support project activities. The manual will be updated regularly and included in the operational manual. The risk associated with internal controls and internal audit i s considered as moderate.
14. Key internal controls for the project include the following: e
e
e
e
e
e
Funds Flow
Restricted access to accounting software with clear responsibility and approval process for adjusting journal entries and correcting errors. Involvement o f municipalities and other relevant entities, as appropriate. Approval o f payments done by the deputy minister or his authorized representative and the project director. Accounting data will be backed up regularly. IFRs will be prepared based on outputs from software developed for the project. Bank account will be reconciled regularly with the Bank Client Connection system.
15. Project funds will f low according to the sources o f project financing as follows:
(a) The Bank loan, by direct payments or v ia the Designated Account (DA), which will be replenished on transactional methods using full documentation Statements o f Expenditure (SOE).
(b) Government counterpart contribution, via the single Treasury account. 16. A Designated Account (DA) will be opened at the Bulgarian National Bank (BNB) and foreign currency amounts will be exchanged as needed in local currency (BGN), to cover payments in local currency to suppliers for eligible expenditures. The DA ceiling would be EUR 2,000,000 at the initial stage o f the Project implementation; when the total disbursed and committed amount shall reach EUR 9,000,000 the ceiling may be increased to EUR 4,000,000. Government counterpart contribution payments will be made via the single Treasury account, based on regular budget allocations in accordance with standard budget procedures.
17. Disbursement from the IBRD Loan Account will fo l low the transaction-based method, Le., traditional Bank procedures: Advances, Direct Payments, Special Commitments and Reimbursement (with full documentation and against Statement o f Expenditures). Withdrawal Applications documenting funds utilized from the Designated Account will be sent to the Bank on a monthly basis. Disbursements will be made on the basis o f full documentation for (a) contracts for works costing more than the equivalent o f Euro 3,500,000 each; (b) contracts for goods costing more than the equivalent o f Euro 650,000 each; and (c) services under contracts o f more than the equivalent o f Euro 135,000 for each consulting firm and more than the equivalent o f Euro 30,000 each for individual consultants. Disbursements below these thresholds will be made according to certified SOEs. Full documentation in support o f SOEs would be retained by the P I U and made available to the Bank during project supervision and for annual audits, which will be required to comment specifically on the propriety o f SOE disbursements and the quality o f associated record-keeping. Risk associated with funds f low and disbursement is considered as moderate. The following disbursement categories will be followed for the project.
44
Expenditure Category
Amount o f Loan Bank Financing Allocated (€) Percentage
1. Consulting services for component 1 2. Preparation o f Master Plans under comnonent 2
4. Front-end Fee
4,093,500 80
16,704,000 80
202,500
60,000,000 3. Works for Studena, Luda Yana, Neikovtsi and Plovdivtsi dams
Amount payable pursuant to Section
2.03 o f the Loan Agreement in
accordance with Section 2.07 (b) o f the
80
Reporting and Monitoring 1 8. Project management-oriented un-audited Interim Financial Reports (IFRs) will be used for project monitoring and supervision. The quarterly IFR reports will cover the entire project and will be submitted to the Bank within 45 days after the calendar quarter end. The IFRs format has been agreed between the Bank and the MRDPW. The risk associated with reporting and monitoring i s considered as moderate.
External Audit 19. Currently, the Borrower i s in compliance with the audit covenants o f al l existing Bank- financed projects. The project will be audited annually by independent auditors acceptable to the Bank. The format o f the Terms o f Reference for the audit been agreed between the Bank and the MRDPW. The audit scope will include the project books and records maintained by the PIU, al l withdrawal applications, and the Designated Account. The audited project financial statements together with the auditor’s opinion thereon will be provided to the Bank within six months after the closure o f the reporting period that ends in December. The cost o f the audit will be financed from loan proceeds. The PHRD grant associated with the project has a permanent audit waiver, based on the alternative assurance procedures performed by the Bank FMS. The procedures performed did not reveal any issues. The risk associated with external audit i s considered moderate. The fol lowing table identifies the audit reports to be submitted and their due dates.
Audit Report Entity financial statements Project financial statements (PFS). The PFS include sources and uses o f funds by category, by components and by financing source; SOE statements; Statement o f Designated Account; notes to financial statements; and reconciliation statement.
Due Date N/A Within six months after the closure o f the fiscal year which i s at the end o f December each year; and also upon the closure o f the project
Supervision Plan
45
As part o f project supervision missions, the Bank will conduct risk-based financial management supervisions at appropriate intervals. During project implementation, the Bank will supervise project financial management arrangements in the following ways: (a) review projects quarterly interim financial reports, annual audited financial statements, auditor’s management letter and recommended remedial actions therein; and (b) during Bank on-site supervision missions, review the fol lowing key areas: project accounting and internal control systems; budgeting and financial planning arrangements; disbursement management and financial flows, including applicable counterpart funds; and any incidences o f corrupt practices involving project resources. As required, a Bank-accredited Financial Management Specialist will assist in supervision.
46
Annex 8: Procurement Arrangements BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT
A. General 1. Procurement for the Municipal Infrastructure Development Project will be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated M a y 2004, and revised in October 2006 (Procurement Guidelines); and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers'' dated May 2004 and revised in October 2006 (Consultant Guidelines) and the provisions stipulated in the Financing Agreement (FA). Procurement actions under different expenditure categories are described below. For each contract to be financed under the FA, the procurement or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame have been agreed between the Borrower and the Bank in the Procurement Plan (PP). The PP will be updated at least annually or as required to reflect actual project implementation needs and improvements in institutional capacity. A General Procurement Notice (GPN) published on 10 February 2008 in UNDB and dgMarket on-line and on the web-site o f Ministry o f the Regional Development http://www.mrrb.aovernment.bg, Specific Procurement Notices (SPN) will be published for al l I C B procurement and Consulting contracts as per Guidelines as corresponding bidding documents and RFPs become ready and available.
B. Assessment o f the Agency's capacity to implement procurement 2. A Country Procurement Assessment Report (CPAR) was prepared in December 2004 and no update has been made. However, Government o f Bulgaria has implemented most CPAR recommendations and current Bulgarian legislation i s in l ine with EU legal frameworks. In 2006, the Bank undertook an Institutional Fiduciary Assessment (IFA) o f the Road Executive Agency within the Ministry o f Regional Development and Public Works (MRDPW), which identified major procurement issues including inconsistent practices in procurement and project record maintenance among M R D P W departments.
3. The Bank's assessment o f the Project Implementation Unit (PIU) under Water and Sewerage Department o f MRDPW, charged with overall responsibility for project implementation and coordination, is included in the project f i le. The assessment i s based on meetings with MRDPW representatives o f the Water and Sewerage Directorate and the Project Implementation Unit (PIU) members. ,
4.
5. a
The overall procurement risk is rated as high.
Summary o f the main findings are:
MRDPW i s the primary ministry in charge o f implementing large infrastructure projects such as public roads, water and sewage utilities, which includes a well-established Directorate dealing with EU funded activities and potentially good capacity to implement projects o f complexity and scale. However, so far experienced M R D P W staff has demonstrated little support or cooperation in dealing with newly appointed P I U procurement staff.
a The P I U procurement specialist i s familiar with Bulgarian Public Legislation and has some experience implementing EU-financed projects.
Procurement Her exposure
47
to Bank-funded procurement i s limited to selection o f consultants under QCBS and interactions with colleagues during a 2008 workshop in Sofia.
Two years after the start o f project preparation, remuneration for P I U staff remains unresolved. Regulations that allow payment o f a 75 percent premium to the base salary for staff involved in EU funded projects do not apply to other IFIs and this disincentive was identified during assessment.
Internal M R D P W procedures, particularly within the department o f water supply and sewerage are not streamlined, documentation f low i s not well established, and the f i l ing system needs to be improved to ensure access to internal information and back up- arrangements.
a
0
Recommendations to address identified risks
a Strengthen M R D P W capacity in Bank-financed procurement implementation. The Ministry has agreed to involve experienced staff from the PIU implementing the TTFSE Project to provide immediate assistance on critical procurement tasks.
Ensure that the Project Director has at least basic procurement training in Works, Goods, or Consulting Services, either on the j ob or through the Bank during the Project Launch Workshop, or both.
Ensure that project procurement staff that have had one-hour training during pre- appraisal mission on the Bank Client Connection system, continue to learn through the available on-line tutorials.
0 Carry out improvements to facilities, organization, record keeping, reporting, and planning and monitoring through a system for document archiving to ensure that records are complete and accessible to MRDPW staff. Prepare a matrix o f M R D P W staff responsibilities for the Operational Manual.
a
0
Overall risk assessment and recommendation on prior-review threshold: 6. a
Key issues and risks in procurement for project implementation include the following:
Capacity to manage large-scale investment projects. The MRDPW has sufficient capacity to manage large contracts but has a procurement skill shortage due to the unresolved issue o f remuneration. However, Government is very committed to implementing the project and M R D P W can make a temporary transfer o f additional resources located in the Directorate for PHARE project implementation for additional technical support if P I U staff remuneration i s resolved. The M R D P W management mobilized two TTFSE P I U senior staff for initial project implementation support.
Risks associated with technical complexity o f contracts. The project i s rated as medium complex project.
a
Prior review thresholds. Procurement thresholds are set in the Procurement Plan
C. Procurement risk assessment 7 . The overall procurement risk i s rated as high.
48
D. Procurement implementation and arrangements
8. Procurement activities wi l l be carried out by the PIU under MRDPW Water and Sewerage Department. The project does not include national competitive bidding (NCB) procurement; however if NCB i s needed, the Borrower agreed to use a Bank-provided Regional Sample o f NCB documents for goods and works.
9. Procurement o f Works. Works contracts procured under this project will include completion o f three water supply dams, Luda Yana, Neikovtsi, and Plovdivtsi, and rehabilitation o f the operational Studena dam, which supplies water to the town o f Pernik. Dam construction had started but was stopped for lack o f funds. This project aims to restart construction after feasibility studies confirm the viability o f investments on economic, financial, and technical grounds. The Borrower indicated that no outstanding contractual relationships exist related to completion o f above construction. Due to the size o f investment and specifics o f construction works, all contracts wi l l include prequalification.
10. Procurement o f Goods. There are no goods contracts under the project.
11. Procurement o f Technical Services. There are no technical services contracts under the project.
12. Selection o f Consultants. Consultant services contracts procured under this project will include Feasibility Study and Designs Update for the Dams and Preparation o f Bidding Documents, Construction Supervision, Audit and Preparation o f Regional Master Plans, and Water and Wastewater plans for towns in six Regions across Bulgaria.
13. Shortlists for consultant services for contracts estimated to be less than EURO 150,000 or equivalent may be composed entirely o f national consultants. Consulting offices associated with local universities may be included in the shortlists, but university-based consultants will not be given preference over other private consultants.
14. Training. The project would include some training activities for PIU staff to be financed under the project funds. 15. Operating Costs. Operating costs including salaries o f implementing agency staff and additional support shall be covered from Government budget.
16. Advance procurement. Procurement related to civil works on Luda Yana and Plovdivtsi dams will be funded by the Ministry from state budget, including the update o f technical documentation and design. The same financing arrangement shall apply to selection o f the construction supervision company that shall perform Engineer’s role. Given the deadline established jointly by the Bulgarian Government and the EU, the consultant selection process for Preparation o f Regional Master Plans and Water and Waste Water plans for the 48 water utility companies started in February 2009.
17. Retroactive Financing. There i s no retroactive financing under the project.
18. Technical issues affecting procurement decisions. MRDPW would like to begin with construction o f the Luda Yana and Plovdivtsi dams because completed detailed designs already exist, although they need to be up-dated and their construction permits renewed. Before consultants are selected, the Dam Safety Panel and Bank should give priority to reviewing the Terms o f Reference for conducting site investigations, economic analysis, and design updates for Luda Yana and Plovdivtsi dams, given their importance for project implementation. The same
49
review process shall apply to the detailed designs and other related documents prior to the start o f the bidding process.
19. Filing and records keeping. PIU procurement staff must establish and maintain the filing system; agreed reporting formats will be specified in the Project Operation Manual, which wi l l be completed by negotiations.
Procurement Plan 20. At pre-appraisal, the PIU under the Water and Sewerage Department o f MRDPW, developed an initial Procurement Plan (PP) for the entire project scope corresponding to the implementation plan that provides information on procurement packages, methods, and Bank reviews. This PP will be agreed between Borrower and Bank project team at negotiations, and will be available from the implementing agency project database and on the Bank external website. The PP will be updated annually in agreement with the Bank project team, or as required to reflect actual project implementation needs and improvements in implementing agency institutional capacity.
Frequency of Procurement Supervision
21, The capacity assessment for the Implementing Agency recommends that in addition to Bank team prior review supervision, regular physical inspection o f sample contracts should be carried out every six months, including prior-reviewed contracts, which should comprise no less than 3 0 percent contracts physically inspected.
Additional Provisions for National Competitive Bidding.
22. additional provisions shall apply:
The project does not foresee NCB contracts, however if NCB to be used the following
0
0
e
0
a point system evaluation shall not be used domestic preference shall not be applied international bidders shall not be excluded from bidding the draft NCB bidding documents shall be prepared and submitted to the Bank for review and no-objection before the first NCB tender i s issued no bids shall be rejected at the bid opening. All bids submitted on or before the deadline for submission o f bids shall be opened and read out at public bid opening local bidders shall demonstrate ability to obtain securities and access to credit bid evaluation criteria shall be pre-disclosed to bidders in the bidding documents technical specifications shall be written to promote the broadest possible competition.
0
0
e
e
23. corruption measures will be in line with Bank Guidelines.
Anti Corruption Measures: Corruption risk i s rated as average and therefore the anti-
50
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Definitions:
ICB-International Competitive Bidding (Section 2 o f the Guidelines). For works contracts valued at or more than EURO 3,800,000. For goods contracts valued at or more than EURO 750,000.
NCB-National Competitive Bidding (Section 3.3 o f the Guidelines). For works contracts valued less than EURO 3,800,000. For goods contracts valued less than EURO 750,000
DC-Direct Contracting (Section 3.6 o f the Guidelines)
S-Shopping (Section 3.5 o f the Guidelines) for works contracts valued at or less than EURO 75,000. For’goods contracts valued at or less than EURO 75,000
Pr ior review: For Works contracts: All ICB contracts. All NCB contracts o f EURO 1,500,000 equivalents or more including the first two contracts regardless o f contract value.
Prequalification wi l l apply to works contracts valued at or more than EURO 7,500,000.
Domestic preference wi l l not apply.
Definitions. CONSULTANT SERVICES
QCBS-Quality and Cost-based Selection (Sections 2.1 - 2.28 o f Consultant’s Guidelines) QBS-Quality Based Selection (Section 3.2 o f Consultant’s Guidelines) CQ-Consultants Qualifications (Section 3.7-8 o f Consultant’s Guidelines) LCS-Least-Cost Selection (Section 3.6 o f Consultant’s Guidelines) SSS-Single Source Selection (Section 3.9- 13 o f Consultant’s Guidelines) IC-Individual Consultant (Section V o f Consultant’s Guidelines)
Pr ior Review: For firms: All contracts equal to EURO 150,000 or more. First two contracts regardless o f value and all SSS contracts
For individual consultants: All contracts equal to EURO 50,000 equivalent or more. First two contracts regardless o f value and all SSS contracts
55
Annex 9: Economic and Financial Analysis BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT
ECONOMIC ANALYSIS
1. Comprehensive economic analysis for the dams will be carried out when feasibility studies, which require updated cost/ benefit information, are completed. An EU Directive requires Bulgaria to provide good quality water to i t s citizens; completion o f the dams and construction o f treatment plants under the project wi l l not only ensure security o f water supply but also the will allow ViKs to supply safe treated water to project area residents, who are now suffering summer water shortages and in some cases, an unsafe untreated water supply.
2. Economic analysis for the feasibility study will take the following into account:
Increase in domestic consumption: The security o f continuous water supply will allow water consumption to increase, first in project dam areas and later in nearby settlements. Per capita consumption i s expected to gradually increase to EU norms (around 130 Ipcd). Based on the information provided, the following assumptions are made:
The Ludu Yunu durn wi l l serve 30,000 people in Panagiurishte, and in the future, another 15,000 people around Lesitsevo and Pazardzhik. Technically, this service can be extended with additional investments not considered under the project. Consumption i s 70 1pcdl3, which i s assumed to increase gradually to EU norms o f around 130 lpcd.
The Neikovtsi dum water supply wi l l connect to 14,000 people in Tryavna, and in the future, to another 10,000 people in Dryanovo through a gravity pipeline. Water consumption i s 74 lpcd and expected to increase gradually.
The Plovdivtsi dum wi l l supply 2 1,000 people in the towns o f Madan and Rudozem and provide a secure water supply to another 5 1 , 000 people, and two-thirds o f the population o f Smolyan, through a gravity flow pipeline from Srednogortsi to Taran. Water demand i s 91 Ipcd, which i s expected to increase gradually.
Increase in non-domestic consumption: Non-domestic consumption can be assumed using availability o f water and expected population growth in the region to arrive at conservative estimates. In Luda Yana, non-domestic consumption in population equivalent (total non-domestic consumption divided by the population) i s currently 36 lpcd, and in Plovdivtsi, it i s 14 Ipcd, both o f which are expected to double in the medium- to long-term. In Neikovtsi, non-domestic consumption in population equivalent i s 123 lpcd, which i s expected to remain unchanged.
Savings in coping costs: During summer, consumers in the three project areas experience weeks without adequate water supply resulting in consumers and ViK incurring significant costs for tankers, wells, or temporary piping from nearby sources to supplement the ViK supply. International studies have quantified similar coping costs; for
j 3 lpcd means liters per capita per day
56
example, in Peru, water from alternate sources such as tankers, or small-scale providers cost customers up to 50 percent more per m3 than municipal-supplied water.14 The analysis to be completed for the feasibility study would include coping costs.
3. In addition to quantifiable benefits, qualitative benefits include improved human health and safety due to the reliable and secure supply o f treated water. Intermittent water supply causes water pressure inside the pipes to drop, creating a risk that water supplied to consumers can be infiltrated by contaminated groundwater. Another benefit o f secure water supply i s the reduced wear and tear on pipes that occurs when water supply i s intermittent and water pressure fluctuates. Such system deterioration increases ViKs' repair and rehabilitation costs. These qualitative benefits should also be considered in the feasibility studies.
FINANCIAL ANALYSIS
4. Financial analysis o f the investments was not performed because preparation o f the Master Plans and dam investments are part o f Government public expenditure programs, and after the dams are constructed, they would be operated by the local water utilities. The national water regulator SEWRC will ensure that the operating costs are covered through the tariffs.
l4 World Bank (2007) Evaluation o f Small-scale Providers o f Water Supply and Sanitation Services in Peru
57
Annex 10: Safeguard Policy Issues BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT
ENVIRONMENT AND SOCIAL
1. Environmental safeguard documents. The proposed project i s rated as environmental assessment category A because the completion o f the three dams could potentially have adverse impacts on the upstream or downstream environment. To study the potential impacts o f construction and operation o f the dams and propose mitigation measures for them, the Borrower prepared the following environmental safeguard documents to meet the OP/BP 4.01 requirements: (a) an Environmental Management Framework (EMF) developed in September 2007 to outline procedures to be undertaken during project implementation once the feasibility studies and detail designs are updated for the dams; (b) three Environmental Due Diligence (EDD) Reports were prepared reflecting the current environmental situation at the three incomplete dam sites where works stopped some years ago due to lack o f finance; (c) Environmental Impact Assessments (EIAs) were prepared for Luda Yana and Neikovtsi, dams, including Environmental Management Plans (EMP); (d) Supplemental Update to the EIA for Plovdivtsi Dam was prepared to fill the gaps between the initial EIA prepared in accordance with the national legislation and approved by the Ministry o f Environment in 2000, and the requirements o f OP 4.01 (the init ial EIA included an Environmental Management Plan (EMP) and was the basis on which construction permit was issued); and (e) a freestanding EMP for the rehabilitation works proposed at Studena dam. The three final EIAs, EDDs and Environment Framework were publicly disclosed in Bulgaria (on the website o f MRDPW) and at the World Bank (Infoshop) before project appraisal.
2. These environmental safeguard documents were developed based on information from existing feasibility studies and designs and visual assessments o f existing sites. The documents summarize dam history, including options analysis; identify legislative and organizational structures for environmental management; describe existing environmental and social conditions and anticipated environmental impacts during dam construction and operations; outline environmental impact mitigation and monitoring plans; and describe the public consultation process. Once the feasibility studies and detail designs are updated during project implementation, the EMPs and EIAs will be revised to incorporate any new engineering documentation or works details needed for construction o f the dams and their possible affiliated impacts.
3 . Social safeguards documents. The social safeguard documents were prepared in order to have a better understanding for and disclosure o f the social safeguard and social risk issues. The social safeguard documents prepared include a) Social Due Diligence (SDD) Reports and b) Land Acquisition Policy Framework (LAPF). Since construction on the dams had begun earlier, the Government had acquired most o f the land that will be required for completing the proposed investments. The SDD Reports for the three dam sites describe the process used in the past by the Government to acquire land. The SDD Reports provide an assessment o f the total amount o f land that was acquired previously for infrastructure construction; identify the number o f people affected; summarize the legal framework under which land was expropriated; and describe the restitution claims on the expropriated land. The L A P F outlines the legal processes required for
58
future land expropriation in compliance with the provisions o f national legislation and Bank Operational Policy 4.12. The LAPF has been prepared in the event additional land i s required for the completion o f the dams.
4. Public consultation process. A national-level consultation on the project took place on December 12, 2007. During the three local-level consultations carried out in October 2007 in the municipalities where the project dams are located, local people requested a prompt start for dam construction so that their long-awaited benefit will materialize-an adequate supply o f good quality water. The SDD Reports, and the LAPF, were disclosed in the country in December 2007 and available in the Bank Infoshop in January 2008. The updated LAPF was also disclosed on March 24,2009. National and local-level public meetings took place in February 2009 to discuss the draft EIA reports for Luda Yana, Neikovtsi, and Plovdivtsi dams, and discussions addressed social impact aspects as well. Final EIAs were disclosed in country and at Infoshop on M a y 12, 2009. All public meetings were well attended by NGOs, affected people, scientists, and government representatives.
5. Overall environmental impacts related to proposed dam construction. Most potential environmental impacts are temporary and related to aspects o f construction works; and a few impacts related to the reservoir and dam existence and operation could be longer-term.
6. As the dam sites and reservoir basins have already been significantly impacted by the previous construction, completing the dams will have a relatively minor incremental impact on the local environment. In fact, the site restoration to be done after completion o f construction i s expected to improve the local conditions. Potential construction-related impacts are likely to be temporary, localized, and can be effectively mitigated by applying international good practice for construction and planning. The anticipated construction stage impacts may be related to (a) air pollutioddust, noise, vibration, and access restriction, (b) improper disposal o f construction- related waste; (c) temporary pollution o f soil and surface waters due to accidental spillage o f fuel and o i l from construction activities; (d) safety hazards including worker safety; (e) damage to trees and existing vegetation; and ( f ) chance finds o f physical cultural resources. However, the contractor will manage these impacts properly during the construction phase, closely supervised by the P I U and designated engineer.
7. Potential environmental effects due to the existence and operation o f the dams and reservoirs may be related to: (a) changes in downstream morphology o f riverbeds and banks due to altered sediment loads o f the rivers that could result in increased local erosion; (b) changes in downstream hydrology (total flows, seasonal flows, short-term fluctuations); (c) changes in downstream water quality (e.g., nutrient load, heavy metals concentration, temperature); (d) reduced biodiversity and river ecosystems due to blocked movement o f local species (e.g. fish) and elimination o f floods; and (v) impacts on existing infrastructure such as roads and bridges. The EDD and SDD reports and the EIAs identified and analyzed these potential impacts and indicated measures to eliminate, reduce or mitigate them.
Summary of findings from EIA, EDD and SDD Reports
8. The findings on the environmental and social aspects appear below.
Neikovtsi Dam
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9. Current environmental status. The dam is located in the valley o f the Neykovska river above Neykovtsi residential estate o f the town o f Plachkovtsi and at about 7.5 km south o f the town o f Tryavna. The run-off o f the river i s uneven in seasonal terms and naturally has a very l ow or even zero f low for part o f the year, especially during summer time. Currently, the natural f low o f the river i s unimpeded because i t s f low i s maintained through an outlet constructed beneath the partially completed dam. Upstream o f the dam i s almost dry during the summer low-water season with little ichthyofauna. Ichthyofauna appears only near Plachkovtsi. Herpetofauna i s represented only by one species o f high conservation status, which might be impacted by the reservoir. There are no species o f high conservation significance; species found in the area are widely distributed throughout the territory on the northern slopes o f Central Stara Planina. The ligneous forest vegetation (6.0-7.0 ha) was cleared when construction began in the 1980s. The humus soil layer has not been stripped. The current soil pollution at the dam site i s not known but it will be analyzed during the update o f the dam feasibility study and design. Based on land use and topography there i s no reason to expect significant pollution o f soil at the site will be found. Once completed, the upstream river ecosystem will be transformed into a reservoir ecosystem as 32.5 ha will be covered by water permanently. According to latest information f rom the MoEW, only the sanitary-protected zones will be within P A Bulgarka. Complete details o f the size and extent o f the reservoir will only be known when the detailed designs are completed. Another Natura 2000 site located in the proximity o f the dam area is the Protected Area Dryanovska reka (code BG 000282) but the dam and reservoir will be located outside this protected area. The purpose o f the sanitary-protected zone o f the dam is to maintain natural vegetation cover to prevent erosion and sedimentation or pollution o f the reservoir water. According to MoEW, the management regime o f the sanitary-protected zone o f the dam i s consistent with the goals o f the Natura 2000 and favorable to the management o f protected area. The updated EMP that wil l be prepared in conjunction with the feasibility study will identify any measures that may be required to ensure that local biodiversity i s not affected. A sustainable ichtiocenosis community will develop in the reservoir following inundation. The lower reaches o f the Neykovska River, downstream o f the dam and upstream from the Plachkovtsi will stabilize some water in the system at al l times due to the release o f environmental flows as part o f the dam operation, and larger releases during the spring. The continuous f low is likely to increase populations o f river-dependent species compared with the present situation o f very l o w water levels during the summer.
10. The Neykovska River i s a small tributary o f the Yantra river which flows into Danube at the border o f Bulgaria. The mean f low at the Neykovski dam site is 73 l/sec, compared with a mean f l ow o f 49,800 I/sec for the Yantra River at the border where it exits Bulgaria. During the construction period there will be no interruption or reduction in f low o f the river and measures will be taken to avoid pollution o f the water. During the impoundment period there will be a reduction in the river f low downstream o f the dam site as part o f the f low will be captured to fill the reservoir. The amount o f the reduction will depend on the reservoir size, filling period and precipitation levels but even with rapid dam filling (less than one year) the impact on the f low o f the Yantra river at the border would be less than 0.2%.
11. Social elements. The acquisition o f lands designated for Neikovtsi Dam was carried out in the period 1978-1982, in accordance with the existing policies and decrees. For dam construction, state-owned land was allocated and private properties were expropriated for which 23 owners received compensations under the terms provided by law. State-owned lands were granted from the following: State Agriculture Fund (4,194 dekares); State Forestry Fund (23,100
60
dekares) for the water purification plant; and State Forestry Fund (160 dekares) for service roads. In 1982, the Gabrovo District Municipal Council expropriated land within the area o f security, Sanitary and Security Area (SSA) Belt I. Eleven parcels and a few residential buildings were expropriated. Based on the archive documentation available, there are no data on the exact measurements and description o f the private properties expropriated. By Order N 549 o f 30.07.1982 o f the Gabrovo District Municipal Council, it appears the total amount o f compensation paid was BGN 105 224.30. Only two o f the persons entitled were compensated with apartments while the rest received monetary compensation. According to data from the Tryavna Municipal Agriculture and Forestry Office, 48 former owners requested restoration o f property on 270.348 dekares o f lands and forests in the territory o f the village o f Plachkovtzi, following the adoption o f the Constitution o f 199 1 and the introduction o f the restitution laws. The owners were denied restoration o f ownership due to the activities related to the dam construction and were compensated with lands or registered compensatory notes, and the owners o f forests were compensated with other forests in areas established by the Plachkovtzi State Forestry. N o appeals have been lodged in court against decisions on compensation with land and registered compensatory notes. Currently the properties for the dam site, its reservoir, and the water treatment plant are owned by the State. The completion o f Neikovtsi Dtim will most likely not require subsequent acquisition and expropriation o f other lands nor displacement o f population. However if any land is determined to be required, this acquisition will be addressed by the provisions o f the LAPF. The suspension o f dam construction has left the towns o f Tryavna and Plachkovtsi, and part o f the villages in their municipalities with inadequate and unreliable water supply.
Luda Yana Dam
12. Environmental status. In 1982, preliminary studies performed by ED1 Vodproekt considered Luda Yana dam an integrated waterpower works designed for potable water supply, irrigation, power generation, water sports, and fishing. In 1989, preliminary studies were developed for the water treatment plant. In addition to environmental procedures to be carried out for this dam, an old cemetery (with 15 burial sites based on visual inspection) will have to be removed prior to Bank financing of this investment. The partially constructed Luda Yana dam i s located downstream the confluence o f three tributaries o f Luda Yana River (namely Okoshka, Muleiska, and Garmidol). The river eco-system i s negatively affected from incomplete dam construction and due to strong fluctuations o f the natural river runoff, which are significant in spring and almost missing during summer months. Currently, the river f low passes entirely through the diversion tunnel constructed in the past. The ichthyofauna i s limited at the dam site. A substantial part o f the forest has been cut and a considerable part o f the humic soils has been cleared and deposited away from the site. This contributed to an accelerated erosion process especially on the right bank after construction suspension in 2000. The herpetofauna, the mammals, and the ornitofauna have been affected by eroded terrains, removal o f forest vegetation, and humus layer stripping. N o critical habitat or species o f high conservation importance have been identified so no special protective measures are proposed. In addition, the reservoir area i s not considered part o f Natura 2000 and as such, the Luda Yana dam construction and future operation will not affect significant ecological resources, flora and fauna in this dam area. According to MoEW, a part o f the sanitary-protected zone i s the only part o f the dam site that falls within the scope o f Sredna Gora Protected Area (code BG 0002054); yet, the regime o f the sanitary-protected zone o f the dam i s in l ine with the goals o f the Natura 2000 and favorable to the management o f protected area. The river eco system upstream o f the dam will be
61
transformed into a water reservoir eco system, as 142 ha will be covered by water permanently. At the same time, the seasonally variable run-off regime o f the river Luda Yana wi l l be stabilized by ecological releases during dam operations. The erosion processes that currently exist wi l l be stabilized by implementing an erosion control project.
13. The partially constructed Luda Yana dam i s located downstream the confluence o f three tributaries o f Luda Yana River (namely Okoshka, Muleiska, and Garmidol). The Luda Yana River i s a small tributary o f the Maritsa River which enters Turkey and Greece downstream o f Bulgaria. The mean flow at the Luda Yana dam site i s 790 l/sec, compared with a mean flow o f 107,908 h e c for the Maritsa River at the border where it exits Bulgaria. During the construction period, there wi l l be no interruption or reduction in flow o f the river and measures wi l l be taken to avoid pollution o f the water. During the impoundment period there wi l l be a reduction in the river flow downstream o f the dam site as part o f the flow will be captured to fill the reservoir. The amount o f the reduction wi l l depend on the reservoir size, fil l ing period and precipitation levels but even with rapid dam fill ing (less than one year) the impact on the flow o f the Maritsa river at the border would be less than 1%.
14. . Social elements: The designation o f lands for the construction o f Luda Yana Dam was carried out in the period 1986- 1987 in accordance with legislation. During 1986- 1987, state- owned lands were designated for the Luda Yana Lake reservoir. For dam construction, land was provided from the State Forestry and Farm Fund with a total area o f 1,753,600 m2 allocated as follows: 1,592,000 m2 for the main dam wall; 62,400 m2 for clay quarries; 52,200 m2 adjacent infrastructure sites; and 46,000 m2 for a temporary holding area. The land designated for dam construction did not result in any displacement o f population; however, approximately 46,000 m2, were “expropriated” from 20 private citizens. These lands were in fact State-owned real estates where citizens had been granted rights to carry out agriculture production. The 4,261 Bulgarian lev (BGN) paid to the 20 persons was generally referred to as compensation for the improvements performed by them, investments in perennial plants and crops (but not for losing the ownership, a legal right they did not actually possess). According to data from the Municipal Farming and Forestry Office o f Panaguyrishte, after 1991 and with the start o f the restitution procedures, 106 owners presented claims for restitution on a total o f 132 farming lands totaling 423,92 000 sq.m., located in the area o f Luda Yana Dam. Restitution rights was denied due to the designation o f these lands for the construction o f the dam; the owners were however, awarded compensation in the form o f registered compensatory notes. N o claims were lodged against the State concerning the allocation o f land for the dam construction. N o future claims for restoration o f property and payment o f compensation for the lands are expected by the Government. I t i s possible that some additional land wi l l be needed for the construction o f the water treatment plant that will be within the SSA Belt I. If there i s a determination that additional land i s required, this acquisition will be addressed by the provisions o f the project’s LAPF.
Plovdivtsi Dam
15. Environmental status. An Environmental Assessment was developed for Plovdivtsi Dam, and accepted by the Regional Inspectorate o f Environment and Water (RIEW) o f the town o f Smolian, which issued a decision to implement the project in 2000. Detailed technical designs for the water treatment plant, and an EA were developed for Plovdivtsi dam in compliance with Bulgarian regulations. A supplementary document was prepared in 2009 to fill gaps between the existing EA and the requirements o f OP 4.01. The dam i s situated in the southern part o f the Rhodopi Mountain and in Smolyan District (South central o f Bulgaria) close to the border with
62
Greece. The partially constructed dam is located on the river Iskrets, which i s a right hand tributary o f river Elhovska that further falls into Arda River. The partially completed dam construction has separated the upper course o f the river from i t s lower zones but the natural f low o f the river i s unimpeded because i t s f low is maintained through an outlet constructed beneath. The herpetofauna i s scarce; mammals and the ornitofauna are more abundant in the area but the species present are widely distributed along the entire territory o f the east and west Rhodopi Mountains. In the vicinity o f the dam reservoir and downstream the Iskrets River, there are no endangered or protected species affected by the works performed until 2000. The “Tsigansko gradishte” Natura 2000 Protected Area (PA) (code BG 0000372) i s situated near the border with Greece on Bulgarian territory; since complete details o f the size and extent o f the reservoir will be known when the designs are updated, the location o f Plovdivtsi dam site versus the “Tsigansko gradishte” P A will be confirmed during project implementation. The ligneous forest vegetation was cleared at the beginning o f construction. The humus soil layer was stripped and stored. The river eco system upstream o f the dam will be transformed into a water reservoir eco system, as 16.1 ha will be covered by water permanently. At the same time, appropriate seasonal dam operations will maintain sustainable ichtiocenosis community to establish in the reservoir while the ecosystem conditions in the downstream reaches o f the Iskrets River will stabilize through constant release o f required minimum environmental flow.
16. The Iskrets River i s a small tributary o f the Arda river which enters Greece and then Turkey downstream o f Bulgaria. The mean f low at the Plovdivtsi dam site i s 500 l/sec, compared with a mean f low o f 72,600 l/sec for the Arda River at the border where it exits Bulgaria. During the construction period, there will be no interruption or reduction in f low o f the river and measures will be taken to avoid pollution o f the water. During the impoundment period there will be a reduction in the river flow downstream o f the dam site as part o f the flow will be captured to fill the reservoir. The amount o f the reduction will depend on the reservoir size, filling period and precipitation levels but even with rapid dam filling (less than one year) the impact on the f low o f the Arda river at the border with Greece would be less than 0.2%. During the operational period there will be little or no impact because the great majority o f water taken from the reservoir returns to the same watershed.
17. Social elements. Land needed for the construction o f Plovdivtsi Dam was acquired by the State under the relevant procedures provided for by law from 1998 to 2000. For the project site, state-owned lands from the State Forestry Fund were allocated and private properties were expropriated for which the owners received compensation. At the time o f expropriation, from 1998 to 2000, specifically within the dam reservoir SSA Belt I: 3,74591 m2 o f land was expropriated from 3 1 “groups o f people” comprising the landowner or heirs o f the landowner to whom 70,135.40 Bulgarian lev (BGN) was paid (62,091.40 BGN for the land, 8,044.0 BGN for perennial crops); and 3,962 m2 o f land was expropriated from 8 “groups o f people” comprising the land owner or heirs for service roads and they were paid 5,888.80 BGN (3,259.80 BGN for the land, 2,629 BGN for perennial crops). The compensation for expropriation was calculated as per the Ordinance on the Rules for Determining the Price o f Agricultural Lands (adopted by the Council o f Ministers in 1998). Prior to the expropriation process, the private lands acquired for the construction o f Plovdivtzi Dam had been restituted to their owners in accordance with the restitution laws. Following restoration o f ownership, the lands were expropriated for the construction o f Plovdivtzi Dam. The Social Due Diligence report noted that there was one claim for land restitution (by the heirs o f Arif Reshidof Sinapov as regards land plot N 033023 with a surface o f 752 sq.m.; land plot N 034010 with a surface o f 1,193 sq,m., and land plot N 034018
63
with a surface o f 199 sq.m) which was originally rejected by Government on the basis o f insufficient documentation, but this judgment was successfully appealed in court and the individuals’ ownership o f the land was confirmed. I t was not possible at the time to determine whether the land in question would fal l within the area needing to be acquired for the project. This will be determined based on the final design, including the definition o f the Sanitary Zone. If any o f the land will need to be expropriated, the provisions o f the LAPF will apply.
18. Summary of known issues and data gaps related to prior land expropriation: It i s clear that the bulk o f the land required for the main dam wall, dam lakes and corresponding submerged area, ancillary structures and adjacent infrastructure has previously been acquired by the Government o f Bulgaria in the years 1978, 1986, and 1998-2000. In summary, the SDDs and additional communication from the Government clarify the following: the degree o f impact o f past expropriations, the number o f applicants claiming restitution rights”, the legal framework used for expropriation and restitution, approach used to calculating compensation amounts paid for expropriation and restitution16, the basis on which claims were approved or denied, the deadline for filing restitution claim” etc,. The Government has specified that there were no outstanding challenges or unresolved issues arising from these actions, either in terms o f claims o f land ownership or the compensation process or amounts. The restitution claims were approved or rejected by the respective Municipal Agriculture and Forests Office or by the court depending on whether the interested persons have managed to prove their rights o f ownership over the lands. The ownership could be proven by eligible evidences such as notary deeds, deeds o f partition, protocols o f the labor co-operative farms using the lands, land registers, applications for membership in co-operatives, rent ledgers protocols, etc. The Government has also clarified that while Bulgarian law (State Property Act) provides for the right o f the owners o f expropriated lands to claim them back if construction has not commenced or the land i s not used for its intended purpose within three years, the fact that construction o f the dams has already begun prevents the former owners in the project areas from claiming back the land. I t has not been possible to confirm some details regarding the past land restitutions and expropriations, such as: (i) how the deadlines for expropriation and restitution were publicized, (ii) the calculation procedures for Neikovtzi Dam under the old legal regime (effective in 1982), (iii) whether there i s any other legal avenue s t i l l available for people who missed the deadlines for restitution applications, and (iv) to what extent the Compensatory Notes provided as compensation have been translated into cash by the recipients. I t i s also not clear whether there was any selectivity in expropriation or restitution decisions. However, during the repeated local public consultations no complaints were raised concerning past expropriation or the use or value o f the compensatory notes.
DAM SAFETY ASSESSMENT
I’ The information regarding the restitution claims for land located at the dam sites are provided by the respective Municipal Agriculture and Forests Offices and are attached as appendices to the SDDs. l6 The basis for calculating the value o f the compensatory notes i s set forth in the Ordinance on the Rules for Determining the Price of Agricultural Lands. l7 The deadlines for filing of restitution claims are set forth in Article 22 of the Final and Transitional Provisions of the Act on Amendin and Supplementing the Agricultural Land Ownership and Use Act (promulgated in State Gazette N o 13 on 9 February, 2007) and in Article 5b of the Final and Transitional Provisions o f the Act Restoring Ownership on Forests and Forest Stock Land Tracts from the Forestry find (the amendment i s promulgated in State Gazette No 13 on 9* February, 2007).
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i!
19. A Bank team that included dam specialists reviewed dam safety issues and technical matters and the findings are outlined below. Bulgarian procedures to ensure dam safety are in line with international practices and the dam safety policies o f the Bank (OP 4.37). The assessment was based on field observations, discussions with dam owners and operators, and clarifications on regulatory framework provided by Government officials. An important project safety feature i s the independent panel o f experts that will review design and implementation o f rehabilitation and completion activities to ensure that dam safety practices are aligned with Bulgarian and Bank policies. Key features o f the Bulgarian system are summarized below: e
e
e
e
e
20.
According to the International Commission o f Large Dams (ICOLD) definition, there are 215 large dams in Bulgaria-200 are embankment-t pe dams, and 15 are concrete structures; total water storage in the country i s 7.6 km . The three dams that would be completed under the project will be constructed by the Ministry o f Regional Development and Public Works, which i s responsible for developing water supply dams. After construction, dam ownership and operations will be transferred to the local water utility. Under the Bulgarian system, there i s a clear separation among the following roles: (a) the dam owner and operator, Le., the water utility; (b) dam regulator - MRDPW; and (c) panel o f experts who are academics and practitioners, which allows independent review o f construction and operations.
In Bulgaria, dams are classified, in l ine with I C O L D classifications, according to the potential hazard they represent but safety procedures are the same for al l dams, irrespective o f their hazard classification. Each dam has a permanent monitoring staff responsible for instrumentation readings, periodic geodetic survey work, visual inspections, and routine maintenance.
An operation manual specifies regular observations and measurements to be carried out, and include steps to be taken following extraordinary events such as floods and earthquakes. Each dam has a program o f technical control that includes measurements, frequency, and locations o f measurements for types o f phenomena occurring during operation. A procedure exists for interpreting observations and measurements, and corresponding actions to be taken. Control and measuring systems data are measured and analyzed the same day they are collected.
If abnormal parameters and deviations are observed, additional measurements are carried out. Staff prepares periodic reports on dam technical performance, typically every 12 months, and an expert council and leading specialists review the report and recommend measures to maintain, repair, improve, or modify the program o f technical control.
Every dam in Bulgaria has an emergency plan, which is strictly inspected by the MRDPW. Permanent communication connections exist between the dams and the offices o f local government, civil defense, and MRDPW. The Department o f Civ i l Defense i s responsible for establishing emergency preparedness plans, including evacuation. In an emergency, the dam owner immediately informs the Department o f Civ i l Defense about the type o f risk or occurrence, and every dam site has stockpiles o f materials necessary for handling emergencies.
A Bulgarian dam safety panel was established for this project to recommend any
Y
additional studies, investments, or design changes necessary to complete and rehabilitate the dams. Panel members were drawn from an existing Bulgarian dam safety panel, and their advice
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will be based on site visits and review o f existing documents, and reflected in the Terms o f Reference for consultants hired to prepare the feasibility studies for al l four dams.
Dam
Luda Yana
Plovdivtsi
Neikovtsi
Annual water Annual water Water flow to Ratio of water demand (mill. retained for water riparians (mill. retained to
m3/year) supply (mill. m3/year) water flow to m3/year) riparians
6.0 1.2 3,403 0.03 5 Yo
4.0 0.81 2,290 0.035%
5.6 1.,12 1,573 0.07%
23. During impoundment, there would be a very small increase in the volume o f water retained (see table below). The time needed for filling each o f the three reservoirs i s estimated to vary from 2 months for Plovdivtsi, to 1 year for Luda Yana, and to 2.5 years for Neikovtsi. However, more accurate durations will be determined through the upcoming updates o f the feasibility studies. The amount o f water volume retained per year would depend on the retention period but the impact on other riparians i s expected to be negligible (table below). For illustration purposes, assuming the impoundment period calculated based on the average multi annual f low rates, the ratio o f water to be retained in the dams compared to the f l ow o f water to the riparians i s very l o w as shown below.
Dam
Luda Yana
Average flow Water retained Water flow Ratio o f
to riparians during retained to water flow to riparians m3/year)
annually water Impoundment Gross rate retained storage
(mill m3)
during volume impoundment time (months) impoundment
(m3/sec) (mill. m3/year) 19.94* 0.62 12.4 19.55 3,403 0.57%
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Plovdivtsi I 2.45
24. On March 19, 2008, the Government o f Bulgaria authorized the Bank to inform riparians about the project. Letters dated March 21, 2008, sent by the Bank on behalf o f Government, informed Turkey, Greece, and the International Commission for the Protection o f the Danube River about the earlier version o f the project in which the dam component i s identical to the existing version. Since then there has been an exchange o f letters between the Governments o f Turkey and Bulgaria, as shown below.
8
8
Turkey sought additional project information in a letter o f May 30,2008. Bank provided sources for publicly available documents on Environmental, Due Diligence, and Social Due Diligence documents, plus hard copies, in a letter o f June 19,2008, and requested that Turkey provide comments by July 21 , 2008. Turkey requested additional time to review documents in a letter o f July 8, 2008. Bank requested comments by September 5,2008, in a letter o f July 15,2008.
8
8
25. A letter o f September 2, 2008, from the Government o f Turkey to the Bulgarian authorities raised several concerns that are addressed in the EIAs. The letter included a general concern regarding potential adverse project impacts related to water quality and quantity, and biocapacity for cropland, grazing land, and forest. Turkey also commented that the design should consider adequate dam capacity to absorb flooding; dam management should take into account river basin capacity and downstream water demand in various months; and that the Bulgarian authorities should supply regular hydraulic and meteorological data to Turkey. Further, any flow irregularities should be reported through the Center o f Early Warning Mechanism formed between the two countries.
26. In March 2009, the Borrower and World Bank agreed that the World Bank wi l l maintain communication with the riparian countries and wi l l update them on the revised project design and findings the final EIAs, once publicly disclosed. Further, the Borrower wi l l agree with the riparian countries on a process for establishing an early warning system and data communication.
27. The final EIAs for the three dams were publicly disclosed on the website o f MRDPW and at the World Bank’s Infoshop, on May 12, 2009. The World Bank sent the updated information on the project, including the final EIAs, to riparian countries and the International Commission on Danube River Protection on May 13,2009. The riparian countries were asked to reply on any aspects related to the information provided by June 15, 2009. Within the deadline for response, no response was received from the Government o f Turkey or the International Commission for Protection o f Danube River. However, on Junel5, 2009, the Government o f Greece informed that the Ministry o f Environment, Physical Planning and Public Works could not trace the websites where the EIAs were posted and requested that the EIA or Executive Summaries be provided. The three EIAs, on hard copy and electronic format, were submitted to the Embassy o f Greece to Bulgaria and the deadline for response was extended until July 15, 2009. On July 2 1 , the Government o f Greece requested additional information on the project; the information was sent on July 22, 2009 and a new deadline for response was set for August 27, 2009. No further comments were received by the deadline nor since then.
0.47 2.0 2.45 I 2,290 I 0.11%
67
Neikovtsi I 4.80 0.063 29.4 1.99 1,573 I 0.13%
Annex 11: Project Preparation and Supervision BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT
Planned Actual Initial Design PCN review June 2 1,2006 June 2 1,2006 Initial PID to PIC July 18,2006 July 18, 2006 Initial ISDS to PIC July 19,2006 July 19,2006 Appraisal February 15,2008 February21,2008 Negotiations April 17, 2008 Revised Design of Project Initial PID to PIC March 2,2009 Initial ISDS to PIC March 2,2009 Appraisal March 12,2009 May 15,2009 Negotiations June 17,2009 October 13-15,2009 Board/RVP approval November 24,2009 Planned date o f effectiveness Planned date o f mid-term review Planned closing date
March 10,20 10 October 2012
December 3 1,20 15
K e y institutions responsible for preparation o f the project: The Ministry o f Finance and The Ministry o f Regional Development and Public Works. Bank staff and consultants who worked on the project included:
Name Title Unit Gabriel Ionita Team Leader ECSSD Orlin Dikov Operations Officer ECSSD Sudipto Sarkar Lead Specialist EASUR Michael Webster Sr. Water and Sanitation Specialist ECSSD Alessandro Palmieri Lead Dam Specialist OPCQC Kishore Nadkarni Financial Analyst, consultant ECSSD Vladislav Krasikov Sr. Procurement Specialist ECSPS Blaga Djourdjin Procurement Analyst ECSPS Bogdan Constantinescu Sr. Financial Management Specialist ECSPS Ruxandra Floroiu Environmental Engineer ECSSD Natasa Vetma Operations Officer ECSSD Radhika Srinivasan Sr. Social Scientist ECSSD Ruxandra Costache Counsel LEGEM Anarkan Akerova Counsel LEGEM Nicholay Chistyakov Sr. Finance Officer LOAFC Yarissa Lyngdoh Sommer Urban Specialist, consultant ECSSD Martha Jarosewich-Holder Environment consultant ECSSD Fritz Schwaiger Engineer, consultant Eolina Petrova Milova Operations Officer ECSSD Milane Reyes Program Assistant ECSSD Teresa L im Program Assistant ECSSD Adelina Dotzinska Program Assistant ECCBG Bank funds expended to date on project preparation: Bank resources: $391,3 11 as of October 10,2009
1, Trust funds: $ 40,000 (PHRD Grant implemented by MRDPW) 2. Total: $ 431,311
Estimated Approval and Supervision costs: Remaining costs to approval: $ 20,000 Estimated annual supervision cost: $130,000
68
Annex 12: Documents in the Project Fi le BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT
1. Project description and rationale, endorsed by the Council o f Ministers.
2. Environmental Due Diligence Documents prepared for the Luda Yana, Neikovtsi, and Plovdivtsi dams.
3. Social Due Diligence Documents prepared for the Luda Yana, Neikovtsi, and Plovdivtsi dams.
4. Environmental Management Plan for Studena dam.
5. Land Acquisition Policy Framework.
6. Environment Framework.
7. Minutes o f public meeting held in October 2007 in the project sites o f Luda Yana, Neikovtsi, and Plovdivtsi dams.
8. Minutes o f national public meeting held on December 12,2007 on the project where the environmental and social documents were disclosed and discussed.
9. Environmental Impact Assessments (EIAs) for Luda Yana, Neikovtsi, and Plovdivtsi dams, including Environmental Management Plan.
69
Annex 13: Statement o f Loans and Credits BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT
Difference between expected and actual
disbursements FY Project Name IBRD IDA SF Grant Canc Undisb. Orig. Frm.
el. Rev’d
Original Amount in US$ Millions
PO8483 1 2005 Energy Efficiency (GEF) 0.00 0.00 10.0 1.3 1.3 -0.2 PO99894 2007 Road Infrastructure Rehabilitation 122.5 0.00 0.00 119.6 44.3
PI00657 2009 Social Inclusion Project 59.0 0.00 0.00 58.9 8.7 PO940 18 2007 TTFSE2 52.8 0.00 0.00 49.4 24.2
PO69532 2003 SIEP 69.3 0.00 0.00 0.1 1.5 -35.5 -1.7
Total: 303.6 0.00 0.00 10.0 0.1 230.6 43.0 -1.9
BULGARIA STATEMENT OF IFC’s
Held and Disbursed Portfolio In Millions o f US Dollars
Committed Disbursed
IFC IFC
F Y Quasi Quasi A o E v a l Comoany Loan Eauity Eauity Partic. Loan Eauity Eauity Partic.
2009 2008 200 1 0/04 2006 2000/01
0 2004/06 0/04 2005
Aes geo energy Atera Bulbank Drujba a.d Epiq nv Kronospan eood
Schwarz group Stomana Trakya bulgaria Unionbank ad
58.65 0 0 22.17 0 17.06
8.07 0 0 0.93
10.24 0
40.32 0 34.16 0 33.75 7.5
4.64 0
0 46.92 40.56 0 0 0 0 22.17 0 0 0 17.06 0 0 8.07 0
3.12 0 0 0.93 0 0.4 10.24 0
0 0 40.32 0 0 0 34.16 0 0 19.77 21.29 0 0 0 4.64 0
0 32.45 0 0 0 0 0 0
3.12 0 0 0.4
0 0 0 0 0 19.77 0 0
Total Portfolio: 189.83 47.66 3.12 67.09 159.28 40.16 3.12 52.62
70
Annex 14: Country at a Glance BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT
Bulgaria at a dance 9/24/08
POVERTY and SOCIAL Europe h Upper-
Cen t ra l middle- B ulgarla
5 0 0 7 Population, mid-year (millions) 7.6 GNipercapita(Afiasmefhod, US$) 4,590 GNI (Aflas method, US$ billions) 35.1
Average annual growth, 2001-07
Population (w -0.6 Laborforce (O%J -2.3
M o s t recent es t lma te ( l a tes t year aval lable, 2001-07)
13 Urban population (%of fofalpopulafion) 71
73 P
99
Poverty (%of populafion below nafio nalpo vertyline)
Lfe eqectancy at birth (ParsJ Infant mortality (per t0001ive births) Child malnutrition (%ofchiidrenunder5) 2 Access to an improved water source (%ofpopulation) Literacy (%ofpopulafion age rS+j 98 Gross primary enrollment (96ofschool-agepopulafion) w
M aie 0 1 Female 99
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
' 1987 1997
GDP (US$ biiiions) 28.4 0.4 Gross capital formationlGDP 32.9 9.9 Eqorts of goods andservices/GDP 40.8 58.3 Gross domestic savings/GDP 311 Y.5 Gross national savingslGDP 30.2 13.4
Current account balance/GDP -2.5 0.1 Interest payments/GDP 14 4.4 Total debt/GDP 29.1 07.1 Total debt sewice/exports v . 2 14.0 Present valueofdebt/GDP Present value of debtleqorts
1987.97 1997-07 2006 ' (average annualgrowth) GDP -3.7 5.1 6.3 GDP percapita -2.9 6.0 7.0 Exports o f goods andservices -8 .6 8.7 9.0
As la Income
445 823 6,052 6,987 2,694 5,750
0.0 0.7 0.5 13
64 75 69 71 23 22
95 95 97 93
98 1P 97 in
96 m
2006 ' 2007
317 395 317 349 637 705 P 9 P 9 134 158
-157 - 7 1 15
661 PO
6 4 9 90 0
2007 2007-11
6 2 5 3 6 9 6 1 0 0 ne
Life expectancy
h o e s s t o improved watersource
-- Bulgaria - U p p e r M k ~ o m gmup
Economic ratios*
Tnde
STRUCTURE o f the ECONOMY
(%of GDP) Agnculture industry
M anufactunng Services
Household final consumption expenditure General gov't final consumption eqenditure imports of goods and services
(average annualgrowth) Agncuiture Industry
M anufactunng SeNlCeS
Household final consumption expenditure General gov't final consumption ewenditure Gross capitaiformation imports of goods and services
1987 1997
114 268 595 286
8 0 291 446
521 730 8 9 P6
426 537
1987-97 1997-07
- 2 0 -14 -70 5 2
5 6 -60 5 7
-55 5 8 -98 4 9
4-72 I74 -211 134
2006
8.5 312 8 . 5
60.3
69.8 7 . 3
82.5
2006
-19 8 3
6 1
4 1 10 8 1
152
n 3
2007
8 1 32 7 8 0
59 2
75 4
92 5 n7
2007
-2.1 0 . 0 n o 9.0
P .8 -0.3
Note 2007 data are preliminary estimates This tabiewas producedfrom the Development Economics LDB database 'Thediamonds showfour keyindicators in thecountry(in bo1d)comparedwithits income-groupaverage If data are missing thediamondmll
be incomplete
71
Bulgaria
P R I C E S and G O V E R N M E N T F INANCE
Domest ic prices (%changeJ Consumer pnces Implicit GDP deflator
Government finance (%of GDP, includes current grants) Current revenue Current budget balance Overall surplusldeficit
T R A D E
(US$ millions) Total egorts (fob)
Consumer goods lnvestm ent goods Manufactures
Total imports (cif) Food Fuel and energy Capital goods
Evor t price index(2000=00) Import pnce index(2000=00) Terms of trade (2OOO=WO)
B A L A N C E o f P A Y M E N T S
(US$ millions)
Imports of goods and services Resource balance
Net income Net current transfers
Current account balance
Financing items (net) Changes in net reserves
M e m o : Reserves including gold (US$ millions) Conversion rate (DEC local/US$)
E q O r t S Of goods and SeNlCBS
1987
0.1
1987
D.287 1801 1479
n298 409
1565 5,PB
PO 79 152
1987
11443 11959
-515
-314 D6
-721
389 332
128E-3
E X T E R N A L D E B T and RESOURCE FLOWS
(US$ millions) 1987
Total debt outstanding and disbursed a 268 IBRD 0 IDA 0
Total debt sewice 1989 IBRD 0 IDA 0
Official grants 0 Compositionof net resourceflows
Official creditors 651 Pnvate creditors 779 Foreign direct investment (net inflows) Portfolio equity(net inflows) 0
World Bank program Commitments 0 Disbursements 0 Pnncipal repayments 0 Net flows 0 Interest payments 0 Net transfers 0
1997
1058.4 948 5
34.9 2 2 2.1
1997
4,809 1354 706 554
4.854 P 3
16'8 822
m m 96
1997
7.011 5,645 166
-357 237
1046
594 -1640
2,402 17
b 9 7
n u 0 501
0
1014 47 0
141 -76 -65 505 52
140 D1 6
65 31 54
2006
5 5 8 5
39 8 7 2 3 5
2006
0,987 4,675 0,952 5,642 8,265
4.398
6 2 6 6 m
2006
20,338 26,m -5,780
-14 834
-4.960
6,58 -1558
D,253 18
2006
20,925 1331
0
2,743 320
0
0 -320
2.228 5,172
95
0 38
276 -237
44 -281
2007
2 1 7 8
38 3 7 8 3 1
2007
15 258
6 '81 20 781
6 DO
171 e4 0 4
2007
30 334 38 067 -8 552
214 1571
8 767
7 917 -1150
11403 14
2007
1604 0
727 0
345 201 65 '(37 62 74
Note This tablewas producedfrom the Development Economics LDB database 9/24/08
72
V I D I N
M O N TA N A
V R AT S A
S O F I YA
G R A D
S O F I YAP E R N I K
K Y U S T E N D I L PA Z A R D Z H I KP L O V D I V
G A B R O V OL O V E C H
P L E V E N
V E L I K OT U R N O V O
S L I V E N
YA M B O L
B U R G A S
R U S ER A Z G R A D
VA R N A
D O B R I C H
S I L I S T R A
S H U M E N
S M O LYA N
K U R D Z H A L I
K H A S K O V O
B L A G O E V G R A D
TURGOVISHTE
Kula
Lom
Berkovitsa
Zlatna Panega
Karlovo
KhisaryaPanagyurishte
Bobov DolGyushevo
Dobrinishta
Asenovgrad
Dospat
Kulata
Levski Popovo
Zlataritsa
Nova Zagora
Dimitrovgrad
Ivaylovgrad
MalkoTurnovo
Tutrakan
Alfatar
Kamenets
Montana
Pernik
Lovec
Razgrad
Turgovishte
Plovdiv
Khaskovo
Vindin
Vratsa
Kyustendil
Blagoevgrad
Pleven
VelikoTurnovo
Shumen
Yambol
Sliven
Dobrich
Silistra
Ruse
Gabrovo
Pazardzhik
KurdzhaliSmolyan
SOFIYA
Tryavna
S TA R AZ A G O R AStudena Dam
Luda Yana Dam
PlovdivtsiDam
Neikovtsi Dam
Kula
Lom
Berkovitsa
Zlatna Panega
Karlovo
KhisaryaPanagyurishte
Bobov DolGyushevo
Dobrinishta
Asenovgrad
Dospat
Kulata
Levski Popovo
Zlataritsa
Tryavna
Nova Zagora
Dimitrovgrad
Ivaylovgrad
MalkoTurnovo
Michurin
Primorsko
Pomorie
Tutrakan
Alfatar
Kamenets
Montana
Pernik
Lovec
Razgrad
Turgovishte Varna
Burgas
Plovdiv
Khaskovo
Vindin
Vratsa
Kyustendil
Blagoevgrad
Pleven
VelikoTurnovo
Shumen
Yambol
Sliven
Dobrich
Silistra
Ruse
StaraZagora
Gabrovo
Pazardzhik
KurdzhaliSmolyan
SOFIYA
Studena Dam
Luda Yana Dam
PlovdivtsiDam
Neikovtsi Dam
V I D I N
M O N TA N A
V R AT S A
S O F I YA
G R A D
S O F I YAP E R N I K
K Y U S T E N D I L PA Z A R D Z H I KP L O V D I V
G A B R O V OL O V E C H
P L E V E N
V E L I K OT U R N O V O
S L I V E N
YA M B O L
B U R G A S
R U S ER A Z G R A D
VA R N A
D O B R I C H
S I L I S T R A
S H U M E N
S M O LYA N
K U R D Z H A L I
K H A S K O V O
B L A G O E V G R A D
S TA R AZ A G O R A
TURGOVISHTE
SERBIA
FYRMACEDONIA
GREECE
TURKEY
ROMANIADanube
Iskur
Mesta
Struma
Danube
Tundzha
Maritsa
Yantra
Aegean Sea
BlackSea
To Negotin
To CalafatTo
Zajecar
To Zimnicea
To Bucharest
To BucharestTo
Calarasi
To Constanta
To Kirklareli
To Edirne
To Edirne
To Komotini
To Serrai
To Kerkini
To Kocani
To Kreva
Palanka
To Surdulika
To Pirot
22°E
23°E 24°E
24°E
25°E
25°E 26°E
26°E
27°E 28°E
42°N42°N
43°N 43°N
44°N
BULGARIA0 20 40 60
0 10 20 30 40 50 Miles
80 Kilometers
IBRD 35957R
FEBRUA
RY 2009
BULGARIAMUNICIPAL INFRASTRUCTURE DEVELOPMENT PROJECT
DAM COMPLETION SITES (3)
DAM REHABILITATION SITE (1)
SELECTED CITIES AND TOWNS
PROVINCE (OBLAST) CAPITALS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
RAILROADS
PROVINCE (OBLAST) BOUNDARIES
INTERNATIONAL BOUNDARIES
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.
