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Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: 84213-GZ

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT PAPER

ON A

PROPOSED ADDITIONAL GRANT

IN THE AMOUNT OF US$ 3.0 MILLION

TO THE

PALESTINE LIBERATION ORGANIZATION

(FOR THE BENEFIT OF PALESTINIAN AUTHORITY)

FOR A

NORTH GAZA EMERGENCY SEWAGE TREATMENT PROJECT

March 17, 2014

Water, Rural Development, and Agriculture UnitSustainable Development Department

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS

(Exchange Rate Effective February 28, 2014)

Currency Unit = NIS (New Israeli Sheqalim)NIS 1 = US$ 0.29US$ 1 = NIS 3.48

FISCAL YEARJanuary 1 – December 31

ABBREVIATIONS AND ACRONYMS

AF Additional financingAFD Agence Française de DéveloppementBLWWTPBOD

Beit Lahiya Wastewater Treatment PlantBiological Oxygen Demand

CMWU Coastal Municipalities Water UtilityCOGAT Coordinator of Government Activities in the TerritoriesDA Designated AccountEA Environmental AssessmentEC European CommissionEMP Environmental Management PlanESAESIA

Environmental and Social AssessmentEnvironmental and Social Impact Assessment

FM Financial ManagementIBRD International Bank for Reconstruction and DevelopmentICB International Competitive BiddingIDA International Development AssociationIFR Interim Financial ReportISDS Integrated Safeguards Data SheetISN Interim Strategy Notem3/d Cubic meters per dayMDTF Multi-donor trust fundMENA Middle East and North AfricaMOF Ministry of FinanceMW MegawattNCB National Competitive BiddingNGEST North Gaza Emergency Sewage TreatmentNGO Non-Governmental OrganizationNGWWTP North Gaza Wastewater Treatment PlantPA Palestinian AuthorityPAP Project Affected Person or PeoplePCC Project-specific Coordination MechanismPLO Palestine Liberation OrganizationPMU Project Management UnitPRDP Palestinian Recovery and Development PlanPWA Palestinian Water AuthorityQCBS Quality and Cost Based Selection

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RAP Resettlement Action PlanRFP Request for proposalsSESIA Supplementary Environmental and Social Impact AssessmentSIDA Swedish International Development AgencyTFGWB Trust Fund for Gaza and the West BankTFPI Task Force on Project ImplementationWBG West Bank and GazaWWTP Waste water treatment plant

Vice President: Inger AndersenCountry Director: Steen Lau Jorgensen

Sector Director: Junaid K. AhmadSector Manager: Steven N. Schonberger

Task Team Leader: Richard W. Pollard

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WEST BANK AND GAZA


THIRD ADDITIONAL FINANCING

CONTENTS

PROJECT DATA SHEET..............................................................................................................ivI. Introduction............................................................................................................................1II. Background and Rationale for Additional Financing............................................................2III. Proposed Changes..................................................................................................................6IV. Appraisal Summary...............................................................................................................7

Annexes

1. Results Framework and Monitoring..................................................................................142. Operational Risk Assessment Framework (ORAF)..........................................................203. Project financing Summary...............................................................................................254. Revised Estimate of Project Costs.....................................................................................265. Allocation Of Grant Proceeds............................................................................................276. Project Preparation and Appraisal Team Members...........................................................307. Map....................................................................................................................................31

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WEST BANK AND GAZANORTH GAZA EMERGENCY SEWAGE TREATMENT PROJECT


PROJECT DATA SHEET

Basic Information – Third Additional Financing (AF)

Country Director: Steen Lau JorgensenSector Director: Junaid K. AhmadSector Manager: Steven SchonbergerTeam Leader: Richard W. PollardProject ID: P146065Expected Effectiveness Date: May 27, 2014Lending Instrument: Investment Project

FinancingAdditional Financing Type: Cost overrun and

restructuring

Sectors: Sanitation (50%); Sewerage (50%)Themes: Pollution management and environmental health (50%); Water resource management (25%); Other human development (25%)Environmental category: A - Full AssessmentExpected Closing Date: December 31, 2017Joint IFC: N/AJoint Level: N/A

Basic Information - Original ProjectProject ID: P074595 Environmental category: A – Full

AssessmentProject Name: North Gaza Emergency Sewage Treatment

Closing Date: June 30, 2014

Lending Instrument: Investment Project Financing Joint IFC: N/AJoint Level: N/A

Basic Information – First Additional FinancingProject ID: P091314 Environmental category: AProject Name: North Gaza Emergency Sewage Treatment



Basic Information – Second Additional FinancingProject ID: P117446 Environmental category: AProject Name: North Gaza Emergency Sewage Treatment



AF Project Financing Data[ ] Loan [ ] Credit [ X ] Grant [ ] Guarantee [ ] Other:Proposed terms: N/A

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AF Financing Plan (US$m)Source Total Amount (US $m)

Total Project Cost:Co-financing:Belgium TF: 2.50

Partnership for Infrastructure Development MDTF: 5.00Borrower: 0.00

Total Bank Financing (TFGWB): 3.00

10.50

Client InformationRecipient: Palestine Liberation Organization for the benefit of the Palestinian Authority (PA)Responsible Agency:Palestinian Water AuthorityAl Wehda Street - Shaath Bldg.Gaza City, GazaTel: (972-8) 282-7409; Fax: (972-8) 282-6630E-mail: [email protected]

AF Estimated Disbursements (Bank FY/US $m)FY 2014 2015 2016 2017 2018Annual 1.00 6.00 2.00 1.00 0.50Cumulative 1.00 7.00 9.00 10.00 10.50

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mailto:[email protected]

Project Development Objective and DescriptionOriginal project development objectives: (i) Mitigate the immediate health and environmental safety threats to the communities surrounding the effluent lake at Beit Lahia Waste Water Treatment Plant; and (ii) Provide a satisfactory long-term solution to the treatment of wastewater for the Northern Governorate in Gaza.

Revised project development objective: N/A

Project description: The Third Additional Financing will cover the cost overruns to complete the construction of the Waste Water Treatment Plant (WWTP) and the effluent recovery and reuse scheme and provide consultant services for implementation under parts A and B of the project. It will also finance operation and maintenance costs for a limited period while institutional and financing capacity is established to ensure the sustainability of project outcomes. This additional financing will be used for the following activities:

Part A: Effluent Transfer to the Proposed North Gaza Wastewater Treatment Site1. Maintenance of the Project Management Unit with day-to-day responsibilities for the implementation of the Project and financing of its Incremental Operating Costs.

2. Implementation of: (a) remedial works at the Beit Lahiya Wastewater Treatment Plant; and (b) risk mitigation measures at the North Gaza Wastewater Treatment Plant comprising of the first phase of the effluent recovery and reuse scheme which would result in the recovery of about 15,000 M 3/day of treated wastewater.

Part B: Construction of the North Gaza Wastewater Treatment Plant1. Construction of phase one of the North Gaza Wastewater Treatment Plant with a capacity of 35,600 m3/day and comprising three (3) treatment modules for secondary biological treatment with nitrogen removal, as well as sludge treatment, digestion, electricity generation, dewatering, drying and storage, including: (a) acquisition of equipment and materials; and (b) operation and maintenance of the North Gaza Wastewater Treatment Plant for three (3) years after the commissioning of the said Wastewater Treatment Plant.

2. Supervision of construction works under Part B.1 of the Project and implementation of the environmental monitoring plan for the said construction works, including the provision of necessary consultants’ services.

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Safeguards and Exception(s) to PoliciesSafeguard policies triggered:Environmental Assessment (OP/BP 4.01)Natural Habitats (OP/BP 4.04)Forests (OP/BP 4.36)Pest Management (OP 4.09)Physical Cultural Resources (OP/BP 4.11)Indigenous Peoples (OP/BP 4.10)Involuntary Resettlement (OP/BP 4.12)Safety of Dams (OP/BP 4.37)Projects on International Waterways (OP/BP 7.50)Projects in Disputed Areas (OP/BP 7.60)

[X]Yes [ ] No[ ]Yes [X] No[ ]Yes [X] No[ ]Yes [X] No[ ]Yes [X] No[ ]Yes [X] No[X]Yes [ ] No[ ]Yes [X] No[ ]Yes [X] No[ ]Yes [X] No

Does the project require any waivers of Bank policies?Have these been endorsed or approved by Bank management?

[ ]Yes [X] No[ ]Yes [X] No

Conditions and Legal Covenants:Financing Agreement Reference

Description of Condition/Covenant Date Due

TF016844/016501 Article V 5.01 (a)

Effectiveness Condition:The execution and delivery of this Agreement on behalf of the Recipient have been duly authorized or ratified by all necessary governmental and corporate action

Effectiveness

TF016844/016501 Article V 5.01 (b)

Effectiveness Condition:The Subsidiary Agreement referred to in Section I.B of Schedule 2 to this Agreement has been executed on behalf of the Recipient and the Palestinian Authority

Effectiveness

TF016844/016501 Schedule 2.Section II. B.1

The Recipient shall maintain or cause to be maintained a financial management system in accordance with the provisions of Section 2.07 of the Standard Conditions

Recurrent


Without limitation on the provisions of Part A of this Section, the Recipient shall, through the Palestinian Authority, prepare and furnish to the World Bank no later than forty-five (45) days after the end of each calendar quarter, interim unaudited financial reports for the Project covering the quarter, in form and substance satisfactory to the World Bank.

Quarterly


The Recipient shall have its Financial Statements audited in accordance with the provisions of Section 2.07(b) of the Standard Conditions. Each audit of the Financial Statements shall cover the period of one (1) calendar year of the Recipient. The audited Financial Statements for each such period shall be furnished to the World Bank not later than six (6) months after the end of such period.

Annual

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WEST BANK AND GAZA



PROJECT PAPER

I. INTRODUCTION

1. This Project Paper seeks the approval of the Executive Directors to provide an additional grant of US$3.0 million for the North Gaza Emergency Sewage Treatment (NGEST) Project (P074595, TF016844) from the Trust Fund for Gaza and the West Bank. This grant, together with the proposed additional co-financing of US$5.0 million (TF016501) from the Partnership for Infrastructure Development Multi-donor Trust Fund (MDTF) and a supplementary grant of 2.0 million Euros (approximately US$2.5 million) provided from the Kingdom of Belgium constitute the Third Additional Financing (AF3) package, amounting to US$10.5 million equivalent in total.

2. The proposed grants would help finance the cost overruns associated with delays incurred in the construction of the wastewater treatment plant and associated wastewater reuse facilities, as well as the need to provide technical assistance for management, operation, and maintenance (operational costs, institutional capacity building, monitoring of environmental impacts and supervision) under parts A and B of the project. They would also finance incremental operating costs associated with the project management unit. The Grants will thus play a fundamental role in achieving the project’s second Development Objective, which is to provide a satisfactory long-term solution to the treatment of wastewater for the Northern Governorate in Gaza.

3. The NGEST Project was developed as an emergency response to the acute public and environmental health and safety risk posed by the overused Beit Lahiya Wastewater Treatment facility. Because it was an emergency project, a comprehensive environmental and social impact assessment was completed during project implementation in 2006. The Environmental and Social Impact Assessment (ESIA) identified a need for additional investments to protect groundwater resources in Gaza. The restrictions to access and entry to Gaza, continued price inflation due in part to global increases in energy prices and raw materials, as well as the weakening of the US Dollar in relation to the Euro have also significantly increased the costs for all project inputs. As a result, a first additional financing grant of US$12.0 million was provided from the Trust Fund for Gaza and the West Bank (TFGWB) in 2008 with an extension of the closing date to June 30, 2012. A second additional financing grant of US$7.0 million was approved on July 30, 2010 and the project closing date was further extended to June 30, 2014.

4. The NGEST Project is co-financed by the Government of Belgium, the European Commission (EC) and the Swedish International Development Agency through trust funds managed by the World Bank. The European Investment Bank provided financing for part A of the project (see Background, below, for a description of Part A). Agence Française de Développement (AFD) is providing parallel co-financing for both parts.

5. This paper also addresses the need to restructure the project and extend the closing date to December 31, 2017 in order to fully achieve the project’s development objectives. This will entail the extension of the closing dates of First and Second Additional Financing grants to

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December, 31, 2017 and the EC grant to December 31, 2015. The results framework has also been adjusted.

6. As of March 2014, the revised budget for the project including all phases of the effluent recovery and reuse scheme is US$106 million. Of this amount, US$89.81 million is required to complete ongoing civil works, construct the first phase of the effluent recovery and reuse scheme, and support operation and maintenance (excluding energy costs) for three years. A summary of NGEST Project financing is attached in Annex 3. Total current donor contributions amount to US$73 million, leaving a financing gap of approximately US$16 million to implement the project through the first phase of effluent reuse. AFD has indicated its willingness to finance up to 4.6 million Euros (approximately US$6 million) of the gap. The remaining US$10.50 million is expected to be financed by the Bank through the proposed AF3.

7. The implementation status of the project is rated moderately satisfactory. Annual audit reports have been received in a timely manner, and are current. A supplementary ESIA was completed and disclosed on August 18, 2013 for the effluent recovery and reuse component. The Integrated Safeguard Data Sheet (ISDS) has been updated and in the last Implementations Status and Results report, the project was rated satisfactory for compliance with safeguards policies.

II. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING

8. The existing Beit Lahiya Wastewater Treatment Plant (BLWWTP), constructed in 1976, is located in the northern part of Gaza, at the outskirts of the town of Beit Lahiya. It was designed to serve a population of 50,000, with a capacity to treat 5,000 cubic meters per day of wastewater to secondary treatment levels. During the 1990s and early 2000s, neighboring communities were provided with sewerage networks and were subsequently connected to the BLWWTP, which now serves a population of about 250,000 people from the municipalities of Jabalya (including the refugee camp), Beit Lahiya, Beit Hanoun, and Um Al Nasser. The current volume of sewage inflows to the BLWWTP is estimated at about 21,000 m3/d, more than four times the plant’s original design capacity. At the outset of the NGEST Project, under strict prohibition to discharge any effluent to the Mediterranean Sea, Palestinian Water Authority (PWA) was directing excess flows of partially treated effluent to emergency holding ponds adjacent to residential areas. The resulting “effluent lake” carried substantial health and safety risks for the surrounding inhabited areas, including catastrophic flooding due to failure of sand embankments.

9. An emergency grant of US$7.8 million was approved by the Board on September 7, 2004 to finance the NGEST Project. The objectives of the project are to mitigate the immediate health and environmental safety threats to the communities surrounding the effluent lake at Beit Lahia and provide a satisfactory long-term solution to the treatment of wastewater for the northern governorate in Gaza. These objectives have been pursued through the implementation of the two-part NGEST program (Part A and B), designed to deal with both impending threats and long-term needs:

a) Part A was designed to drain the effluent lake to alleviate the environmental and health threats associated with the existing BLWWTP. The effluent has been transferred to another site where new infiltration basins have been built, thus eliminating the immediate threat of flooding and backflows of raw sewage and achieving the project’s first objective. Remedial works at the BLWWTP site and establishing an effluent recovery and reuse program is ongoing; and

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b) Part B will provide a long-term solution to the wastewater treatment issue for northern Gaza area by constructing a new wastewater treatment plant (WWTP) with improved effluent quality standards and by developing the institutional capacity to operate and maintain the plant and associated works.

10. First additional financing: Delays in implementation caused by the political and security situation, the global increase in energy prices and raw materials costs, as well as the weakening of the US dollar in relation to the Euro, have significantly impeded implementation and increased the costs for all aspects of the project. In particular, the prevailing security situation in Gaza with frequent closures and restrictions on movement and access (access to the project sites that are adjacent to the border with Israel and restrictive controls on the entrance to Gaza of construction material, technical staff, etc.) has been, and continues to be, a significant cause of delays and cost overruns.

11. Furthermore, since the NGEST Project was an emergency response to a wastewater management crisis an Environmental Assessment (EA) was carried out and an Environmental Management Plan (EMP) was prepared during project implementation. The precise nature of investments that would be required to ensure the long term sustainability and effectiveness of wastewater treatment for Northern Gaza was therefore not known at the outset of the project. The EA and EMP were completed in 2006. They identified the need to protect the Coastal Aquifer through an effluent recovery and reuse scheme.

12. A first additional financing grant of US$12 million from the TFGWB (AF1, P091314) was approved by the Board in 2008 to cover the cost over-run of part A and for a portion of the costs of the effluent recovery and reuse scheme that is in Part B. The recovery and reuse scheme is essential to ensure the environmental sustainability of the project. It will also entail additional economic benefits by providing a valuable source of reclaimed water for irrigation.

13. Part A of the Project (construction of terminal pumping station, installation of a pressure pipeline, and construction of nine infiltration ponds at the site for Part B) was completed in 2010, and the new ponds have been in use since April 2009. The unstable emergency sludge holding ponds at Beit Lahiya were drained and the immediate danger and environmental threat posed by them was eliminated, effectively achieving the Project’s first Development Objective.

14. Second additional financing: Implementation of Part B – in particular construction of the WWTP - was delayed and costs increased due to uncertainties about sources of funds, conflict between Israel and Gaza that resulted in significant damage to the infrastructure that was constructed through the project, and continued restrictions on entry of goods and services to Gaza. The second additional financing grant of US$7.0 million was provided to help fill the funding gap. AFD also provided an additional grant of 5 million Euros in 2010 for this purpose.

15. Proposed third additional financing and extension of closing date: The costs of the NGEST Project have continued to rise due to a number of factors, principally the continued restrictions on entry of goods and services to Gaza, ongoing periodic conflict with Israel, and a need to redesign some parts of the North Gaza Waste Water Treatment Plant (NGWWTP). In addition, damage to the Gaza power system has resulted in costs for providing electricity for the NGWWTP that were unforeseen when the project was designed, and deteriorating water services in Gaza overall has caused increased costs for providing water for the plant. A financing gap of US$4.5 million now exists to make the remaining payments for the NGWWTP civil works contract, power supply, water supply, and remedial works at BLWWTP. US$ 6.5 million is

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needed to operate and maintain the plant, build the institutional capacity for sustained operation over a period of three years, and for technical assistance for the risk mitigation activities. US$ 5.0 million is required to construct phase 1 of effluent recovery and reuse scheme. The proposed AF3 would cover a part of these costs, and parallel additional funding from AFD is expected to cover the balance.

16. Security issues and other constraints have also significantly impeded the pace of project implementation. Therefore, the closing date of the project will be extended to 31 December, 2017 in order to allow sufficient time to fully achieve the project’s Development Objectives and ensure the sustainability of the wastewater management infrastructure and services financed by the project. The extensions of closing dates to 31 December, 2017 will apply to the first and second additional financing grants, which will also be restructured to allow for a single expenditure category, which will streamline administration and eliminate the need for budget reallocations. The proposed reallocations are summarized in Annex 5. The closing date for the EC co-financing grant for WWTP civil works will be extended to 31 December, 2015.

Borrower Interest

17. The Palestinian Water Authority recently completed a capacity and needs assessment for operating and maintaining the NGWWTP and related facilities that point to a need for ongoing donor support for capacity-building technical assistance and for a portion of operating costs on a declining basis over about three years. Support for operations and maintenance was envisioned in the original project design and was included in civil works contract, but cost overruns have depleted the financing for this as a part of the overall financing gap.

18. The PA requested in June 2013 the supplemental funding of US$10.5 million from the World Bank to cover a portion of the remaining budget shortfall. AF3 is proposed in response.

Consistency with the Interim Strategy

19. The proposed additional financing fits well with the Bank’s Interim Strategy for the West Bank and Gaza for the Period FY12–FY14. It also conforms to the Bank’s regional strategy for the Middle East and North Africa and its twin goals of reducing poverty and fostering shared prosperity through, inter alia, creating conditions for sustainable growth and creating jobs. The financing would directly support the PA’s efforts to create an enabling environment for private sector-led growth, the second pillar of the Interim Strategy. Within that context the project would increase the sustainability of infrastructure by completing the construction of, and developing the institutional capacity to manage, operate, and maintain the North Gaza wastewater treatment plant. It would support environmental protection by completing the first phase of the proposed effluent recovery and reuse scheme, which is necessary to ensure the protection of water quality in the Coastal Aquifer. The Coastal Aquifer is vital for Gaza’s water supply, and it is shared with Israel. The scheme will also support agricultural production with reduced use of freshwater resources. There is also scope for support to private sector development through private sector participation in waste water management and the operation and maintenance of the treatment plant will create some long-term employment.

Project Implementation progress

20. Part A of the NGEST Project is now completed. The immediate objective to mitigate the health and environmental safety threats to communities surrounding the effluent lake at Beit Lahiya has been achieved. The lake is drained and since December 2010 most effluent from the

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old treatment plant is being pumped to the new infiltration ponds that are adjacent to the NGWWTP that is under construction. Remedial work on the dried ponds at Beit Lahiya is also planned under Part B. All Part A facilities are now managed by the Coastal Municipalities Water Utility (CMWU). Technical assistance is ongoing for the implementation of Part B activities including support for the operation of the Project Management Unit (PMU) and implementation of the environmental monitoring plan.

21. In addition, five groundwater monitoring wells have been constructed in the planned groundwater recharge and reuse area and a groundwater base line survey has been completed. The water quality monitoring contract at both Beit Lahiya and at the new site has been awarded and groundwater monitoring is on-going. The groundwater model has been revised to produce meaningful baseline data for the well field test rounds.

22. The civil works contract to construct the WWTP under Part B commenced in early September 2010. Close coordination with the Israeli Defense Force's (IDF's) Coordinator of Government Activities in the Territories (COGAT), along with other donors, remains critical to ensure predictable and timely delivery of goods, materials, and consultants across the Israeli border. The delays and cost overruns that plagued implementation of Part A because of restrictions and access issues have continued to affect the project. The contractor responsible for the construction of the new WWTP has been granted a 128 day extension to complete construction, bringing the contract completion date to January 31, 2014. Reasons for this extension include, in addition to security and import restrictions, modifications to the original engineering designs which have been required for technical reasons. A further extension is being negotiated. The ponds will also need some rehabilitation to regain infiltration efficiency following completion of the WWTP. Overall, however, the project remains on track to meet its development objectives. A new resident supervising engineer was appointed in November, 2012 and supervision quality has improved as a result. Construction of the WWTP is nearing completion and commissioning is beginning in mid-2014. Some additional investment is required for the electricity supply to the WWTP. In addition, the cost for securing water from municipal suppliers has increased. Finally, additional investment is required to repair damages to the entrance road to the plant that resulted from the December 2013 winter storm. These additional investments notwithstanding, the plant is expected to be fully operational in late 2014.

23. A detailed design study for effluent recovery and reuse, which will provide long-term protection for the underlying aquifer as well as ultimately supply irrigation water for about 1500 hectares of agricultural land, has been completed. The total cost for fully implementing the scheme is estimated at US$28 million. The first phase of the reuse scheme, which will recover about 15,000 M3/day to irrigate up to 500 hectares of agricultural land and is expected to cost US$12 million, must be completed in 2015 to minimize long-term impacts on aquifer water quality. Portions of the first and this proposed third additional financing along with contributions from AFD are expected to cover the cost for the first phase of the reuse scheme.

24. A Supplementary Environmental and Social Impact Assessment (SESIA) was carried out following completion of the detailed design for the effluent recovery and reuse component per the World Bank safeguards policies. Public consultations were conducted (the last one was held on October 22, 2012) to discuss the outcomes of the SESIA report with all concerned stakeholders. An updated Environmental Management Plan (EMP) and a Resettlement Action Plan (RAP) have been prepared. The SESIA, EMP, and RAP have been cleared by the Bank and publicly disclosed in the West Bank and Gaza and through InfoShop on August 18, 2013.

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III. PROPOSED CHANGES 25. The grants under AF3 would help ensure completion of all project activities and achievement of the original development objectives for NGEST. The longer term sustainability of the project outcomes depends to a large extent on the effective operation of the infiltration basins completed under part A to ensure that treated effluent is properly and safely reused for groundwater recharge and irrigation as planned. This will depend on completion and sustainable operation of the wastewater treatment plant, effluent recovery and reuse, and related monitoring systems under Part B, which would be financed by the proposed third additional financing grant.

26. The principal outcome of the additional financing will be timely completion of part B of the NGEST project resulting in commissioning of the wastewater treatment plant and operation of the facilities by the CMWU as well as completion of the first phase of the effluent recovery and reuse scheme allowing for the reuse of about 15,000 M3/day of treated wastewater, and related monitoring systems. The financing will also ensure the long term sustainability of the facilities and achievement of the project’s second Development Objective by investing in institutional capacity building and supporting operation and maintenance costs for a limited period of time.

27. There are no new activities or changes to the original project objectives, design and components envisaged under AF3. The PDOs continue to be strategically aligned with the current ISN for Gaza and the West Bank. The PDO in the Grant Agreement will be reworded to be consistent with the PDOs described for the original project. The results framework will be refined to better reflect the project achievements and the revised closing date (updated Results Framework for the Additional Financing is summarized in Annex 1).

28. The additional financing will be implemented using the same institutional framework, procurement, and disbursement arrangements currently employed under the NGEST Project since these systems are performing well, remain appropriate, and have the capacity to absorb the additional funds. The additional financing will be used for the following activities under the original project design:

Part A: Effluent Transfer to the Proposed North Gaza Wastewater Treatment Site

Maintenance of the Project Management Unit with day-to-day responsibilities for the implementation of the Project and financing of its Incremental Operating Costs.

Implementation of: (a) remedial works at the Beit Lahiya Wastewater Treatment Plant; and (b) risk mitigation measures at the North Gaza Wastewater Treatment Plant comprising of the first phase of the effluent recovery and reuse scheme which would result in the recovery of about 15,000 M3/day of treated wastewater.

Part B: Construction of the North Gaza Wastewater Treatment Plant

Construction of phase one of the North Gaza Wastewater Treatment Plant with a capacity of 35,600 m3/day and comprising three (3) treatment modules for secondary biological treatment with nitrogen removal, as well as sludge treatment, digestion, electricity generation, dewatering, drying and storage, including: (a) acquisition of equipment and materials; and (b) operation and maintenance of the North Gaza Wastewater Treatment Plant for three (3) years after the commissioning of the said Wastewater Treatment Plant.

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Supervision of construction works under Part B.1 of the Project and implementation of the environmental monitoring plan for the said construction works, including the provision of necessary consultants’ services.

29. The general description of items under the different expenditure categories remains the same as in the original project. Annex 4 shows the allocation of all grant proceeds for the project by component and activity. Annex 5 provides the allocations by expenditure category for the proposed additional financing grants and the reallocations for the First and Additional Financing Grants.

IV. APPRAISAL SUMMARY 30. The longer term sustainability of the project outcomes is closely tied to the effective operation of the infiltration basins completed under part A which in turn will depend on the completion and sustainable operation of the wastewater treatment plant, the effluent recovery and reuse scheme, and related monitoring systems under Part B, which would be financed in part by the AF3. The AF3 is therefore essential for achieving the second project development objective for NGEST.

31. It is anticipated that the WWTP construction and commissioning will be completed by late 2014. It is expected that the WWTP will reach a treatment capacity of 35,600m3/day within three years following commissioning. Stage 1 of the effluent recovery and reuse scheme, recovering about 15,000 m3/day of treated effluent, is expected to be completed by June 30, 2015, and CMWU is expected to be fully capable of operating the plant sustainably by June 30, 2017. Financing for the second phase of the recovery and reuse scheme will need to be secured and implementation started by 2017 in order to maintain protection of the Coastal Aquifer.

Procurement

32. Current procurement performance is rated moderately satisfactory. For the additional financing, procurement of goods, works and consultants will continue to be in accordance with the “Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers” dated January 2011 and the “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers” dated January 2011, and the provisions stipulated in the Legal Agreement. The provisions of the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants” dated October 15, 2006 and revised in January 2011 will also apply. The PMU will continue to hold the responsibility for procurement under the additional financing, following the same arrangements in place for the original project and the first and second additional financing.

33. The third additional financing will finance part of the cost overruns under the contract for the construction of the WWTP (US$2.8 million) and will contribute to the cost of the technical assistance package and other operating costs for Operation and Maintenance of the WWTP (US$6.0 million), which is currently being procured by the PMU. It will also finance the following procurement packages for works for the WWTP: erection of electricity line (US$800K), potable water well (US$100K) and remedial works (US$800K). An updated procurement plan reflecting these packages was submitted by the PMU and cleared by the Bank.

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Financial Management and Disbursement

34. The same Financial Management (FM) and disbursement arrangements in place for the original NGEST Project will continue to be employed under the AF3. The overall FM risk rating continues to be assessed as Substantial after the following mitigating measures. A U.S. Dollars dominated Designated Account (DA) will be opened by the MoF at the Bank of Palestine (Ramallah). No funds will be transferred to Gaza. The PMU will be responsible for the daily management and reconciliation of this DA, while MoF will be responsible for the DA replenishment and approving withdrawal applications. PWA-Ramallah will hold the sole responsibility to disburse on behalf of the Project to suppliers, contractors, and consultants.

35. Al-Aseel accounting system will be used to account for Project transactions. However, since Al-Aseel software is not linked to the Government Unified Accounting System (Bisan). The PMU will arrange with PWA-Ramallah to have the Project transactions recorded into Bisan system on a periodic basis following the current procedures for recording 2011 and 2012 transactions of the original project and related AFs. Al-Aseel accounting system is capable of capturing all Project related transactions by component and by each financier. The system will be used to prepare the Quarterly Interim Unaudited Financial Reports (IFRs). The IFRs will be submitted by PWA to the Bank within 45 days after the end of each period.

36. An external auditor, acceptable to the bank, will be appointed based on terms of reference (TOR) acceptable to the Bank to audit the AF3 financial statements. The external audit report and management letter for the year ended December 31, 2012 has been submitted to the Bank. The auditor expressed unmodified “clean” opinion and management letter did not include significant observations on internal control. The audit for 2013 is ongoing.

37. Based on the latest supervision mission conducted in February 2014, current financial management performance is rated Satisfactory. Additional training has been provided to the Financial Manager to gain more experience with Bank-financed project policies and procedures. The overall FM arrangements are acceptable and are capable to account and monitor the proposed additional financing.

38. The original project trust fund closing date is proposed to be extended to December 31, 2017 to allow for the completion of construction and commissioning of the sewage treatment plant, build technical and financing capacity for operation and maintenance, and implement the risk management and wastewater reuse programs. At this time, it is expected that the proposed closing date extension and financing will allow for completion of all project components through the first phase of the risk management and wastewater reuse programs. The new end date for the project will be 30 June, 2017, six months prior to the grant closing date.

39. The closing dates for the first and second Additional Financing grants will also need to be extended to December 31, 2017, and funds will need to be reallocated within the current expenditure categories for each of these funds. The reallocations that are required are summarized in the tables in Annex 5.

40. Disbursement: Disbursement methods will include advances, direct payments, and reimbursements. Initial advances up to the DA ceilings, which have been set at US$500,000 for the AF3 Grant and US$800,000 for the MDTF Grant, will be disbursed to the DAs. Subsequent advances will be made upon receiving reports (i.e. statements of expenditures or records) on the use of the initial advances.

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Environment and Social Development

41. Environmental Aspects: Due to its size and environmental relevance, the NGEST project has been classified as Category A according to the Bank’s Operational Policy on Environmental Assessment (Operational Policy 4.01). Therefore, a full Environmental Assessment (EA) was prepared for the project by an independent third party consultant. The EA was disclosed in Country and at the World Bank’s Info shop in April 2006.

42. A comprehensive public participation program was conducted during the process of EA preparation. Governmental agencies, NGOs, community representatives, neighboring landowners, and other stakeholders were involved in the process. The consultation process was performed by direct interviews, questionnaires, and public meetings. Most of the environmental issues, including wastewater reuse, sludge reuse, socioeconomics, and aquifer water quality, were discussed in great detail. The results and findings of the EA study were presented through a public hearing workshop that involved the different stakeholders. All relevant comments and concerns were considered during the preparation of the final report.

43. A supplementary ESIA (SESIA) was prepared following completion of the detailed design for the effluent recovery and reuse component. The SESIA was reviewed, discussed during public consultations with relevant stakeholders that were as comprehensive as those held for the original EA. The last consultation was held on October 22, 2012. The findings and recommendations were approved by the World Bank per the safeguards policies and the ISDS has been updated and disclosed on August 18, 2013.

44. Environmental Management Plans (EMPs) were developed as integral parts of both the original EA and the SESIA. They include mitigation measures, monitoring plans, and capacity building activities. In 2008 a baseline groundwater quality survey was completed to monitor the impacts of the operation of Part A infrastructure on groundwater at Beit Lahiya, and future impacts at the new infiltration ponds.

45. A qualified environmental and social specialist was hired within the PMU and is responsible for supervising the mitigation and monitoring program, and for discussing any issue in coordination with the relevant local governmental entities. The last World Bank mission has rated the environmental safeguards performance as satisfactory in terms of monitoring, mitigation, and reporting.

46. Energy and water supply needs for the operations phase of NGEST may benefit from a supplemental and more reliable supply than is in use for the construction phase of NGEST. Any such provisioning will be considered an associated work to NGEST. At the time at which such details are known, the Client will be responsible for preparing the requisite environmental and social safeguards documents to support such interventions.

47. Social Development Aspects: While the direct social benefits of the additional financing are self-evident in terms of water resource protection and provision of treated wastewater for irrigation, the project will continue to address the need for ongoing public consultation and information dissemination. Project implementation will therefore include regular communication with all partners to get early warning of any public concerns, and to consider the most effective way to provide accurate public information and maintain public confidence in the work. A Resettlement Action Plan (RAP) has been prepared that identifies the adverse impacts of project activities. These are minimal in scale and the RAP has specific mitigation measures for

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implementation. The RAP identified 51 Project Affected People (PAPs). Of these, 36 landowners will be compensated for small amounts of land required for well sites and access roads. Fifteen people who are currently employed to operate privately owned irrigation wells that would be shut down as a result of the project will lose their employment. They will be compensated based on the time they have been employed, and they will be encouraged to apply for new employment in the operation of the effluent reuse scheme. The Palestinian authorities have taken measures to avoid or minimize the acquisition of land or assets of the affected population, and to avoid the displacement of the affected population. Where the acquisition of land or assets, or the displacement of people is unavoidable, the project will not start any works on that particular site until adequate compensation is provided to the affected people in accordance with the Resettlement Action Plan.

48. Economic Analysis: The project was originally prepared under emergency recovery procedures in 2004. At that time the economic rate of return for the investment was estimated at 8.7 and 17.0 percent against the Mekorot1 water price and seawater desalination costs, respectively. Since that time the investment costs for the project have risen by 75 percent. On the other hand the economic value of the environmental and health risks averted and the averted impacts on increasingly scarce water resources in Gaza has also risen. The effluent reuse scheme constructed under the project, which was not factored in the initial economic assessment, is also expected to contribute to the positive economic impacts of the project. Although a detailed economic re-appraisal of the project was not possible during the preparation of this additional financing it is estimated that the project remains economically viable.

49. By providing adequate wastewater treatment facilities and removing the risk of flooding from the Beit Lahia Sewage Lake, the NGEST Project is critical to the economic, social and physical well-being of the 300,000 people living in Beit Lahia, Beit Hanoun, Um Al Nasser, and the Jabalya refugee camp. Project benefits include the following:

a) Elimination of the risk of flooding local communities with sewage released from Beit Lahia lake;

b) Provision of adequate sanitation facilities to targeted populations;

c) Protection of groundwater from contamination by poorly treated sewage by recharging local aquifers with secondary-treated effluent;

d) Reduction of environmental impact by increasing the volume of adequately treated waste water discharged to the environment;

e) Generation of job opportunities during the construction period and also long-term employment for operating and maintaining the WWTP;

f) Enabling PWA and the municipalities of Northern Gaza to conform to environmental regulations for wastewater management; and

g) Provision of treated wastewater for use in irrigated agriculture.

50. Risks. The overall implementation risk is rated High. The proposed additional financing faces the same implementation risks as the original project, with the major risk widely acknowledged by the donor community being the economic and security situation prevalent in Gaza and the associated border restrictions imposed by Israel. However, a field based, project 1 Mekorot is the Israeli bulk water supply utility.

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specific coordination mechanism is already in place to expedite the flow of materials and expertise to the project. Many donors are participating in a coordinated effort to maximize coordination with the Israeli authorities whenever problems arise. The on-going dialogue with the Israeli Government and diplomatic support has mitigated these risks to a significant extent. Nonetheless, there is a high probability that security matters and border restrictions will significantly delay project implementation and also have an impact on project costs and the prospects for financial sustainability of the wastewater management services. The following specific risks have been identified along with measures to mitigate their impact:

a) Restricted entry of materials, equipment, and contractors to Gaza and limited access to the project site. All project stakeholders recognize that the volatile security situation could jeopardize smooth implementation, particularly if closures, import restrictions, and curfews remain in effect for an indefinite period. A project-specific coordination mechanism (PCC) is in place to ensure effective field coordination with the Israeli authorities on security arrangements. The PWA has secured a comfort letter from the Israeli Civil Administration to allow entry of materials to implement project activities. Donor partners have coordinated closely with each other and with the Office of the Quartet Representative (OQR) to facilitate cooperation through COGAT and other Israeli Government agencies.

b) Restricted power supply. Sufficient power to operate water and wastewater services is currently unavailable within Gaza and might not be provided from Israel. The plant is currently connected to the Gaza grid, and frequent power outages along with the possibility of power fluctuations and surges can be expected, which can shorten the life of electro-mechanical equipment. The plant and reuse system will ultimately require up to 11 MWs of power for all facilities, starting with about 3.5 MW in June 2014. To address this issue, a written request for additional power for the NGEST project has been submitted by the Palestinian Energy Authority (PEA) Israel Energy Authority and COGAT. Israel has agreed in principle to provide a small amount of additional electricity through an existing feeder line in North Gaza, but it will be insufficient to meet the base needs to operate the plant. In addition, several longer term options to address Gaza’s power needs and in particular for the NGEST project are being reviewed. The Bank is currently working with the Client to develop a viable power supply for the WWTP and reuse scheme. This is expected to be based on solar power.

c) Movement of PMU officials. Freedom of movement of the PWA staff into and out of Gaza may be impeded in case of closures. The PCC and the Task Force on Project Implementation (TFPI) mechanisms would be employed to facilitate such movements.

d) Project management and institutional capacity. With the PWA unable to operate effectively in Gaza due to the prevailing political circumstances, project management may be impeded. Implementation is currently managed by a PMU delegated by PWA and agreed by the Bank and other donors involved in the project. The PMU will continue to coordinate and manage the proposed works and will maintain the unified progress reporting, financial auditing and other fiduciary requirements that are in place for Part B of the Project. The PMU has proven to be an effective and reliable implementing agency representing the PWA. Although the PMU established for the

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NGEST Project construction phase has demonstrated a high level of competence in managing the construction contract and preparing for the effluent recovery and reuse component, it is not designed or empowered for long term operation and management of the facilities. The PMU is very dependent on the high level of competence of the staff assigned to it. Professional resources within PWA outside of the PMU are limited and any staff movement or changes in PWA’s personnel policies that may demotivate staff or encourage them to seek other employment would likely have significant deleterious impacts on the PMU’s capacity to manage the project.

e) Sustainability. Long-term operation and maintenance will require a competent, well-run utility. The CMWU is expected to ultimately assume direct responsibility for operation and maintenance of the WWTP, and a performance contract will be signed between CMWU and PWA that will link payments to the volume of treated wastewater meeting PA effluent quality standards. However, transfer of facilities management to the CMWU can only be effective once the CMWU becomes fully operational. The CMWU, with support from the Second Gaza Emergency Water Project and the ongoing Water Supply and Sewer Systems Improvement Project, has rapidly improved, but it still has limited capacity to collect tariffs or directly manage services in most municipalities. CMWU staff are now managing the BLWWTP and operation of the infiltration basins completed under Part A. The project includes resources for ongoing training of CMWU staff. The ongoing Gaza Water Supply and Sewer Systems Improvement Project provides complementary support for tariff reforms through the CMWU. An AFD-financed study of the financing and institutional needs for sustained operation of the NGWWTP was completed in 2013 and provides a road map for institutional strengthening and tariff reforms. The AF3 would directly address sustainability issues by financing operation and maintenance costs and capacity-building measures for about three years as described in the AFD-financed study report.

f) Reputational risk. By taking the lead as the coordinating and supervising agency for an emergency operation in a high-risk environment, the Bank exposes itself more than usual to reputational risk. Also, the fact that all donors have expressed concerns about the sustainability of the Project increases the pressure on the Bank to ensure that it attains satisfactory completion. The Task Team has ensured that all donors are being consulted and made part of any key decision-making on the project design, institutional and financing arrangements, and implementation schedule.

Financial Terms and Conditions for the Additional Financing

51. The additional financing will be provided as grants from the Trust Fund for Gaza and the West Bank (TFGWB)(US$3.0 million), The Belgian Trust Fund for the NGEST Project (Euros 2.0 million equivalent), and the Partnership for Infrastructure Development Multi-donor Trust Fund (US$5.0 million).

52. For contracts financed by more than one trust fund and/or donor, the additional financing will cover 100% of its relative share of the contract or activity. Given that the FM arrangements at the project are satisfactory and the FM system is capable of recording and reporting financial information on each trust fund separately, Bank records and accounting transactions in the system should be clearly allocated and recorded between the different trust funds based on a pre-

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approved budget allocation for each contract and the financing for it. The following steps will be taken by the NGEST PMU for every contract that is financed by more than one trust fund:

a) A detailed budget should be prepared and pre-approved by the Bank that lists the relative financing shares and amounts allocated to each trust fund.

b) Withdrawal Applications to be submitted to the Bank for replenishment should specify clearly the funding percentages from each trust fund as per the detailed pre-approved plan mentioned above.

c) Terms of reference for an independent auditor will include a full scope audit for 100% of the amount contracted and show the different financing percentages and allocations to each trust fund.

53. Accounting records, as well as designated account records, will be maintained clearly and separately recording and reporting each trust fund's relative share of funding. The auditor should verify and assure the accuracy of funding allocations and financing amounts disbursed on behalf of each contract and on each trust fund.

54. On safeguards, a supplementary ESIA was prepared following completion of the detailed design for the effluent recover and reuse component in Part B. The supplementary ESIA was reviewed and approved by the Bank per the safeguards policies and the ISDS updated.

55. The proposed extension of the closing date for the Project will take the implementation period to more than ten years. The World Bank BP10.00 para 52 stipulates that projects that are extended beyond ten years will require, before extension, an interim ICR to be completed unless the extension and additional financing is solely for cost overruns, in which case Management can decide to have a single ICR prepared upon the full completion of the project. Given that the Additional Financing proposed is exclusively for cost overruns, with no changes to the Development Objectives or expansion of project impacts beyond what was initially envisaged, the Country Director decided that a single ICR will be prepared.

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ANNEX 1

RESULTS FRAMEWORK AND MONITORINGWest Bank and Gaza

North Gaza Emergency Sewerage Treatment Project

Revisions to the Results Framework Comments/Rationale for Change

PDOCurrent (PAD) Proposed (i) Mitigate the health and environmental safety threats to the communities surrounding the effluent lake at the BLWTP.

(ii) Provide a satisfactory long-term solution to the treatment of wastewater for the Northern Governorate in Gaza.

No changeThere is a small difference in the PDO wording in the legal agreements2. This would be corrected as part of the Additional Financing to ensure full consistency.

PDO indicatorsCurrent (PAD) Proposed change*1. Effluent lake is drained

and no longer a threat to the surrounding communities at the BLWTP.

No change With the draining of the lake, health and safety risks have been significantly reduced. Prior to the completion of Part A of the project there were breaches of the lake embankment resulting in several deaths. It is not practical to measure the incidence of diarrhea at local clinics and then attribute any change directly to project outputs, but there is anecdotal evidence from stakeholders in the vicinity of the ponds of health improvements and reduced safety risks.

Positive incidence on localpopulation observed at local clinics.

This indicator is dropped

2. Increase the quantity of wastewater treated and appropriately disposed of – At least 25000 M3/day of wastewater collected and treated in accordance

Revised:Volume of Wastewater collected and treated in accordance with Palestinian environmental standards suitable for groundwater infiltration and reuse (M3/day)

The indicator has been updated and revised to reflect the new closing date of the project. 25,000M3/day is the current average wastewater flow from the connected sewer systems. That will be served as

2 In previous legal agreements the objectives of the Project are stated as: “(i) mitigate the health and environmental safety threats to the communities surrounding the effluent lake at Beit Lahia; (ii) implement a scheme to transfer the effluent in the said lake to the newly constructed infiltration basins east of Jabalia and thereby prevent backflows in the sewerage system; and (iii) provide a satisfactory long-term solution to the treatment of wastewater for the Northern Governorate in Gaza”. Objective (ii) is an activity that must be completed in order to achieve Objective (i). It will therefore be eliminated in the new legal agreement to make the agreement consistent with the PDOs described in the Project Paper.

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with Palestinian environmental standards suitable for groundwater infiltration and reuse by June 30, 2014, from a baseline of 21,000 M3/day of wastewater that was collected but inadequately treated at the outset of the project.

Target revised to: 25,000 M3/day by June 30, 2017

soon as the wastewater treatment plant is commissioned. The previous indicator referred to the design capacity of the plant, which will be reached when additional sewer networks are connected.

3. Improvement of groundwater quality in terms of salinity and nitrates contamination.

Less than 5% increase in salinity and nitrate levels at monitoring wells within project site compared to before commissioning the plant

Measurement of indicator clarified. The project is not expected to improve groundwater quality, but to prevent further deterioration.

N/A 4. [NEW] Maintenance and operational costs of the NGWWTP fully financed by CMWU, Ministry of Local Government and Municipalities (yes/no)

Added to measure long-term sustainability of the project

N/A 5. [NEW] CMWU manages plant so that effluent standards are met at all times (yes/no)

Added to measure long-term sustainability of the project

N/A 6. [NEW] Direct Project Beneficiaries (number), of which female (%)

Core indicator added

Intermediate Results indicatorsCurrent (PAD) Proposed change*1. One and a half million M3

of effluent drained from the lake at Beit Lahiya to the proposed NGWTP site

No change

2. Wastewater pipeline installed (8 km), terminal pump station and infiltration basins are constructed

No change

Infiltration basins are adequately operated and maintained until the NGWTP is operational

Dropped Measuring the same thing as Indicator 4 below so dropped to simplify results framework.

3. EA and EMP implementation is monitored

Revised:EIA, EMP and supplementary ESIA and remedial works studies are completed and their implementation is monitored

The indicator has been updated and revised as a supplementary ESIA was completed following completion of the detailed design for the effluent recover and reuse component per the safeguards policies.

Remedial studies are completed

4. Operation and maintenance of the infiltration basins are adequately supervised

No change

5. A wastewater treatment plant with a capacity of

No change

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35,600 M3/day is adequately constructed and commissioned in North Gaza

6. The NGWWTP is operated and maintained according to industry standards

No change

7. Remedial works are completed

No changes

8. [NEW] Risk Management Facilities (Effluent recovery and reuse) are constructed and operational

Result added to specify achievement of sustainable management of effluent, protection of the aquifer, and provision of water for irrigation.

9. Identified packages are tendered and completed satisfactorily in accordance with the project plan

No change

10.A construction manager to supervise the NGWWTP civil works is hired and adequately supervises the work

No changes

11.Implementation of the EA, EMP, and remedial works are adequately supervised

EA, EMP and supplementary ESIA implementation (for effluent recovery and reuse component) are adequately supervised

The indicator has been updated and revised as a supplementary ESIA was completed following completion of the detailed design for the effluent recover and reuse component per the safeguards policies.

12. [NEW] Volume(mass) of BOD pollution load removed by treatment plant under the project

Core indicator added.

New wastewater treatment plant will be treating up to 35,600 cubic meters of wastewater daily to BOD level of 20 mg/l or less. The projected population served is 350,000.

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REVISED PROJECT RESULTS FRAMEWORKProject Development Objective (PDO):

(i) Mitigate the health and environmental safety threats to the communities surrounding the effluent lake at the BLWTP.(ii) Provide a satisfactory long-term solution for the treatment of wastewater from the Northern Governorate in Gaza.

PDO Level Results Indicators

Cor

e UOM

BaselineOriginal ProjectStart(2004)

Progress To Date

(2013)

Cumulative Target Values

Frequency Data Source/Methodology

Responsi-bility for

Data Collection

Comments2014 2015 2016 2017

1. Effluent lake is drained and no longer a threat to the surrounding communities at the BLWTP.

Yes/No

NoEffluent lake is full and is

an environmental health and safety threat

to surrounding communities.

YesConstruction

of the infiltration basins and

effluent transfer scheme

completed in December 2010 and functional since 2010.

Yes Yes Yes Yes Quarterly

Project supervision and progress reports; PWA quarterly and annual reports; environmental reports

PMU

2. Wastewater collected and treated in accordance with Palestinian environmental standards suitable for groundwater infiltration and reuse (M3/day)

Number 0 0 0 22,000 24,000 25,000 Quarterly


PMU

3. Less than 5% increase in salinity and nitrate levels at monitoring wells within project site compared to before commissioning the plant

Yes/No n/a Yes Yes Yes Yes Yes Quarterly


PMU

4. Maintenance and operational costs of the NGWTP fully financed by PWA, Ministry of Local Government and Municipalities (yes/no)

Yes/No n/a n/a No No No Yes Quarterly Project supervision and progress reports; PMU

5. CMWU manages plant so that effluent standards are met at all times (yes/no) Yes/No n/a n/a Yes Yes Yes Yes Quarterly


PMU

Project beneficiaries, Number 0 200,000 200,000 250,000 300,000 350,000 Quarterly Project supervision and progress reports; PWA quarterly and annual reports; environmental reports

PMU

Communities located in Jabalya, Beit Lahia, Beit Hanoun and Um Al Nasser

Of which female (beneficiaries) % 0 50% 50% 50% 50% 50% Quarterly

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Intermediate Results and Indicators

Intermediate Results Indicators

Cor

e

Unit of Measurement


Progress To Date(2013)

Target Values


Responsi-bility for

Data Collection

Comments2014 2015 2016 2017

Intermediate Result 1: Successful completion of the scheme to transfer the effluent transfer to the proposed NGWTP site

1. One and a half million M3 of effluent drained from the lake to the proposed NGWTP site

Yes/No No Yes Yes Yes Yes Yes Quarterly


PMU

2. Wastewater pipeline installed (8 km), terminal pump station and infiltration basins are constructed



PMU

Effluent transfer facilities completed and functioning as designed since late 2010.

Intermediate Result 2: Implementation of Component 1 is adequately monitored by PWA

3. EIA, EMP and supplementary ESIA and remedial works studies are completed and their implementation is monitored

Yes/No No study was in place Yes Yes Yes Yes Yes Quarterly


PMU

Original ESIA and EMP completed 3/30/2006. ESIA prepared for sludge recovery and reuse component completed.

4. Operation and maintenance of the infiltration basins are adequately supervised Yes/

No No Yes Yes Yes Yes Yes Quarterly


PMU

Intermediate Result 3: North Gaza WWTP is operational

5. North Gaza WWTP with a capacity of 35,000 cubic meters per day is constructed and operational

Yes/No No No Yes Yes Yes Yes Quarterly

Project supervision and progress reports; PWA quarterly and annual reports;

PMU

Construction of WWTP continues with some delays due to security situation and cost overruns.

6. The NGWWTP is operated and maintained according to industry standards

Yes/No N/A N/A No Yes Yes Yes Quarterly


PMU

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Intermediate Results and Indicators

Intermediate Results Indicators

Cor

e

Unit of Measurement


Progress To Date(2013)

Target Values


Responsi-bility for

Data Collection

Comments2014 2015 2016 2017

7. Remedial works are completed Yes/No No No No Yes Yes Yes Quarterly


PMU

Intermediate Result 4: Implementation of Part B activities is adequately monitored by PWA

8. Risk Management Facilities are constructed and operational Yes/No No No Yes Yes Yes Yes Quarterly


PMU

Implementation of remedial works and effluent reuse scheme is pending completion of SESIA.

9. Identified packages are tendered and completed satisfactorily in accordance with the project plan



PMU

10. A construction manager to supervise the NGWWTP civil works is hired and adequately supervises the work



PMU

11. EA, EMP and supplementary ESIA implementation (for effluent recovery and reuse component) are adequately supervised



PMU

12. Volume(mass) of BOD pollution load removed by treatment plant under the project

Tons/yr 1000 4000 4000 4000 4000 7000 Quarterly


PMU

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ANNEX 2

OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF)West Bank and Gaza

North Gaza Emergency Sewage Treatment ProjectThird Additional Financing Grant

Stage: Board.

Risks.

Project Stakeholder Risks

Stakeholder Risk Rating High

Risk Description:

Gaza communities suffer from high unemployment rates and Gaza is home to a large number of refugees for whom welfare payments in the form of free public services are expected. Tariff rates in Gaza are too low to cover operation and maintenance costs of water and sanitation services and tariff collection rates are very low (in the range of 20% in most municipalities) and there may be public resistance to paying for services.

Risk Management:

Public awareness campaigns will seek to increase public understanding and willingness to pay for services. The cooperation of mayors and their local governance structures will be sought to encourage higher willingness to pay.

The ongoing Gaza Water Supply and Sewer Systems Improvement Project provides complementary support for tariff reforms through the CMWU.

Resp: Client Status: In Progress

Stage: Implementation Recurrent: Due Date:

June 30, 2017

Frequency: Continuous

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Implementing Agency (IA) Risks (including Fiduciary Risks)

Capacity Rating Substantial

Risk Description:

Risk Management:

An institutional development roadmap will be prepared by CMWU with support from donors.Technical and financing assistance will be provided through PWA to build the capacity of CMWU and the municipalities to operate and maintain the WWTP. The Water Sector Capacity Building Project will provide specific procurement capacity building for PWA. Procurement staff in PWA and other agencies as may be required will receive training on contract management to conform with Bank

FM guidelines as well as those of AFD.

PWA has limited project management capacity as well as limited capacity to address restrictions and access issues. PWA procurement staff need regular training updates to maintain adequate knowledge of the Bank Procurement Guidelines.

Although the NGEST PMU is experienced and capable, it requires support to respond to World Bank administrative requirements.

The CMWU has limited capacity to manage the operation and maintenance of water or wastewater services. CMWU effectively functions as a PMU for donor-financed water sector projects rather than as a regional water utility.

Resp:Client/Bank/Donor

Status:In Progress

Stage:Implementation

Recurrent: Due Date:June 30, 2017

Frequency:continuous

Governance Rating Moderate

Risk Description: Risk Management:

Define and strengthen wastewater reuse policies through support to Water Sector Capacity-building Project Implementation of the Action Plan for Water Sector Reform will, inter alia, clarify institutional roles, responsibilities, and

coordination mechanisms.

Waste water treatment and reuse will require effective coordination and clear delineation of roles and responsibilities between the PWA,

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the Ministry of Agriculture, local authorities, and water users. Wastewater reuse policies are not well defined for Palestine and institutional rivalries within the PA may compromise the effectiveness of project outputs, especially concerning wastewater reuse.

The Water Sector Capacity Building Project will provide technical and financial resources for achieving effective inter-agency coordination to achieve sector development goals.

The procurement procedures will be subject to the Bank’s and AFD’s prior review and will adhere to Bank procurement guidelines; Resp:Client

Status:In Progress

Stage:Implementation


Frequency:

Design Rating Moderate

Risk Description: Risk Management:The WWTP technical design will require specialized skills to operate, and chemicals that may be restricted for entry to Gaza by Israel.The scale of the proposed reuse scheme is large and institutional arrangements for managing it are untried.Risk that O&M arrangements may become institutionally complex

A service contract with an international firm experienced in WWTP operation and management will be executed to build institutional capacity over three years.

Ongoing coordination with COGAT will leverage donor support for import of critical supplies for the WWTP. Ongoing pilot projects in Gaza are developing institutional models for managing wastewater reuse in Gaza. AFD-financed

technical assistance will aim to define institutional needs and strengthen capacity for management.

Resp: Client Status: In Progress

Stage: Implementation Recurrent: Due Date:June 30, 2017

Frequency:

Social and Environmental Rating Moderate

Risk Description:

Resettlement Action Plan has been prepared and approved by the Bank that comprehensively addresses the social impacts of the reuse scheme.

An emergency management plan is in place to cope with catastrophic failure of the WWTP by diverting flows to emergency lagoons.

Wastewater treatment facilities and network for sewage and wastewater reuse will require land acquisition and land owners may be inadequately compensated if land is acquired for the project.

Affected parties may suffer economic losses with no or insufficient compensation.

Wastewater effluent will enter groundwater and has the

Resp: Client Status: In progress Stage: Implementation Recurrent: Due Date: June 30,

2017Frequency:

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potential to contaminate the aquifer.

Treatment plant failure could lead to partially treated effluent overflows to surrounding lands within Gaza.

Program and Donor Rating Low

Risk Description:

New co-financing is being channeled through a multi-donor trust fund that provides for streamlined reporting and fiduciary arrangements. Ongoing coordination with AFD for parallel co-financing is effective and will be maintained.

Co-financiers may provide parallel co-financing with different fiduciary arrangements and reporting requirements, increasing administrative burdens for PWA.Sufficient funding for all work may not be available

Resp: Client/Donor Status:In Progress

Stage: Implementation Recurrent: Due Date:

June 30, 2017Frequency:

Delivery Monitoring and Sustainability Rating High

Risk Description: Risk Management:Operation and maintenance of the waste water treatment and reuse facilities will require a revenue stream from tariffs and/or subsidies sufficient to cover all costs.Current tariffs for both water supply and sewerage are low and collection rates are also low. Tariffs will likely need to be increased. There may be public resistance to paying and there may be insufficient financing to operate and maintain the infrastructure to be constructed through the project.

Dialogue already underway with Gaza municipalities indicates awareness that tariff reform is needed, public attitudes need to change, and collection needs to be enforced.

Prepaid metering has been effective in improving financing of water and sanitation services in parts of the West Bank and can be introduced in Gaza.

Resp: Client Status: In Progress Stage:Implementation

Recurrent: Due Date:

June 30,

Frequency:

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2017

Other (Optional) Rating HighRisk Description: Risk Management:Israel’s policy of disengagement from Gaza and high levels of security risks severely constrain movement and access of goods, materials, people, and resources such as electrical power and bulk water supplies between Gaza and Israel.

Sufficient power to operate water and wastewater services is currently unavailable within Gaza and might not be provided from Israel. The plant is currently connected to the Gaza grid, and frequent power outages along with the possibility of power fluctuations and surges can be expected, which can shorten the life of electro-mechanical equipment..

Donor partners have coordinated closely with each other and with the Office of the Quartet Representative (OQR) to facilitate cooperation through COGAT and other Israeli Government agencies.

A written request for additional power for the NGEST project has been submitted by the Palestinian Energy Authority (PEA) to the Israeli Energy Authority.

Several options to address Gaza’s power needs and in particular for the NGEST project are being reviewed Optimal immediate measures to ensure an adequate supply for the NGEST Project facilities pending a longer term solution for Gaza as a whole have been identified.

Resp: Client/Bank/Donors

Status: In progress Stage: Implementation


Frequency:

Overall Risk: High

Risk Description:There are significant risks affecting the ability of the Project to deliver its DO’s. The main risks are related to the overall political and security context, the specific progress in the PWA-led water sector reform agenda, and to the capacity of PWA, the Coastal Municipalities Water Utility and the Gaza municipalities to agree on institutional modalities and financing for operating and monitoring the wastewater treatment and reuse system.

The PMU established for the NGEST Project construction phase has demonstrated a high level of competence in managing the construction contract and preparing for the effluent recovery and reuse component.

A capacity and needs assessment for operating and maintaining the wastewater treatment plant indicates very low institutional and financial capacity currently (the additional financing is intended to specifically address this risk). Although there is substantial regional and global experience with wastewater reuse for irrigation, practical experience in the Palestinian Territories is limited. The scale of the proposed reuse scheme is large and institutional arrangements for managing it are untried.

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ANNEX 3West Bank & Gaza: North Gaza Emergency Sewage Treatment Project

Third Additional Financing

PROJECT FINANCING SUMMARY

Source of FundsApproved

AmountAdministration

Costs

Net Amount available for

Project Estimated net amount in US$

Current Financing:World Bank:

Original Grant 7,800,000$ - 7,800,000$ 7,800,000$ AF1 12,000,000$ - 12,000,000$ 12,000,000$ AF2 7,000,000$ - 7,000,000$ 7,000,000$ Sida co-financing:

Original grant SEK 40,000,000 800,000SEK 39,200,000SEK 5,774,049$ Supplemental grant SEK 10,000,000 200,000SEK 9,800,000SEK 732,719$

Belgian co-financing 4,000,000€ 80,000€ 3,920,000€ 5,168,703$ European Commission co-financing 6,000,000€ 120,000€ 5,880,000€ 7,762,218$

TOTAL World Bank-administered financing: 46,237,689$ AFD

Original Grant 12,000,000€ - 12,000,000€ 15,600,000$ Additional Grant 4,000,000€ - 4,000,000€ 5,200,000$

TOTAL AFD financing: 16,000,000€ 16,000,000€ 20,800,000$ European Investment Bank 5,400,000$ - 5,400,000$ 5,400,000$ MoF/tax financing 541,452$ - 541,452$ 541,452$

TOTAL CURRENT FINANCING: 72,979,141$

Proposed Additional Financing:World Bank:

AF3 3,000,000$ - 3,000,000$ 3,000,000$ Infrastructure MDTF 5,000,000$ - 5,000,000$ 5,000,000$ Belgium: 2,000,000€ 40,000€ 1,960,000€ 2,548,000$ TOTAL World Bank-administered Additional Financing: 10,548,000$

AFD: 4,600,000€ 4,600,000€ 5,980,000$ GRAND TOTAL CURRENT & PROPOSED FINANCING: 89,507,141$

TOTAL NGEST BUDGET ESTIMATE : 106,000,000$ (including effl uent recovery/reuse Phase 2)

Remaining deficit: (16,492,859)$

Current and projected Funding for the NGEST Project, February 2014

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ANNEX 4

West Bank & Gaza: North Gaza Emergency Sewage Treatment Project


REVISED ESTIMATE OF PROJECT COSTS

No. Project Component Intial Budget as Revised 2010

Revised Budget January 2014

WB TF54208 (original grant)

WB AF I TF92196

WB AF II TF97081

WB AF III Multi donor trust fund SIDA TF056186

Belgium TF057109

EC TF057595 Total - World Bank-managed funds

EIB+MoF AFD + Add.Fin. AFD Add.Fin.II Total AFD (US$) Equivalent

Not Financed Yet

Component A1

14,487,668 14,122,462 5,194,345 3,000,001 - - - 694,639 - 200,626 9,089,611 4,703,494 329,357 - 329,357 -

Component A2 -

1,671,580 1,742,323 1,332,926 - - - - - - - 1,332,926 409,398 - - - -

16,159,248 15,864,785 6,527,270 3,000,001 - - - 694,639 - 200,626 10,422,536 5,112,892 329,357 - -

Component B1 0

40,474,931 44,327,743 - - 1,510,507 900,000 300,000 5,760,114 7,627,948 7,630,358 22,328,927 0 20,598,816 0 20,598,816 (0)

Component B2 Implementation of Remedial Work 0 0

550,000 800,000 - - - 800,000 - - 0 0 0 0 0 0 0 0

Component B3 Risk Management Facilities: Phase II. 0

7,650,000 28,374,478 - 6,501,313 - - - - 0 0 6,501,313 0 0 5,500,000 5,500,000 (16,373,165)

Component B4 0

4,093,070 7,466,271 552,613 2,498,687 3,410,000 - - - 0 0 6,461,300 4,971 0 1,000,000 1,000,000 0

Component B5 Operation and maintenance of the facilities 0 0

4,237,054 8,880,761 687,829 - 2,079,493 1,300,000 4,700,000 - 0 0 8,767,322 113,439 0 0 0 0

57,005,055 89,849,253 1,240,442 9,000,000 7,000,000 3,000,000 5,000,000 5,760,114 7,627,948 7,630,358 46,258,863 118,410 20,598,816 6,500,000 27,098,816 (16,373,165)

73,164,303 105,714,039 7,767,713 12,000,001 7,000,000 3,000,000 5,000,000 6,454,753 7,627,948 7,830,984 56,681,399 5,231,302 20,928,173 6,500,000 27,428,173 (16,373,165)

Effluent Transfer

Sub-Total A1

Sub Total B5

Sub Total B4

Sub-Total B2

Sub-Total B3

Sub-Total A2

Sub-Total B1

Part A

Part B

Total Part A + Part B

Sub-Total Part B (B1+B2+B3+B4+B5)

Technical Assistance and Implementation of Component (A1) Activities

Sub-Total Part A (A1+A2)

Wastewater Treatment Plant

Component 4: TA for Implementing Component (B1,B2,B3) Activities

-26-

ANNEX 5

West Bank & Gaza: North Gaza Emergency Sewage Treatment Project


ALLOCATION OF GRANT PROCEEDS

3rd Additional Financing Grant from TFGWB (TF016844) (US$ 3.0 million)

Expenditure Category Amount in US$ millions Financing Percentage

Works, Goods, Non-consulting Services, Consultants’ Services (including Audit), Incremental Operating Costs, and North Gaza Wastewater Treatment Plant Operation and Maintenance Expenditures.

3.00 100

Total Grant Allocation: 3.0 100

Co-Financing GrantPartnership for Infrastructure Development Multi-donor Trust Fund (TF016501)

(US$ 5.0 million)Expenditure Category Amount in US$ millions Financing Percentage


5.00 100


Supplemental Co-Financing Grant – Kingdom of Belgium Trust Fund TF070390 (disbursing fund TF057109)

(Euros 2.0 million)

Expenditure CategoryAmount in US$ millions

equivalentFinancing Percentage

Works 2.50 100


-27-

Proposed Reallocations of Grants

2nd Additional Financing Grant from TFGWB (US$ 7.0 million) TF097081Reallocation of proceeds

Expenditure CategoryCurrent

allocation

Requested reallocation

RevisedFinancing Percentage

in US$ millions

Works 1.40 0.00 0

Goods 1.70 0.00 0

Consultant Services 2.90 0.00 0

Incremental Operating Costs 0.70 0.00 0

Unallocated 0.30 0.00 0


0.00 7.00 100

Total Grant Allocation: 7.00 7.00 100

-28-

1st Additional Financing Grant from TFGWB (US$ 12.0 million) TF092196Reallocation of proceeds

Expenditure CategoryCurrent

allocation

Requested reallocation

RevisedFinancing Percentage

in US$ millions

Works 10.65 0.00 0

Goods 0.07 0.00 0

Consultant Services 0.90 0.00 0

Incremental Operating Costs 0.15 0.00 0

Unallocated 0.23 0.00 0Works, Goods, Non-consulting Services, Consultants’ Services (including Audit), Incremental Operating Costs, and North Gaza Wastewater Treatment Plant Operation and Maintenance Expenditures.

0.00 12.00 100

Total Grant Allocation: 12.00 12.00 100

-29-

ANNEX 6

PROJECT PREPARATION AND APPRAISAL TEAM MEMBERS

Name Title Unit

Richard Pollard Senior Water and Sanitation Specialist,Team Leader

MNSWA

Iyad Rammal Senior Infrastructure Specialist MNSWA

Junghun Cho Program Manager MNC04

Velayutham Vijayaverl Senior Procurement Specialist MNAPR

Lina Tutunji Senior Procurement Specialist MNAPR

Nadi Mashni Financial Management Specialist MNAFM

Eric Ranjeva Finance Officer CTRLA

Nikolai Soubbotin Lead Counsel LEGEM

David Meerbach Senior Water Resources Specialist ECSAR

Tracy Hart Senior Environmental Specialist MNSSD

Nina Bhatt Lead Social Development Specialist MNSSD

Fifi Antar Program Assistant MNC04

Khairy Al Jamal Senior Infrastructure Specialist,Peer Reviewer

EASWE

Pier Mantovani Lead Water & Sanitation Specialist,Peer Reviewer

ECSUW

-30-

ANNEX 7

MAP

-31-

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