Document of The World Bank

Report No: 55397-TZ

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF

DAR ES SALAAM WATER SUPPLY AND SANITATION PROJECT

CREDIT NO. 3771-TA

MAY 27, 2003

TO THE

UNITED REPUBLIC OF TANZANIA

June 29, 2010

Urban and Water Unit (AFTUW) Country Department AFCE1 Africa Region

The 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.

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ABBREVIATIONS AND ACRONYMS

DAWASA Dar es salaam Water and Sewerage Authority IDA International Development Association IFR Interim Financial Report MOFEA Ministry of Finance and Economic Affairs PDO Project Development Objective Pty Proprietary Limited Company TMS Turbo Machinery Services UK United Kingdom USD United States Dollars

Regional Vice President: Obiageli K. Ezekwesili Country Director: John Murray McIntire

Sector Manager / Director: Junaid Kamal Ahmad Task Team Leader: Rosemary Mukami Kariuki

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Extension of Closing Date

TANZANIA — DAR ES SALAAM WATER SUPPLY AND SANITATION PROJECT P059073

CREDIT NO. 3771-TA

Restructuring Paper 1. In a letter from the Ministry of Finance and Economic Affairs (MOFEA), dated June 24, 2010 (and an amendment dated June 28, 2010) the borrower has requested that the closing date for Tanzania, DAR ES SALAAM WATER SUPPLY AND SANITATION PROJECT (DWSSP), Credit No. 3771-TA, P059073 be extended from June 30, 2010 until November 15, 2010 for a single contract in the amount of USD 2,080,434.00 with M/S Degremont (Pty) Limited of South Africa for the purchase of Water Pumps and Spares for installation at the Upper and Lower Ruvu Treated Water Stations (signed April 28, 2010). There will be no other changes to the project and based on communication received from the supplier the team considers an extension of 5 months adequate. This will be the 3rd extension of the project and will bring the closing date to November 30, 2010.

Compliance with Operational Policy (OP) 13.30

2. The team has agreed with the borrower on a written specific action plan which is acceptable to the Association to complete the project within the new extension period. A copy of the borrowers request for extension and the action plan that has been agreed with the Association are attached. The Project Development Objective continues to be achievable if the extension is granted and action plan implemented. The performance of the borrower and implementing agency is satisfactory. However the audit report for fiscal year 2008/2009 was qualified. The Association and the borrower agreed in writing on a time bound action plan to address the audit findings, which is detailed in the action plan enclosed as Attachment 3. Neither Tanzania nor DWSSP are under suspension of disbursements.

3. The completion of this contract will increase the likelihood of sustainability by allowing for the: (i) replacement of aged high lift pumps; and (ii) the procurement of necessary spares deemed essential to the continued functioning of the Upper Ruvu and Lower Ruvu plants. Both have been experiencing frequent breakdowns that have disrupted service delivery to Dar es Salaam. Efforts to procure the pumps begin in June 2009, however, there have been significant delays. The borrower first requested the Association’s approval to proceed with the purchase of the pumps on July 6, 2009. However, the first attempt to procure the pumps failed as quotations from shortlisted suppliers were considered expensive and the proposed delivery period extended beyond the initial project closing date of December 31, 2009. Processing of a second request for bids was therefore suspended until an extension of the project was granted up to June 30, 2010.

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4. Following the extension of the project in December 2009, the borrower sought permission (March 2010) from the Association to directly contract the plant and equipment taking into account lessons learned from the first attempt to procure the pumps. This request was granted in April 12, 2010 and the schedule of requirements and specifications was reviewed, negotiations carried out and the contract signed on April 28, 2010 with M/S Degremont Pty Ltd (the Supplier) with a delivery and installation period of three months. On June 15th, the Manufacturer M/S Turbo Machinery Services (TMS) UK communicated to the borrower (through the Supplier) that due to other commitments, the delivery of the pumps would be further delayed. Considering the time required for inspection and shipment it is expected that the timetable for delivery and installation of these pumps will be delayed to October/November, 2010.

5. The borrower has paid the first of three installments in the amount of $390,087 (20% advance payment) against a receipt of invoice. The balance to be paid is $1,690,347 (see details in Attachment 1). There are sufficient funds remaining in the credit to cover the remaining payments. Out of a total of $60.11 million available to the borrower, $58.94 million has been disbursed and $2.85 million is undisbursed1 (see Attachment 2. There will be no changes in the flow of funds or to disbursement arrangements. The project has regularly prepared required Interim (Unaudited) Financial Reports (IFRs) and submitted these to the Bank on time. The IFRs have been found to be satisfactory.

1 Client Connection, Estimated June 1, 2010.

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Attachment 1

Pumps and Spare parts Contract Payment Terms

Schedule Item Payment Terms Amount paid

Schedule 1 Plant and Equipment supplied from abroad

$1,950,434

20% advance payment against receipt of invoice and an irrevocable advance payment security.

70% upon delivery to carrier

10% upon issuance of Completion Certificate, and Operational Acceptance Certificate

$390,087

Schedule 2 NA N/A N/A

Schedule 3 Local Transportation

$53,300

20% advance payment against receipt of invoice and irrevocable advance payment security.

80% upon delivery to site, receipt of invoice and certification by Project Manager

-

Schedule Installation Services

$ 76,700

20% advance payment against receipt of invoice and irrevocable advance payment security.

70% of the measured work value, paid monthly, on receipt of invoice and certification by Project Manager

10% of total or pro rate value of installation services, on receipt of invoice and certification by Project Manager

-

TOTAL $2,080,434 Balance due - $1,690,347 $390,087

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Attachment 2

Dar es salaam Water Supply Project Category Summary in Currency of Loan Commitment

A D UC C D USD USD USD

IDA WKS PT A C D D E 764

IDA GOODS PT A C DIDACONS AUD PTAB CD D EIDA TRAINING PTC DIDA OP COSTS PT DIDA PPF QIDA UNALLOCATED 

DA A D ADA B D AMDRI  IDA MDRI 

E R XDR  USD  J

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Attachment 3

Action Plan agreed between the Borrower and the Association

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