Western Uzbekistan Water Supply System Development Project. Uzbekistan Asian Development Bank (ADB)

Transcription

1 Western Uzbekistan Water Supply System Development Project Uzbekistan Asian Development Bank (ADB) 12 May 2017

2 Project/Programme Title: Country/Region: Western Uzbekistan Water Supply System Development Project (Modernization and development of the water supply in the districts Nukus, Muynak. Kungrad, Berunyi and Karauzak as well as the rehabilitation of the 2nd lift pumping station Tuyamuyun) Uzbekistan Accredited Entity: Asian Development Bank National Designated Authority: Centre Of Hydrometeorological Service At The Cabinet Of Ministers of Republic of Uzbekistan

3 GREEN CLIMATE FUND PAGE 1 OF 5 A. Project / Programme Information Please submit the completed form to fundingproposal@gcfund.org 1 A.1. Project / programme title A.2. Project or programme A.3. Country (ies) / region A.4. National designated authority(ies) Western Uzbekistan Water Supply System Development Project (Modernization and development of the water supply in the districts Nukus, Muynak. Kungrad, Berunyi and Karauzak as well as the rehabilitation of the 2nd lift pumping station Tuyamuyun) Project Uzbekistan His Excellency Prof. Victor Chub Minister, Director General Centre of Hydrometeorological Service Cabinet of Ministers 72, 1st Bodomzor yuli str. Tashkent, Uzbekistan Tel E mail: uzhymet@meteo.uz A.5. Accredited entity Asian Development Bank Executing Entity: Uzkommunkhizmat (Uzbekistan Communal Services Agency, A.6. Executing entity / UCSA) under the Ministry of Housing and Communal services beneficiary Beneficiary: the Republic of Karakalpakstan, Uzbekistan A.7. Access modality Direct International A.8. Project size category (total investment, million USD) A.9. Mitigation / adaptation focus A.10. Public or private Micro ( 10) Small (10<x 50) Medium (50<x 250) Large (>250) Mitigation Adaptation Cross-cutting public Which of the following targeted results areas does the proposed project/programme address? A.11. Results areas (mark all that apply) Reduced emissions from: Energy access and power generation (E.g. on-grid, micro-grid or off-grid solar, wind, geothermal, etc.) Low emission transport (E.g. high-speed rail, rapid bus system, etc.) Buildings, cities, industries and appliances (E.g. new and retrofitted energy-efficient buildings, energy-efficient equipment for companies and supply chain management, etc.) Forestry and land use (E.g. forest conservation and management, agroforestry, agricultural irrigation, water treatment and management, etc.) Increased resilience of: Most vulnerable people and communities (E.g. mitigation of operational risk associated with climate change diversification of supply sources and supply chain management, relocation of manufacturing facilities and warehouses, etc.) Health and well-being, and food and water security (E.g. climate-resilient crops, efficient irrigation systems, etc.) Infrastructure and built environment (E.g. sea walls, resilient road networks, etc.) Ecosystems and ecosystem services (E.g. ecosystem conservation and management, ecotourism, etc.) 1 Please use the following naming convention for the file name: [CN]-[Agency short name]-[date]-[serial number] (e.g. CN-ABC ).

4 GREEN CLIMATE FUND PAGE 2 OF 5 A.12. Project / programme life span A.13. Estimated implementation start and end date 25 years Start: the 1 st quarter of 2018 End: the 4 th quarter of 2020 B. Project/Programme Details The Fund requires the following preliminary information in order to promptly assess the eligibility of project/programme investment. These requirements may vary depending on the nature of the project/programme. B.1. Project / programme description (including objectives) General Concept The modernizatation and development of the water supply in the districts Nukus, Muynak. Kungrad, Berunyi and Karauzak as well as the rehabilitation of the 2nd lift pumping station Tuyamuyun project (the Project) will support a paradigm shift in an all-inclusive climate resilient approach towards domestic water supply. The project will follow the DOCS (design-operations-communication-strategic) climate resilient methodology in upgrading the water supply system of six districts in Western Uzbekistan. The Project offers a unique opportunity to serve as a show-case of rehabilitation and upgrading domestic water supply systems in dry regions under pressure of climate change using this all-inclusive DOCS climate resilient approach and simultaneously improving living conditions of over 400,000 people by The Project will be significant in terms of value-for-money to GCF as the main part of the rehabilitation will be covered by other funds and only the climate resilience components are requested from GCF. Location of the districts in Karakalpakstan in Western Uzbekistan where the project will be implemented. Social and Physical Setting The Republic of Karakalpakstan (RK), Uzbekistan, covers an area of over 165,000 km 2 in the nation s entire north-western extremity. Its natural environment is primarily arid desert, being composed of sparse, barren lands that are subject to severe drought. Water resources suitable for drinking water in RK are limited and in decline due a combination of human-driven factors and on-going long-term climate changes. Historically, the RK s water resources included the globally unique Aral Sea, however due to excessive water extraction from the Amu Darya and the Syr Darya rivers, its surface area had shrunk by 90%. Groundwater is pervasive throughout the RK, but is mostly brackish or saline and therefore of limited value, as it is prohibitively expensive to treat for human consumption. The situation is further exacerbated by climate change, as river flow from the Amu Darya, the primary source of water supply for RK,

5 GREEN CLIMATE FUND PAGE 3 OF 5 is projected to decline in the coming decades due to receding glaciers in the upstream areas of Tajikistan, and higher demands upstream by a combined effect of changing rainfall patterns and increased evaporation by higher temperatures. The climate is continental, determined by the landlocked position of Uzbekistan within the Eurasian continent and characterized by high solar radiation and relatively low humidity. The average temperatures range from 0-4 ºC in January and ºC in July. In the Project area, summer temperatures may peak up to 50 ºC and in winter to below -10 ºC. Annual precipitation is between 80 and 100 mm, concentrated in the spring and winter months, April being the most wet month, with an average of 20 mm of rainfall. Climate change projections in the Project area show substantial higher temperature and significant increases in precipitation variation. This will lead to: (i) increase in the number of people relying on sustainable water supply, (ii) increase in water requirements per person, (iii) higher reliability of the delivery infrastructure, (iv) improved awareness of the value of water (v) increased emergency storage and/or supply, and (vi) changes in operations. Projected changes in temperature and precipitation in the Project area according to various IPCC GCMs between and Source: Climate Risk and Vulnerability Assessment, In addition, much of the water supply infrastructure has deteriorated and requires rehabilitation. Services are unreliable, leakage losses reportedly high, and raw water quality is a mounting concern. Relatively high per-capita system costs coupled with low affordability levels constrain investment and inhibit delivery. Some consumers only receive water supplies for two hours per day. Intake points for the water supply are located in canals, often irrigation canals, which are fed by the river Amu Darya. The Amu Darya originates from the Pamir mountains and flows through Tajikistan, Uzbekistan and Turkmenistan and is regulated by various reservoirs. Numerous abstractions points exit before the river reaches Karakalpakstan, and the Tuyamuyun Hydro Complex Dam. The Department for Operation of Interregional Water Supply Tuyamuyun Nukus (DOIWS-TN), commonly referred to as TN, based in Nukus, the capital of RP, is solely responsible for water supply throughout the RK. Currently, its existing centralized system supplies water to urban centres and rural settlements in all of the RK s districts serving about half of the RK s population. TN is responsible for water supply within Karakalpakstan through its urban and district branches.

6 GREEN CLIMATE FUND PAGE 4 OF 5 Analysis of flows into the Tuyamuyun Dam under various climate projections. Source: Climate Risk and Vulnerability Assessment, DOCS approach The all-inclusive climate resilient DOCS (design-operations-communication-strategic) approach is derived from lessons learnt and scientific thinking on climate resilience. The Design of new or rehabilitation of existing domestic water supply systems must take into account forecasted changes due to climate change in supply and demand of water; total as well as annual and inter-annual variation. The Operations of domestic water supply require radical changes as stationarity is dead. Dynamics in both supply and demand will intensify and operations should be adjusted to cope with these changes. Communication is key in this all-inclusive climate resilience as both suppliers and users should join forces to keep the system sustainable and reliable. Finally, Strategic planning should be an integrated continuous process beyond the scope of the design phase. Once a water supply system starts to malfunction the process is irreversible as users starts to take own actions (e.g. excessive withdrawal for storage, illegal abstractions, other sources, etc) which will disrupt the entire system. For this specific Project, this DOCS approach will be implemented as follows. During the Design phase water supply and demand will be analysed taking into consideration not only economic and population forecasts, but all expected changes in climate induced water supply and demand. For the Project, located completely downstream, these climate induced changes will be substantial given the expected changes in glacial dynamics, rainfall patterns, increased water consumption due to higher temperatures, changing reservoir operations, higher turbidity due to intensification of rainfall, amongst others. Previous analytical work of these changes in dynamics will be used and will support the design of climate-resilient infrastructure. Operations of the water supply must change drastically to make the system climate resilient and operators should be trained for this. This will require substantial efforts as stationarity in operations should shift towards dynamic and pro-active operations. Intensive training of staff of the TN is needed to make this paradigm-shift in operating their systems in a re-active (by complaints) modus towards a pro-active way by considering short and long-term forecasts in demand and supply. Communication will be implemented by public awareness campaigns targeting schools, kindergarten, water users, and other stakeholders and aimed at educating the population to better appreciate and understand to value of water and to ensure sustainable and productive use of water supplied. Besides this basic water related education, a real-time communication system will be setup so that water users can be informed on a day-today base about expected water delivery. This will build trust and will avoid disruption of the system by e.g. excessive storage by users, illegal withdrawals, non-sustainable source development, etc. Finally, Strategic monitoring and development will not stop

7 GREEN CLIMATE FUND PAGE 5 OF 5 after the Project design and construction. On a regular base (annual) past performance and near-future strategic decisions will be made to ensure optimal distribution of water and maintenance. Similarly, a system will be established to evaluate on a five-years base the longer term strategic decisions to ensure that the system is still climate resilient. Substantial capacity building and institutional refocussing is needed to achieve this. Project Outputs The Project will improve the climate resilience, health, and living conditions in the Republic of Karakalpakstan (RK), Uzbekistan, by rehabilitating and expanding water supply systems based on the DOCS (design-operations-communication-strategic) approach in six districts of the RK benefiting over 400,000 people in Simultaneously, the approach followed is a show case of a paradigm shift in an allinclusive climate resilient approach that can be served to guide similar projects in water stressed environments. Layout of main Project s infrastructure features. Project Activities The Project responds directly to this by revitalizing and expanding climate resilient water supplies within six districts of the RK that ensure sustainable delivery of water for the coming decades. The impact of the project is aligned with improved living standards, health, and economy in the RK. The outcome will be improved and expanded access to climate resilient, reliable, sustainable, and affordable water supply services in the RK. The physical works will mainly consist of the construction and rehabilitation of some 650 km of water pipelines and of several pumping water distribution centers, the rehabilitation of the 2nd lift pumping station at the Tuyamuyun water treatment plant (WTP), and the extension of the treatment capacity of the existing WTP at Takiatash. The construction of a new WTP in Mangit (Amudarya district) will be included as well. Based also on preliminary reviews the option desalination plants will be considered only in cases of extreme necessity. The overall project activities will include: (i) Water supply system rehabilitated and fully operational in the selected districts of the RK including the rehabilitation and expansion of climate-proofed and least-

8 (ii) PROJECT / PROGRAMME CONCEPT NOTE GREEN CLIMATE FUND PAGE 6 OF 5 cost water supply infrastructure incorporating water intake structures, treatment plants, pump stations, water distribution centres, distribution networks and other components. Water supply system in Munyak City improved and climate-proofed including construction of transmission lines to connect to the central RKS water supply system, and rehabilitation of water distribution centres, distribution networks, and pumping stations. (iii) Improved operations and business model for the RK water supply utility, the Republic of Karakalpakstan Suvokova (RKS), including the provision of training for technical and financial management, climate risk assessment and management, assistance to establish customer care units in the six district branches, establishment of computerized customer inventories and an RKS asset management system, installation of household water meters, and implementation of a computerized financial management system. (iv) Project management and implementation capacity strengthened including recruitment of additional Project Coordination Unit staff, engagement of international project management consultants, and provision of trainings. (v) Installation of District Metering Areas (DMA) including distribution zone flow metering, and introduction of a computerized system for permanent productionconsumption flow monitoring within each distribution area. (vi) Implementation of public awareness campaigns targeting schools, kindergarten, water users, and other stakeholders and aimed at educating the population to reduce misuse of drinking water. B.2. Background information on project sponsor Since Uzbekistan became a member in 1995, ADB intervention in rural and urban water supply and sanitation (WSS) has progressively increased to the extent that ADB is now one of the nation s primary development partners in WSS. During , ADB provided financial assistance to the government for nine projects totalling more than $500 million, equivalent to about 10% of ADB s total lending and grants to the nation. This assistance has yielded significant improvements in urban infrastructure and services, and particularly in water supply and sanitation (WSS), where over 5 million residents have so far benefitted from safer and more reliable WSS services. ADB has also supported policy reforms in WSS through its grant assistance. The government has also approved its midterm national sector development program for In 2009, ADB approved a multitranche financing facility, the Water Supply and Sanitation Services Investment Program, in order to improve WSS services in provincial cities and secondary towns across eight provinces. In addition to physical investments to rehabilitate and expand WSS systems, nonphysical investments include four key components: (i) strengthening financial management systems, (ii) improving financial sustainability, (iii) introducing performance-based contracts, and (iv) piloting private sector participation through a lease agreement mechanism. These components aim to rationalize and improve institutional efficiency, and complement other development partner sector initiatives. ADB continues to support the reform activities, and is assisting the government to establish full-scale, unified consumer billing systems for project water utilities. The key WSS stakeholders include (i) the Ministry of Finance, which has the legal mandate and sector oversight functions; (ii) the newly created Ministry Housing and Communal Services (MHCS); (iii) the Uzbekistan Agency (UCSA) under the MHCS, a national agency that formulates policy, advises on reforms and decrees, and serves as focal executing agency for foreign investments in WSS; and (iv) provincial WSS suvokovas (state unitary enterprises) responsible for WSS delivery within their respective provinces through their city and district branches. Each district branch is responsible for WSS operation and maintenance and tariff billings and collections within its administrative territory. In RP, the Republic of Karakalpakstan Department for Operation of Interregional Water Supply Tuyamuyun Nukus (TN), based in Nukus, the capital of RP, and with a staff of 1,635 personnel, is solely responsible for water sanitation and supply provision throughout the RK. Currently, its existing centralized system supplies water to select areas in all of the RK s districts, serving about half of the RK s population.

9 GREEN CLIMATE FUND PAGE 7 OF 5 B.3. Market overview B.4. Regulation, taxation and insurance Not applicable To carry out the project activities, UCSA (Uzbekistan Communal Services Agency Uzkommunkhizmat ), the executing agency, is required to obtain the necessary operating and environmental licenses and permits to comply with government policies and regulations as well as with ADB guidelines on environmental and social safeguards. The government will finance all taxes and duties for the Project (other than those required by the government under specific consulting service or procurement contracts). Consulting firms and contractors to be contracted by UCSA are expected to purchase the necessary insurance policies as required by the relevant government laws and/or policies. The Government has also agreed to follow all relevant ADB policies including Procurement Guidelines and so on to ensure transparency and efficiency of the project implementations. B.5. Implementation arrangements The Uzbekistan Agency Uzkommunkhizmat (UCSA) will be the Project s executing agency. UCSA s existing Project Coordination Unit, which is responsible for ADBfinanced project implementation, will be strengthened to manage the project including procurement, contract management, project administration, safeguards compliance and reporting. UCSA will also recruit a consulting firm to assist with project implementation. C. Financing / Cost Information C.1. Description of financial elements of the project / programme Please provide An indicative breakdown of cost estimates analysed focusing on the major cost categories. Total (mus$) Rehabilitati on Climate Resilience Physical Components Extension of WTP Takiatash Waterworks Pumping station Takiatash to Muynak Rehabilitation 2nd lift PS Tuyamuyun Subtotal Kungrad Subtotal Nukus Subtotal Muynak Subtotal Karauzak Subtotal Berunyi Subtotal Amudarya Metered household connections Subtotal (Physical Components) Soft Components PCU N.A. Project implementation consultant Design and tendering Capacity building LARP EMP Social components GAP etc Subtotal (Soft Components) TOTAL

10 GREEN CLIMATE FUND PAGE 8 OF 5 Note: the cost estimates above do not include: a) the construction of the D 400 mm, transmission main from Kungrad to Muynak; and b) incidental costs for State licensing and permits required for implementing and operating the project, applicable taxes, foreign exchange regulations and insurance policies. Other detailed information and analysis (including the financial model) will be provided as part of full proposal. C.2. Project financing information Total project financing (a) = (b) + (c) Financial Instrument Amount Currency Tenor Pricing 160 million USD ($) (i) Senior Loans (ii) Subordinated Loans (iii) Equity (iv) Guarantees N/A N/A N/A N/A million USD ($) ( ) years ( ) years ( ) % ( ) % ( ) % IRR (b) Requested GCF amount (v) Reimbursable grants (vi) Grants * N/A 40 million USD ($) * Detailed economic and financial analysis and justification will be provided as part of full proposal. Total Requested (i+ii+iii+iv+v+vi) 40 million USD ($) Financial Instrument Amount Currency Name of Institution Seniority (c) Cofinancing Senior Loans Counterpart funding million USD ($) million USD ($) Asian Development Bank Government of Uzbekistan pari passu pari passu (d) Covenants (e) Conditions precedent to disbursement Lead financing institution: Asian Development Bank Discussion with the government on the covenants will be held in separate during loan negotiations based on project risk assessment results. Discussion with the government on the conditions precedent to disbursement will be held in separate during loan negotiations based on project risk assessment results. D. Expected Performance against Investment Criteria Please explain the potential of the Project/Programme to achieve the Fund s six investment criteria as listed below.

11 GREEN CLIMATE FUND PAGE 9 OF 5 D.1. Climate impact potential [Potential to achieve the GCF's objectives and results] Specify the climate mitigation and/or adaptation impact. Provide specific values for the below indicators and any other relevant indicators and values, including those from the Fund s Performance Measurement Frameworks. The beneficiaries of the Water Supply Project are the inhabitants of the republic of Karakalpakstan, particularly those living in rural areas. The recipient of the Project can be identified as the Tuyamauyun-Nukus Water Supply Company which is entrusted to: i) deliver safe water supply to an increasing number of inhabitant with the objective to attain 100 service level; ii) generate funds to repay the loan, operation and maintenance and ultimately cover costs for extension of the service in the long range; and iii) ensure long term quality and continuity of the water supply service. The TN Water Company has a long-standing experience in the delivery of water supply to urban centers and rural areas. Through an integrated program of Capacity Building being provided under the Water Supply Project the technical, managerial and financial capacity of the water company is expected to significantly improve thus ensuring sustainable operation in the long term. Based on analysis a population of some 330,000 living in 75 settlements and the six district centers will benefit of improved or new water service upon completion of the construction works in Additional detailed analysis to be provided with full proposal. D.2. Paradigm shift potential [Potential to catalyze impact beyond a one-off project or programme investment] Provide the estimates and details of the below and specify other relevant factors. Project will develop innovative solutions for water supply in water-stressed areas. High potential for replicability and scalability of project approach and design in other water-stressed regions of Central Asia. Project will develop novel and quantitative understanding of the impact of climate change to water supply in the Amu Darya Basin. Project will support capacity building and improved operations and business model for the RK water supply utility, the Republic of Karakalpakstan Suvokova (RKS), including climate risk management. Under the Presidential Decree 2732 of 18 January 2017, the Government of Uzbekistan is engaging in a massive campaign of multi-sector investments aimed at improving the infrastructure, services and quality of life in the Republic of Karakalpakstan. It is clearly acknowledged that climate resilience should be the centerpiece of the sustainability of these investments. The action plan attached to the decree includes 64 projects/actions to be completed until The implementation of this program constitutes a favorable platform enhancing synergies between services and economic development thus ensuring flexible adaptation of the water company, capable of auto financing in the long term, to sustain increasing workload yet ensuring the required level of performance. Under the Water Supply Project the TN Water Company is starting up a program of renewal and expansion of its infrastructure accompanied by a series of capacity building programs aimed to strengthen the technical, managerial and financial capacity of the Company. The overall target if the water company is to achieve sustainability and self-financing. TN is committed to include climate resilience in their overall strategy and not only during the design phase of projects. The proposed paradigm-shift, by using an all-inclusive climate-resilient approach based on the DOCS (design-operationscommunication-strategic) methodology as included in the current Project, will have the potential to catalyze impact in future project and program investments. Additional detailed analysis to be provided with full proposal. D.3. Sustainable development potential [Potential to provide wider development co-benefits] Provide the estimates of economic, social and environmental co-benefits. Examples include the following: Economic co-benefits expected: job creation Social co-benefits expected: improved health Environmental co-benefits: improved water quality

12 GREEN CLIMATE FUND PAGE 10 OF 5 Gender-sensitive development impact expected: improved water access by women The project will have significant positive impact in livelihoods and family income and will set up favorable premises for boosting small scale business. Major positive impacts inducing economic return are related to the anticipated reduction of diseases directly related to sanitation. Among possible indicators for monitoring the anticipated positive impacts, the most typical ones can be: i) household income, ii) incremental number of small scale business, and iii) waterborne related health indicators. D.4. Needs of recipient [Vulnerability to climate change and financing needs of the recipients] Detailed analysis to be provided with full proposal. Describe the scale and intensity of vulnerability of the country and beneficiary groups and elaborate how the project/programme addresses the issues. Examples of the issues include the following: The water supply in RK is already highly exposed to and impacted by a combination of human-driven factors and on-going long-term climate changes. River flow from the Amu Darya, the primary source of water supply for RK, is expected to decline in the coming decades due to receding glaciers in the upstream areas of Tajikistan and upstream changes in rainfall, water consumption and evaporation. The Project will draw water indirectly from the Amu Daria River, whose level and flow is expected to be negatively affected in the coming decades by decline in glacial coverage in upstream areas and changing patterns of precipitation due to climate change. A primary risk to RK water supply and thus the Project investments is that in future decades there may be insufficient reliable water availability at the proposed offtake points for the target beneficiaries, thereby reducing the lifetime of the investment. Water users are already highly vulnerable to these effects, as much of its infrastructure has deteriorated and requires rehabilitation. Services are unreliable, leakage losses reportedly high, and raw water quality is a mounting concern. Relatively high per-capita system costs coupled with low affordability levels constrain investment and inhibit delivery. Some consumers only receive water supplies for two hours per day. Without the proposed intervention, and with continued deterioration of the water supply due to climate change, the population may be forced to relocate out of their communities in RK due to lack of water availability. Due to the abovementioned risks, the Project feasibility study will include a climate risk and vulnerability study, including a detailed hydrological study of the Amu Darya, to assess expected changes in the pattern and level of river flow over the lifetime of the project, as well as expected changes on groundwater recharge. The results of the assessment will inform project design including selection of (i) most vulnerable beneficiaries, (ii) offtake points, (iii) water storage and distribution options and the development of an integrated climate risk management system to ensure sustained climate resilience. D.5. Country ownership [Beneficiary country ownership of project or programme and capacity to implement the proposed activities] D.6. Effectiveness and efficiency [Economic and financial soundness and effectiveness of the proposed activities] Provide details of the below and specify other relevant factors. The autonomous Republic of Karakalpakstan is the primary beneficiary of the Project. The Uzbek Communal Services Agency (UCSA) will be the executing agency (EA) of the proposed project. Since 2002, with the 3 Project Coordination Units (PCU) established within it, UCSA has already completed 6 MDB projects (ADB: 3, World Bank: 2, and China Exim Bank: 1) and is now implementing 11 MDB projects (ADB: 6, World Bank: 3, IsDB: 1 and OFID&SFD: 1). The ADB Project Coordination Unit has been implementing mentioned 6 projects since TN has participated in 5 MDB projects (ADB: 2, World Bank: 1, KFAED: 1 and Natixis: 1). Provide details of the below and specify other relevant factors (i.e. debt service coverage ratio), if available. GCF is specifically asked to provide a grant instead of a loan to ensure full effectiveness and efficiency of the proposed climate components of the Project. For the supply of settlements located in remote areas with no access to a source of safe water it is necessary to construct distribution lines over long distances requiring relatively high investment costs for the benefit of often small number of inhabitants living in those rural settlements. These areas are specifically vulnerable to climate

13 GREEN CLIMATE FUND PAGE 11 OF 5 change, given their remote location and limited options for alternative drinking water sources. The multiplication of similar cases might hamper the financial feasibility of the Project since, due to the limited number of connections, water bills alone might not be sufficient to repay a loan. A grant will ensure that the Project will embrace this all-inclusive climate reliance component and will boost financially and economically sustainability. Additional detailed analysis to be provided with full proposal. E. Brief Rationale for GCF Involvement and Exit Strategy Please specify why the GCF contribution is critical for the project/programme. The proposed Western Uzbekistan Water Supply System Development Project - Modernization and development of the water supply in the districts Nukus, Muynak. Kungrad, Berunyi and Karauzak as well as the rehabilitation of the 2nd lift pumping station Tuyamuyun (the Project) will be based on a paradigm shift by including an all-inclusive climate-resilient component based on the DOCS (design-operations-communication-strategic) methodology on top of the proposed existing water supply rehabilitation project. Without the contribution of GCF the Project will be implemented not taking into consideration climate aspects with the risk of underperforming in the coming years when the impact of climate change starts affecting the system seriously. Loss of trust from potential beneficiaries and financers can then be expected, on top of impacting lives of people depending on reliable water supply. Moreover, the GCF grant will help to establish a demonstration case of a paradigm-shift on how water supply systems can be rehabilitated in a climateresilient manner. According to a recent report of the OECD such a paradigm shift is urgently needed as investments in climate adaptation in the water supply sector is lagging behind compared to other countries and other sectors in the country. Climate-related development finance in Uzbekistan by sectors in 2013 and 2014 (USD million per year: average). Source: OECD Please explain how the project/programme sustainability will be ensured in the long run, after the project/programme is implemented with support from the GCF and other sources. The GCF funding will be used to add the climate resilient component to the proposed rehabilitation Project. Sustainability of the entire Project is therefore guaranteed by the core resources of the project. The GCF funding is needed to setup the hard and soft components of the climate components of the Project. Once the Project is in full operations the climate components are in place and established and will continue during the delivery of water supply services. F. Risk Analysis Please describe the financial and operational risks and discuss mitigating measures. Interviews for the preparation of the Financial Management Assessment (FMA) of the TN, which will be the Executing Agency (EA) of the Project have been carried out between 20 and 25 March. An assessment of the Procurement capacity of the EA is currently under way.

14 GREEN CLIMATE FUND PAGE 12 OF 5 Please briefly specify the substantial environmental and social risks that the project/programme may face and the proposed risk mitigating measures. The Project is classified under category B with regard to involuntary resettlement. Planning of the Involuntary Resettlement survey is also well advanced. Questionnaire forms have been prepared and the specialist is assembling the cartographic documentation and layouts based on Google Maps, in close coordination with the Engineering team. Environmental Preliminary environmental reviews indicate that the Project may be classified under environmental category B; an Initial Environmental Examination (IEE) will therefore be carried out. Under the environmental duediligence particular attention will be paid to examine possible interference of projects sites particularly in Beruni and in Amudaria districts, with the perimeters of the Lower Amudarya State Biosphere Reserve (LABR). Preliminary examinations show that some civil works will occur within the Transition zone of the LABR, within which there are no restrictions for civil works of the type related to our project. Detailed analysis to be provided with full proposal. G. Multi-Stakeholder Engagement Please specify the plan for multi-stakeholder engagement, and what has been done so far in this regard. A household survey is currently undertaken as well as round-table meetings with stakeholders representatives of various groups of interest (May-2017). Detailed analysis to be provided with full proposal. H. Status of Project/Programme 1) A pre-feasibility study is expected to be completed at this stage. Please provide the report in section J. 2) Please indicate whether a feasibility study and/or environmental and social impact assessment has been conducted for the proposed project/programme: Yes No (If Yes, please provide them in section J.) 3) Will the proposed project/programme be developed as an extension of a previous project (e.g. subsequent phase), or based on a previous project/programme (e.g. scale up or replication)? Yes No (If yes, please provide an evaluation report of the previous project in section J, if available.) I. Remarks J. Supporting Documents for Concept Note Map indicating the location of the project/programme Financial Model Pre-feasibility Study Feasibility Study (if applicable) Environmental and Social Impact Assessment (if applicable) Evaluation Report (if applicable)