Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00006201 IMPLEMENTATION COMPLETION AND RESULTS REPORT IBRD-85630 ON A LOAN IN THE AMOUNT OF US$120 MILLION TO THE DOMINICAN REPUBLIC FOR THE DISTRIBUTION GRID MODERNIZATION AND LOSS REDUCTION PROJECT ( P147277 ) May 30, 2023 Energy & Extractives Global Practice Latin America And Caribbean Region CURRENCY EQUIVALENTS (Exchange Rate Effective May 16, 2023) Currency Unit = DOP DOP54.72 = US$1 FISCAL YEAR January 1 – December 31 Regional Vice President: Carlos Felipe Jaramillo Country Director: Michel Kerf Regional Director: Maria Marcela Silva Practice Manager: Stephanie Gil Task Team Leader: Huong Mai Nguyen ICR Main Contributor: Enrique O. Crousillat ABBREVIATIONS AND ACRONYMS ASAI Average Service Availability Index CDEEE Corporation of Dominican State Electricity Companies (Corporación Dominicana de Empresas Eléctricas Estatales) CPS Country Partnership Strategy CRI Cash Recovery Index DR Dominican Republic EDE Electricity Distribution Company (Empresa Distribuidora de Electricidad) EDRP Electricity Distribution Rehabilitation Project EIB European Investment Bank EIRR Economic Internal Rate of Return EMS Environmental Management System ERI Energy Recovery Index FM Financial Management GRM Grievance Redress Mechanism IBRD International Bank for Reconstruction and Development IDB Inter-American Development Bank IFI International Financial Institution ISR Implementation Status and Results Report IT Information Technology LV Low Voltage M&E Monitoring and Evaluation MV Medium Voltage NDS National Development Strategy NPV Net Present Value O&M Operations and Maintenance OFID OPEC Fund for International Development PAD Project Appraisal Document PCBs Polychlorinated Biphelnyls PDO Project Development Objective PIU Project Implementation Unit POM Project Operational Manual SIE Superintendence of Electricity (Superintendencia de Electricidad) SMS Social Management Strategy WB World Bank TABLE OF CONTENTS DATA SHEET .......................................................................................................................... 1 I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 5 A. CONTEXT AT APPRAISAL .........................................................................................................5 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION ................................................................8 II. OUTCOME .................................................................................................................... 10 A. RELEVANCE OF PDOs ............................................................................................................10 B. ACHIEVEMENT OF PDOs (EFFICACY) ......................................................................................10 C. EFFICIENCY ...........................................................................................................................12 D. JUSTIFICATION OF OVERALL OUTCOME RATING ....................................................................13 E. OTHER OUTCOMES AND IMPACTS .........................................................................................13 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 14 A. KEY FACTORS DURING PREPARATION ...................................................................................14 B. KEY FACTORS DURING IMPLEMENTATION .............................................................................15 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 17 A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................17 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE .....................................................18 C. BANK PERFORMANCE ...........................................................................................................20 D. RISK TO DEVELOPMENT OUTCOME .......................................................................................22 V. LESSONS AND RECOMMENDATIONS ............................................................................. 22 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 25 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 33 ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 35 ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................... 36 ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 39 ANNEX 6. SUPPORTING DOCUMENTS .................................................................................. 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name Distribution Grid Modernization and Loss Reduction P147277 Project Country Financing Instrument Dominican Republic Investment Project Financing Original EA Category Revised EA Category Partial Assessment (B) Partial Assessment (B) Organizations Borrower Implementing Agency DOMINICAN REPUBLIC CDEEE, SIE Project Development Objective (PDO) Original PDO

The project development objective is to improve the financial viability of the electricity distribution companies (EDEs) by reducing energy losses and increasing revenue collections in the circuits rehabilitated under the project and consequently increase the supply of electricity. .

Page 1 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 120,000,000 112,219,481 112,219,481 IBRD-85630 Total 120,000,000 112,219,481 112,219,481 Non-World Bank Financing 0 0 0 Borrower/Recipient 0 0 0 Total 0 0 0 Total Project Cost 120,000,000 112,219,481 112,219,481 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 15-Dec-2015 27-Jan-2017 07-Oct-2019 31-Dec-2020 30-Nov-2022 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 08-Nov-2020 73.93 Change in Results Framework Change in Loan Closing Date(s) Change in Implementation Schedule 18-Aug-2022 97.15 Change in Results Framework Change in Loan Closing Date(s) KEY RATINGS Outcome Bank Performance M&E Quality Moderately Satisfactory Satisfactory Substantial Page 2 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 13-May-2016 Moderately Satisfactory Moderately Satisfactory 0 02 29-Nov-2016 Moderately Satisfactory Moderately Satisfactory 0 03 20-Apr-2017 Moderately Satisfactory Moderately Satisfactory .50 04 19-Dec-2017 Moderately Satisfactory Moderately Satisfactory 2.41 05 05-Jun-2018 Moderately Satisfactory Moderately Satisfactory 3.23 06 11-Dec-2018 Satisfactory Moderately Satisfactory 22.88 07 13-Jun-2019 Satisfactory Moderately Satisfactory 27.89 08 23-Dec-2019 Satisfactory Moderately Satisfactory 59.82 09 29-Jun-2020 Moderately Satisfactory Moderately Satisfactory 71.39 10 24-Dec-2020 Satisfactory Moderately Satisfactory 75.42 11 22-Jun-2021 Satisfactory Satisfactory 85.53 12 11-Jan-2022 Moderately Satisfactory Moderately Satisfactory 93.89 13 21-Jul-2022 Moderately Satisfactory Moderately Satisfactory 95.81 SECTORS AND THEMES Sectors Major Sector/Sector (%) Energy and Extractives 100 Public Administration - Energy and Extractives 9 Energy Transmission and Distribution 5 Other Energy and Extractives 86 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Page 3 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) Public Sector Management 92 Public Administration 92 Transparency, Accountability and Good 92 Governance Social Development and Protection 8 Social Inclusion 8 Participation and Civic Engagement 8 Environment and Natural Resource Management 98 Climate change 98 Mitigation 98 ADM STAFF Role At Approval At ICR Regional Vice President: Jorge Familiar Calderon Carlos Felipe Jaramillo Country Director: Karin Erika Kemper Michel Kerf Director: Anita Marangoly George Maria Marcela Silva Antonio Alexandre Rodrigues Practice Manager: Stephanie Gil Barbalho Task Team Leader(s): Sergio Augusto Gonzalez Coltrinari Huong Mai Nguyen ICR Contributing Author: Enrique O. Crousillat Page 4 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL Context 1. At appraisal, the Dominican Republic’s (DR) economy was growing at a high rate, though this growth did not translate into a reduction of poverty or inequalities at the same pace. The energy sector, a critical engine for growth, faced the following long-lasting challenges: (i) high levels of losses, (ii) unreliability of service, (iii) high cost of energy production due to a mostly fuel oil-based generation matrix, (iv) weak governance framework, (v) inefficient targeting of subsidies, and (vi) high vulnerability to external shocks. Losses ranging between 30 to 36 percent of the energy served by the distribution companies were above the regional average. Power outages were six times higher than the regional average. 2. The DR’s electricity market comprised separate generation, transmission and distribution companies, as well as a market coordinator (Organismo Coordinador del Sistema Eléctrico Nacional, OC-SENI) and a sector regulator (Superintendencia de Electricidad, SIE). There were three state-owned distribution companies (Empresas Distribuidoras de Electricidad, EDEs – EDENORTE, EDESUR, and EDEESTE) that were coordinated by a public holding company, the Corporation of Dominican State Electricity Companies (Corporación Dominicana de Empresas Eléctricas Estatales, CDEEE). A crucial problem in the electricity sector was the governance of the state-owned distribution companies that had been privatized, but then sold back to the Government in 2009 due to their poor financial performance. 3. All three EDEs were financially unsustainable due to high commercial and technical losses, retail tariffs set below costs, and poor revenue collection. Losses came primarily from unbilled energy caused by lack of metering (more than half of their clients were not metered) and theft. As a result, the Government had to subsidize the power sector deficit to keep the EDEs afloat. The deficit had grown up to US$1.3 million in 2014, about 2 percent of the country’s Gross Domestic Product (GDP). This situation hindered the country’s economic competitiveness and growth, as electricity was the main obstacle to doing business. 4. In response to the sector’s crisis, CDEEE developed a Strategic Electricity Sector Plan 2013-2016, which focused on three pillars: (i) Modification of the generation matrix; (ii) Loss reduction; and (iii) Management efficiency. Since 2012, the Government had prioritized the implementation of the first pillar and, through CDEEE, was beginning to work on the second pillar. CDEEE set a loss reduction target of 6 percent and planned the following measures: (a) rehabilitation of networks and installation of meters for existing clients and illegal connections, (b) remote metering and macro metering, (c) community outreach activities, (d) improvement of commercial management and infrastructure, and (e) institutional strengthening. 5. The World Bank (WB) had supported the DR electricity sector for over a decade with the successful implementation of three lending operations for US$149.3 million, including an Electricity Distribution Rehabilitation Project (EDRP, P089866, US$42 million). With the high economic costs associated with unreliable electricity service and the significant fiscal burden of the EDEs to the State, it was important for the Bank to remain involved. The Project was part of the DR’s strategic Distribution Grid Modernization and Electrical Loss Reduction Program, which was also supported by the European Investment Bank (EIB, US$100 million), the Interamerican Development Bank (IDB, US$78 million), and the OPEC Fund for International Development (OFID, US$60 million). Given the scale of the investment Page 5 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) requirements to reduce losses – estimated during appraisal to be around US$800 million – the engagement of all International Financial Institutions (IFIs) was justified. The distribution systems to be rehabilitated served around one million people, of which 41 percent were low-income and 51.4 percent were women. 6. The Project was consistent with the Government’s Strategic Electricity Sector Plan for 2013-2016 and the Bank’s Country Partnership Strategy (CPS) for FY15-FY18. It focused on reducing energy losses and improving access to efficient and reliable electricity networks, which are the key pillars of both strategies, respectively. The Project was also aligned with the country’s National Development Strategy (NDS) for 2030 and the World Bank’s Energy Directions Paper of 2013, in particular in supporting affordable and sustainable energy needed to end poverty. Theory of Change (Results Chain) 7. The Project Appraisal Document (PAD) did not articulate an explicit theory of change 1 for the Project. An illustrative Theory of Change, or Results Chain, based on the development objective and key components of the Project at appraisal, is presented below. 1 This was not a requirement at that time. Page 6 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) 8. The Project Development Objective (PDO) is expected to contribute to the achievement of the DR’s long-term objectives, as expressed in the NDS 2030, and the prioritized development objectives agreed upon in the CPS. Project activities were designed in a comprehensive manner to support the delivery of the Project’s infrastructure, Information Technology (IT) and social outputs which in turn are essential for reaching the PDO. Following the experience of a previous distribution project in the DR, the Project included a larger and more ambitious social management activities aimed at complementing the infrastructure works. The achievement of long-term outcomes also considers the following underlying assumptions: (i) sustained political support in improving the overall performance of the electricity sector and in reducing losses; (ii) the high cost of energy production will be reduced through investments aimed at a more efficient generation matrix; and (iii) that CDEEE and the EDEs will have better capacity to manage a large number of contracts in terms of administrative monitoring and technical oversight. Project Development Objectives (PDOs) 9. To improve the financial viability of the electricity distribution companies by reducing energy losses and increasing revenue collections in the circuits rehabilitated under the Project and consequently increase the supply of electricity. Key Expected Outcomes and Outcome Indicators 10. Progress towards achieving the aforementioned PDO is expected to be achieved through two outcomes of equal importance and that are connected to each other. They are “to improve the financial viability of the electricity distribution companies” and “to increase the supply of electricity.” Accordingly, they were to be assessed through the following indicators: a. Outcome Indicator 1 (to improve the financial viability of the electricity distribution companies): Increase of Cash Recovery Index (CRI) at the rehabilitated circuits of each EDE. b. Outcome Indicator 2 (to increase the supply of electricity): Increase of the Average Service Availability Index (ASAI) in the rehabilitated circuits. Components 11. The Project was designed to comprise the following four components 2: a. Component 1: Rehabilitation of selected distribution circuits and upgrading of metering systems and implementation of Environmental Management Systems (EMS) for the EDEs (original cost US$103.63 million; actual cost US$97.9 million). To support the rehabilitation of circuits selected by each EDE, including: (i) Grid rehabilitation and modernization (i.e. replacement of obsolete/overloaded Medium Voltage (MV) and Low Voltage (LV) power lines and transformers; installation of anti-theft MV and LV network, and high meter boxes with remote metering and switching for existing and newly regularized unmetered end-users); (ii) Macro and micro metering systems and loss reduction monitoring (i.e. equipment to monitor power flows, overloads, energy balances and commercial losses in distribution grids); (iii) Smart grid remote metering systems (i.e. remote switching – disconnection and disconnection – for low voltage residential and 2On average, 93.5 percent of the loan proceeds were actually disbursed and the ratio of disbursements per component ranged from 79.7 percent to 98.4 percent (See Annex 3). Page 7 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) commercial end-users), and (iv) EMS for residue sites following international best practices for hazardous waste management. b. Component 2: Citizen engagement and community participation (original cost US$ 4.56 million; actual cost US$ 4.48 million). Provision of support for the implementation of a Social Management Strategy (SMS) aiming at restoring the confidence between users and the EDEs, increasing cash collection levels and promoting an efficient and safe use of electricity. The SMS was to be implemented by the Social Management Unit of each EDE and teams assigned for each rehabilitated circuit in accordance with the criteria set in the Project Operational Manual (POM). The component included, inter alia, training of the communities, the signing of Social Compacts between the EDEs and the communities, and customer service satisfaction surveys. c. Component 3: Commercial management and project management, monitoring and evaluation of the Distribution Grid Modernization and Electrical Loss Reduction Program (original cost US$ 11.16 million; actual cost US$ 9.6 million). Provision of support for: (i) the refurbishing and upgrade of existing offices and technical assistance to monitor the business cycle; (ii) IT platform for CDEEE and the EDEs and forecasting and demand analysis. Integration of CDEEE and EDEs IT systems through fiber optic, support demand forecasting and setup of a data center at CDEEE; and (iii) Institutional strengthening and coordination, monitoring of the grid modernization, and electrical loss reduction, including technical advisory services to CDEEE and the EDEs in project management, monitoring and evaluation, and support to EDEs in developing financial accounting reports in accordance with best international reporting standards. d. Component 4: Complementary tariff study (original cost US$350,000; actual cost US$278,927). The study was complementary to an ongoing IDB-supported study, to weigh the social implications of changes in tariff design and setting and recommend mitigation measures. B. SIGNIFICANT CHANGES DURING IMPLEMENTATION Revised PDOs and Outcome Targets 12. No changes were made to the PDO. However, adjustments were made to the Project’s Results Framework as indicated below. Revised PDO Indicators 13. The PDO indicators were revised during the first restructuring, on November 8, 2020 (See Table 1). Minor adjustments in the end targets of both PDO indicators were made in the first restructuring, based on the results of the 2019 Mid-Term Review. Specifically, changes in the end targets were introduced as follows: (i) the CRI target was decreased from 83.6 to 83.2 percent, and (ii) the ASAI was increased from 95.9 to 96.5 percent. Revised Components 14. There was no revision to the Components of the Project. Page 8 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) Other Changes 15. Table 1 presents a complete set of the changes made under the two Project restructurings. Table 1. Details and Timeline of Changes in the Results Framework Scope of the Restructuring Unit of Measure Original Adjusted First Restructuring (November 8, 2020) Loan Closing Date Dec 31, 2020 Aug 31, 2022 PDO Indicators • Increase of Cash Recovery Index (CRI) % 83.6 83.2 • Average Service Availability Index (ASAI) % 95.9 96.5 Intermediate Results Indicators • Increase of the Energy Recovery Index (ERI) % 83.1 82.7 • Number of kms of rehabilitated distribution km 1,003 687 networks (distribution lines) • Number of ‘remotely metered’ clients number 138,100 130,770 • Number of illegal users converted to legitimate number 73,550 71,320 paying clients Second Restructuring (August 18, 2022) Loan Closing Date Aug 31, 2022 Nov 30, 2022 Intermediate Results Indicator • Development of an integrated environmental number 1 0 management system among the EDEs and CDEEE Rationale for Changes and Their Implication on the Original Theory of Change 16. Extensions of Loan Closing Date. Under the first restructuring, the two main reasons were: i) delay in getting effectiveness (13 months after loan signing on January 27, 2017) (See Section II.C.); and ii) delays due to the COVID-19 pandemic where there were insurmountable global supply chain and logistics disruptions in the DR and in the suppliers’ countries. Under the Second Restructuring, additional time was required to finish two contracts: equipment for an IT Data Center and the safe disposal of Polychlorinated Biphenyls (PCBs). 17. Changes in PDO indicators. The indicator targets for CRI and ASAI were adjusted due to initial delays in the implementation of the Project where: (i) some of the circuits originally considered at appraisal had experienced some changes; and (ii) some circuits with high losses had to be urgently rehabilitated and were therefore reassigned to projects financed by other IFIs. 18. Reduction in the number of kms of rehabilitated distribution networks. This is an intermediate outcome indicator for Component 1. Such reduction resulted from the adjustments in the nature and scale of the rehabilitation works in the supported circuits, while the number of circuits to be rehabilitated remained unchanged. The actual works of connecting existing and new consumers often required a larger or smaller network reflected in the kms of distribution Page 9 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) lines depending on their location and the density of electricity users in a given circuit. 19. Dropping on the immediate outcome indicator associated with the integrated environmental management system. This was due to the fact that the Government had initiated a process to liquidate CDEEE, and therefore, an integrated system with the said entity was no longer possible as there was no institutional structure in place to integrate with nor the need to do so. Through the Bank’s ongoing engagement in the sector, it was confirmed that the institutional procedure and capacity for the environmental management system has been developed and retained within the EDEs. 20. None of these changes had an impact on the TOC, which remained valid and relevant. II. OUTCOME A. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating 21. The Project’s development objective remains consistent with the first High-Level Outcome of the WB’s Country Partnership Framework (CPF) for fiscal years 2022-2026. Specifically, it supports the goal of achieving improved access to quality public services, including enhanced efficiency in electricity. The PDO continues to align with the country’s national development priority, that is, to address the long-standing problem that has: i) seriously affected the quality and quantity of the electricity service, ii) debilitated the financial health of the electricity sector, and iii) constituted a burden to public finances and the national economy. 22. The plan to reduce energy losses and increase revenues experienced considerable delays caused by several factors. The most salient reason was the impact of the COVID-19 pandemic – the two Project Restructurings helped to adjust to the new conditions in an effort to achieve the proposed outcomes, thus retaining the relevance of the level of ambition. Whereas the restructurings changed some targets, the basic design of the Project remained unchanged. Furthermore, the Government has continued to demonstrate its long-standing commitment to this agenda, as reflected by its long-standing engagement with the WB to support it. Therefore, the Project’s relevance is rated High. B. ACHIEVEMENT OF PDOs (EFFICACY) Assessment of Achievement of Each Objective/Outcome 23. The Project had one single development objective: to improve the financial viability of the electricity distribution companies by reducing energy losses and increasing revenue collection in the circuits rehabilitated under the Project and consequently increase the supply of electricity. To achieve this objective, the Project included four components that comprised a set of the Bank’s interventions to support infrastructure rehabilitation investments, upgrade the metering system, and support a citizen engagement strategy and commercial/monitoring management activities. 24. The achievement of the development objective is measured by two outcome indicators, the achievement of which is showed in Table 2. The target for Increase of the Average Service Availability Index (ASAI) in the rehabilitated circuits was surpassed, while the CRI achieved a substantial 90.4 percent of the revised target. In terms of how sustainable Page 10 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) the loss reductions will be, the EDEs have learned the importance of monitoring performance closely in the rehabilitated circuits to make sure the loss reductions are sustained. The know-how within the EDEs to sustain the results exists, but the availability of adequate funding for investments and operational expenses will be important. Table 2. PDO Indicators and Targets Percentage Original Target Revised Target PDO Indicators Actual Achieved of the (%) PAD (%) Nov. 2020 Revised Target Increase of Cash Recovery Index (CRI) at 83.6 83.2 75.2 90.4 the rehabilitated circuits of each EDE Increase of the Average Service Availability 95.9 96.5 98.7 102.3 Index (ASAI) in the rehabilitated circuits 25. The below-target achievement of several intermediate indicators reflected slightly scaled-down scope of the operation. These included: the number of kilometers of distribution lines in the rehabilitated networks (actual 599.6 km compared to the revised target of 687 km), the number of remotely metered clients (actual 112,896 compared to the revised target of 131,770), and the number of users converted to legitimate clients (actual 61,120 compared to the revised target of 71,320). This is due to: (i) the changes made during the Project’s first restructuring on the nature and scale of some of the circuits to be rehabilitated, and (ii) the fact that one sub-project (lot 16) was not completed by project closing. Both factors resulted in a reduction in the size – though not the quality – of some of the outputs under Component 1, a feature that is also consistent with the disbursement of 93.5 percent at loan closing. With regard to the most noticeable reduction in the number of km of distribution lines, while keeping almost the same level of beneficiaries (clients metered or converted to legitimate paying clients), it should be noted that such reduction is not an indication of – nor led to – a lower achievement of PDOs. On the contrary, it reflected the higher efficiency in achieving them with reduced investment in distribution lines. 26. Although the Project went through two restructurings, a split evaluation is not justified. This was because the PDO was not changed in any case and the outcome targets were modified by less than one percent, as explained in Section B. Revised PDO Indicators. Such a small change would not have impact on the overall outcome of the Project. In fact, the main restructuring focused primarily on the extension of the loan closing date to allow for the successful completion of the Project. Justification of Overall Efficacy Rating 27. Since the Project either surpassed the target for or reached substantial progress in achieving its outcome indicators, its performance in achieving its PDO is considered to be Substantial. Page 11 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) C. EFFICIENCY Assessment of Efficiency and Rating 28. The Project’s design and implementation paid special attention to the efficient use of resources. To this end, it relied on the Project Implementation Unit (PIU) that had been working efficiently on other IFI operations and a previous WB project. Taking advantage of the existing experience, the PIU took a leading role in procurement activities in close coordination with the EDEs, as well as in financial management and in assuming overall responsibility on the Project’s Monitoring and Evaluation (M&E). 29. In addition to utilizing the capacity built in previous projects, the Project’s design incorporated a set of capacity building activities. This included a key citizen engagement component that helped facilitate a more efficient and smoother implementation. Nevertheless, implementation had a slow start, particularly during the first two years, as getting the loan effectiveness took longer than expected and the preparation of the bidding documents for the main procurement package was subsequently delayed. 30. An ex-post analysis of the Project aimed at replicating the one at appraisal provided the following results (See more details in Annex 4): a. An economic internal rate of return (EIRR) of 5.6 percent and a net present value (NPV) of negative US$21.1 million. These results compare to an EIRR of 16.4 percent estimated at appraisal. In addition, the ex-post NPV is lower than the PAD’s estimate, which reached US$22 million. The lower economic return and NPV achieved by the Project are attributed to: (i) a lower level of energy purchases and billed, that is, a smaller size of the market as compared to the PAD’s figures, as actual energy billed accounts for only 58 percent of the PAD’s estimate; and (ii) a lower projection for loss reduction of 23.5 percent compared to the PAD’s more optimistic assumption of 25.4 percent. b. The financial analysis results are as follows: a FIRR of 12.6 percent and an NPV of US$ 15.3 million, which also compare negatively with the PAD’s estimates (27.5 percent and US$67.3 million, respectively). 31. The financial analysis concludes that in monetary terms, the Project provides net benefits to the electricity sector. Based on the Project design, the financial analysis better reflects the key objective of the project, which is the reduction of non-technical energy losses. This is not an economic benefit as energy was being used prior to the Project by either unmetered customers or illegal users, but a transfer from former unmetered and illegal users to the utilities. 32. Meanwhile, the results of the economic analysis should be considered conservative, since there are important unquantifiable benefits that are not included in the assessment. These benefits include the improvement of the quality of life of households in terms of health, education, leisure time, safety, and the productive activities made possible by the access to good electricity service. It is also worth noting that a key outcome of a distribution rehabilitation effort, that is, the reduction of non-technical energy losses is not an economic benefit. It should therefore be acknowledged that economic analysis does not embody a full assessment of the benefits in a broad sense, including financial and the benefits of formalizing the sector associated with the Project’s outcomes. 33. Taking into account that the Project’s economic performance was below expectations, and the slow implementation during the first two years, it is rated Modest for efficiency. Page 12 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) D. JUSTIFICATION OF OVERALL OUTCOME RATING 34. A Moderately Satisfactory rating is assigned based on the balanced assessment of the following: the continued high relevance of the Project’s objectives, the substantial achievement of its PDO targets, and the modest (relative to an optimistic PAD estimate) economic returns yielded by the Project. E. OTHER OUTCOMES AND IMPACTS Gender 35. The rehabilitation of selected distribution circuits benefited 103,793 households. It was estimated at appraisal that more than 40 percent of the households belonged to the low socio-economic strata, of which 51.4 percent were women. In all three EDEs, 39.6 percent of the households were headed by women. There was a significant presence of women during the implementation of the Project. In all sub-projects, women played an active role in representing their own communities in all stages of the Social Management Strategy. Accordingly, they were also recipients of training on the safe and efficient use of electricity and their rights and responsibilities as clients. Institutional Strengthening 36. The Project had a positive impact on strengthening institutions through a set of activities explicitly designed for that purpose. These included capacity building efforts to support the implementation of the Project, as well as long- term development of capacity of key entities in the sector. These included: (i) technical advisory services to CDEEE and the EDEs in project management, including environmental management and M&E; (ii) support to the EDEs in developing financial accounting reports in accordance with best international standards; and (iii) training of the Superintendence of Electricity (Superintendencia de Electricidad, SIE) staff in Financial Management (FM) and disbursement procedures. In addition, the Implementation Support Plan (ISP) carried out by the WB team provided the opportunity for on-the-job training on safeguards, fiduciary, and technical aspects. Social Management Strategy 37. The social management units of each EDE implemented an SMS tailored to each rehabilitated circuit. This SMS was aimed at drawing the communities’ active participation, restoring confidence between users and EDEs, increasing cash collection, normalizing former illegal users, and achieving more efficient and safer use of electricity. Accordingly, the effort comprised community engagement, communication and dissemination campaigns, social management equipment, training and capacity building, and consulting services. Leaders and communities were trained in all distribution rehabilitation sub-projects on the safe and efficient use of electricity and their rights and duties as clients of the EDEs. The SMS proved to be instrumental in improving the communication between utilities and their customers, enhancing the design of plans, and facilitating a smooth implementation. Overall, it was a highly successful experience with the potential of constituting a valuable model for other countries. Further elaboration on this outcome is presented in Section III.B. Poverty Reduction and Shared Prosperity 38. More than 40 percent of the households (around 150,000 people) that benefited from a better quality of electricity service belonged to the low socio-economic strata. Benefits that contributed towards a reduction in poverty Page 13 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) included the households’ savings in avoiding more costly and less efficient forms of energy, as well as benefits arising from the improvement of the quality of life of households in terms of health, education, leisure time, safety and the productive activities made possible by the access to a good electricity service. Other Unintended Outcomes and Impacts 39. The were no unintended outcomes or impacts. III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION 40. The Project’s design was aligned with the Government’s Strategic Electricity Sector Plan for 2013-2016 and the Bank’s Country Partnership Strategy (CPS) for FY15-FY18, as well as to the country’s long-term objectives established in the NDS 2030. The Project objectives addressed a highly relevant sector and national objectives. Project design was based on the successful experience of the WB’s own EDRP. The underlying theory of change was realistic, and its technical design was based on sound and, in some cases, state-of-the-art technologies that are appropriate for the country’s particular case: a long-standing problem of high energy losses caused by the scant or inefficient metering and theft. Key factors that contributed towards a better Project design were: a. Strong commitment of the Government to support the electricity sector objectives and, in particular, the energy loss reduction effort. The Government’s support made it possible to: (i) design an ambitious project that included the borrowing of US$4.56 million for an essential social component to enable strong citizen engagement and community participation; and (ii) provide the assurance that the required resources will be allocated for the management and supervision of Project activities. b. Project design drew lessons from the previous EDRP. These included: (i) the need to complement distribution rehabilitation with support for improved commercial management; (ii) improved incentives in contracts aimed at a more efficient response of contractors; (iii) contracts for social management coordinators; (iv) design of a community outreach component; (v) integration of social and environmental requirements into contract design; (vi) strengthening of the EDE’s implementation structure and the incorporation of adequate M&E systems. c. A well-designed Results Framework that included measurable key indicators tailored to capture effectively the progress made in achieving the PDO, complemented by intermediate indicators that reflected the complex and diverse elements of the Project. d. The awareness of most parties regarding the need for an innovative and ambitious social component aimed at facilitating the implementation of the rehabilitation works, improving customer discipline, and ensuring the sustainability of the loss reduction efforts. e. The Project’s thorough preparation and the advantage of using the experience, staff, and organizational arrangements of an existing PIU within CDEEE, which had managed the previous EDRP and other IFI- supported operations. Page 14 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) B. KEY FACTORS DURING IMPLEMENTATION 41. The project had a slow start because of the delays in achieving the loan effectiveness (thirteen months after loan approval) and in the preparation of bidding documents for the main procurement package for network rehabilitation under Component 1. Table 3 presents the main factors that affected the implementation of the Project categorized into those that are: (i) subject to the government and implementing entity’s control, (ii) subject to the World Bank’s control, and (iii) outside the Project’s control. Two factors had a significant impact: a. Citizen engagement and community participation: The EDRP included an “Outreach to Communities” social component with the aim to break the long-standing vicious circle of a culture of no service with a culture of no payment. The success of this initiative led to the design of an equally innovative but more ambitious component aimed at restoring the confidence between users and the EDEs, improving cash collections, and increasing the consumers’ willingness to pay and their awareness on the efficient and safe use of electricity. This component, which was incorporated into the rationale of the Project, was implemented by the three EDEs through their social units and achieved the active participation of all the communities that benefitted from the rehabilitation of distribution circuits. Through the implementation of SMS, the Social Compacts were signed for all cases between the EDEs and the communities. The component comprised the following activities: (i) community engagement; (ii) communication campaigns and dissemination materials; (iii) social management equipment; (iv) training and capacity building; and (v) consulting services. The scale of this participatory effort is illustrated by the following: (i) identification of 875 organizations to be involved in the SMS; (ii) 9,967 community members participated in the discussion on the EDEs’ plans to improve the electricity service; (iii) 42 monitoring and coordination committees were established within the communities, including 9,967 leaders; and (iv) more than 350,000 people were reached by the awareness campaign. The social component proved to be instrumental in improving the communication between utilities and their customers, enhancing the design of plans, and facilitating a smooth implementation. The achievements were confirmed by an ex-post service satisfaction survey. Overall, it has been a positive experience that could be used as a model of good practices for other countries. b. Impact of the COVID-19 pandemic: Overall, project implementation was affected severely by the COVID-19 pandemic from its start in early 2020, until loan closing in November 2022. The impact was twofold: (i) a considerable delay in most project activities; and (ii) the loss of market discipline and subsequent increase in energy losses. The initial months were the most critical as the Government enforced emergency health measures that stopped all Project activities during a period of seven months. Thereafter, activities gradually resumed. However, the production and delivery of equipment and materials for the Project were slow and costly due to the global supply chain disruption caused by the pandemic. Furthermore, the pandemic undermined the Project’s gains in terms of customer discipline, since the EDEs were instructed to suspend their service cutting policy following delayed payments. And given the lack of direct access to the field, most activities of the SMS slowed down considerably, including disconnecting illegal connections. This resulted in a loss of customer awareness of the Project’s potential benefits and requirements, and subsequently increases in energy losses. Although it is not possible to precisely quantify the pandemic’s impact on the Project, it is reasonable to assume that it caused a delay of more than one year. In response, the Government proposed an extension of the closing date and adjustment of some outcome targets. Subsequently, the Bank approved a Project restructuring in November 2020 that extended the loan closing date by 20 months. Page 15 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) Table 3. Factors That Affected Project Implementation Key Factors Subject to the Government and/or Subject to the World Outside the Project’s Implementing Entity’s Control Bank’s Control Control Major delays in loan • The compliance with the • Inconsistency of project • Delay in loan effectives effectiveness conditions for loan effectiveness schedule and due to the change of (achieved 10 months disbursement profile government in 2016 and compared to what with oncoming political Congress’ approval was envisaged at events and Congress’ negotiation) approval requirements Approval of bidding • Delay in the preparation and approval of the bidding documents for the documents in compliance with WB guidelines for the main main procurement procurement package for network rehabilitation under package Component 1 (around US$100 million) covering 18 lots • Delay (for about 5 months) in Project implementation caused by the delayed preparation and approval of the bidding documents Citizen engagement • Implementation of an SMS • The Bank’s local support • Active participation of and community tailored to the situation in each to follow up with the communities in the SMS participation – a rehabilitated circuit for implementation of the • 18 Social Compacts social model to community participation, trust SMS signed between the replicate in other building between users and the communities and the countries EDEs, cash collection and EDEs recovery, and the efficient and safe use of electricity Poor performance of • Cancellation of several contracts • The Bank’s close • Arbitration of cases and a contractor and long rebidding processes by monitoring of the resolution in favor of the CDEEE, which resulted in project contractors’ poor Borrower delays. PIU’s rigorous records performance issues and proved instrumental for a approval for the favorable arbitration proposed rebidding Impact of the COVID- • Emergency Decree issued by the • The Bank’s approval for • Delay in production and 19 pandemic on Government as a health the Project restructuring trade activities due to major delays in the protection measure which in November 2020 and the health protection DR and supplier suspended all Project activities the extension of the loan measures of supplier countries for seven months. closing date. countries • Undermined customer discipline and project gains due to the subsequent suspension of service interruptions by the EDEs under the Emergency Decree • Proposal of the Government for the extension of the loan closing date Page 16 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 42. The two outcome indicators captured the nature and expected progress (both financial and technical) of the PDO, and were supported by eight intermediate indicators designed to systematically monitor the progress achieved by the Project’s four components. The two main indicators, the CRI and ASAI, measured the progress in reducing energy losses in an effective though indirect manner. Overall, the set of indicators reflected well the Project’s objective and the outputs expected from each component, that is, they were consistent with the Project’s underlying theory of change. The targets established by the M&E framework were measurable, and the formulas required for complex quantitative indicators were established with no ambiguity. 43. In addition to the end targets, the Results Framework included baseline values for each indicator plus cumulative target values for the first four years of implementation. While the M&E design is considered substantial, the quality of the Results Framework could have been improved through the incorporation of additional intermediate indicators designed to track the pace in implementation of construction / rehabilitation works, as well as the highlight the extent and impacts of the supporting but crucial activities such as social management. They could include: (i) an indicator measuring the number of people involved in citizen engagement component; (ii) an indicator measuring the institutional strengthening activities undertaken as part of Component 3; and (iii) a measure on the progress made in the contracts’ monitoring. M&E Implementation 44. The POM established the responsibilities of all parties regarding M&E. The responsibility for M&E rested with the PIU, which had experience in handling this function in previous similar operations. Under its coordination, the EDEs collected data on the rehabilitation subprojects (Component 1) and other components using their specialized technical staff and social teams. The PIU submitted quarterly progress reports to the WB. These reports comprised a detailed update of the Project’s implementation progress, including an update of the results framework indicators, as well as the monitoring of the sub-projects’ progress, contracts, and safeguards compliance. Although M&E activities continued without any noteworthy obstacles during the pandemic and, overall, were effective, different parties reported shortcomings in the monitoring of contracts. M&E Utilization 45. M&E data was regularly reflected in 13 Implementation Status and Results Reports (ISRs) produced by the Bank team during implementation. These reports were used by the Bank in identifying, and informing management, on potential problems in various areas and in monitoring closely the Project’s slow progress of the initial years. However, the cumulative target values were not used (apparently due to a constraint set by the ISR format). M&E performance was rated moderately satisfactory until the end of 2020 and was upgraded to satisfactory thereafter. Page 17 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) Justification of Overall Rating of Quality of M&E 46. Given its adequate design, effective implementation and utilization, but some moderate shortcomings, the quality of the M&E is rated Substantial. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Social and Environmental Safeguards 47. The Project triggered three World Bank safeguard policies as identified in the PAD. These were: Environmental Assessment (OP/BP 4.01); Natural Habitats (OP/BP 4.04) and Physical Cultural Resources (OP/BP 4.11). It did not trigger any social safeguard policies. The Project’s safeguards category was set as B. The works implied mainly the right of ways of the rehabilitated distribution lines and installation of new metering systems and did not involve the construction of new distribution lines. An Environmental Impact Assessment (EIA) for all circuits to be rehabilitated was carried out during Project preparation. Most of them were located in urban areas. In case any additional circuits were to be proposed by the EDEs, their respective EIA would have to be conducted. In such case, no activity that would be considered Category A was eligible for Project financing. 48. The Project included a US$2.4 million allocation for an important environmental management sub-component. This included the strengthening of each of the EDEs' environmental safety units that were created for the purposes of the Project, as well as the implementation of an Environmental Management System (EMS) aimed at improving the utilities’ performance in this field. A notable feature was the storage and disposal of hazardous waste, specifically transformers contaminated with Polychlorinated Biphenyls (PCBs). To this end, safe storage places (Puntos Verdes) were built and maintained by each EDE and a contract was signed with a foreign company for the export and final disposal of PCBs. The safe storages were subject to monthly inspections. While the disposal of PCBs’ suffered delays associated with the effects of the COVID pandemic, the contract was completed satisfactorily by Project closing. 49. The PIU prepared thorough quarterly reports on the status of Environment, Safety and Health issues, which provided an objective account on the Project’s progress in complying with the WB’s safeguards requirements and standards in implementation of the works, as well as in the implementation of the EMS. 50. A Grievance Redress Mechanism (GRM), administered by CDEEE and the EDEs, was available to provide remedies to parties that perceived that their rights had been adversely affected by the Project. This mechanism was made operational as part of the national loss reduction program that was supported by other IFIs (IDB, OFID, EIB). In total, 210 complaints were presented to six contractors; all complaints were processed according to the GRM and 170 of the complaints resulted in corrective actions. Cases were attended to in an average of 4.49 days. 51. One fatality occurred in 2019 in a circuit of EDESUR, in which a man lost his life by electrocution. As per the Bank's fatality management and reporting procedure, the Bank worked closely and continuously with EDESUR and CDEEE on the application of the Environment and Social Incident Response Toolkit (ESIRT). The victim’s family received compensation from the insurance company. The GRM proved to be a useful instrument in addressing people’s concerns and in securing the participation of different parties in solving situations that affected the implementation of the Project. 52. The EDEs reported that the use of WB safeguards made a significant difference in terms of the utilities’ practices in dealing with environmental issues. Given the strengthened capacity of the EDEs in the field, it is expected that this Page 18 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) improvement in environmental practices would be incorporated into the utilities’ standard procedures and, subsequently, in all other operations. 53. The Project’s good environmental performance was reflected in its ratings: compliance in all environmental safeguards was rated either satisfactory or moderately satisfactory throughout all the implementation period, closing with a satisfactory rating. Financial Management and Audits 54. A Financial Management (FM) assessment of CDEEE, the fiduciary entity and overall coordinator for the Project, was conducted at the time of appraisal. The PIU of the CDEEE handled fiduciary tasks for Project Components 1,2 and 3. The PIU already had the required capacity and experience in implementing previous WB financed and other IFI operations. It was confirmed that its FM department was adequately staffed, and the appropriate systems and controls were in place. The US$0.35 million Component 4 was implemented by SIE. For such purpose the SIE was strengthened prior to processing disbursements through: (i) the designation of new staff; (ii) training in the Bank’s FM and disbursement guidelines and procedures; and (iii) the installation of FM information systems and its corresponding training. SIE proceeded through direct payments that were reimbursed through SOEs. 55. Centralization of project administration in the hands of the PIU’s qualified and experienced staff led to satisfactory FM during implementation. The Project consistently provided timely and reliable quarterly unaudited financial reports for monitoring purposes, and recommendations were implemented on an ongoing basis. External audits did not identify reportable conditions nor qualified opinions and the firm to undertake the final audit report has already been hired. It is worth noting that, under Component 3, a sub-component aimed at supporting the EDEs in developing financial accounting reports in accordance with international reporting standards (IFRS) was implemented. Financial Management performance was rated moderately satisfactory during part of the implementation period and was upgraded to satisfactory 18 months prior to Project closing. Procurement 56. Procurement for the project was carried out in accordance with the provisions stipulated in the Loan Agreement: the WB’s “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 revised in July 2014, the “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers” dated January 2011 and revised in July 2014, and the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credit and Grants” dated October 15, 2006, and revised in January 2011. 57. CDEEE was responsible for all procurement activities through its PIU, except for the tariff study (Component 4) that was managed by SIE. An assessment of the existing structure and procurement capacity of the PIU was carried out during Project preparation using the Procurement Risk Assessment and Management System (P-RAMS). This assessment confirmed the PIU’s capacity to undertake procurement activities under the Project. Since SIE had no prior experience in WB’s procurement, an experienced specialist was hired to strengthen its capacity in this aspect. A procurement strategy for the Project was prepared and agreed upon during the preparation phase. 58. The PIU was responsible for preparing all procurement documents and for signing contracts to be overseen by the three EDEs. This included completing bidding document packages, managing the whole procurement process, and preparing for the supply and service contracts. CDEEE and the EDEs were jointly responsible for the evaluation of Page 19 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) proposals and contract award recommendations. The EDEs were responsible for preparing the technical specifications, managing contracts, and supervising the construction works. The PIU’s and EDEs’ staff received training in procurement and contract management. 59. The most salient procurement activity was the International Competitive Bidding (ICB) and execution of a package (for around US$100 million) that encompassed 18 lots for all the circuits to be rehabilitated under the Project. Although discussions on the bidding documents for the said package started during the preparation phase, an agreement on a document in compliance with WB guidelines was not reached until mid-2017, around 18 months after Project approval, thus constituting a significant factor of delay as referred in Section III (Key Factors Affecting Implementation). Once the bidding documents were agreed upon, procurement activities followed a smooth course. Contracts were allocated for 18 lots to a diverse group of experienced international companies. 60. Most Project activities, especially work contracts, suffered significant delays caused by the COVID-19 pandemic, as the Government declared a state of emergency that slowed down works and many commercial activities, and similar protection measures were taken in most supplier countries. This impact justified a first extension of the Loan’s closing date. It is worth noting that two specific procurement issues that arose were addressed satisfactorily: a. Contracts for lot 3, lot 7 (both for EDESUR), and lot 16 (for EDEESTE), for network rehabilitation under Component 1, were cancelled, and penalties were applied due to the poor performance of the same contractor. Cases went through arbitration and were solved successfully, thanks to the rigorous records kept by the implementing agencies. Lot 3 was re-bid and successfully completed, while the implementation of lot 7 was executed directly by EDESUR. Lot 16 was not completed by Project closing. b. A post-review held on June 2021 identified some weaknesses in procurement activities. Some contracts’ activities had been extended and paid without the prior signing of the corresponding contract amendments. Subsequently, the Bank proposed an action plan to improve procurement management and proceeded to hire a specialized consultant to undertake a field assessment. It was confirmed that the amendments and extensions were technically justified and satisfactorily completed and that there were complete records on the storage of excess materials. 61. With the exception of the above-mentioned initial delays, procurement responsibilities were handled in a satisfactory manner, rated either moderately satisfactory or satisfactory throughout implementation, and closing with a satisfactory rating. C. BANK PERFORMANCE Quality at Entry Rating: Satisfactory 62. Project design was based on a sound assessment of the electricity sector challenges and formulated in a way that directly addressed a concern of high relevance to the sector: the precarious financial situation of the distribution utilities and, particularly, the urgent need to reduce energy losses and increase revenue collections. The underlying theory of change was sound and coherent. Page 20 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) 63. Preparatory work was characterized by a thorough assessment of most aspects including safeguards, the Project’s economic and financial viability, confirmation of the executing agencies’ implementing capacity and fiduciary arrangements, and the incorporation of lessons learned from the previous projects. 64. Implementation arrangements were based on the capacity and experience of an existing PIU that had implemented efficiently a previous WB electricity project as well as other IFIs operations. 65. Arrangements for procurement and M&E, and overall implementation planning, were appropriate. Two areas that could have been improved were: (i) given the importance of a main procurement package that comprised more than 80 percent of the loan proceeds, a more advanced level of preparation of the corresponding bidding documents would have helped in achieving smoother implementation; (ii) the Project schedule and disbursements profile appeared optimistic and not consistent with oncoming political changes and Congress’ loan ratification requirements. 66. The Project design was innovative. It included an ambitious and effective social management component (Citizen Engagement and Community Participation) aimed at restoring confidence between users and the EDEs, taking into account the experience of a previous WB project and enhancing its design. 67. Important risks associated with governance and institutional capacity were identified at the preparation stage and specific measures were incorporated into the Project to address them. Accordingly, the overall risk rating was considered moderate. The severe impact of the COVID-19 pandemic, a major factor exogenous to the Project, could not have been foreseen. Quality of Supervision Rating: Satisfactory 68. The Bank actively supervised the Project. The frequency of field missions was adequate; eight in seven years, in spite of the constraints posed by the pandemic. There were also two virtual missions between 2021 and early 2022. The Bank team engaged effectively with the PIU, always keeping focus on the Project’s development outcomes. 69. Reporting on project implementation was objective, timely, and consistent throughout the entire period. The team issued nine aide memoires and thirteen ISRs that reported on the main implementation issues drawing attention to shortcomings, and effectively monitored the Project’s progress vis-à-vis the results framework. Performance ratings were objective and justified. 70. Overall, supervision of safeguards and fiduciary aspects was satisfactory, both in terms of the quantity of resources allocated and quality of supervision and local support. However, the executing agency reported that the absence of a local WB financial management specialist became an impediment to a smooth implementation. 71. Delays caused by a late loan effectiveness and/or the pandemic were not attributable to the Bank. However, it is perceived that the process for the approval of the bidding documents for the main procurement package could have been more efficient through better dialogue. 72. Overall, the Bank’s dialogue with the Borrower and related agencies was constructive and useful in overcoming implementation obstacles. The Bank was responsive and flexible in dealing with most implementation problems. Upon Page 21 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) the Government’s request to restructure the Project in two occasions, the Bank responded in a timely fashion. Both restructurings entailed amendments aimed at adapting to changing conditions, that is delays caused by internal and external factors, and some changes in the composition of component 1 and, therefore were justified. 73. A follow-on project is being prepared, which would continue supporting the development challenge that the project was addressing. The Bank team has worked with CUED to ensure adequate transition arrangements (for regular operation of supported activities after loan closing). Justification of Overall Rating of Bank Performance 74. Considering the preparation and supervision ratings, an overall rating of Satisfactory is assigned. D. RISK TO DEVELOPMENT OUTCOME 75. The Project’s development outcome was to improve the financial viability of the EDEs by reducing energy losses and increasing revenue collections. As presented in Section II.B., this outcome was substantially achieved. A set of risks was identified at appraisal, such as those associated to sector governance and institutional capacity, and specific measures were incorporated into the Project to address them. 76. There is a risk of this outcome not being maintained, both in terms of energy loss reduction and the financial performance of the EDEs. This risk is not technical as proven state-of-the-art technologies have been used in all rehabilitation and metering works, but of an institutional, social, and pricing policy nature. The risk is related to the following factors: (i) the full effect of the aftermath of COVID-19 as the pre-pandemic conditions return, in terms of allowing for effective commercial operation and maintaining users’ discipline, is not yet clear; and (ii) recent rising inflation caused the Government to freeze prices of electricity in order to cushion its impact on households. Nevertheless, these are short to near-term factors, and they should not have an impact on the Project’s development outcome in the long term. 77. With regards to sustaining the achieved loss reductions, it has been observed that during the period where monitoring and follow-up was made difficult due to the COVID pandemic, energy losses have increased in some circuits. This confirms that breaking the long-standing vicious circle of a ‘no service, no payment culture’ is a particularly complex task that requires a sustained effort that goes beyond the scope of implementing a single project. The sustainability of the Project will rely on continued operations and maintenance (O&M), commercial and social management effort with the active and coordinated participation of the EDEs and the respective communities, and the sustained political support of the Government in defining priorities and providing the required leadership and resources. V. LESSONS AND RECOMMENDATIONS 78. A project aimed at improving the service in an electricity distribution system characterized by a high level of energy losses, including theft, requires a comprehensive approach to design and implementation along the following: Page 22 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) a. Complex cases of energy losses involving theft require, besides the rehabilitation of deteriorated circuits, a sophisticated metering design that includes macro and micro metering systems, smart remote metering, and loss reduction monitoring, as well as an anti-theft design, for example through high-level meters and protection of installations. b. Design of distribution and execution of rehabilitation and loss reduction projects and programs requires an appropriate balance between the quality of service and loss reduction objectives, thus avoiding the risk of subordinating the loss reduction effort (a multidisciplinary approach) to infrastructure works (an engineering approach) that could be a common bias among power utilities. c. Development and implementation of pre-paid systems in new areas of low resources are an appropriate course of action. However, this system should be accompanied by a user-friendly pre-payment method, that is, through mobile phone instead of bank platforms that often require the client to go to utility offices or designated/authorized places. d. An SMS aimed at restoring the confidence between electricity users and the utilities is essential in complementing technical and commercial loss reduction measures. An SMS should be built on the basis of reliable information regarding the scope of each project, the type of infrastructure to be used and the specific policies that will set the framework for project implementation. The social management team should: (i) be involved in the project from the early stages (design phase) to incorporate the views and concerns of community stakeholders and minimize the risk of opposition/rejection; (iii) carry out an awareness campaign with a view to maximize the participation of the affected communities; and (ii) work together with the contractors during implementation to help identify social conflicts and help resolve them. e. Community leaders are key to the success of an SMS. However, it also requires a strong and broad-based supervision committee, as well as specific guidelines for its functioning. 79. In distribution systems characterized by a long-standing problem of high energy losses, including theft, achieving the sustainability of a loss reduction effort requires taking into account the following: a. Reducing energy losses and providing a good service is a multidisciplinary effort, a chain where all links must be in place and are equally important, from the rehabilitation/modernization of infrastructure to commercial operation, passing through an SMS (essential to address social/cultural constraints and client’s payment discipline) and the environmental plan. All elements should be present, complementing each other, from early project preparation to operation in order to guarantee sustainability. b. Breaking the vicious circle of a ‘no service, no payment culture’ is a particularly complex task that requires a sustained effort that goes beyond the traditional concept of project implementation. The sustainability of the Project will rely on a continued (post-commissioning) O&M, commercial and social management effort with the active and coordinated participation of the distribution utilities and the affected communities. c. A post-commissioning management aimed at ensuring the sustainability of the loss reduction effort often requires strengthening the utility’s structure through the integration of all follow-up activities, social management, technical monitoring, effective commercial management, as well as effective implementation. It is recommended to continue follow-up activities for at least one year after the completion of infrastructure works, including contractual arrangements for such purposes. d. In areas where clients will be formalized, it is essential to monitor closely what is happening in the field in order to avoid the influence/pressure of new (returning) fraudulent initiatives. e. Government’s political will is imperative, where the lack will be high risk to the Project’s development outcome. Loss reduction projects require sustained support in providing leadership, the required resources, and a continued effort in strengthening institutions. Page 23 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) 80. Managing a large number of simultaneous contracts within a single project requires effective monitoring practices and tools comprising the following: a. An adequate institutional arrangement – staff capacity, adequate IT, and quick access to information b. An effective monitoring of contracts to guarantee a smooth procurement of materials and the provision of all resources to be committed by contractors. c. The use of software to monitor all contracts’ activities in the field in an integrated (comprehensive) manner in order to strengthen controls and achieve more efficient technical and administrative processes. d. A close working relationship between the Borrower and the World Bank in order to identify early any oncoming problems. e. Rigorous construction records are essential in monitoring the progress of works as well as in facilitating the resolution of potential conflicts between contractors and utilities (and other stakeholders). f. Contracts that incorporate strong efficiency incentives, in particular in their payments schedule. 81. Adequate and timely procurement support of the WB (Bank’s capacity/expertise) could be critical during the initial stages of implementation; in particular, when a significant part of the project’s procurement relies on a single and main package. The early preparation and approval of high quality and timely set of bidding documents (with technical specifications that maximize efficiency and competition) can determine a good start and subsequent success of the project. In this regard, the contribution of the WB’s specialized local staff is always beneficial. 82. The management of environmental and safety risks should be incorporated into the overall management of the utilities, adopting the tools and instruments developed through WB or other IFIs operations. To this end, it is necessary to have a competent and committed team and the commitment of main leaders in the sector. . Page 24 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: To improve the financial viability of the electricity distribution companies (EDEs) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Increase of Cost Recovery Percentage 59.00 83.60 83.20 75.20 Index (CRI) at the rehabilitated circuits of each 20-Nov-2015 15-Dec-2015 08-Nov-2020 30-Nov-2022 EDE. Comments (achievements against targets): Target was substantially achieved (90.4 percent). The target was adjusted due to initial delays in the implementation of the Project where: (i) some of the circuits originally considered at appraisal had experienced some changes; and (ii) some circuits with high losses had to be urgently rehabilitated and were therefore reassigned to projects financed by other IFIs. Objective/Outcome: To increase the supply of electricity in the rehabilitated circuits Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Page 25 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) Increase of the Average Percentage 71.30 95.90 96.50 98.70 Service Availability Index (ASAI) in the rehabilitated 20-Nov-2015 15-Dec-2015 08-Nov-2020 30-Nov-2022 circuits Comments (achievements against targets): Target was surpassed (102.3 percent). The target was adjusted due to initial delays in the implementation of the Project where: (i) some of the circuits originally considered at appraisal had experienced some changes; and (ii) some circuits with high losses had to be urgently rehabilitated and were therefore reassigned to projects financed by other IFIs. A.2 Intermediate Results Indicators Component: Rehabilitation of Selected Distribution Circuits and Upgrading of Metering Systems - Implementation of Environmental Management System Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Increase of the Energy Percentage 58.70 83.10 82.70 76.00 Recovery Index (ERI) at the rehabilitated circuits of each 20-Nov-2015 15-Dec-2015 08-Nov-2020 30-Nov-2022 EDE Comments (achievements against targets): Target was substantially achieved (91.8 percent). Page 26 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of kms of Kilometers 0.00 1,003.00 687.00 599.60 rehabilitated distribution networks 20-Nov-2015 15-Dec-2015 08-Nov-2020 30-Nov-2022 Comments (achievements against targets): Target was not fully achieved (87.3 percent). This is explained by the changes in the nature and scale of some of the circuits to be rehabilitated and the fact that one sub-project (lot 16) was not completed by project closing. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of ‘remotely Number 0.00 138,100.00 130,770.00 112,896.00 metered’ clients at the EDEs 20-Nov-2015 15-Dec-2015 08-Nov-2020 30-Nov-2022 Comments (achievements against targets): Target was not fully achieved (86.3 percent). This is explained by the changes in the nature and scale of some of the circuits to be rehabilitated and the fact that one sub-project (lot 16) was not completed by project closing. Page 27 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Development of an Number 0.00 1.00 0.00 0.00 integrated environmental management system among 20-Nov-2015 15-Dec-2015 18-Aug-2022 30-Nov-2022 the 3 EDEs and CDEEE Comments (achievements against targets): This indicator was dropped in the latest restructuring approved in 18-Aug-2022. The implementation of an environmental management system by the EDEs has received support from the Project and ongoing satisfactorily. However, given that the Government has initiated the process of liquidating CDEEE as part of a broader effort to improve the transparency and governance of the sector, this intermediate indicator has become irrelevant and will not be completed. Therefore, is not evaluated as part of the project results. Component: Citizen Engagement and Community Participation Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of ‘Social Compacts’ Number 0.00 18.00 18.00 18.00 signed with the communities 20-Nov-2015 15-Dec-2015 15-Dec-2015 30-Nov-2022 Comments (achievements against targets): Target was achieved. Through the implementation of SMS, 18 Social Compacts were signed between the EDEs and the communities. Page 28 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) Component: Commercial Management and Project Management, Monitoring and Evaluation of the Distribution Grid Modernization and Electrical Losses Reduction Program Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of illegal users Number 0.00 73,550.00 71,320.00 61,120.00 converted to legitimate paying clients 20-Nov-2015 15-Dec-2015 08-Nov-2020 30-Nov-2022 Comments (achievements against targets): Target was not fully achieved (85.7 percent). This is explained by the changes in the nature and scale of some of the circuits to be rehabilitated and the fact that one sub-project (lot 16) was not completed by project closing. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Installation of IT Data Center Number 0.00 1.00 1.00 1.00 20-Nov-2020 15-Dec-2015 15-Dec-2015 30-Nov-2022 Comments (achievements against targets): Target was achieved. Component: Complementary Tariff Study Page 29 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Complementary Tariff Study Number 0.00 1.00 1.00 1.00 20-Nov-2015 15-Dec-2015 15-Dec-2015 30-Nov-2022 Comments (achievements against targets): Target was achieved. Page 30 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) B. KEY OUTPUTS BY COMPONENT Objective/Outcome 1: To improve the financial viability of the electricity distribution companies (EDEs) Objective/Outcome 2: To increase the supply of electricity in the rehabilitated circuits Outcome 1. Increase of Cash Recovery Index (CRI) at the rehabilitated circuits of each EDE. Indicators 2. Increase of the Average Service Availability Index (ASAI) in the rehabilitated circuits. Component 1: Rehabilitation of selected distribution circuits and upgrading of metering systems. 1. Increase of the Energy Recovery Index (ERI) at the rehabilitated circuits of each EDE. 2. Number of kilometers of rehabilitated distribution lines in the selected circuits. 3. Number of ‘remotely metered’ clients in the rehabilitated circuits of each EDE. 4. Development of an integrated environmental management system among the three EDEs and CDEEE. Component 2: Citizen engagement and community participation Intermediate 1. Number of ‘Social Compacts’ signed with the communities. Results Indicators Component 3: Commercial management and project management, monitoring and evaluation of the Distribution Grid Modernization and Electrical Loss Reduction Program. 1. Number of illegal users converted to legitimate paying clients. 2. Installation of an IT data center. Component 4: Complementary tariff study. 1. Completion of complementary tariff study. Component 1: Rehabilitation of selected distribution circuits and upgrading of metering systems. 1. New and rehabilitated distribution installations in the three EDEs, with environmentally safe and anti-theft design. 2. New and additional macro and micro metering systems, including energy loss monitoring. Key Outputs by 3. Installation of smart remote metering. Component 4. Environmental management system for the three EDEs. Component 2: Citizen engagement and community participation 1. Implementation of a Social Management Strategy Page 31 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) 2. Social Compacts signed between the EDEs and the communities 3. Training of communities on safe and efficient use of electricity. Component 3: Commercial management and project management, monitoring and evaluation of the Distribution Grid Modernization and Electrical Losses Reduction Program. 1. Refurbished and upgraded existing offices and technical assistance to monitor the business cycle. 2. IT platform for the EDEs and CDEEE 3. Institutional strengthening – technical advisory services in project management and M&E. 4. Support in developing financial accounting reports in accordance with best international standards. Component 4: Complementary tariff study. 1. Workshop held to present and discuss tariff study Page 32 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Preparation Sergio Augusto Gonzalez Coltrinari Task Team Leader Zoila Catherine Abreu Rojas Procurement Specialist Maritza A. Rodriguez De Pichardo Financial Management Specialist Ruth Tiffer-Sotomayor Environmental Specialist Supervision/ICR Huong Mai Nguyen Task Team Leader Maria Alejandra Scheker Lora Procurement Specialist Lucas Carrer Financial Management Specialist Surekha Jaddoo Team Member Mary Lou M. Veizaga Procurement Team Luis M. Vaca-Soto Team Member Peter Johansen Team Member Maria J. Hermann Team Member Bruce MacPhail Social Specialist Francisco Xavier Geraldes Siragusa Environmental Specialist Fabiola Maria Lucia Mercado Jaldin Environmental Specialist Alexandra Soto Ortiz Environmental Safeguards Specialist Laura Wendell Berman Procurement Team Agostina Signorini Team Member B. STAFF TIME AND COST Page 33 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY14 18.837 119,198.20 FY15 27.519 244,948.42 FY16 5.969 112,724.81 Total 52.33 476,871.43 Supervision/ICR FY16 10.051 85,412.54 FY17 16.097 114,591.55 FY18 11.207 125,946.37 FY19 29.182 175,254.22 FY20 15.163 161,329.67 FY21 17.015 164,731.77 FY22 19.999 164,182.11 FY23 14.535 115,282.18 Total 133.25 1,106,730.41 Page 34 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) ANNEX 3. PROJECT COST BY COMPONENT Amount at Approval Actual at Project Percentage of Components (US$M) Closing (US$M) Approval (US$M) Rehabilitation of Selected Distribution Circuits and Upgrading of Metering Systems - Implementation 103,630,000.00 94.5 97,895,931.10 of Environmental Management System Citizen Engagement and Community Participation 4,560,000.00 4,488,472.75 98.4 Commercial Management and Project Management, Monitoring and Evaluation of the 11,160,000.00 9,256,134.78 82.9 Distribution Grid Modernization and Electrical Losses Reduction Program Complementary Tariff Study 350,000.00 278,927.00 79.7 Front-end Fee 300,000.00 300,000.00 100.0 DA-A 3 15.00 Total 120,000,000.00 112,219,480.63 93.5 3The amount of USD 15.00 in the Designated Account (DA-A) refers to an unutilized balance not refunded by the project and waived on an exceptional basis by the Bank. Page 35 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) ANNEX 4. EFFICIENCY ANALYSIS 1. Following the appraisal’s approach, the ex-post economic analysis was carried out and focused on Component 1 (Rehabilitation of Selected Distribution Circuits and Upgrading of Metering Systems, and Implementation of Environmental Management System for the EDEs), which accounted for 87 percent of the Project’s total cost. The analysis was carried out from the perspective of the sector as a whole, including economic and financial approaches. The main quantifiable benefits arising from the Project stem from the following: (i) reduction in the system technical losses, (ii) reduction in non-technical losses associated with theft and unmetered connections, (iii) an increase in system availability, and (iv) a more efficient commercial operation. 2. Economic benefits include: a. Economic value of the reduction in technical losses estimated at the cost of a standby power plant. b. Reduction in energy demand by newly metered consumers who would have to pay for their electricity consumption, estimated at the avoided cost EDEs energy purchases. c. Savings to consumers in avoided backup generators and other forms of energy estimated on the basis of ex- post socio-economic surveys. 3. Financial benefits include: a. Savings associated with the reduction of technical and non-technical losses, estimated at the cost of a standby power plant. b. Improvements in collections. 4. Costs included the capital costs of Component 1 plus annual O&M costs of the rehabilitated infrastructure and new equipment, excluding import duties and other levies. For the purposes of comparison, the analysis is based on the following PAD assumptions: (i) generation cost of a stand-by plant (Punta Catalina), and (ii) the purchase price of energy, which does not differ from the EDEs’ purchase prices of 2020. 5. The economic internal rate of return (EIRR) of the Project’s Component 1 is 5.6 percent and its net present value (NPV) a negative US$21.1 million, based on a 10 percent discount rate that, at appraisal, was considered to be the economic opportunity cost of capital in the Dominican Republic. These results compared to an EIRR of 16.4 percent estimated at appraisal for the same component. The ex-post NPV is lower than the PAD’s estimate, which was US$22 million. The lower economic return and NPV achieved by the Project is attributed to: (i) a lower level of energy purchased and billed, that is, a smaller size of the market for the rehabilitated circuits compared to the PAD’s optimistic estimates. Actual energy billed in the rehabilitated circuits accounts for only 58 percent of the PAD’s estimate; and (ii) latest projections consider a lower level of losses reduction, 23.5 percent which compares to the PAD’s more optimistic assumption of 25.4 percent. 6. The results of the financial analysis are as follows: a FIRR of 12.6 percent and a NPV of US$ 15.31 million, which also compare negatively with the PAD’s estimates (27.5 percent and US$67.3 million, respectively). The differences between the economic and financial results, in favor of the financial, are explained mainly by the fact that from an economic point of view the reduction of non-technical energy losses is not an economic benefit because that energy was being used prior to the project, by either unmetered customers or illegal users. The rehabilitation of circuits and improved metering imply, hence, a transfer from the above-mentioned users to the utilities, that is, a transfer from informal (including illegal) to the formal side of the economy. Page 36 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) 7. It is worth noting that the economic analysis is limited to the benefits that can be quantified, while there are other important benefits that cannot be included in the assessment, such as the benefits arising from the improvement of the quality of life of households (in terms of health, education, leisure time, safety) and the productive activities made possible by the access to a good electricity service. Hence, it should be acknowledged that the outcome of the economic evaluation is conservative. On the other hand, the financial evaluation concludes that in monetary terms the Project is providing net benefits to the electricity sector. Page 37 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) Page 38 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS 1. Upon the Bank’s request, the Borrower reviewed the draft ICR and submitted a set of comments and suggestions which included the following main points: a. A lesson learned for future projects is that EDEs should have access to an ex-post evaluation methodology to help guarantee a sustainability model for distribution investment, as well as to sustain the Project’s results in time. b. The PDO and Intermediate Results Indicators do not reveal a full achievement of targets (that is, 100 percent) because the Project was not fully executed, as Lot 16 was not completed and Lot 3 was completed partially. 2. The PIU prepared a completion report (Informe de Cierre, November 2022) that addresses the Project’s background and objectives, activities, budgetary execution, implementation performance, and results, as well as lessons learned. The report’s quantitative conclusions coincide with the ICR and its lessons were a valuable input in the preparation of the ICR. Lessons presented in the PIU report, and discussed with the WB team, are summarized below. Project Preparation/Design 3. Complex cases of energy losses that include an important component of theft require a design based on more sophisticated (smart) metering systems, remote metering, macro metering, among others, as done in the Project, as well as an anti-theft design, such as the sistema de medición concentrado en altura (SMCA). 4. Engineering design of circuits rehabilitation is an ongoing exercise where utilities should follow a flexible approach aimed at adapting to changing needs in terms of geographical growth and other possible changes. Designs need to be updated. 5. Successful design features included: (i) pre-paid metering; (ii) anti-fraud design, for example with high-level installations; (iii) design scheme excluding triplex conductor. Project Implementation and Operation Distribution Infrastructure 6. Rehabilitation of circuits should be effectively coordinated with other services (telephone, cable, and so on) that may be relying on the utilities’ installations and could cause delays. 7. Development and implementation of pre-paid systems in new areas of low resources are the right way to go. However, this system should be accompanied by a user-friendly pre-payment method, that is, through mobile phone instead of bank platforms that often require the client to go to utility offices or designated/authorized places. 8. Contract management requires effective monitoring tools comprising the following: a. Adequate institutional arrangement – staff capacity, adequate IT. b. Quick access to information. Page 39 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) c. Rigorous construction records are essential in monitoring the progress of works as well as in facilitating the resolution of conflicts between contractors and utilities (and other stakeholders). The right documentation proved key for a successful arbitration. d. Consider for future projects the use of software to monitor all activities in the field in a comprehensive manner in order to strengthen controls and achieve more efficient technical and administrative processes. e. More detailed and comprehensive monitoring of contracts is required to guarantee a smooth procurement of materials and the provision of all resources to be committed by contractors. Environmental and Social Management 9. Compliance with WB environmental safeguard requirements made a significant difference in EDEs’ management practices. Implementation of an EMS facilitated the establishment in EDEs of new instruments and tools for managing environmental issues. However, these standards have not been incorporated into other EDEs activities, thus setting a double standard that risks the sustainability of the Project. 10. The management of environmental and safety risks should be incorporated into the overall management of the utilities, adapting the tools and instruments developed through WB financing. To this end, it is required to have available a competent and committed team and the commitment of main leaders in the sector. 11. A Social Management Strategy (SMS) is essential for the success of a loss reduction initiative. This SMS should be built on the basis of reliable information regarding the scope of each project, the type of infrastructure to be used, and the specific policies that will set the frame for project implementation. The social management team should: (i) be involved in the project from the early stages to incorporate the views and concerns of community stakeholders and minimize the risk of opposition/rejection; and (ii) work together with the contractor during implementation to help identify social conflicts and solve and mitigate them. 12. Community leaders are key for the success of a project; however, it is also required a strong and broad-based supervision committee as well as specific guidelines for its functioning. Sustainability 13. The effort to reduce energy losses and provide a good service is like a chain –all links must be in place and are equally important, from the rehabilitation/modernization of infrastructure to commercial operation, passing through social management (essential to address social/cultural constraints and client discipline) and the environmental plan– all elements should be present, complementing each other, from project preparation to operation in order to guarantee sustainability. 14. Upon the risk of continued theft stronger legislation should be made available (to penalize electricity fraud). Also, in areas where clients will be formalized, it is essential to monitor closely what’s happening in the field in order to avoid the influence/pressure of new (returning) fraudulent initiatives. 15. In cases where there’s a tradition of market indiscipline, it is essential to maintain and enhance the benefits of rehabilitation through a post-commissioning management that integrates technical, commercial, and social work, that is, an effective transition implementation-operation. The PIU recommends follow-up activities during a period of at least one year after the completion of infrastructure works, including contractual arrangements for such purposes. Page 40 of 41 The World Bank Distribution Grid Modernization and Loss Reduction Project ( P147277 ) ANNEX 6. SUPPORTING DOCUMENTS Consejo Unificado de la Empresas Distribuidoras – Presidencia de la República Dominicana. Plan Integral de Reducción de Pérdidas 2022-2028. Corporación Dominicana de Empresas Eléctricas Estatales (CDEEE). Plan Estratégico 2013-2016 y 2017-2020. Corporación Dominicana de Empresas Eléctricas Estatales (CDEEE), Unidad Ejecutora de Proyectos, Programa de Modernización y Reducción de Pérdidas de redes de Distribución. Informe de Cierre de la Operación. November 30, 2022. Corporación Dominicana de Empresas Eléctricas Estatales (CDEEE), Unidad Ejecutora de Proyectos, Proyecto de Modernización y Reducción de Pérdidas de Redes de Distribución. Informes Trimestrales de Avance, 2016-2022. Corporación Dominicana de Empresas Eléctricas Estatales (CDEEE), Unidad Ejecutora de Proyectos, Proyecto de Modernización y Reducción de Pérdidas de Redes de Distribución. Informes Trimestrales, Medio Ambiente, Seguridad y Salud en el Trabajo, 2016-2022. International Bank for Reconstruction and Development, International Finance Corporation and Multilateral Investment Guarantee Agency. Country Partnership Strategy for the Dominican Republic for the Period FY15-FY18, Report No. 89551- DO. September 3, 2014 International Bank for Reconstruction and Development, International Finance Corporation and Multilateral Investment Guarantee Agency. Country Partnership Framework for the Dominican Republic for the Period FY22-FY26, Report No. 167896-DO. March 2, 2022. Loan Agreement (Distribution Grid Modernization and Loss Reduction Project) between Dominican Republic and International Bank for Reconstruction and Development. December 29, 2015. Project Agreement (Distribution Grid Modernization and Loss Reduction Project) between Dominican Republic and International Bank for Reconstruction and Development. December 30, 2015 World Bank. Aide Memoire for the Project’s Identification and Implementation Support Missions, 2013-2022. World Bank. Project Implementation Status & Results Reports (ISRs), 2016-2022. World Bank. Project Appraisal Document on a Proposed Loan in the Amount of US$120 Million to the Dominican Republic for a Distribution Grid Modernization and Loss Reduction Project. November 20, 2015. World Bank. Project Restructuring documentation issued from December 2015 to August 2022. Page 41 of 41