The World Bank Rural Electrification and Renewable Energy Development II (RERED II) Project (P131263) REPORT NO.: RES52863 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF RURAL ELECTRIFICATION AND RENEWABLE ENERGY DEVELOPMENT II (RERED II) PROJECT APPROVED ON SEPTEMBER 20, 2012 TO PEOPLE'S REPUBLIC OF BANGLADESH ENERGY & EXTRACTIVES SOUTH ASIA Regional Vice President: Martin Raiser Country Director: Abdoulaye Seck Regional Director: Pankaj Gupta Practice Manager/Manager: Simon J. Stolp Task Team Leader(s): Tanuja Bhattacharjee, Jari Vayrynen The World Bank Rural Electrification and Renewable Energy Development II (RERED II) Project (P131263) ABBREVIATIONS AND ACRONYMS DBD Domestic Biogas Digesters GCF Green Climate Fund ICS Improved Cookstoves IDCOL Infrastructure Development Finance Company Limited IPP Independent Power Producer kWp Kilo Watt peak MW Mega Watt PDO Project Development Objective PO Partner Organization RAPSS Remote Area Power Supply Systems RERED Rural Electrification and Renewable Energy Development SDR Special Drawing Rights SHS Solar Home System SIP Solar Irrigation Pumps TA Technical Assistance TF Trust Fund The World Bank Rural Electrification and Renewable Energy Development II (RERED II) Project (P131263) BASIC DATA Product Information Project ID Financing Instrument P131263 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 20-Sep-2012 18-Dec-2023 Organizations Borrower Responsible Agency PEOPLE'S REPUBLIC OF BANGLADESH Project Development Objective (PDO) Original PDO The proposed project development objectives are to increase access to clean energy in rural areas through renewable energy and promote more efficient energy consumption. Current PDO Increase access to clean energy through renewable energy in rural areas. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-62020 10-Apr-2018 30-May-2018 26-Aug-2018 18-Dec-2023 55.00 24.09 26.74 IDA-55140 19-Jun-2014 30-Jun-2014 28-Sep-2014 18-Dec-2023 78.40 69.83 .64 IDA-51580 20-Sep-2012 23-Oct-2012 20-Feb-2013 18-Dec-2023 155.00 148.31 3.84 The World Bank Rural Electrification and Renewable Energy Development II (RERED II) Project (P131263) TF-B4774 21-May-2021 31-May-2021 24-Aug-2021 18-Dec-2023 20.00 9.87 10.13 TF-A3639 20-Oct-2016 28-Nov-2016 28-Nov-2016 31-Dec-2018 1.07 1.07 0 TF-15077 30-Sep-2013 30-Sep-2013 18-Dec-2013 31-Dec-2016 9.96 9.96 0 TF-15034 10-Jul-2013 15-Jul-2013 28-Jul-2013 31-Dec-2018 5.35 5.35 0 TF-98472 02-Mar-2011 02-Mar-2011 28-Apr-2011 30-Jun-2014 6.75 6.75 0 TF-96551 12-May-2010 12-May-2010 12-May-2010 30-Sep-2013 7.20 7.20 0 TF-96552 12-May-2010 12-May-2010 12-May-2010 30-Jun-2015 1.10 1.10 0 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No 1. This Restructuring Paper and seeks the approval to: (i) Cancel SDR 22,343,433 (equivalent to US$ 29,660,2371) under credit numbers: a. IDA-5158 (SDR 2,884,000 equivalent to US$ 3,828,423), b. IDA-5514 (SDR 471,601 equivalent to US$ 626,036) and c. IDA-6202 (SDR 18,987,832 equivalent to US$ 25,205,777). (ii) Reallocate (i) SDR 19,441 (equivalent to US$ 25,807) from Category 1 (Sub loans-Part A1 A2) of IDCOL part to Category 5 (Goods CS TR IOC Part D) i.e. Power Cell part- under IDA 5158; and (ii) SDR 1,000,000 (equivalent to US$ 1,327,470) from Category 3 (TA -Part B (HE)) to Category 4 (Subgrant Part B) under IDA-6202 credit. The rationale behind this request is presented in this Restructuring Paper. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Background 2. On September 20, 2012, the Executive Board of the World Bank approved the Rural Electrification and Renewable Energy Development II (RERED II) Project (IDA Credit 5158-BD of US$155 million), and subsequent additional financing on June 19, 2014 (IDA Credit 5514-BD of US$78.4 million), and on April 10, 2018 (IDA Credit 6202-BD of US$55 million). 1 Based on the exchange rate 1 SDR = 1.32747 USD, as of December 6, 2023. The World Bank Rural Electrification and Renewable Energy Development II (RERED II) Project (P131263) 3. The RERED II Project Development Objective (PDO) is to Increase access to clean energy through renewable energy in rural areas. To achieve this objective, the Project is structured around three components: (A) Access to Electricity, implemented by IDCOL, supporting (A1) the Solar Home Systems (SHS) Program and (A2) solar mini- grids, SIPs, and captive plants based on renewable energy under the Remote Area Power Supply Systems (RAPSS); (B) Household Energy, implemented by IDCOL, supporting ICSs and domestic biogas digesters; and (C) Technical Assistance, implemented by Power Cell, supporting sector reform and capacity building activities 4. The current closing date of the Project is December 18, 2023 (extended from its original closing date of December 31, 2021, through a restructuring in May 2021). B. Implementation Progress 5. Implementation Status: The current ratings for both progress towards the achievement of the PDO and overall implementation progress are Moderately Satisfactory. All other key project ratings are Satisfactory. As of November 15, 2023, the disbursements for IDA Credit 5158-BD, IDA Credit 5514-BD, and IDA Credit 6202-BD stand at 97.2 percent, 99 percent, and 46.2 percent, respectively. All grant funds have been fully disbursed, except for the Green Climate Fund (GCF) (TF0B4774), which has a disbursement percentage of 49.4 percent as of November 15, 2023. 6. The Project is on track to meet its PDO of increasing access to clean energy in rural areas through renewable energy. As of September 2023, the Project has directly benefited 8.95 million people (out of 9.8 million) by providing access to clean energy for 4.67 million households and entities (out of 6.08 million). A total of 9,082 connections (out of 26, 881) have been provided through the mini-grid systems and captive plants. A total of 1,303 Solar Irrigation Pumps (SIP) (out of 1,987) have been installed and verified. Additionally, the Project has disseminated 3.44 million Improved Cook Stoves (ICS) (out of 5 million). As part of its achievements, the Project has so far added 85 megawatts (MW) of off-grid renewable energy generation capacity (out of 88MW). 7. While the Project is on track to realize its development objective of increasing access to clean energy through renewable energy in rural areas, overall implementation has been slowed down since the last mission in March 2023 due to factors beyond the control of the implementing agency. Specifically, under Component A, despite achieving or surpassing some of the Result Framework targets, the Project will not yield further results from Component A2 due to delays in approval of new SIPs and Monpura Solar Independent Power Producer (IPP) sub- projects. 8. Under component B, funded by the GCF grant, several bottlenecks slowed down the full achievement of objectives. The processing of the grant took much longer time than anticipated due to extended formalities between the Bank and the GCF, further exacerbated by delays caused by the Covid-19 pandemic. As a result, the GCF grant lost over two years from the speculated implementation period required for utilization and result delivery. When the funding became available, the Infrastructure Development Company Limited (IDCOL), the implementing agency, utilized the first tranche of GCF proceeds (US$10 million out of US$20 million) within only 15 months, doubling the sales of ICS. However, in the last six months, due to the delayed GCF fund flow, the ICS program has significantly slowed down. The GCF fund is expected to be replenished by the first week of December 2023. IDCOL estimates utilizing US$2 million out of the remaining US$10 million GCF grant by the current Project The World Bank Rural Electrification and Renewable Energy Development II (RERED II) Project (P131263) closing date (December 18, 2023). This will result in approximately a 20 percent shortfall in achieving the target of 5 million ICS, proportionally impacting the overall achievement of associated Result Framework targets. 9. Under Component C, other outputs and outcomes of the project include several critical studies that have informed sustainable energy development efforts, power sector reforms, and the preparation of several Bank-funded projects, including Bangladesh Ghorashal Unit 4 Repowering Project (P128012), Power System Reliability and Efficiency Improvement Project (P159807), Enhancement and Strengthening of Power Transmission Network in Eastern Region (P159974), and Bangladesh Scaling-up Renewable Energy Project (P161869). 10. Previous Restructurings. The project has undergone three restructurings, detailed as follows. 11. The first restructuring in 2014 allowed the Project to reallocate funding between disbursement categories to further support the SHS and RAPSS activities, to include micro-grid as an eligible technology for support under the Project as well as to allow other changes under the Project (such as a change in the date of the retroactive financing to support some of the SHS installed during the September – December 2021 period). 12. In the second restructuring in 2018, the Project stopped supporting the SHS Program due to the rapid increase in electrification coverage by the Bangladesh Rural Electrification Board and the distribution of free SHS and public photovoltaic systems under a national social safety net program. 13. In the third restructuring in May 2021, the Project was restructured to: (i) extend the closing date from December 31, 2021, to December 18, 2023, to allow sufficient time for disbursement of the US$ 20 million GCF Grant approved on March 2, 2018 (TF0B4774), and to recover from the overall implementation delay caused by the Covid-19 pandemic; (ii) reallocate US$ 0.45 million between categories within Component A; (iii) revise intermediary indicators and end target values. 14. The Aims of the Proposed Restructuring: The proposed restructuring has two aims: (i) cancellation of the remaining IDA-credit funding; and (ii) reallocation of funds between disbursement categories under the Project. The proposed restructuring does not propose any amendments in the PDO or its associated outcome indicators. No changes are required in the Program's safeguard category, nor its existing implementation arrangements. 15. Borrower’s Request for Cancellation of the Remaining IDA-credit Funding and Reallocation of Funds. In a letter dated December 6, 2023, the Secretary of the Economic Relations Division of the Ministry of Finance of the Government of the People’s Republic of Bangladesh (the Borrower) formally requested the cancellation of the undisbursed amounts of SDR 22,343,433 of the RERED II Project (equivalent to 12.33 percent of the allocated amount) under credit-numbers IDA-5158, IDA-5514, and IDA-6202. In the same letter, the Borrower also requested (i) the reallocation of SDR 1,000,000 from Category 3 (TA -Part B (HE)) to Category 4 (Subgrant Part B) under IDA-6202 credit; (ii) the reallocation of SDR 19,441 from Category 1 (Sub loans-Part A1 A2) of IDCOL part to Category 5 (Goods CS TR IOC Part D) i.e. Power Cell part- under IDA 5158. II. DESCRIPTION OF PROPOSED CHANGES The World Bank Rural Electrification and Renewable Energy Development II (RERED II) Project (P131263) 16. The following changes are proposed to the following Financing Agreements: (a) Financing Agreement (amending and restating the Financing Agreement and providing the first additional financing) between the People's Republic of Bangladesh (the "Recipient") and the International Development Association (the "Association") for the Rural Electrification and Renewable Energy Development II Project (the "Project"), dated June 30, 2014, as amended (the "Original Financing Agreement"); and (b) Financing Agreement between the People’s Republic of Bangladesh (the “Recipient”) and the International Development Association ( the “Association”), dated May 30, 2018, as amended (the “Financing Agreement”) for Rural Electrification and Renewable Energy Development II Project: (i) Cancellation of remaining IDA-credit fundings: a. Cancel SDR 22,343,433 (equivalent to US$ 29,660,2372) under credit numbers: 1. IDA-5158 (SDR 2,884,000 equivalent to US$ 3,828,423), 2. IDA-5514 (SDR 471,601 equivalent to US$ 626,036) and 3. IDA-6202 (SDR 18,987,832 equivalent to US$ 25,205,777). (iii) Reallocation between disbursement categories: a. SDR 19,441 (equivalent to US$ 25,807) from Category 1 (Sub loans-Part A1 A2) of IDCOL part to Category 5 (Goods CS TR IOC Part D) i.e. Power Cell part- under IDA 5158; and b. SDR 1,000,000 (equivalent to US$ 1,327,470) from Category 3 (TA -Part B (HE)) to Category 4 (Subgrant Part B) under IDA-6202 credit. 17. The Financing Agreement is amended as follows: (i) For the Credit No.5158-BD, the withdrawal table set forth in Section IV.A.2 of Schedule 2 to the Financing Agreement is amended as follows: Amount of the Original Percentage of Credit Allocated Expenditures to be (expressed in SDR) Financed “Category (inclusive of Taxes) (1) Sub-loans under Parts A.1 and A.2 of 78,576,474 100% the Project (2) Goods, consulting services, Training 3,400,085 100% and Incremental Operating Costs under Part A of the Project 2 Based on the exchange rate 1 SDR = 1.32747 USD, as of December 6, 2023. The World Bank Rural Electrification and Renewable Energy Development II (RERED II) Project (P131263) (3) Goods, consulting services, Training, 8,000,000 100% Incremental Operating Costs, and Sub- grants under Part B of the Project (4) Goods, consulting services, and 0 100% Training under the Part C of the Original Project (5) Goods, consulting services, Training, 9,939,441 100% Incremental Operating Costs under Part C of the Project (6) Unallocated 0 (7) Cancelled as of December 06, 2023 2, 884,000 TOTAL AMOUNT 102,800,000” (ii) For the Credit No.5514-BD, the withdrawal table set forth in Section IV.A.2 of Schedule 2 to the Financing Agreement is amended as follows: Amount of the Percentage of Additional Credit Expenditures to be Allocated (expressed in Financed “Category SDR) (inclusive of Taxes) (1) Sub-loans under Parts A.1 and A.2 of 45,477,968 100% the Project (2) Goods, consulting services, Training 4,323,663 100% and Incremental Operating Costs under Part A of the Project (3) RAPSS Sub-grants under Part A.3(b) of 311,780 100% the Project (effective upon countersignature of this amendment letter) (4) Cancelled as of December 6, 2023 471,601 TOTAL AMOUNT 50,585,012 (iii) For the Credit No.6202-BF, the withdrawal table set forth in Section III.A of Schedule 2 to the Financing Agreement is amended as follows: The World Bank Rural Electrification and Renewable Energy Development II (RERED II) Project (P131263) Amount of the Percentage of Financing Allocated Expenditures to be Category (expressed in SDR) Financed (inclusive of Taxes) (1) Sub-loans under Part A.2 of the Project 1,672,245 100% of the disbursed amount (2) Goods, (excluding vehicles), 3,389,923 100% consulting services, Training and Incremental Operating Costs under Part A of the Project (3) Goods, (excluding vehicles), 5,800,000 100% consulting services, Training, Incremental Operating Costs Part B of the Project (4) Sub-Grants under Part B of the 7,950,000 100% of the disbursed Project amount Cancelled as of December 6, 2023 18,987,832 TOTAL AMOUNT 37,800,000 III. SUMMARY OF CHANGES Changed Not Changed Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ The World Bank Rural Electrification and Renewable Energy Development II (RERED II) Project (P131263) Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation Disburs UNDISBURSE IDA-51580- 102,800,000.0 ing&Re XDR 2,884,000.00 06-Dec-2023 99,916,000.00 D BALANCE 001 0 paying AT CLOSING UNDISBURSE IDA-55140- Disburs XDR 50,585,012.00 471,601.00 06-Dec-2023 50,113,411.00 D BALANCE 001 ing AT CLOSING UNDISBURSE IDA-62020- Disburs XDR 37,800,000.00 18,987,832.00 06-Dec-2023 18,812,168.00 D BALANCE 001 ing AT CLOSING Fully TF-15034- Disburs USD 5,347,536.42 0.00 5,347,536.42 001 ed The World Bank Rural Electrification and Renewable Energy Development II (RERED II) Project (P131263) Fully TF-15077- Disburs USD 9,959,221.23 0.00 9,959,221.23 001 ed Fully TF-96551- Disburs USD 7,200,000.00 0.00 7,200,000.00 001 ed Fully TF-96552- Disburs USD 1,099,581.31 0.00 1,099,581.31 001 ed Fully TF-98472- Disburs USD 6,750,000.00 0.00 6,750,000.00 001 ed Fully TF-A3639- Disburs USD 1,072,500.00 0.00 1,072,500.00 001 ed UNDISBURSE TF-B4774- Disburs USD 20,000,000.00 0.00 06-Dec-2023 20,000,000.00 D BALANCE 001 ing AT CLOSING OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-51580-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: SUB LOANS PART A1 A2 81,479,915.00 78,457,570.14 78,576,474.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GOODS CS TR IOC PART A 3,400,085.00 3,400,084.99 3,400,085.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: GOODS CS TR IOC SG PART B 8,000,000.00 7,999,302.58 8,000,000.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: GOODS CS TR PART C1 0.00 0.00 0.00 100.00 100.00 The World Bank Rural Electrification and Renewable Energy Development II (RERED II) Project (P131263) iLap Category Sequence No: 5 Current Expenditure Category: GOODS CS TR IOC PART D 9,920,000.00 9,939,440.71 9,939,441.00 100.00 100.00 iLap Category Sequence No: 6 Current Expenditure Category: UNALLOCATED 0.00 0.00 0.00 100 Total 102,800,000.00 99,796,398.42 99,916,000.00 IDA-55140-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: SUB LOANS PART A1 A2 45,531,534.00 45,477,967.88 45,477,968.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GOODS CS TR IOC PART A 4,737,578.00 3,802,495.89 4,323,663.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: RAPSS Sub-grants pt A.3(b)-wef from amndt CS 315,900.00 311,779.04 311,780.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: GOODS CS TR PART C1 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 5 Current Expenditure Category: GOODS CS TR IOC PART D 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 6 Current Expenditure Category: UNALLOCATED 0.00 0.00 0.00 100 Total 50,585,012.00 49,592,242.81 50,113,411.00 The World Bank Rural Electrification and Renewable Energy Development II (RERED II) Project (P131263) IDA-62020-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: SUB LOANS PART A2 20,600,000.00 1,672,244.68 1,672,245.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: Gd ex vhcl CS Trng IOC Pt A 3,450,000.00 3,208,513.57 3,389,923.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: Gd ex vhcl CS Trng IOC Pt B 6,800,000.00 4,683,872.07 5,800,000.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: Sub grants part B 6,950,000.00 6,929,740.51 7,950,000.00 100.00 100.00 Total 37,800,000.00 16,494,370.83 18,812,168.00 .