The World Bank West Bank and Gaza Electricity Sector Performance Improvement Project (P148600) REPORT NO.: RES52161 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF WEST BANK AND GAZA ELECTRICITY SECTOR PERFORMANCE IMPROVEMENT PROJECT APPROVED ON JULY 27, 2017 TO PALESTINIAN LIBERATION ORGANIZATION (FOR THE BENEFIT OF THE PALESTINIAN AUTHORITY) ENERGY & EXTRACTIVES MIDDLE EAST AND NORTH AFRICA Regional Vice President: Ferid Belhaj Country Director: Kanthan Shankar Regional Director: Paul Noumba Um Practice Manager/Manager: Husam Mohamed Beides Task Team Leader(s): Ashok Sarkar, Lucine Flor Lominy The World Bank West Bank and Gaza Electricity Sector Performance Improvement Project (P148600) I. BASIC DATA Product Information Project ID Financing Instrument P148600 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 27-Jul-2017 20-Dec-2023 Organizations Borrower Responsible Agency Palestinian Liberation Organization (for the Benefit of the Palestinian Energy and Natural Resources Authority Palestinian Authority) (PENRA) Project Development Objective (PDO) Original PDO The Project Development Objective is to enhance institutional capacity of the energy sector, improve efficiency of the distribution system in targeted areas, and pilot a new business model for solar energy service delivery in Gaza. Current PDO The Project Development Objective is to improve operational performance of electricity sector institutions, and pilot a new business model for solar energy in Gaza. Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A9136 28-Feb-2019 10-Mar-2019 11-Jun-2019 30-Jun-2022 7.00 5.45 1.55 TF-A9139 28-Feb-2019 10-Mar-2019 11-Jun-2019 20-Dec-2023 5.00 1.08 3.92 TF-A5065 06-Nov-2017 06-Nov-2017 16-Jan-2018 30-Jun-2022 4.00 .73 3.27 The World Bank West Bank and Gaza Electricity Sector Performance Improvement Project (P148600) TF-A5078 06-Nov-2017 06-Nov-2017 16-Jan-2018 30-Jun-2022 7.00 3.83 3.17 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES A. PROJECT STATUS 1. Electricity Sector Performance Improvement Project (P148600 - ESPIPP) was approved and became effective on July 2017 and January 2018, respectively. On December 14, 2018, an Additional Financing was approved by increasing the total amount of the Project to US$ 23 million (original amount of $US11 million) and the official closing date to December 20, 2023 (original official closing date June 30, 2022). The Project Development Objective (PDO) is to improve operational performance of electricity sector institutions, and pilot a new business model for solar energy in Gaza. It has four (4) components: (i) Component 1: Strengthening the Capacity of Palestinian Electricity Sector Institutions, PETL and PERC; (ii) Component 2: Improving the Operational Performance of Palestinian DISCOs; (iii) Component 3: Improving Energy Security in Gaza with Solar Energy; and iv) Technical Assistance, Capacity Building and Project Management. 2. The project was restructured twice: (i) the first restructuring in April 2019, consisted of reallocating funds among the project’s categories; and (ii) the second restructuring in May 2021 consisted of (a) modifying the scope of the Revolving Fund activities, (b) reallocating funds between categories to address the financing gap identified for sub- component 2.2, Management Information Systems (MIS), and (c) adjusting the results framework. 3. Following the project's Mid Term Review (MTR) in March 2022, and as per the last Implementation Support and Results Report, dated June 27 2022, ESPIP was rated Satisfactory and Moderately Satisfactory for Progress towards achievement of PDO and Overall Implementation Progress, respectively. Those ratings will improve during the second semester of 2022, as the remaining procurement packages are launched and disbursement increases. The ratings for Financial Management and Procurement are both Satisfactory. The Environmental and Social (E&S) safeguards risk rating continues to be moderate. Both the Bank and the Project agreed on elaborating and approving a simplified E&S strategy to ensure on-time implementation of remaining revolving fund activities. The project's overall risk rating is Moderate and the one for Monitoring and Evaluation (M&E) Satisfactory. 4. Most of the main procurement processes were conducted, contracts signed, and implementation of activities are ongoing. Only two (2) remaining activities are to be launched: (i) the equipment for upgrading PETL connection point, and (ii) the second phase of the solar Revolving Fund for Gaza (component 3). Disbursement to date is at 47.55% (US$ 10.94 million) and about $US 8 million committed. 5. Component 1. Strengthening the Capacity of Palestinian Electricity Sector Institutions, PETL and PERC (US$5 million), rated Moderately Satisfactory: Three (3) main activities are ongoing within this component: (i) The bidding process for the supply of the equipment for upgrading connection points. The bidding document was prepared and the expected launch date is July 2022; (ii) Regarding the supply of spare parts for HV sub-stations, all switch gear and The World Bank West Bank and Gaza Electricity Sector Performance Improvement Project (P148600) transformers have been delivered to PENRA and the contracts completed; (iii) The contract for the PETL Masterplan was signed in January 2022 and is being implemented. 6. Component 2. Improving the Operational Performance of Palestinian DISCOs (US$12.9 million),rated Moderately Satisfactory, includes two sub-components (i) to support the Revenue Protection Program (RPP) and (ii) to strengthen Management Information Systems (MIS) for the 6 DISCOs in the West Bank & Gaza. For the RPP, the bidding process for all six (6) DISCOs was completed, the contract signed on June 28, 2020 and delivery of equipment expected in September 2022. Regarding the MIS, contract for the MIS systems in the West Bank was signed on August 18, 2021, and implementation ongoing within the five (5) West Bank DISCOs. The contract is expected to be completed by August 2023. 7. Component 3. Improving Energy Security in Gaza with Solar Energy (US$3.1 million),rated Moderately Satisfactory, includes two sub-components: (i)Pilot Solar revolving fund for households and small & medium enterprises (SMEs). To date, nineteen (19) systems have been installed for households, and in response to the COVID- 19 pandemic, seven (7) kits deployed to provide solar PV solution for five clinics and six (6) schools also benefited from solar kits. A new strategy for the second phase of this solar revolving fund is currently under review; (ii) Solar for health facilities. A total of 21 solar PV systems have been installed and the contract completed. 8. Component 4. Technical Assistance, Capacity Building and Project Management: This component, rated Moderately Satisfactory, is under implementation. This includes strengthening systems in PENRA and supporting costs of the PMU in Ramallah and Gaza. PENRA PMU has been reinforced based on previous recommendations of the WB team. In addition, the PMU continues to identify ways to strengthen support to PENRA's staff in Gaza. B. RATIONALE FOR RESTRUCTURING AND PROPOSED CHANGES 9. This restructuring aims at extending, by eighteen (18) months, the closing date of the project-related TFs, TF A5065, TF A9136 and TF 5078, closing on June 30, 2022, to align them with the actual project closing date of December 20, 2023, in order to allow for continuing financing of the project ongoing activities. The closing dates of the donors funded PID-MDTF for the West Bank and Gaza (WB&G), which includes the Project's TFs, was on June 30, 2022. However, due to delays in project implementation caused by many factors and most importantly by the global pandemic of COVID-19, the extension closing dates of the PID-MDTF (now December 31, 2024) has formally been processed on June 23, 2022. By extending the project's TFs closing dates to December 20, 2023, the Project will enable the remaining project funds to be disbursed for committed and planned remaining contracts and ensure quality implementation. 10. No Interim Financial Reports or audits are overdue. All audits reports were satisfactory to the Bank. There are no changes in safeguards category resulting from the proposed changes in this restructuring and no triggering of new safeguards policies. Bank safeguards policies have been complied with under the cleared safeguards instruments, and Project’s safeguards performance is Moderately Satisfactory. All other legal covenants have been complied with. The task team confirms that, (i) the PDO remains achievable; (ii) the performance of the Recipient remains satisfactory; (iii) the Bank and the Recipient agree on actions that will be undertaken to complete the Project on time; and (iv) the Project is not subject to suspension of disbursements. III. DETAILED CHANGES The World Bank West Bank and Gaza Electricity Sector Performance Improvement Project (P148600) LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-A5065 20-Dec-2023 30-Jun-2022 20-Dec-2023 20-Apr-2024 TF-A5078 30-Jun-2022 20-Dec-2023 20-Apr-2024 TF-A9136 30-Jun-2022 20-Dec-2023 20-Apr-2024 TF-A9139 Effective 20-Dec-2023 20-Dec-2023 20-Apr-2024