The World Bank Sierra Leone Energy Sector Utility Reform Project (P120304) REPORT NO.: RES52372 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SIERRA LEONE ENERGY SECTOR UTILITY REFORM PROJECT APPROVED ON DECEMBER 18, 2013 TO GOVERNMENT OF SIERRA LEONE ENERGY & EXTRACTIVES WESTERN AND CENTRAL AFRICA Regional Vice President: Ousmane Diagana Country Director: Pierre Frank Laporte Regional Director: Ibou Diouf Practice Manager/Manager: Ashish Khanna Task Team Leader(s): Alassane Agalassou, Rhonda Lenai Jordan Antoine The World Bank Sierra Leone Energy Sector Utility Reform Project (P120304) I. BASIC DATA Product Information Project ID Financing Instrument P120304 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 18-Dec-2013 31-Dec-2022 Organizations Borrower Responsible Agency Electricity Distribution and Supply Authority Government of Sierra Leone (EDSA),Ministry of Energy Project Development Objective (PDO) Original PDO The Project Development Objective is to improve the operational performance of the national electricity distribution utility. Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-64110 17-May-2019 17-Jun-2019 14-Oct-2019 31-Dec-2022 50.00 30.97 18.20 IDA-53330 18-Dec-2013 17-Jan-2014 15-Dec-2014 31-Dec-2022 40.00 35.98 .43 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Sierra Leone Energy Sector Utility Reform Project (P120304) II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES A. Summary of the status of the project: 1. The overall disbursement rate of ESURP is 78.23 percent (original project and additional financing). The additional financing is disbursed at 61.49 percent while the parent project’s disbursement rate stands at 98.75 percent. 2. The financial management is rated Satisfactory and there is no overdue audited report or IFRs. Procurement performance is rated Moderately Satisfactory and procurement risk Moderate. Compliance with Environmental and Social Standards is also rated Moderately Satisfactory and with Environmental and Social Risk Rating as Substantial. 3. The project consists of the following components: (a) Distribution Utility Capacity Enhancement and Performance Improvement (IDA US$16 million equivalent); (b) Improvement of Electricity Supply in Urban Areas (IDA US$51 million equivalent); (c) Sector Planning Assistance, Project Implementation Support and Monitoring and Evaluation (US$7 million equivalent); (d) COVID-19 emergency response component (IDA US$17 million equivalent); (e) Contingent Emergency Response Component (IDA US$0 million equivalent); (f) RAP compensation payment. Component 1: Distribution Utility Capacity Enhancement and Performance Improvement 4. Network quality improvement and status of technical, commercial and collection losses. The reliability of the distribution network has improved substantially resulting in improvement on key performance indicators of PDO. The distribution capacity of the 33 kV and 11 kV network increased from 40 MW in 2016 to 78 MW in the second semester of 2021. The Aggregate Technical, Commercial and Collection (ATC) losses are still high at 48 percent as of March 2022 compared to 46 percent in September 2021. The implementation by EDSA of its loss reduction action plan and the grid loss verification activity launched by EDSA and the MoE together with the Integrated Management System (IMS) will have a significant effect on reducing ATC by the closing date of the project in December 2022. The total number of customers of EDSA stands at 214,563 compared to 185,000 in 2018. EDSA is installing 20,000 new prepaid meters funded by Word Bank that will enhance the replacement of faulty meters. The implementation of the revenue protection plan commenced, and another 40,000 meters contract was signed and will be delivered by end of December 2022. However, given the recent generation crisis where the main private power producer is curtailing its plants’ output, the country is experiencing frequent load shedding which is jeopardizing the gains made so far on the front of service continuity. 5. EDSA’s financials. EDSA has high operational losses of 48 percent, and a bill collection rate of only 80 percent from private consumers. The dollar-denominated contracts with IPPs cause severe financial stress as the SLL depreciates and oil prices increase. Ministries, departments, and agencies (MDAs) owe about SLL253 billion or 60 percent of EDSA’s current revenues further exacerbating the crisis. The transitionary nature of EDSA management, for over 12 months now, does not help the situation and needs urgent attention. The financial situation at EDSA is having a direct negative impact on the country’s fiscal situation as the GoSL has provided a total subsidy equivalent to US$63.76 million during 2018-20 which in 2020 represented 6.4 percent of the government’s expenditures and 1.56 percent of the GDP. The estimated direct subsidy for 2022 could reach US$100 million due to increasing fuel prices. The key drivers of the poor financial situation of the power sector are: (i) the cost associated with IPP generation plants - The World Bank Sierra Leone Energy Sector Utility Reform Project (P120304) representing more than 51 percent of actual energy demand in the grid; (ii) the poor performance of the distribution utility (EDSA) triggered by a high level of Aggregated technical and commercial losses (48 percent in 2021). 6. Implementation of an integrated Information Management System (IMS). The IMS contract was signed on February 9, 2022, under the Additional Financing of the project (see more details below). The contractor has already completed several workshops to facilitate project implementation and the advance payment has been completed. However, there may be a potential delay that may jeopardize the entire implementation of IMS as the project ends in December 2022. Component 2: Improvement of Electricity Supply in Freetown area 7. This component is related to: (i) the reinforcement, re habilitation, and extension of the primary medium voltage (33 kV) distribution network; and (ii) the reinforcement, rehabilitation, and extension of priority secondary (11 kV) and low voltage distribution network. 8. Original financing. Two lots were funded in the original financing. (i) For lot 1, all construction works activities (11/0.4kV Distribution lines and Customer Connection) have been completed and closing activities are underway. The lot1 closing activities are facing challenges related to the corrective measures recommended by the audit of the implementation of safeguards instruments following the change in the technical design of a portion of underground cables to overhead technique without the knowledge and approval of the Bank team in September 2020. The implementation of these corrective measures is ongoing with adequate resources available. Closing activities for this component are expected to be finalized by end of June 2022; (ii) for lot 2, all substations’ works under the contract are finalized and operational. 9. Additional financing: Three contracts under the additional financing have been signed for (i) 33/11 kV Substations and (ii) 33 kV sub-transmission lines (iii) Information management System and 20 percent advance payment made for each. There will be a delay in the implementation of these contracts. Some challenges and issues were reported by the Contractors (KESEC & HNXJDL JV and INDRA) related to the escalation of COVID-19 restrictions in China where manufacturing facilities, ports, and airports have been locked down. The IMS contractor (INDRA) also indicated this may delay manufacturing, shipment of equipment and material as well as receiving the original documents required for invoicing. As per the Project Recovery Time Schedule (PRTS) submitted by the contractors, most of the work will be completed in March and April 2023 after the actual closing date of the project. Without completing these activities, certain PDO indicators will fall short of their targets. Component 3: Sector Planning Assistance, Project Implementation Support and Monitoring and Evaluation 10. This component funded the capacity Building of MoE's Planning Unit and the staff of the MoE. The Planning Unit and World Bank have worked together on creating a National Electrification Platform that provides the least cost path to universal electrification. The platform looks at grid extension, densification, mini-grids, and other off-grid solutions as well. A long-term vision for the planning unit is paramount to sustaining planning activity in the Ministry and the Ministry of Energy should consider institutionalizing the planning unit and its integration into its organigramme. Component 4: Energy COVID-19 Emergency response 11. The activities related to energy sector response to COVID-19 under the project have been completed. The activities aimed to: (i) improve and reinforce electricity supply to health care and treatment centers; (ii) support business The World Bank Sierra Leone Energy Sector Utility Reform Project (P120304) continuity of EDSA and EGTC across the country, including (a) equipping specific taskforces to tackle outages or bring back the supply of electricity to critical facilities during the COVID-19 pandemic period; (b) providing staff of the EDSA and EGTC with protective personal equipment, and sensitizing said staff to undertake additional workload, and associated risks as a result of COVID-19 pandemic; and (iii) provision of emergency financing to EDSA and EGTC to ensure continuity of essential services, including (a) six (6) months of operational costs; (b) six months stock of fuel to avoid any fuel disruption of generation plants (independent power producers and genset in isolated districts); and (c) payment of part of arrears owed by utilities to independent power producers to avoid any interruption in electricity supply by the independent power. As of April 2022, 89 percent of the US$17 million reallocated to COVID-19 response has been fully disbursed to contractors. The balance of US$1,873,200.40 (savings) which represents 11 percent have been fully committed as follows: (1) for payment of compensation to PAPs and (2) for Design, Supply and Replacement of 11kV Switch gear at Wilberforce, Roportee & Wellington Primary Substations. Component 5: Compensation cash payment 11. The component has paid for expenditure related to physical and economic displacement impacts including disruption to trading activities, partial demolition of make-shift structures, and temporal disruption of access to business in some sections of the project’s RoW and other resettlement assistance directly associated with the works. B.The proposed changes include the extension of the closing date of Credit No.6411 -SL by six months until June 30, 2023. III. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 31-Aug-2020, 31-Dec- IDA-53330 Effective 31-Dec-2018 2022 IDA-64110 Effective 31-Dec-2022 30-Jun-2023 30-Oct-2023