Document of The World Bank FOR OFFICIAL USE ONLY Report No: 68084-GN PROJECT PAPER ON A PROPOSED ADDITIONAL GRANT IN THE AMOUNT OF SDR 11.9 MILLION (US$18.3 MILLION EQUIVALENT) AND RESTRUCTURING TO THE REPUBLIC OF GUINEA FOR THE ELECTRICITY SECTOR EFFICIENCY IMPROVEMENT PROJECT (ESEIP) May 1, 2012 Energy Group Sustainable Development Department Africa Region Country Department AFCF1 This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank's policy on Access to Information..Public Disclosure CURRENCY EQUIVALENTS Exchange Rate Effective March 31, 2012 Currency Unit = Guinean Franc GNF 7 100 = US$1 US$ 1.549 = SDR 1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AFD Agence Française de Développement (French Agency for Development) AMR Automatic Meter Reading ATCL Aggregate Technical and Commercial Losses BAD Banque Africaine de Développement (African Development Bank) BOT Build, Operate, Transfer CAS Country Assistance Strategy CDM Clean Development Mechanism CFAA Country Financial Accountability Assessment CPAR Country Procurement Assessment Report CPS Country Partnership Strategy CT Current Transformer DSM Demand Side Management EdF Electricité de France (French Electricity Company) EDG Electricité de Guinée (Guinean Electricity Company) EE Energy Efficiency ENELGUI Entreprise Nationale d’Electricité de Guinée (National Electricity Company of Guinea) EIRR Economic Internal Rate of Return ESCO Energy Service Company ESEIP Electricity Sector Efficiency Improvement Project ESMF Environmental and Social Management Framework ESPP Electricity Strategy and Policy Paper EU European Union FIRR Financial Internal Rate of Return FM Financial Management FMR Financial Monitoring Report FMS Financial Management System FPM Financial Procedures Manual 2 GDP Gross Domestic Product GEF Global Environment Facility GIS Geographic Information System GoG Government of Guinea HFO Heavy Fuel Oil HIPC Highly Indebted Poor Countries (Initiative) HR Human resources HT High Tension HV High Voltage IAS Internal Audit Section ICB International Competitive Bidding ICR Implementation Completion Report IDA International Development Association IDB Islamic Development Bank IFC International Finance Corporation IPP Independent Power Producer ISA International Standards of Auditing ISO Independent System Operator ISR Implementation Status report kVA Kilo-Volt Ampere kW Kilo Watt kWh Kilo Watt-hour LNG Liquefied Natural Gas LT Low Tension LV Low Voltage MBC Metering Billing and Collection MEH Ministry of Energy and Hydraulics of Guinea MDG Millennium Development Goals MIGA Multilateral Investment Guarantee Agency MIS Management Information System NCB National Competitive Bidding NEPAD New Partnership for Africa’s Development PIM Project Implementation Manual PIU Project Implementation Unit PLF Plant Load Factor PRS Poverty Reduction Strategy PRSP Poverty Reduction Strategy Paper RPF Resettlement Policy Framework SBD Standard Bidding Documents SCADA Supervisory Control and Data Acquisition SIL Specific Investment Loan 3 SOE Statement of Expenditures SRFP Standard Request for Proposal TA Technical Assistance TOR Terms of Reference WAPP West African Power Pool Vice President: Obiageli K. Ezekwesili Country Director: Ousmane Diagana Sector Director: Jamal Saghir Sector Manager: Lucio Monari Task Team Leader: Moez Cherif 4 REPUBLIC OF GUINEA ELECTRICITY SECTOR EFFICIENCY IMPROVEMENT PROJECT ADDITIONAL FINANCING CONTENTS Project Paper Data Sheet Project Paper I. Introduction II. Background and Rationale for Additional Financing III. Proposed Changes IV. Appraisal Summary Annexes 1. Revised Results Framework and Monitoring Indicators 2. Operational Risk Assessment Framework 3. Revised Estimate of Project Costs 4. Status of Original Project Dated Covenants 5 REPUBLIC OF GUINEA ELECTRICITY SECTOR EFFICIENCY IMPROVEMENT PROJECT ADDITIONAL FINANCING DATA SHEET Basic Information - Additional Financing (AF) Country Director: Ousmane Diagana Sectors: Power (100percent) Sector Manager: Lucio Monari Themes: Infrastructure Services for Team Leader: Moez Cherif Private Sector Development (P) Project ID: P129148 Environmental category: C-not Expected Effectiveness Date:10/15/2012 required Lending Instrument: Specific Expected Closing Date: 12/31/2014 Investment Loan Joint IFC: Additional Financing Type: IDA Grant Joint Level: Basic Information - Original Project Project ID: P077317 Environmental category: C-not required Project Name: Guinea: Electricity Sector Expected Closing Date: 06/30/2013 Efficiency Improvement Project (ESEIP) Revised Closing Date: 12/31/2014 Lending Instrument: Specific Investment Joint IFC: Loan Joint Level: AF Project Financing Data [ ] Loan [ ] Credit [X] Grant [ ] Guarantee [ ] Other: Proposed terms: Project Financing Plan (US$m) Source Total Amount (US $m) Total Project Cost: 30.3 Cofinancing: (GEF): 4.5 PPIAF 0.3 Borrower: - Total Bank Financing: 25.5 IBRD - IDA 25.5 New 18.3 Recommitted Client Information Recipient: Government of Guinea Responsible Agency: Electricité de Guinée Contact Person: Mr. Abdoul RACHID Telephone No.: +224 62 08 97 80 +224 60 598 828 Fax No.: Email: abdoulrachid@hotmail.com AF Estimated Disbursements (Bank FY/US$m) 6 FY 20132012 2014 2015 Annual 7.2 9.3 1.8 Cumulative 7.2 16.5 18.3 Project Development Objective and Description 1. Original project development objective: At the time of approval of the parent project, the PDO was stated differently in the PAD and the Financing Agreement, the difference being more of an editorial nature. This AF paper reconciles these differences and confirms that the PDO for this project is the one stated in the FA: the objective of the Project is to support the Recipient in its efforts to improve the technical, commercial and operational efficiency of its power sector through critical investment support and capacity building. 2. The project development objective remains unchanged. 3. Project description :  Distribution Efficiency Improvement. The component reengineers core business processes and deploys innovative technology solutions, such as pre-payment meters, in order to improve service delivery to reduce technical and commercial losses in the Kaloum area of Conakry;  Rehabilitation of critical generation facilities. Financing of critically required equipment and spare parts and technical assistance for operations, to improve the reliability and efficiency of the existing Garafiri hydroelectric plant and the Tombo thermal power plant.  Institutional strengthening through Technical Assistance. Technical assistance to help improve commercial management of the power utility and to implement an energy efficiency program for the utility’s large customers. This component also supports a pilot program to introduce energy efficient lamps, as well as capacity building of the Ministry in charge of energy to process public-private partnership (PPP) projects. Safeguard and Exception to Policies Safeguard policies triggered: Environmental Assessment (OP/BP 4.01) [ ]Yes [x] No Natural Habitats (OP/BP 4.04) [ ]Yes [x] No Forests (OP/BP 4.36) [ ]Yes [x] No Pest Management (OP 4.09) [ ]Yes [x] No Physical Cultural Resources (OP/BP 4.11) [ ]Yes [x] No Indigenous Peoples (OP/BP 4.10) [ ]Yes [x] No Involuntary Resettlement (OP/BP 4.12) [ ]Yes [x] No Safety of Dams (OP/BP 4.37) [ ]Yes [x] No Projects on International Waterways (OP/BP 7.50) [ ]Yes [x] No Projects in Disputed Areas (OP/BP 7.60) [ ]Yes [x] No Does the project require any waivers of Bank policies? []Yes [x] No Have these been endorsed or approved by Bank management? []Yes [ ] No Conditions and Legal Covenants of AF1: 1 It is proposed that the Amended and Restated Financing Agreement retain the same dated covenants as the original project Financing Agreement, albeit with some modifications in response to changes in sector conditions, as listed below. Please refer to Annex 4 for a full description of the status of the original project dated covenants and proposed modifications under the Amended and Restated Financing Agreement. 7 Financing Agreement Description of Condition/Covenant Date Due Reference Section 5.01(a) The Subsidiary Agreement has been Effectiveness executed on behalf of the Recipient and the condition Project Implementing Entity. Section 5.01(b) The A&R GEF Grant Agreement has been Effectiveness executed and delivered and all conditions condition precedent to its effectiveness or to the right of the Recipient to make withdrawals thereunder (other than the effectiveness of this Agreement) have been fulfilled. Section 5.01(c) The Recipient has adopted the revised Effectiveness Project Implementation Manual. condition Section 5.01 (d) The Recipient has delivered a policy letter Effectiveness to the Association setting forth its condition electricity sector development policy, in form and substance satisfactory to the Association, including a comprehensive tariff policy. Section 5.01 (e) The Project Implementing Entity has Effectiveness produced and disclosed its annual audited condition consolidated financial statements for the years 2007 to 2011 inclusive, in form and substance satisfactory to the Association and in accordance with international accounting standards. Section 5.01 (f) The Project Implementing Entity has hired Effectiveness an accountant in accordance with other condition provisions of the IDA Financing Agreement. Section 5.01 (g) The Ministry of Energy and Environment Effectiveness shall have adopted an anti-fraud plan, in condition form and substance satisfactory to the Association, vis-à-vis the public consumption and billing of electricity. 8 Section 5.01 (h) The Project Implementing Entity has Effectiveness adopted a framework, in form and condition substance satisfactory to the Association and approved by the Ministry of Energy and Environment, for the dispatch policy of the Project Implementing Entity, and which framework shall be based on: (a) least-cost dispatch of the generation plant; and (b) a rationing mechanism when demand exceeds supply. Section I.E.1 of The Recipient shall, no later than six (6) Six months after Schedule 2 months after the Effective Date, carry out effectiveness an environmental audit of its Garafiri hydropower and Tombo thermal power generation facilities in a manner satisfactory to the Association, and shall, no later than one (1) month after completion of said audit, adopt an action plan, in form and substance satisfactory to the Association, for implementation of the recommendations of said audit and thereafter carry out the said action plan in a manner satisfactory to the Association. Section V.A of The Recipient shall cause the Project Throughout project Schedule 2 Implementing Entity to apply tariff implementation revisions and adjustments in accordance with the provisions of the tariff policy adopted by the Recipient as part of its electricity sector development policy referred to in Section 5.01(d) of this Agreement. Section V.B.1 of The Recipient shall cause the Project Throughout project Schedule 2 Implementing Entity to maintain implementation throughout Project implementation a debt service coverage ratio of 1.3. Section V.B.3 of The Recipient shall cause the Project No later than one Schedule 2 Implementing Entity to disclose, no later month after than one (1) month after the Effective Date, effectiveness and and every six months thereafter throughout throughout project Project implementation, all of the latter’s implementation investments exceeding $100,000, including thereafter any such investments made under the Project. 9 Section V.B.4 of No later than two (2) weeks prior to the Throughout project Schedule 2 beginning of each semester, the Recipient implementation, No and the Project Implementing Entity shall later than two (2) jointly submit to the Association, weeks prior to the throughout Project implementation, a beginning of each reasonable forecast, in form and substance semester satisfactory to the Association, of the Project Implementing Entity’s Total Operating Revenues and Total Operating Expenses during such semester, including in respect of any changes in fuel and purchased power costs. Section V.B.5 of The Recipient shall cause the Project No later than six (6) Schedule 2 Implementing Entity to produce and months after the end disclose, no later than six (6) months after of the Project the end of the Project Implementing Implementing Entity’s fiscal year, throughout Project Entity’s fiscal year, implementation, annual consolidated throughout Project audited financial statements, in form and implementation substance satisfactory to the Association and in accordance with international accounting standards. Section V.C of The Recipient shall cause the Project No later than three Schedule 2 Implementing Entity to publish, no later (3) month after than three (3) month after the Effective effectiveness Date, and on a six-month basis after said date, throughout Project implementation, a list, in form and substance satisfactory to the Association, of the Project Implementing Entity’s customers whose aggregate arrears are the equivalent of GNF1,500,000 or more and whose arrears are more than four (4) months old. Section V.D of The Recipient shall assist, throughout Throughout project Schedule 2 Project implementation, in a manner implementation satisfactory to the Association, the Project Implementing Entity in the recovery of arrears owed by the latter’s customers, including those who might be public figures. 10 I. Introduction 1.1 This Project Paper seeks the approval of the Executive Directors to provide an additional grant in an amount of SDR 11.9 million (US$18.3 million equivalent) to the Republic of Guinea for the Electricity Sector Efficiency Improvement Project (ESEIP), with original project number P077317 and Grant Number IDA-H2400. 1.2 The proposed Additional Financing (AF) will cover a cost overrun, a financing gap and some scale up of planned activities, mainly related to: (i) distribution equipment for Kaloum area (component 1); (ii) spare parts for the Garafiri hydropower plant (component 2); and (iii) technical assistance to the Guinean Electricity Company - Electricité de Guinée (EDG) to improve its commercial management and to support the pilot program for energy saving lamps (component 3). 1.3 The proposed AF would also include a restructuring of the original project to better align the project activities with latest sector needs to update its loan covenants and results framework, and extend the closing date of the original credit. II. Background and Rationale for Additional Financing in the amount of US$18.3 million. 2.1 A request for an AF of US$18 million for the ESEIP was received from the Government of Guinea (GoG) on December 8, 2011. The AF is being requested in order to allow: (i) the completion of original project activities in consideration of the unanticipated cost overrun and financing gap; and (ii) limited scale-up of some of the original project components due to the degradation of the power infrastructure resulting from poor sector management and lack of investment during the 2009-2010 period of political instability. 2.2 The AF is consistent with the development objectives of the original project as it covers either the same or scaled up activities. The proposed AF is also consistent with the Republic of Guinea Interim Strategy Note for FY11-FY12 dated April 21, 2011, whose main goal is to deliver timely and adequate support to the newly elected government in its effort to bring about a tangible improvement of the living conditions of the population. The proposed AF is also in line with the Africa Strategy approved in March 2011, in particular with pillar 1 which focuses on competitiveness and employment by improving the quality and reliability of electricity supply. 2.3 The proposed AF complies with OP/BP 13.20 as original project implementation is satisfactory (Development Outcome and Implementation ratings have been Moderately Satisfactory since December 2011 and the previous drop below Moderately Satisfactory was due to the suspension of Bank operations in 2009/2010 as a result of the military coup in Guinea) and its loan covenants are substantially compliant (please refer to Annex 4 for a full assessment of compliance with original loan covenants). Financial Management and Procurement are rated Satisfactory in the latest ISR and there are no safeguards issues to report (safeguards category is C). Audits of the project’s financial statements are current and satisfactory. 11 2.4 Audits of EDG’s financial statements during project implementation have not been completed as required by a specific loan covenant in the Financing Agreement: a first attempt at hiring an auditor was cancelled further to the suspension of Bank operations in 2009. Further to Bank reengagement in 2011, a new hiring process was launched and auditors have been recruited in March 2012; it is expected that a progress report of the audits for 2007 to 2011 will be provided by end of May 2012 and that a final audit report will be completed by June 30, 2012. Completion of EDG’s financial audits will be an effectiveness condition for the AF. 2.5 The project with the additional financing is economically justified (see economic analysis in section IV below), as the poor and worsening condition of the distribution system is a source of high losses and unreliability of supply of electricity, with negative impact on the economy and a substantial drain on the Government budget. The revised Economic Internal Rate of Return (EIRR) of the project is calculated at 28.7 percent, slightly higher than the EIRR of the original project (27 percent), mainly because of the higher expected benefits of electricity supply currently than at the time of the original project due to the rise in power shortages. Based on the updated procurement plan and disbursement projections, all project activities are expected to be completed by the proposed extended closing date of the project; the additional financing is expected to close eighteen months later than the current closing date of the original project, i.e. on December 31, 2014. 2.6 At the time of approval of the parent project, the Project Development Objective (PDO) was stated differently in the PAD and the Financing Agreement, the difference being more of an editorial nature. This AF paper reconciles these differences and confirms that the PDO for this project is the one stated in the FA: the original project development objective was to support the Recipient in its efforts to improve the electricity sector’s technical, commercial and operational efficiency of its power sector through critical investment support and capacity building. These results were to be achieved through critical investment support and capacity building impacting the financial viability of the sector and quality of service delivery. The project was expected to contribute to reduction of carbon dioxide (CO2) emissions by addressing the large inefficiencies in the distribution sector and reducing energy losses (mainly through the GEF financed activities). 2.7 The original grant amount was US$7.2 million, complemented by a GEF US$4.5 million grant. The IDA grant was approved on June 22, 2006 and became effective on August 3, 2007. The GEF grant was approved on May 15, 2008, but was only signed on September 2, 2011 and made effective on February 6, 2012, due to the suspension of Bank operations in 2009/10. It was also expected initially that a restructuring of the IDA Decentralized Rural Electrification Project (DREP) would result in a saving of US$1.9 million to be transferred to the project. This did not materialize and therefore results in a financing gap. 2.8 The initial project had three components:  Distribution Efficiency Improvement. The component reengineers core business processes (with a pronounced focus on the retail metering, billing and collection 12 functions) and deploys innovative technology solutions, such as pre-payment meters, in order to improve service delivery to reduce technical and commercial losses;  Rehabilitation (repairs and maintenance) of critical generation facilities. Investment support is provided though the financing of critically required equipment and spare parts and technical assistance for operations, to improve the reliability and efficiency of the existing Garafiri hydroelectric plant and the Tombo thermal power plant which have an abnormally low availability rate; and  Institutional strengthening through Technical Assistance. This component supports the development of a robust and modern technical and commercial management of EDG, with particular attention to management accountability through a Performance Contract and the reorganization of the commercial function aiming at making staff accountable for the level of billing and collection. This component also supports a pilot program to introduce energy efficient lamps. 2.9 The project is progressing satisfactorily toward achieving the expected outcome of improving the power distribution performance of EDG in the Kaloum area (Conakry’s city center). The project’s development outcome and implementation ratings have improved since resumption of disbursements in 2011: they were upgraded from Unsatisfactory to Moderately Unsatisfactory after resumption of operations and, in the last ISR (December 2011), they were further upgraded to Moderately Satisfactory due to the rapid implementation of the project’s procurement plan. Key actions under implementation include: (i) a large contract of US$7 million for distribution equipment, which was signed in November 2011; (ii) a contract for the supply of 600,000 energy saving light bulbs; (iii) the contract of the project’s consulting engineer, which has been extended; and (iv) the recruitment of the auditors for the project 2 and EDG, which is underway. 2.10 Dated covenants of the original IDA financing agreement have been substantially complied with (please refer to Annex 4 for a full description of dated covenants, their current status and remaining actions to reach full compliance). 2.11 The following outstanding covenants have been added as effectiveness conditions (as described below) for this additional financing, but are expected in the near future: i. The updated General Policy Declaration of the Sector Policy Letter has been adopted and signed by the Recipient; ii. The audit report of EDG’s 2007 to 2011 financial statements has been received by the Bank; iii. Hire an accountant for the PIU, to the Bank’s satisfaction; iv. Strengthen the EDG anti-fraud plan with quantitative targets and deadlines; and v. Improve the note on economic dispatch of power plants and management of load shedding to a satisfactory level. 2 Project audits to-date are in compliance. 13 Sector Context 2.12 The Government’s energy strategy in the short to medium term, as expressed in its updated Energy Sector Policy Letter – General Policy Declaration of March 2012, consists in:  Providing a high level of access and quality of service through the accelerated rehabilitation of existing capacities and development of additional generation capacity (thermal and hydro);  Achieving sector financial autonomy through suitable tariff structure and commercial management and implementation of an Action Plan for EDG endorsed in principle by GOG and the main donors on January 15-16, 2012;  Supporting the participation of private partners in generation, transmission and distribution in a fair regulatory framework, calling in particular on PPP with mining businesses established in Guinea;  Redirecting the role of the Government toward sector regulation and definition of policies and strategies with a reinforcement of the energy sector Regulator; and  Accelerating the development of the country’s hydropower potential for increased energy security and lower production cost. 2.13 The French Agency for Development (AFD) and the Bank co-financed a Power Sector Diagnostic and Recovery Study, which is proposing a three-year action and investment plan to improve EDG’s performance. Total funds needed by the electricity sector are estimated at US$ 1,125 million for the following categories:  Rehabilitation of generation capacity to eliminate power shortages (US$142 million);  Additional generation capacity (including Kaleta regional hydro plant) (US$649 million);  Investment in transmission (US$75 million);  Rehabilitation of the distribution system including energy efficiency (US$192 million);  Reinforcement of EDG’s commercial function (including meters) (US$27 million); and  EDG’s legal, financial and management restructuring (US$ 40 million). 2.14 In addition to the project, these are some of the key planned investments in the 2012- 2015 period: (i) the GoG and China Eximbank are financing the 240 MW Kaleta hydropower project for an estimated cost of US$527 million; (ii) the GoG is financing 100 MW of thermal capacity (HFO based estimated at US$150 million) to meet short term base load needs and longer term peaking needs and protect the system against seasonal and annual variation in hydrology; (iii) a US$30m project funded by the African Development Bank (AfDB) and the Islamic Development Bank (IsDB) is addressing distribution needs in Ratoma and Matoto areas of Conakry; (iv) another project supported by AfDB (US$24m) is focused on electrifying secondary cities through grid extension; (v) a project supported by ECOWAS Bank for Investment and Development (EBID) of US$22 million for the rehabilitation and extension of the distribution network in 4 Guinean towns; (vi) The West Africa Power Pool (WAPP) is providing regional funds of US$7 million for the rehabilitation of the distribution system, the 14 110 kV transmission system and high efficiency lamps; and (vii) the Decentralized Rural Electrification Project (US$7m) funded by IDA/GEF is focused on off-grid electrification. 2.15 Out of the total investment plan, about US$ 836 million are already funded and US$ 304 million are sought for the completion of the rehabilitation of the distribution system, for power metering, and rehabilitation of the dilapidated existing power plants, as well as for the priority reinforcement of the commercial function and management systems of EDG. Funds for such large investments are currently unavailable from donors, as confirmed at a donors meeting on January 16-17, 2012. The Government, which is expected to cover part of the gap from the national budget in 2012-13, is keen to commit to the utility reform plan recommended by the Study, take concrete steps in implementing it, and convene another donors meeting by the summer of 2012 in order to raise more funds. Sufficient funds to meet the emergency needs of the sector for rehabilitation investments are available through existing projects, and through the proposed AF of US$18.3 million and a complementary IsDB expected financing of US$18 million for the rehabilitation and management of the Tombo thermal power plant, besides Government budget resources. 2.16 The outcome of the Electricity Sector Round Table of January 16-17, 2012 in Conakry confirmed that at this point, most traditional sector donors (such as AfDB, IsDB and AFD) and new financing sources (China and India) are already engaged in financing other priority components of the sector investment program, and limited fresh money was offered. The gap in financing would have to be met by the Government budget. The GoG, however, is already heavily engaged in financing the high priority Kaleta hydropower project, in the rehabilitation of Tombo thermal plant and hydropower plants and in financing of the additional 100 MW of priority thermal capacity. The GoG indicated it would be difficult to stretch available budget resources to cover the additional financing needed for the ESEIP. As the additional financing is needed to meet the development objective of the initial ESEIP and the project components and categories are the same as in the original project, an additional financing was preferred to the preparation of a new operation. III. Proposed Changes 3.1 The proposed AF retains the same PDO as the original project. 3.2 The scope of the project will not be revised. It will have the same three components with minor changes in activities, and with more emphasis on the improvement of distribution and commercial efficiency, which is critical to EDG’s performance improvement. Support to improving commercial management will be added to the technical assistance component, in line with the recommendations of the recent Power Sector Diagnostic and Recovery Study, and some other technical assistance activities will be cancelled as they are either less urgent than improving commercial performance or have other sources of funding. Support to Ministry of Energy and Hydraulics (MEH) to process hydropower PPPs to serve the demand from industries and to substitute for high-cost generation capacity was also added. 3.3 The proposed AF would include a restructuring of the original project to adjust the activities financed by the project, update its loan covenants and results framework, and extend the closing date of the original credit. The GEF Grant Agreement which provides co-financing 15 to this project will be amended as needed to ensure consistency with the Amended and Restated IDA Financing Agreement. Regarding loan covenants, the following main changes are proposed (for a detailed table of original project loan covenants and proposed changes, see Annex 4):  The project’s results framework has been modified (see Annex 1) and will be updated accordingly in the Project Implementation Manual;  Provide list of EDG investments: the periodicity of the list will become semi-annual rather than quarterly and the minimum level of investment to be included will be increased from US$ 10,000 to US$ 100,000;  Projections of EDG cost and revenue: periodicity will become semi-annual rather than quarterly; and  Disclosure of non-paying customers: In the revised legal agreements, disclosure will be made semi-annually and the minimum level of arrears to be included in the list will be increased to GNF 1.5 million (approximately US$ 200 equivalent), instead of an average monthly bill of GNF 150,000 (equivalent to about US$ 20). 3.4 The Results Framework has been revised in order to reflect revised activities, the latest sector performance indicators and to focus more closely on outcomes and intermediate results that can be directly attributed to the project (with a focus on the Kaloum area, where the bulk of project activities are being implemented). The following development outcome indicators are proposed:  Number of low voltage customers in Kaloum area;  Total distribution losses in Kaloum (percent);  Collection rate in Kaloum (percent); and  Reduction in CO2 emissions in tons (as a result of distribution of energy saving lamps). In addition, the following intermediate performance indicators will be tracked throughout project implementation:  Number of sub-stations rehabilitated/installed;  Replaced underground cables (km);  Meters installed (number);  Available capacity rate at Garafiri hydropower plant (percent);  Power generation of Unit 33 G at Tombo plant (MWh);  High efficiency lamps distributed (number); and  Energy audits executed (number). 3.5 The closing date of the original credit for the project and the GEF co-financing would be extended by eighteen months to coincide with that of the AF of December 31, 2014. 3.6 The proposed AF will cover a cost overrun, a financing gap and some scale up of planned activities, mainly related to: (i) distribution equipment for Kaloum area (component 1); (ii) spare parts for the Garafiri hydropower plant (component 2); and (iii) technical assistance to EDG to improve its commercial management and to support the pilot program for energy saving lamps 16 (component 3). The additional financing is needed to cover the revised project cost due to several factors:  A reallocation of US$1.9 million from the DREP to the ESEIP project, included in the ESEIP financing plan did not happen, leading to a financing gap;  Prices escalated during the project suspension period, but there is little risk of further cost escalation as the largest contract in the project (US$7 million for distribution equipment) has already been awarded, and other large tender cost estimates (such as the tender for meters estimated at US$6 million and underground cables estimated at US$4.6 million) are based on unit costs of recent tender outcomes in Guinea or in other African countries, and the AF includes suitable provisions for physical and price contingencies; and  The condition of the Kaloum distribution network further worsened, requiring more rehabilitation, and the replacement of underground cables to ensure uninterrupted power supply. The AF is the best way to meet these urgent needs for extra funds as the utility (EDG) currently does not have the necessary resources to cover them, nor is there another donor that could mobilize resources at short notice. 3.7 Table 1 below illustrates the project’s original cost, funding sources, latest cost estimates and the resulting need for additional financing (all figures are in US$ million). Table 1 - Project Cost and Financing Sources Component Original Funding Source Revised cost AF needed Cost estimate IDA ESEIP IDA GEF DREP*/Fund ing Gap Distribution 7.4 3.9 1.3 2.2 22.4 16.2 efficiency improvement Generation 2.0 2.0 0.0 - 3.6 1.6 efficiency enhancement Technical 3.8 1.3 0.6 2.3 4.0 0.5 assistance and pilots Total 13.2 7.2 1.9 4.5 29.9 18.3 *A transfer from another project, the DREP was envisaged, but did not materialize. 3.8 For a detailed break-down of the initial and latest cost estimates by component and main activity, please refer to Annex 3. 3.9 Regarding safeguards, the obligation to carry out an environmental and social management framework for distribution facilities will be removed from the GEF Grant 17 Agreement and the requirement to carry out an environmental audit of the Tombo and Garafiri power generation plants will be added to the IDA and GEF legal agreements (see paragraph 4.6 below). There are no significant changes in the project’s institutional arrangements, financial management, and disbursement arrangements, apart from minor changes described in paragraph 4.7 below. The PIU of the original project has been implementing the project efficiently and proactively since resumption of Bank operation in Guinea in 2011. Bank procurement guidelines will continue to apply without exceptions. For packages included in the original project and for which procurement is already engaged, the 2004 Procurement guidelines will apply. For all packages for which the procurement process is not engaged, the 2011 procurement guidelines will apply. IV. Appraisal Summary 4.1 Economic and financial analysis. The project economic and financial evaluation was revised compared to the initial estimates taking into account revised investment costs. The same methodology as in the original economic and financial valuation was adopted. Some revisions to the assumptions were made to take into account the impact of the increase of petroleum product prices on the cost of alternative sources of electricity supply, the results of the long term Development Program and Access Plan for the Power Sector and the Electricity Tariff Study. Along the lines of the original economic and financial evaluation, the analysis distinguishes two project components: (i) the distribution investment component, including metering and billing; and (ii) the generation rehabilitation component. (As in the original project, technical assistance and project management activities were excluded from economic and financial analysis). 4.2 The results of the revised economic and financial analysis differ from the original analysis, with a slightly higher economic rate of return, due to higher willingness to pay for electricity, and a slightly lower financial rate of return due increases in project cost more than offsetting any tariff increases. The project remains economically and financially justified. 4.3 The economic analysis was prepared from the standpoint of Guinean economy. In particular, the metering and billing project components aiming at reducing illegal consumption of electricity have been assumed to bear little economic benefits (although they do generate financial gains to EDG), as the benefits of electricity consumption occur whether electricity is paid to EDG or not. The EIRR of the distribution component which includes US$ 6 million of metering equipment is therefore lower (15.2 percent) than the EIRR of the generation rehabilitation component (60.6 percent). Overall, the project EIRR is 28.7 percent, compared to 27 percent initially. It is higher than the initial EIRR because of the higher benefits of the project generation component due to the increase in consumers’ willingness to pay, demonstrated by the increasing recourse to self-generation despite higher production costs resulting from petroleum products prices hikes. Sensitivity analysis were prepared for a capital cost 20 percent higher and for benefits reduced by 30 percent, as well as for a combination of the two. The EIRRs are given in Table 2 below, indicating that despite the increase in costs, each component of the project as well as the overall project retains an EIRR above 16 percent even under the worst case scenario. 18 Table 2 - Project Economic Analysis EIRR NPV at 12% discount factor (in US$ million) Distribution Generation Project Distribution Generation Project Initial Project 25% 30% 27% 2.29 1.96 4.25 Revised Project Base Case 15.20% 60.60% 28.70% 3.1 20.7 23.8 A- Investment cost + 20% 11.80% 53.10% 24.10% -0.2 19.7 19.5 B- Loss reduction 30% 8.80% 46.50% 20.00% 2.8 13.0 10.2 lower A &B 5.70% 40.20% 16.10% -6.1 11.9 5.9 4.4 The project financial analysis indicates that the Financial Internal Rate of Return (FIRR) of the revised project is still a strong 26.7 percent, slightly lower than under the initial project base case, because of the increase in cost. The financial rate of return of the generation component is relatively low, as despite the recent tariff increases, the marginal production cost of Tombo is higher than the average tariff, which means the increase in production of Tombo does not generate an increase in project financial benefits. On the other hand, the marginal production cost of Garafiri (hydro) is substantially lower than the tariff, generating positive financial benefits. The sensitivity analysis indicated that even under capital costs 20 percent higher and benefits 30 percent lower, the project’s FIRR remains positive and strong at 16.0 percent, although the FIRR of the generation component drops to 0.8 percent. This low FIRR is offset by the higher financial profitability of the distribution component. The comparison between the economic and financial benefits of the project components indicates that the distribution component has a low EIRR but a high FIRR, whereas the generation component has a high EIRR and a relatively low FIRR. This is due to the fact that the reduction of power theft generates little economic benefits, but increases significantly the cash flow of EDG, whereas the increase in production from Garafiri and Tombo generates significant economic benefits due to the high WTP of consumers, but little cash flow, as the marginal production cost for Tombo is higher than the average tariff. 19 Table 3 - Project Financial Analysis FIRR NPV at 12percent discount factor (in US$ million) Distribution Generation Project Distribution Generation Project Initial Project 27% 30% 29% 1.6 1.2 2.8 Revised Project Base 29.90% 10.30% 26.70 25.4 -0.4 25.0 Case % A- Investment cost + 26.00% 6.90% 22.90% 22.1 -1.4 20.7 20% B- Loss reduction 30% 22.40% 3.80% 19.40% 12.8 -1.8 11.0 lower A &B 18.90% 0.80% 16.00% 9.5 -2.8 6.7 4.5 Safeguards. The revised project has not changed significantly compared to the initial project. As was the case with the original project, the AF will finance the rehabilitation in situ of distribution equipment, machinery repairs, and purchase of spare parts and meters to be installed in existing facilities without construction of new buildings, infrastructure or civil works. Any environmental impacts are moderate and localized and will be guided by national and local laws and regulations. The project does not involve civil works, nor will it result in land acquisition/involuntary resettlement; it may include small works in conjunction with equipment installation contracts. The main change is the financing of the replacement of medium-voltage underground cables in Kaloum, which does not raise environmental or social issues, as the project will finance the replacement of existing underground cables with the same routing using parallel nearby trenches. The project safeguards rating will therefore remain a category C as the AF does not trigger any new safeguards policies, nor do scaled up activities require a change of environmental category. 4.6 It is not necessary for EDG to prepare an environmental and social management framework (ESMF) for its distribution facilities, as was previously foreseen under the GEF Grant Agreement, given the project’s C safeguards category and its focus on rehabilitating existing distribution infrastructure. Therefore this requirement will be deleted from the revised GEF Grant Agreement. That said, EDG will carry out an environmental audit of the Tombo thermal plant and the Garafiri hydropower plant, which are both benefitting from maintenance and spare parts through the project, to be completed 6 months after effectiveness of the AF. 4.7 Procurement and Financial Management. Project fiduciary arrangements which have been effective so far will remain the same, and the existing Project Implementation Unit (PIU) which is managing satisfactorily the original project will retain the same organization as before, including an environmental specialist on the team and an accountant to be hired well before effectiveness of the AF. Contrary to what was foreseen in the original Financing Agreement, there will be only one PIU, within EDG, which will be responsible for fiduciary management of the entire project. Another PIU within the Ministry of Energy was foreseen, but was not set up and is not considered to be necessary. Some technical assistance activities, such as institutional reform and energy efficiency audits, will still be technically managed by the Ministry of Energy, but their fiduciary management will be conducted by the single project PIU. (This change will be reflected in the legal agreements.) 20 4.8 Funds flow and disbursement arrangements will remain the same as in the original project. Please see revised disbursement tables for the IDA and GEF funds in Table 4 below: Table 4 - IDA Disbursement Table Category Amount of the Amount of the Percentage of Original Grant Additional Grant Expenditures Allocated Allocated (to be Financed) (expressed in SDR) (expressed in SDR) (1) Part 1 of Project: Distribution Efficiency Improvement (a) Goods and works 2,200,000 8,910,000 89 % (b) Consultants’ services 270,000 960,000 100 % (c) Training 70,000 260,000 100 % (2) Part 2 of Project: Generation Efficiency Improvement (a) Goods and works 1,290,000 1,030,000 100 % (b) Consultants’ services 0 0 (3) Part 3 of Project: Technical Assistance for Energy Efficiency and Institutional and Business Process Strengthening (a) Goods and works 0 0 (b) Consultants’ services 890,000 300,000 74 % (c) Training 0 0 (4) Operating Costs 100,000 230,000 100 % (5) Unallocated 180,000 210,000 TOTAL AMOUNT 5,000,000 11,900,000 21 Table 5 - GEF Disbursement Table Amount of the GEF Percentage of Category Financing Allocated Expenditures (expressed in USD) (to be Financed) (1) Part 1 of Project: Distribution Efficiency Improvement 2,000,000 11 % (a) Goods and works (2) [Intentionally left blank]. 0 (3) [Intentionally left blank]. 0 (4) Part 3 of Project: Technical Assistance for Energy Efficiency and Institutional and Business Process Strengthening (a) Goods and works 1,600,000 100 % (b) Consultants’ services 600,000 26 % (5) Operating Costs 0 0 (6) Unallocated 300,000 100 % TOTAL AMOUNT 4,500,000 4.9 Procurement and financial management are both rated Satisfactory in the latest project ISR and the PIU has been implementing the project proactively and efficiently since resumption of Bank operations in Guinea in 2011. Bank procurement guidelines will apply to all goods and services procured under the Project. For packages included in the original project and for which procurement is already engaged, the 2004 Procurement guidelines will apply. For all packages for which the procurement process is not engaged, the 2011 procurement guidelines will apply. 4.10 Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and updated January 2011, shall apply to the project. 22 Annex 1: Results Framework and Monitoring GUINEA: Electricity Sector Efficiency Improvement Project Additional Financing Results Framework Revisions to the Results Framework Comments/ Rationale for Change PDO Current (PAD) Proposed Improve the electricity sector’s The objective of the Project is to support the Recipient in No change; the proposed PDO as the same as in the commercial and operational its efforts to improve the technical, commercial and original project’s Financing Agreement. efficiency. These results will be operational efficiency of its power sector through critical achieved through critical investment support and capacity building. investment support and capacity building impacting the financial viability of the sector and quality of service delivery. PDO indicators Current (PAD) Proposed change Improvement in Utility Drop Too broad; project is focused on Kaloum area. Tracked Profitability through bill collection rate below Number of low voltage customers in Kaloum. In line with project focus on Kaloum area. Reduction in Technical More in line with project focus on Kaloum area. Losses Total distribution losses in Kaloum (percent) Increase in Billing Bill collection rate in Kaloum (percent) Simpler to track and more in line with project focus on Increase in collection Kaloum area. Increase in revenues Reduction CO2 Reduction CO2 emissions in Tons No change emissions in tons Intermediate Results indicators Current (PAD) Proposed change* Number of Sub-stations rehabilitated/installed Monitor physical implementation (output) Replaced underground cables (km) Monitor physical implementation (output); new activity 23 Revisions to the Results Framework Comments/ Rationale for Change Meters installed (number) Monitor physical implementation (output) Improve Availability Availability rate Garafiri (percent) No change Garafiri Improve Availability Electricity generation of Unit 33 G at Tombo (MWh) More targeted: the purpose of the component is to reduce Tombo fuel consumption High efficiency lamps distributed (number) Monitor physical implementation (output) Number of Energy Energy audits executed (number) No change Audits of Customers Increase in Dropped Indicator is not defined Performance Verification Index Launch Customer Dropped Included in covenants Care Center Improve tail-end Dropped Points of measurement undefined, and dependent upon voltage external factors as well as from the project Improve Customer Dropped Indicator not defined Satisfaction Reduction Peak Load Dropped Point of reference un-defined, and development of mines Demand by 12.15 makes indicator irrelevant MW Three training Dropped Does not monitor a key project activity programs on PPP Production and Dropped Standard covenant Disclosure of Audited Accounts Launch anti-theft Dropped Covered through monitoring number of meters installed technology Dropped 24 REVISED PROJECT RESULTS FRAMEWORK Project Development Objective (PDO): The PDO is to support the Government in its efforts to improve the technical, commercial and operational efficiency of its power sector through critical investment support and capacity building. Baseline Cumulative Target Values Original Progress Responsibility 2012 2013 2014 20153 Data Source/ PDO Level Results Indicators UOM Project To Date Frequency for Data Comments Core Methodology Start (2011) Collection (2006) EDG’s EDG’s 1. Number of low voltage 2006 figure is estimated Number 11,300 12,373 12,868 13,268 13,693 Annual commercial Commercial customers in Kaloum based on 2007 figure. statistics Directorate EDG’s 2. Total distribution losses in Technical and percent 21.5 26.7 26.0 21.7 16.0 Annual Project Unit Kaloum Commercial Directorates EDG’s EDG’s 2006 figure is estimated 3. Bill collection rate in Kaloum percent 66 83 90 92 95 Annual Commercial Commercial based on 2007 figure. Directorate Directorate EDG’s EDG’s 4. Reduction CO2 emissions Ton 0 0 0 12,149 36,448 Annual Technical Technical Directorate Directorate Beneficiaries Number 78,024 81,145 83,668 86,348 Based on proportion of low voltage customers Project beneficiaries, 71,258 EDG’s EDG’s who are households Annual Commercial Commercial (79percent) and average Directorate Directorate number of people per household (8). Number EDG’s EDG’s 35,941 36,307 36,650 37,335 Assumes 50percent 35,629 Annual Commercial Commercial Of which female (beneficiaries) females in households Directorate Directorate 3 Project closes in 2014 so 2015 target values are not required. 25 Intermediate Results and Indicators Baseline Target Values Unit of Original Progress Responsibility 2012 2013 2014 2015 Data Source/ Intermediate Results Indicators Measur Project To Date Frequency for Data Comments Core Methodology ement Start (2011) Collection (2006) Intermediate Result 1: Number of low voltage customers in Kaloum Statistical Report of 1. Availability rate of Garafiri EDG’s percent 95.8 97.9 97.9 98.5 98.5 Annual Technical hydropower plant Management Department of EDG Statistical Report of 2. Generation of unit 33 G at EDG’s In 2006 the unit was not MWh 0 23,482 86,248 149,013 211,779 Annual Technical Tombo thermal plant Management in operation. Department of EDG Intermediate Result 2: Total Distribution losses in Kaloum 3. Number of sub-stations EDG’s EDG’s Number 0 0 15 42 42 Annual rehabilitated/installed Project Unit Management EDG’s EDG’s 4. Replaced underground cables km 0 0 7.5 35.5 55.5 Annual Project Unit Management Intermediate Result 3: Collection rate in Kaloum EDG’s Commercial EDG’s 5. Meters installed Number 0 0 0 9,000 13,693 Annual Directorate management Annual Report Intermediate Result 4: Reduction CO2 emissions Number of Technical 7. High efficiency lamps Number 0 0 200,000 600,000 600,000 Annual lamps Department of distributed distributed, EDG 26 Intermediate Results and Indicators Baseline Target Values Unit of Original Progress Responsibility 2012 2013 2014 2015 Data Source/ Intermediate Results Indicators Measur Project To Date Frequency for Data Comments Core Methodology ement Start (2011) Collection (2006) EDG Energy Efficiency Unit Annual report Energy Efficiency Ministry of 8. Energy audits executed Number 0 0 0 15 30 Annual Department Energy of Ministry Energy 27 ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF) Guinea: Electricity Sector Efficiency Improvement Project Additional Financing Stage: Board Project Stakeholder Risks Rating: Substantial Description : There are beneficiaries of the current situation Risk Management: The utility’s recovery plan includes measures to incentivize managers and who may feel threatened by the project (utility employees staff at the power utility to modify their behavior as well as disciplinary measures. The who may be colluding with customers to reduce bill government is also stepping-up communication with citizens at large to explain the link collection or turn a blind eye to illegal connections). Some between service improvement and necessity to pay electricity bills. Additional resources for consumer groups may not support the project because it the sector are being mobilized through a donors’ round table to increase access to, and will enforce tighter payment discipline despite low quality reliability of electricity in urban areas. Improved availability of service will be provided in a of electricity service and relatively high tariffs coordinated manner with the rolling out of the distribution and collection improvement program, so clients can observe a simultaneous improvement of quality of service as payment discipline is reinforced in their area. Status: Not yet Resp: EDG Stage: Imp Due Date : 06/06/2013 due Implementing Agency Risks (including fiduciary) Capacity Rating: Moderate Description : Changes in the management of the PMU, its Risk Management : The project will be implemented by the existing Project Management structure or functioning. Given the limited availability of Unit (PMU) with a satisfactory track record and experience with World Bank procedures. competencies for project management in the country and The PMU is staffed with an accountant and equipped with acceptable accounting software especially in the line Ministry and the public utility EDG, any and manual of procedures allowing timely, and reliable reporting of the use of the bank funds. disruption of the PMU would have a negative impact on the An external independent auditor acceptable to the Bank is been hired and any change of PMU implementation of the project. management will be submitted to the Bank’s prior approval Status: Not yet Resp: EDG Stage:Imp Due Date :12/31/2014 due Governance Rating: Moderate Description : Governance. Interference of the line Ministry or Risk Management : of EDG’s management in the project implementation Since inception of the project, there has been no indication of interference of the line Ministry or of EDG’s management in the operation of the PMU. The new General Manager of EDG was a staff of the PMU and is familiar with the governance requirements of Bank supported projects. Status: Not yet Resp: GOG Stage: Imp Due Date :12/31/2014 due Project Risks Design Rating: Moderate Description : Uncertainty concerning the scope of repair works Risk Management : The plant rehabilitation component of the project has been prepared on and performance of equipment may cause cost overruns and the basis of detailed technical studies conducted by reputable international engineering delay on repair works. Possible changes in specification of firms. The design of the distribution component is modular and can be easily adapted if some equipment may involve an over run risk conditions warrant such as cost overruns. In addition, as the largest US$ 7 million contract 28 for distribution equipment has been already awarded. The risk of overrun is limited to minor distribution components of the project. The performance of pre-payment meter systems in a system with poor quality of power is a concern, but as the quality of power improves with the addition of new capacity in the system and rehabilitation of existing plants, this risk will be reduced. Status: Not yet Resp: EDG Stage: Imp Due Date :12/31/2014 due Social & Environmental Rating: Low Description : Rehabilitation of the distribution system of Risk Management : The replacement of cables in any given area will take a few days with limited Kaloum involves works in a heavily populated area and limited disruption to local social life. This will be implemented in accordance with national laws and digging of trenches to replace cables, which may temporarily regulations and supervised by the PIU’s safeguards specialist. affect street vendors. The supply of spare parts for the plants Status: On- Resp: EDG Stage: Imp Due Date :12/31/2014 has no socio-environmental impact. going Program & Donor Rating: Moderate Description : As the program is limited to certain areas, the Risk Management : Close partnership was initiated very early-on in project preparation with fight against fraud and corruption in distribution may trigger a AfDB, AFD and IsDB. As each donor has selected a specific geographical area for its project, the social backlash in areas affected first by the crack-down. At IDA project would not be affected by implementation delay or issues in other donors’ distribution sector level, if other donors funded projects aiming at improving components. Concerning the generation aspects, the allocation of areas of responsibilities was the generation performance of EDG are not implemented in agreed amongst donors and with GOG at the January 2012 Donor Meeting. The Bank and AFD parallel to the IDA project the IDA project will be less effective will continue to cooperate closely in the design and implementation of sector reforms through periodical consultation. Status: On- Resp: GOG Stage: Imp Due Date : 12/31/2014 going Delivery Monitoring & Sustainability Rating: Substantial Description : Ineffective implementation of the EDG action Risk Management : The project includes component to finance the development of a modern plan, in particular the commercial component, would reduce management system in EDG, including a commercial management system, based on the EDG’s cash flow and capacity to maintain its equipment and conclusions of a recent diagnostic and recovery study funded jointly by AFD and the Bank with a infrastructure, thereby affecting the sustainability of the project special focus on commercial issues. A tariff study dated 2009 is available and its conclusions need in the medium and long term. to be implemented to improve tariff structure. The financing of prepayment meters under the project will also contribute to address the billing and collection issue of EDG and to improve its cash flow. The implementation of EDG action plan will be monitored by an independent external auditor. Status: On- Resp: GOG Stage: Imp Due Date : 31/12/2013 going Overall Implementation Risk Rating: Substantial Comments: A Substantial risk rating was selected for implementation due to the various challenges related to the country and sector: the electricity sector in Guinea has had a deteriorating performance in recent years and several attempts at reform in the past have failed. 29 ANNEX 3 – REVISED ESTIMATE OF PROJECT COSTS AND FINANCING Guinea: Electricity Sector Efficiency Improvement Project Additional Financing Component/Activity Amount IDA GEF IDA Total Revised Cost Additional Status of in original Financed Financed Reallocation/ Initial Financing Activity Ref. PAD Financing IDA/GEF Explanation Gap Financing 1 Improving distribution efficiency a) Reduction of technical 3.65 0.74 2.16 1.21 2.90 7.00 4.10 CO In losses (equipment progress price in new tender 1.1 higher than estimate); FG; SU (new MV terminal) b) Compensation reactive 0.60 0.30 0.08 0.00 0.38 0.08 -0.30 Complete power, improvement of sub- Cost saving stations and transmission c) Outage Management 0.05 0.05 0.00 0.00 0.05 0.08 0.03 CO Pending (equipment price); SU d) Commercial management 2.00 2.00 0.00 0.00 2.00 6.04 4.04 CO; SU Pending improvement: metering (more meters needed) e) Customer support center 0.00 0.00 0.00 0.00 0.00 0.40 0.40 CO; SU Pending Engineering supervision, 0.78 0.49 0.00 0.09 0.49 2.60 2.11 CO; SU; In implementation support, FG progress auditing and training (incl. for (increased 1.2 other components) need for engineering supervision due to AF 30 Component/Activity Amount IDA GEF IDA Total Revised Cost Additional Status of in original Financed Financed Reallocation/ Initial Financing Activity Ref. PAD Financing IDA/GEF Explanation Gap Financing System protection and 0.20 0.20 0.00 0.00 0.20 1.05 0.85 CO Pending coordination (increase in price of equipment) 1.3 ; SU (additional quantities needed) Kaloum underground cables 0.00 0.00 0.00 4.60 4.60 New 1.4 SU activity (add.) 1.5 Contingencies and Unallocated 0.10 0.10 0.00 0.00 0.10 0.50 0.40 Component 1 Distribution 7.38 3.88 2.24 1.30 6.12 22.35 16.23 Efficiency 2 Generation efficiency enhancement Garafiri Investment Support 0.86 0.86 0.00 0.00 0.86 2.00 1.14 SU (more Pending 2.1 spare parts needed) Tombo Investment Support 0.86 0.86 0.00 0.00 0.86 1.45 0.59 CO (due to Complete increase in 2.2 spare parts price) 2.3 Technical Studies 0.18 0.15 0.00 0.03 0.15 0.00 -0.15 Cost saving Complete 2.4 Contingencies and Unallocated 0.10 0.10 0.00 0.00 0.10 0.10 0.00 Component 2 Generation 2.00 1.97 0.00 0.03 1.97 3.55 1.58 Efficiency Enhancement 3 Technical Assistance Energy 0.50 0.00 0.50 0.00 0.50 0.60 0.10 CO (cost of Pending Efficiency/Conservation/DSM services higher due 3.1 to $ vs. Euro devaluation) 3.2 Policy Preparation Support 0.30 0.15 0.00 0.05 0.15 0.15 0.00 - Complete 31 Component/Activity Amount IDA GEF IDA Total Revised Cost Additional Status of in original Financed Financed Reallocation/ Initial Financing Activity Ref. PAD Financing IDA/GEF Explanation Gap Financing Finance and Accounting 0.60 0.60 0.00 0.00 0.60 0.00 -0.60 Cancelled 3.3 Cost saving Support MIS and IT Support. 1.29 0.35 0.00 0.54 0.35 0.00 -0.35 Cost Cancelled 3.4 Monitoring and Evaluation saving Purchase High Efficiency 1.00 0.00 1.00 1.00 1.48 0.48 CO (price In lamps in tender progress 3.5 higher than planned) 3.6 Tariff Study 0.00 0.00 0.00 0.00 0.10 0.10 SU Complete TA for commercial 1.00 1.00 New 3.7 SU management activity Institutional Support 0.00 0.00 0.50 0.50 0.34 -0.16 Partly Cost 3.8 new saving activity Audit EDG 0.00 0.00 0.00 0.00 0.25 0.25 In 3.9 SU progress 3.10 Contingencies and Unallocated 0.10 0.20 0.26 0.46 0.10 -0.36 Component 3 Technical 3.79 1.30 2.26 0.59 3.56 4.02 0.46 Assistance Total 13.17 7.15 4.50 1.92 29.92 18.27 32 ANNEX 4 - STATUS OF ORIGINAL PROJECT DATED COVENANTS Guinea: Electricity Sector Efficiency Improvement Project Additional Financing Nb. Covenant Covenant Content Status at Negotiations Modifications under number in number in Amended Financing IDA FA GEF GA Agreement 1. Sche 2 1 B 2 Sch. 2 1 B 2 Maintain a PIU with (i) a financial management specialist; Only accountant is Hiring of accountant a a (ii) an accountant; (iii) a procurement specialist; (iv) a missing (financial becomes an effectiveness distribution system specialist; (v) a generation system management specialist is condition specialist; (v) an information system specialist; and (vi) an currently acting environmental and social safeguards specialist. accountant) 2. Sche 2 1 B 2 Sch. 2 1 B 2 EDG to appoint an independent Project implementation Compliant None d d consultant, for purposes of oversight and quality control of financial management and procurement under the Project and engineering design and implementation support. 3. Sche 2 2 A 1 Sch. 2 2 A 1 EDG to monitor and evaluate the progress of the Project and Compliant Revise performance ad a prepare quarterly Project Reports on the basis of the indicators in Project performance indicators. Implementation Manual in line with agreed revised indicators, which becomes an effectiveness condition 4. Sch 2 2 B 2 EDG to provide quarterly financial reports of the project Compliant None 5. Sch 2 2 B 3 Sch. 2 2 B 3 PIE to provide annual audited reports of the project Compliant None 6. Sch 2 5 A Sch. 2 5 A GOG to adopt, no later than January 31, 2007, an electricity Partly fulfilled. Letter is Signing of the sector sector development policy including a comprehensive tariff ready to be submitted to policy letter (general policy and a regulatory framework Council of Ministers for declaration) becomes an approval effectiveness condition 7. Sch 2 5 C 1 Sch. 2 5 C 1 EDG to maintain, throughout Project implementation, a Compliant since 2009 Revise minimum debt minimum debt service coverage ratio of 1.5. service coverage ratio to 1.3. 8. Sch 2 5 C 3 Sch. 2 5 C 3 EDG to furnish no later than one (1) month after the Compliant None Effective Date, a plan, in form and substance satisfactory to the Association, for the servicing of EDG’s debt 9. Sch 2 5 C 4 Sch. 2 5 C 5 EDG shall, no later than one (1) month from the Effective Compliant None Date, agree with the Bank upon a minimum cash reserve, to be maintained throughout Project implementation. 33 Nb. Covenant Covenant Content Status at Negotiations Modifications under number in number in Amended Financing IDA FA GEF GA Agreement 10. Sch 2 5 C 5 EDG to disclose, every three (3) months throughout Project Compliant Make periodicity semi- implementation, all investments exceeding $10,000, annual, with a revised threshold of $ 100,000 11. Sch 2 5 C 6 EDG to submit throughout Project implementation, a Compliant Make periodicity semi- reasonable quarterly forecast, of Total Operating Revenues annual and Total Operating Costs 12. Sch 2 5 C 8 Sch. 2 5 C 6 EDG to disclose, no later than six (6) months after the end Not yet complied with. Final audit report to of the fiscal year, throughout Project implementation, annual Contract with auditor is become an effectiveness audited financial statements. signed, progress report is condition expected by end of April 2012 and final report by end of June 2012. 13. Sch 2 5 D 1 Sch. 2 5 D 1 EDG to publish, at the end of every quarter throughout Substantially compliant Revise to make semi- Project implementation, a list, of customers whose monthly (list with a threshold of annual, and raise overall bill has averaged GNF 150,000 or more over the previous 12 300,000 GNF for Kaloum arrears threshold to GNF months and whose arrears are more than three (3) months area was published in local 1.5 million old newspapers) 14. Sch 2 5 D 2 Sch. 2 5 D 2 EDG furnish no later than one (1) month after the Effective Compliant None Date, a plan, for addressing major customer grievances 15. Sch 2 5 E 2 Sch. 2 5 E 2 GOG shall, clear, its arrears to EDG and remain current in Compliant None its payments to EDG throughout Project implementation 16. Sch 2 5 E 3 Sch. 2 5 E 3 GOG shall prepare, no later than October 31, 2006, and Plan was provided. Improve plan by adding implement thereafter, an anti-fraud plan quantitative targets and deadlines; this becomes an effectiveness condition 17. Sch 2 5 E 4 Sch. 2 5 E 4 EDG shall prepare, no later than one (1) month after the Compliant None Effective Date, a human resource management plan 18. Sch 2 5 E 5 Sch 2 5 E 5 The Recipient shall cause the Project Implementing Entity Dispatch framework was Improve note on to prepare, no later than three (3) months after the Effective provided, but needs some economic dispatch of Date, a framework, in form and substance satisfactory to the improvement. power plants and load Association and approved by the Ministry of Energy and shedding framework to a Environment, for the dispatch policy of the Project satisfactory level; this Implementing Entity, and which framework shall be based becomes an effectiveness on: (i) least-cost dispatch of the generation plant; and (ii) condition. service to zones at times of the day ensuring the highest financial return to service. 34