The World Bank CAR Emergency Electricity Supply and Access Project (P164885) REPORT NO.: RES46212 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF CAR EMERGENCY ELECTRICITY SUPPLY AND ACCESS PROJECT APPROVED ON FEBRUARY 28, 2019 TO THE CENTRAL AFRICAN REPUBLIC Energy and Extractives Global Practice Western and Central Africa Region Regional Vice President: Ousmane Diagana Country Director: Abdoulaye Seck Regional Director: Ashish Khanna Practice Manager: Ashish Khanna Task Team Leaders: Anas Benbarka, Nash Fiifi Eyison The World Bank CAR Emergency Electricity Supply and Access Project (P164885) ABBREVIATIONS AND ACRONYMS CAR Central African Republic ENERCA Energie Centrafricaine GoCAR Government of CAR GRM Grievance Redress Mechanism FCFA franc CFA ICR Implementation Completion and Results Report IDA International Development Association PAPs Project Affected Persons PDO Project Development Objective PIU Project Implementation Unit PURACEL Emergency Electricity Supply and Access Project RAP Resettlement Action Plan The World Bank CAR Emergency Electricity Supply and Access Project (P164885) BASIC DATA Product Information Project ID Financing Instrument P164885 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 28-Feb-2019 28-Feb-2024 Organizations Borrower Responsible Agency Ministry of Development of Energy and Water Resources Central African Republic (MDEWR),Energie Centrafricaine (ENERCA),Ministry of Economy, Planning, and International Corporation Project Development Objective (PDO) Original PDO The PDO is to increase electricity supply and access in Central African Republic. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-D4300 28-Feb-2019 09-Apr-2019 27-Jun-2019 28-Feb-2024 65.00 12.69 53.71 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank CAR Emergency Electricity Supply and Access Project (P164885) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Background and project status 1. The electricity sector of the Central African Republic (CAR) has been characterized by inadequate infrastructure, a weak policy and regulatory framework and a utility, ENERCA (Energie Centrafricaine), that has been struggling to recover costs and thus to maintain and expand services. Electricity generation and transmission capacity have long failed to keep pace with the growth in demand, and the sectoral infrastructure stock has been inadequate and dilapidated. Access to the national power grid is limited, and the electricity supply is highly erratic. To support the Government of CAR (GoCAR) in addressing these issues, the World Bank supported the Emergency Electricity Supply and Access Project (PURACEL; P164885) which is not only providing electricity to consumers but also increasing the share of electricity generated renewable energy (solar energy). 2. The International Development Association (IDA) grant (IDA D4300) in the amount of US$65 million equivalent for the PURACEL was approved on February 28, 2019 and became effective on June 27, 2019. The project’s current closing date is February 28, 2024. The project development objective (PDO) is to increase electricity supply and access in CAR. 3. The project includes the following components: (i) Component 1 - Construction of a Solar PV Electricity Generation Plant; (ii) Component 2 - Strengthening of the transmission and distribution networks; (iii) Component 3 - Institutional strengthening, capacity building, and project implementation support; and (iv) Component 4 - Contingent emergency response. 4. Progress towards achievement of PDO and overall implementation progress are currently rated Moderately Satisfactory, and US$12.69 million (19.12 percent) out of US$65 million has been disbursed as of October 28, 2021. The main contract for the solar plant under the Component 1 was signed in December 2020 and the construction phase was initiated. Detailed progress under the project components is presented below. 5. Construction of a Solar PV Electricity Generation Plant. The identified 75 ha project site for the installation of the solar plant is located near the village of Danzi, about 20 km north of Bangui and about 3 km from the existing transmission line (63 kilovolt (kV)) that links the Boali hydropower system to Bangui. The procurement process for the solar plant was completed, and the contract for the design, supply, installation, operations, and maintenance for three years was signed on December 17, 2020. All safeguards’ instruments have been approved1. The compensation of project affected persons was completed for Component 1 and the contractor initiated construction of the solar plant. RAP under Component 1 was fully implemented. A total of 142 Project Affected Persons (PAPs) received resettlement-related payments including: (i) cash compensation for land and properties; (ii) moving allowances; (iii) temporary income losses; and (iv) other resettlement assistance directly associated with the use of the land to host the solar plant. A Grievance Redress Mechanism (GRM) was established since June 2019. The grievance committee was comprised of representatives from the ministries, NGOs, and nearby villages. A compensation committee was also created to cover the compensation of PAPs. The GRM received a total of 46 complaints, which have all been resolved satisfactorily by the committee. A full report was prepared by the Project Implementation Unit (PIU) and submitted to the Bank, including discharges from all 46 plaintiffs confirming their satisfaction with the resolution of their grievances. A final RAP and 1 The IDA financing to cover US$500,000 in costs of RAPs was approved by Regional Vice President on December 6, 2018. The World Bank CAR Emergency Electricity Supply and Access Project (P164885) GRM reports were issued by the PIU and cleared by the Bank. In October 2020, the PIU recruited a third-party consultant to undertake an audit of compensations, and the Bank submitted its comments on the draft report which was revised and finalized accordingly in February 2021. 6. Strengthening of the Transmission and Distribution Networks. Technical studies have been completed to refine the scope of activities. Component 2.1 includes investments in transmission to reinforce and upgrade substations Bangui A and Bangui B so that they can handle the additional generation from the solar plant and to permit automatization with the SCADA system. Received offers have been evaluated and activity is now in the contracting phase. Component 2.2 includes (i) installing 40 medium-voltage and low-voltage substations, including transformers, circuit breakers, and related equipment; (ii) installing 110 km of new medium-voltage distribution lines including poles and related equipment; (iii) installing 340 km of new low-voltage distribution lines, including poles and related equipment; (iv) installing equipment to connect new customers; and (v) providing equipment for the installation and maintenance of the distribution infrastructure by ENERCA. The PIU has successfully completed the procurement process for distribution equipment which would be installed by ENERCA. All contracts for the five lots have commenced implementation and 40 percent of funds disbursement has been achieved on all. The finalized RAP indicates an estimate of 372 PAPs, of which 13 are vulnerable people. B. Rationale for restructuring 7. Ability of the GoCAR to finance the difference in the increased cost of RAP under the Component 2 remains limited due to its overall fiscal challenges. The impact of COVID-19 is projected to lead to a contraction of GDP per-capita and shift of the fiscal balance into a deficit. The total financing needs in 2021 are estimated at FCFA 77.5 billion – about US$138.2 million equivalent and 5.4 percent of GDP – and expected to be financed by a coordinated effort of donors. Public debt declined from 63 percent of GDP in 2014 to 46.8 percent in 2020 due to economic growth, arrears clearance, and limited new borrowing. However, according to the latest Debt Suitability Analyses (November 2020), CAR remains at high risk of debt distress because of significant repayments due going forward, sizable contingent liabilities, and a volatile security environment, especially following recent elections. 8. At time of approval of the financing for PURACEL, the resettlement costs estimates were based on the RAP for Component 1 relating to the site of the solar plant in Bangui as feasibility studies for Component 2 relating to expansion of distribution network and transmission infrastructure upgrade were still underway. Compensation of PAPs for Component 1 was higher than estimated considering the larger number of PAPs (142 instead of 104), and sepultures to be displaced (77 instead of 44), and the number of PAPs affected by activities under the Component 2 was larger than originally estimated (372 instead of 100). Additional PAPs to be compensated under Component 2 are based on recent RAP cleared by the Bank2. 9. As of September 21, 2021, an amount of FCFA 188,471,748 (US$340,816.90 equivalent)3 has been disbursed to cover resettlement costs under the Component 1. The RAP for Component 2 - indicates that there will be additional resettlement costs of approximately FCFA 362,296,485 (US$655,147.35 equivalent) bringing the total of amount of resettlement compensation to FCFA 550,768,233 (US$995,964.25 equivalent) under both project 2 https://documents.worldbank.org/en/publication/documents-reports/documentdetail/523831632463351840/plan-d-action-de- reinstallation-de-la-construction-de-la-ligne-ht-dans-le-cadre-du-renforcement-des-reseaux-de-transmission-et-de-distribution- entre-le-village-de-danzi-a-bangui 3 US$1 = FCFA 553 (based on exchange rate as of July 12, 2021). Dollar amount is an estimate as compensations were paid during 2020 in various installments. The World Bank CAR Emergency Electricity Supply and Access Project (P164885) components. The provision of IDA financing needs to be increased from US$500,000 to US$1,100,000 to cover the additional resettlement costs. These funds are available to be reallocated within the project because Component 1 currently has a budget surplus following the signature of the solar plant contract which came in at a lower price than anticipated, and contingencies built in within the project. 10. The GoCAR in its follow up letter, dated March 2, 2021, has requested the World Bank to increase allocation for RAP implementation and allow a total of US$1,100,000 of the IDA grant proceeds to be earmarked for resettlement activities relating to the solar plant construction and associated transmission distribution networks rehabilitation. Speedy implementation of RAP for Component 2 remains critical to ensure that project is implemented and reach its PDO, as procurement for the transmission infrastructure upgrade (Component 2.1) is in final stages, and procurement for the distribution network expansion (Component 2.2) has been completed. IDA proceeds will be used to compensate PAPs and implement RAP in order not to delay project implementation. Approval to finance additional resettlement costs in the amount of US$600,000 from the IDA financing was provided by the Regional Vice President on October 29, 2021. 11. Key risks related to implementation of RAPs include: (i) risk of delays in compensation payments; (ii) non-payment of funds to PAPs; (iii) risk of conflicts and disputes; (iv) Institutional capacity risks; (v) risks with value of payments; (vi) risk of fraud and corruption. In general, these risks will be mitigated by the monitoring role of independent NGO and regular submission of the Interim Financial Reports and the statements of expenditure. 12. The risk associated with delays in compensation payments will be mitigated by using IDA funds to compensate PAP. The risk associated with non-payment of funds to PAP will be mitigated by recruiting an experienced NGO that will support the PIU and assist PAPs following compensation process to ensure they improve use of their proceeds in economic activities that improve their livelihood, which was among the recommendations of the audit report for Component 1 RAP. Supervision of expenditures and payments to PAPs will be done by the PIU following similar arrangements set up for compensations under Component 1, with setting up a local committee for compensation and a committee for addressing complaints. In addition, the PAPs will be required to provide confirmation of receipt of funds and the account will be audited by an independent institution or consultant appointed by the PIU and with the no-objection of the World Bank. The risk associated with conflicts and disputes will be mitigated through the GRM and disputed amounts will be held in the escrow account. Adequate staffing of PIU with relevant social experts that gained firsthand experience with implementing compensation under Component 1 will mitigate the instructional risk. Training and awareness programs could be envisaged to strengthen the PIU, and an NGO will be recruited to support the PIU for compensation. The risk associated with value of payment will be partially mitigated through having the PIU verify the valuation and consult each PAP on their entitlement before proceeding to payment stage. However, there will remain risks of currency fluctuations. The risk associated with fraud and corruption will be mitigated by the monitoring role of independent NGO and regular submission of the Interim Financial Reports and the statements of expenditure. 13. The compensation process for Component 2 will further benefit from lessons learnt during the compensation for Component 1 and recommendations from the audit conducted: (i) have the committee in charge of complaints presided by civil society member experienced in conflict management; (ii) support by NGOs for the development of revenue-generation activities benefiting PAPs after PAR implementation; (iii) where possible recruitment of local workforce (PAPs and others) to support project implementation; and (iv) provision of adequate resources for the committee in charge of compensation. The World Bank CAR Emergency Electricity Supply and Access Project (P164885) 14. The IDA allocation will finance all resettlement compensation including cash compensation at full replacement for the loss of land use, crops, trees and income because of the proposed infrastructure investments in Bangui area under Component 2 of the project. 15. Funding for the compensation will continue to be channeled through the designated account of the project, as was done for the compensations relating to the RAP of Component 1. Compensation payment vouchers based on the mitigation measures outlined in the RAP would be processed by the PIU. The PIU would then announce to the individual PAPs the dates and time for issuing the payment vouchers/checks and will take appropriate security measures (with strong financial control mechanism) if cash payment is in hand. The PIU has a safeguards team who has experience in payment of compensation and provision of other resettlement support to affected persons, and successfully completed the compensation of PAPs relating to Component 1. The project team will ensure there is a detailed record of all compensation paid by IDA under the project, including the identification of PAPs and the specific land-based economic or physical losses for which they are being compensated and/or assisted. 16. The RAP for Component 2 will have clear monitoring and evaluation actions to be undertaken by PIU. This will be expanded to include periodic checks by the World Bank safeguards team through field visits and audio discussions on the status of released funds, completed payments, use of the Committee in charge of payment of compensations, and the Committee in charge of resolution of grievances, among other measures. At the end of implementation, the GoCAR, through the PIU, will submit a RAP implementation completion report detailing all accountabilities, processes, challenges and lessons learnt among others. This will be reviewed and cleared by the World Bank and it will be part of the project Implementation Completion and Results Report (ICR) so that the ICR duly reflects that resettlement implementation has been duly completed. The PIU will also procure an independent third-party audit of compensations as was done for Component 1. These reports will be reviewed and cleared by the World Bank. II. DESCRIPTION OF PROPOSED CHANGES 17. The proposed changes for the project include the following: (a) changes to components and cost estimate of the project; (b) creation of a new disbursement category to cover the allocated amount totaling US$1.1 million for RAP implementation under the project, and (c) reallocation between disbursement categories. 18. Changes in components and costs: The proposed revisions to components and their costs are presented below in Table 1. Component 3 of the project will have additional allocation of US$600,000. Table 1. Revised costs of components of the project Name of component Before restructuring After restructuring Project cost Project cost in US$ million in US$ million Component 1: Construction of a Solar PV Electricity Generation Plant 45.5 44.9 Component 2: Strengthening of the Transmission and Distribution 11.8 11.8 Networks Component 3: Institutional Strengthening, Capacity Building, and Project 7.7 8.3 Implementation Support Component 4: Contingent Emergency Response 0 0 Total 65.0 65.0 The World Bank CAR Emergency Electricity Supply and Access Project (P164885) 19. Reallocation between disbursement categories: New disbursement category 4 will be created. New disbursement category 4 will be dedicated to the implementation of RAPs totaling of SDR 778,900 (US$1.1 million equivalent)4. The above mentioned amount will be reallocated from Category 1. Once the restructuring is completed and considering that a first compensation was completed for a total of US$340,816.90 under the Category 1, the PIU will submit a request for adjustment. This will enable the transfer of expenditures for compensation made under the Category 1 to Category 4. 4 US$1 = SDR 0.71 as of November 2, 2021. Result was rounded to the next US$100. The World Bank CAR Emergency Electricity Supply and Access Project (P164885) III. SUMMARY OF CHANGES Changed Not Changed Components and Cost ✔ Reallocation between Disbursement Categories ✔ Other Change(s) ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) The World Bank CAR Emergency Electricity Supply and Access Project (P164885) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component 1: Construction of a Component 1: Construction of Solar PV Electricity Generation 45.50 Revised a Solar PV Electricity 44.90 Plant Generation Plant Component 2: Strengthening of Component 2: Strengthening the transmission and distribution 11.80 No Change of the transmission and 11.80 (T&D) networks distribution (T&D) networks Component 3: Institutional Component 3: Institutional strengthening, capacity building, strengthening, capacity 7.70 Revised 8.30 and project implementation building, and project support implementation support Component 4: Contingent Component 4: Contingent 0.00 No Change 0.00 emergency response emergency response TOTAL 65.00 65.00 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-D4300-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: GD,WKS,NCS,CS,TRN,OC 45,300,000.00 8,153,420.00 44,521,100.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: PPA REFINANCING 1,500,000.00 278,076.40 1,500,000.00 iLap Category Sequence No: 3 Current Expenditure Category: CER Component 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: RAP implementation The World Bank CAR Emergency Electricity Supply and Access Project (P164885) 0.00 0.00 778,900.00 100 Total 46,800,000.00 8,431,496.40 46,800,000.00 .