The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) Project Information Document (PID) Appraisal Stage | Date Prepared/Updated: 05-Feb-2021 | Report No: PIDA27274 February 5, 2021 Page 1 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) BASIC INFORMATION OPS_TABLE_BASIC_DATA A. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Uganda P166685 Uganda Electricity Access Scale-up Project (EASP) Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) AFRICA EAST 09-Feb-2021 16-Mar-2021 Energy & Extractives Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Republic of Uganda Rural Electrification Agency (REA), Ministry of Energy and Mineral Development (MEMD), Uganda Energy Credit Capitalization Company (UECCC) Proposed Development Objective(s) The Project Development Objective is to increase access to energy for households, commercial enterprises, industrial parks, and public institutions Components Grid Expansion and Connectivity Financial Intermediation for Energy Access Scale-up Energy Access in Refugee Host Communities Project Implementation, Support and Affordable Modern Energy Solutions Contingent Emergency Response PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 505.00 Total Financing 505.00 of which IBRD/IDA 400.00 Financing Gap 0.00 February 5, 2021 Page 2 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) DETAILS -NewFinEnh1 World Bank Group Financing International Development Association (IDA) 400.00 IDA Credit 340.00 IDA Grant 60.00 Non-World Bank Group Financing Counterpart Funding 3.00 Borrower/Recipient 3.00 Trust Funds 40.00 Clean Technology Fund 30.00 Energy Sector Management Assistance Program 10.00 Other Sources 62.00 Foreign Private Commercial Sources (unidentified) 62.00 Environmental and Social Risk Classification Substantial Decision The review did authorize the team to appraise and negotiate Other Decision (as needed) B. Introduction and Context Country Context 1. Uganda is a landlocked country in Eastern Africa, bordered by Kenya, South Sudan, the Democratic Republic of Congo, Rwanda, and Tanzania. Extending over an area of 241,550 km2, Uganda is about the size of the United Kingdom. Uganda’s population is growing rapidly at 3.3 percent per year and is expected to grow from 42.7 million in 2018 to over 60 million in 2030. The country has one of the world’s youngest population with almost half of Ugandans under the age of 15 years and nearly 80 percent under the age of 30 years. About 77 percent of February 5, 2021 Page 3 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) the total population live in rural areas and work in the agricultural sector, which accounts for 71 percent of the total employment and around a quarter of the country’s gross domestic product (GDP)1. 2. The topical issues of gender inequalities and climate impacts also persist in Uganda. The people, environment and economy are highly dependent on natural resources and the country is experiencing impacts of climate change. Along with poverty, land degradation, and rapid and unplanned urbanization and with the increase in the spread of vector-borne diseases, these climate risks affect the people and major productive sectors in the country, which lack sufficient institutional and community capacities to adapt to climate change impacts. Gender inequalities are stark with Uganda ranking 131 out of 161 countries in the 2019 Gender Inequality Index2. Prevalence rates of gender-based violence (GBV) in Uganda are high compared to both global and regional averages3. The Government of Uganda recognizes GBV as a serious problem and approved a National Policy on the Elimination of GBV in October 2016. 3. Sustainably hosting refugees from neighboring countries has emerged as an important development challenge. Uganda is the largest refugee-hosting country in Africa and the third largest worldwide. By the end of February 2020, there were 1.4 million refugees and asylum seekers in Uganda. Most refugees reside in settlements located in 12 districts (out of 134) across the country and alongside local host communities, mainly in Northern Uganda and the West Nile4. The West Nile sub-region which hosts the majority of refugees is among the poorest and most underdeveloped areas of the country. Lack of adequate employment opportunities, health, education, and transport infrastructure, as well as increasing land degradation, places increased tension between refugees and local hosting communities. 4. COVID 19 could impact long-term development vision that seeks to transform Uganda into a modern and prosperous country by 2040 (vision 2040). The Government of Uganda (GoU) aims to drive economic development through implementation of a series of 6 five-year National Development Plans (NDPs). The current NDP III covers 2021-25 and plans for real GDP growth between 4.5 to 7.2 percent. With the advent of COVID-19, GDP growth has slowed to 3.1 percent in FY20 compared to an average 6.8 percent in the previous FYs. Even if GDP growth rebounds strongly by 2022, the level of per capita GDP is likely to remain well below its pre-COVID trajectory. This unanticipated shock to the economy will also push more Ugandans into poverty adding to the current 8.7 million and could reverse the gains in poverty reduction in recent years5 (Uganda Economic Update, World Bank, December 2020). The refugee and host communities could also be significantly impacted – high level of price volatility in food products have reduced the purchasing power of cash assistance provided to refugees. The GoU acknowledges the role of energy to ‘build back better’ from COVID impact and to transition to an industrialized and urbanized economic structure. 1 World Bank World Development Indicators (2017). 2 http://hdr.undp.org/en/content/gender-inequality-index-gii. 3 It is estimated that 51 percent of women in Uganda will experience violence in their lifetime. By comparison, the global average prevalence rates for violence against women (physical or sexual) ages 15–49 is estimated by the World Health Organization at 35.6 percent and the regional (Africa) average is 37.7 percent. http://www.noneinthree.org/uganda/policy-hub/. Accessed on January 20, 2020. 4 Office of the Prime Minster (OPM), Government of Uganda, February 2020 available at: https://ugandarefugees.org/en/country/uga 5 https://www.worldbank.org/en/country/uganda/publication/uganda-economic-update-uganda-can-benefit-from-the- demographic-dividend-by-investing-more-in-education-health February 5, 2021 Page 4 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) 5. The World Bank, following consultation with UNHCR, has determined that Uganda’s refugee protection framework remains adequate for accessing financing from the IDA19 Window for Host Communities and Refugees (WHR). Uganda is recognized globally as having one of the refugee policies most aligned with the Global Compact on Refugees. Not only is Uganda a state party to international or regional instruments protecting refugees, but also its laws, policies, and practices are largely consistent with international refugee law, guaranteeing non-refoulement and adequate protection for refugees and asylum seekers. Uganda has ratified the 1951 Refugee Convention and the 1967 Protocol relating to the Status of Refugees, albeit with seven reservations to the former. The country has also ratified the 1969 Organization of African Unity Convention Governing the Specific Aspects of Refugee Problems in Africa as well as nine core international and regional human rights instruments relevant for refugee protection. These are domesticated into Uganda’s legal system through the 2006 Refugee Act and its 2010 Regulations as well as other laws which accord protection to life and liberty of all persons, such as the Bill of Rights in the 1995 Constitution and the Penal Code Act. The Refugee Act guarantees refugees’ fundamental rights, including the rights to work, enjoy freedom of movement, own property and access social services. The Refugee Regulations stipulate the integration of refugee matters in NDPs and that refugee concerns be taken into consideration in the initiation and formulation of sustainable development and environmental plans. Uganda’s asylum policies and protection framework advance the integration of refugees and foster an enabling environment for them to live in safety, with dignity, and in harmony with host communities. Uganda is also implementing the Comprehensive Refugee Response Framework (CRRF) in accordance with the New York Declaration for Refugees and Migrants that is guiding and framing all refugee related activities. These combine with the aim to ensure that the refugee response provides support to both refugees and host communities putting them on a path to self-reliance and by bridging humanitarian and development ways of working. 6. Uganda has remained committed to its refugee policy reforms despite the pressures of COVID and this project will be key in strengthening an integrated policy approach to refugees and host communities through the Sustainable Energy Refugee Response Plan (SERRP). The World Bank is supporting Uganda’s implementation of its policy reforms through a number of projects reducing pressure on social services, infrastructure and natural resources across refugees and host communities. Uganda’s Refugee Act (2006) and Refugee Regulations (2010) provide one of the strongest sets of policy measures globally to implement the Global Compact on Refugees. GoU’s progress since the 2017 Letter of Government Policy have been strong. Uganda has reiterated its ongoing policy commitments to refugee protection in the context of COVID in Uganda’s Strategy Note on Support to Refugees and Host Communities which are reflected in the Project Appraisal Document (PAD). Its renewed policy commitments are outlined in the Strategy Note on Support to Refugees and Host Communities which are reflected in the Project Appraisal Document. The GoU has taken a number of concrete policy and operational steps since the Refugee Sub-Window (RSW) eligibility assessment in 2017. It has established functional CRRF coordination mechanisms, with a senior-level CRRF Steering Group consisting of GoU, development and humanitarian partners (including the World Bank) meeting quarterly. Uganda has taken substantive policy steps to progress CRRF implementation through a CRRF Roadmap and by strengthening access to integrated social services and infrastructure. Operational policy documents in the form of Refugee Sector Response Plans have been developed for education, health, water and environment, job and livelihoods, and drafts are being developed for energy and private sector engagement. These Plans provide agreed priorities and activities for development partners to support GoU strengthening of services, employment opportunities and safeguards to build the self-reliance of refugees and host communities. This project will be essential in supporting the full development and implementation of the Sustainable Energy Refugee Response Plan (SERRP). This key policy document will see an integrative approach to meet the energy needs of refugees and host communities in a strategic and prioritized manner. February 5, 2021 Page 5 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) Sectoral and Institutional Context 7. The past two decades have witnessed major changes in Uganda’s power sector, which redefined the role of the GoU as a reformer. In 1999, the GoU passed a comprehensive power sector reform strategy enshrined in the 1999 Electricity Act, which paved the way for the (a) establishment of an independent Electricity Regulatory Authority (ERA) to regulate all sector activities, (b) unbundling of the vertically-integrated Uganda Electricity Board (UEB) into separate entities, namely the Uganda Electricity Generation Company Limited (UEGCL), Uganda Electricity Transmission Company Limited (UETCL), and Uganda Electricity Distribution Company Limited (UEDCL); and (c) establishment of the Rural Electrification Board to oversee the implementation of rural electrification activities and day-to-day operations of the Rural Electrification Agency (REA) serving as its secretariat. The Ministry of Energy and Mineral Development (MEMD) retained the responsibility for policy formulation in the sector and overall sector coordination and planning. 8. Uganda’s institutional model for service delivery is unique in SSA – the assets are owned by Government while operations are managed by a mix of private concessionaire, private service providers, and public distribution company. The unbundled electricity sector adopted the ‘single buyer’ model where the transmission operator is the sole buyer and wholesaler of electricity, and the private sector plays significant roles in power generation and distribution. Most of the fixed assets along the electricity supply chain are owned by three public enterprises: the UEGCL for power generation, the UETCL for power transmission, and the UEDCL for power distribution. Umeme is the concessionaire for large part of distribution business. The Second Rural Electrification Strategy and Plan (RESP-2) covering the period 2013-22 divided the country into 14 service territories, most of which included Umeme footprint. Electricity service in these STs are provided by distribution companies (also known as the Service Provider [SP]) for the geographic areas outside of Umeme’s footprint. Uganda electricity distribution is performed by Umeme, the UEDCL and eight smaller SPs. All distribution assets operated by Umeme are owned by UEDCL, whereas, all distribution assets outside of Umeme concession area are constructed by the REA and leased out to the UEDCL and small SPs for operation and maintenance (O&M) on a commercial basis. 9. Uganda has recorded impressive physical achievements and in policy framework in energy sector. Installed generation capacity has increased from about 300 MW in 2002 to 1,252 MW in 2019, of which 80 percent is hydropower. On the transmission side, the network has expanded from about 1,165 km in 2003 to 2,989km in 2019, and transmission losses have remained stable at about 3.45 percent. Investments targeting interconnection with the wider Eastern Africa Power Pool are also ongoing, whereby Kenya, Uganda, and Tanzania will be interconnected with 220 kV interconnectors with the capability of trading up to 600 MW among neighbors. Electricity sales nationally have doubled from 2,000 GWh in 2008 to 4,000 GWh in 2019. On the distribution side, Umeme has reduced distribution losses from 38 percent in 2005 to about 16.9 percent in 2019 and increased revenue collections from 80 percent in 2005 to over 99 percent in 2019. In a recent paper on the financial viability of 39 utilities in Sub-Saharan African countries, it was found that only two countries (Uganda and Seychelles) had financially viable utilities operating at full cost recovery, covering both operational and capital expenditures6. In the policy and regulatory realm, Uganda is in green zone alongside a number of East African peers as highlighted in Regulatory Indicators for Sustainable Energy (2019) published by the World Bank7. 10. The off-grid market is one of the most dynamic in East Africa. According to the National Electrification Survey Report-2018 (UBOS, 2020), 18 percent of the population currently relies on off-grid solar technologies 6 Making Power Affordable for Africa and Viable for its Utilities, 2016. 7 https://rise.esmap.org/ February 5, 2021 Page 6 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) providing Tier 1 level access and above. The Uganda Solar Energy Association (USEA) reports over 210 solar companies operating in the Ugandan market as at end-December 2020, with most sales coming from a few international companies (for example, Fenix, M-Kopa, Solar Today, Village Power8). These companies sold over 482,100 off-grid solar products in 2019 and 128,242 off-grid solar products in the first half of 2019, positioning Uganda as the third largest market in East Africa behind Kenya and Ethiopia. 11. About 58 percent of the population live without electricity. The main access deficit is exhibited in rural areas, where 80 percent of the population resides and less than 40 percent has access to electricity. As reported in the Poverty Maps of Uganda Technical Report (World Bank, November 2019), the districts with the highest access deficits below 10 percent, also correspond to the poorest ones, as visualized in the maps in figure 2. At the national level, Uganda has one of the lowest electricity consumptions per capita in the world, estimated at an average of 80 kWh per year in 2017, which is far below its peers (for example Kenya at 155 kWh per year, Ghana at 300 kWh per year). Such trends contribute to Uganda’s “adaptation deficit�, which limits the opportunity o f communities to be resilient to external shocks, including those caused by disease or climate change. 12. The outcomes in clean cooking are even more dire with about 95 percent of Ugandans using solid biomass fuels for their meals. The SDG7 tracking report9 identified Uganda as one of the 20 largest deficit countries in the population without access to clean cooking and highlighted Uganda as one of the countries with declining access rates to clean cooking as additional access is not keeping up with population growth. In Uganda, only 2 percent of the population uses some type of clean fuel and only about 15% of population uses an efficient biomass stove. Exposure to household air pollution from burning of biomass fuels for cooking in Uganda is estimated to significantly impact the health of over 20 million people and cause over 13,000 deaths every year. In addition, reliance on wood fuels has been imposing pressure on natural resources, especially forests. 13. In the districts hosting refugee settlements, lack of access to electricity and clean cooking solutions remains a key challenge. Refugee and host community households own on average less than 1 light source and 1.5 light sources per family, respectively, with heavy reliance on low-quality fuels such as kerosene and firewood. The absence of household lighting has also constrained participation of children in education, affecting about 62 percent of the refugee population which is of school-going age. The availability and adoption of efficient stoves and fuels is scarce, with about 90 percent of refugee and host community households depending on wood-fuels for cooking, adding additional health, environmental and climate-related stresses on already marginalized and vulnerable populations. Emerging research suggests that patients exposed to air pollution have a higher risk of dying from respiratory viruses like COVID-19. In poorly ventilated dwellings, pollution from cooking smoke can be 100 times higher than levels deemed acceptable by the World Health Organization. 14. Access to electricity services is about 50 percent for health centers and 20 percent for schools , with access deficits most prominent among health centers at the sub-county (55 percent access) and parish levels (38 percent access) and in primary schools (16 percent access). This lack of electrical connectivity has become more critical due to COVID and limits the implementation of the Ministry of Health’s COVID-19 Preparedness and Response Plan. Lack of electrical connectivity will impact on implementation of the plan’s surveillance and laboratory pillar by undermining ability to undertake the necessary laboratory testing; limit the efficiency of risk communication and social mobilization pillar to communities that are not connected; and reduce the pillar on 8 USEA, Uganda Solar Market Report. Annual Sales and Impact Data. January-December 2019; GOGLA Global Off-Grid Solar Market Reports. Sales and Impact Data for H1 2020. 9 https://trackingsdg7.esmap.org/ February 5, 2021 Page 7 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) continuity of health services by diminishing what can be provided in an already overstretched and under- electrified health system. Strengthened electrical connectivity will support the efficiency and effectiveness of COVID prevention and response, including for refugees and host communities. In the education sector, lack of connectivity has also limited the access to mobile learning provided through radio, television and digital platforms. 15. The challenges to scale-up access are multi-dimensional and include, among others, the (a) lack of national-level integrated planning process which may lead to financial burden to the sector; (b) affordability barriers and low consumption, access, and quality of electricity services; (c) slow uptake of clean cooking and fuels and technologies; (d) lack of low-cost network planning tools and cost-effective technologies for electrification; and (e) low access to equipment for productive uses and efficient appliances; and (f) a broad range of different and poorly coordinated humanitarian partner approaches within refugee settlements. The challenges are compounded by the fact that Uganda has one of the highest fertility rates in the world and its population is projected to grow by an average of 3.3 percent annually over the next decade. 16. The GoU has launched several initiatives to scale-up access. The most prominent is the approval of Electricity Connections Policy in 2018. The ECP covers the period 2018-27 and subsidizes connection costs for customers in proximity of the existing network as the means for scaling up access to grid connectivity as well as improved consumption. More specifically, the ECP targets: (a) 3 million new connections by 2027 through fully subsidizing no pole and one-pole connections, addressing affordability of internal wiring through credit and low- cost technologies (for example, ready boards), increasing capacity of Electricity Service Providers to meet connection targets, and promoting off-grid solutions through private sector participation; and (b) increasing electricity demand through facilitating connection of large-load customers and promoting productive uses of electricity. Another important policy initiative has been the adoption of Quality Assurance Framework for component-based solar home systems (SHS) in 2019. GoU has also undertaken two important studies – national off-grid strategy and diagnostic of distribution sector institutional reforms, that will influence the direction of grid and off-grid programs in the run-up to 2030 SDG7 targets. The GoU has mainstreamed the role of planning and a GIS working is establishing a Spatial Development Infrastructure (SDI) for integrated power sector planning across generation, transmission, and distribution under the auspices of MEMD. 17. Achieving universal access by 2030 requires a steady commitment from the GoU and Development Partners. According to the draft National Electrification Strategy (NES) developed by MEMD[1], about US$5 billion will be required to serve 10 million new customers. The geospatial least-cost analysis underpinning the NES identifies the optimal technology breakdown to achieve universal access as: 88 percent on-grid connectivity and 12 percent through off-grid solutions (both solar home systems and mini-grids). The NES highlights the high potential for grid densification, estimated to serve 3.4 million customers (where grid extension less than 1 million). Solar home systems are projected to be the optimal technology choice for almost 6 million households (whereas mini-grids only 100,00); without considering the pre-electrification potential for customers waiting for grid connectivity. The proposed EASP builds on these findings and leverages the potential for scale-up of low-cost densification and off-grid connectivity. 18. The proposed project builds on earlier engagements in the sector to directly support the expansion and strengthening of the electricity network, and scale-up of service connections in areas within the network reach, as well as increase access to off-grid electricity and clean coking solutions in areas outside the network footprint [1] MEMD, September 2020 version. February 5, 2021 Page 8 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) and in refugee settlements and their host communities. Experience in Uganda has shown positive implementation progress for operations where disbursements are linked to specific results indicators. For example, the implementation of the Output-based Aid (OBA) approach for grid connections under the Energy for Rural Transformation phase II (ERT II) project in Uganda, where subsidies were linked to verified connections, significantly increased connections in the country, especially within the Umeme footprint. These outcomes will be a result of a suite of interventions across the energy space and create a platform to solicit resources for continuous scale-up towards universal energy access. 19. The proposed project supports the COVID-19 crises response and the mitigation of their impacts on the country’s socio-economic development. The project will provide increased power to Uganda’s health and education systems and mitigate livelihood disruptions. The Contingent Emergency Response will also provide opportunities for further support immediately to face the impact of the crises as they unfold. The proposed EASP will mitigate the negative impacts on poverty through improved access to affordable energy services to power productive uses and income generating activities in support of the diversification of the economy and recovery from agriculture losses. The project also targets the most vulnerable, with tailored access provision to the 12 districts hosting refugees, which are among the poorest in the country. The solar water pumps (SWPs), and solar refrigeration units (SRUs) could play a critical role revitalizing rural economy and in COVID-19 vaccine deployment. A new ESMAP supported Lighting Africa report on Productive Use Leveraging Solar Energy (PULSE) in Uganda, identified use of SWPs and SRUs for enhancing agricultural productivity and adding value in priority commodity sectors such as maize, coffee, fruit, vegetables, livestock, poultry, dairy and fish. 20. The proposed project supports Uganda’s Intended Nationally Determined Contribution (INDC)10, which includes a series of priority mitigation and adaptation measures intended to lead the country to a climate-resilient and low-carbon development path linked to green growth and broader sustainable development goals over the long-term. Given the low level of energy access and electricity consumption, these measures include priority actions such as building grid-based infrastructure for electricity sector development, promoting distributed and decentralized renewable energy sources, and increasing the efficiency in the use of biomass. The proposed project will reduce climate vulnerability and increase climate mitigation by directly supporting the development of the electricity sector through the expansion of renewable energy access (to households and businesses as well as schools and health centers)11, districts hosting refugees such as Hoima, Kyegegwa, and Isingiro, which face the highest overall exposure to natural hazards and climate-induced changes12. Specifically, the proposed project will expand renewable energy access by financing the construction of medium voltage (MV)/low voltage (LV) networks and associated service connections. The project will also promote renewable energy sources through off-grid solar solutions for households and public institutions, including education and health centers. Finally, the project will contribute to market development of clean cooking solutions by promoting efficient biomass stoves that will reduce the inefficient use of solid biomass fuels for cooking, thereby decreasing pressure on unsustainable harvesting of firewood from forests and agricultural lands while also decreasing the risk of forest fires 21. The GoU has made self-reliance central to Uganda’s refugee response with a focus on development interventions targeting refugee hosting districts. Central to this refugee model is creating economic opportunities 10 Uganda’s Intended INDC (October 14, 2015) sets out priority actions in adaptation and mitigation and was presented to the international community ahead of the United Nations Framework Convention on Climate Change (UNFCCC) Paris Conference in 2015. 12 World Bank Report: Using Big Data to Inform the Response to Vulnerability in Uganda’s Settlements and Host Communities February 5, 2021 Page 9 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) in and around the areas hosting refugees to benefit both refugees and host communities. However, most refugee hosting areas are in rural and remote locations that increase the challenges for local economic development. Many refugees and hosts have limited access to productive employment, income-generating opportunities and lack human capital. COVID has significantly worsened these factors. Social impacts are circumscribed by the underlying poverty and vulnerabilities exacerbated by weak basic social services delivery, poor infrastructure including electricity and clean cooking solutions, and limited market opportunities in the refugee hosting settlement areas that impacts refugees and host communities alike13. The project will strengthen electrical connectivity support economic growth and open employment opportunities. This will be essential in supporting a v-shaped economic recovery to support employment growth within refugee hosting districts in order to deliver Uganda’s commitments and vision of building refugee self-reliance in the age of COVID. C. Proposed Development Objective(s) Development Objective(s) (From PAD) 22. The Project Development Objective is to increase access to energy for households, commercial enterprises, and public institutions. Key Results D. Project Description 23. Progress toward achieving the PDO will be measured by the following project outcome indicators: ▪ People provided with access to electricity under the project with grid and mini-grid (Number) o Of which female (Number) ▪ People provided with access to electricity under the project with off-grid. (Number) o Of which female (Number) ▪ People provided with access to electricity with grid, mini-grid, off-grid in Districts hosting refugees (Number) o Of which refugees (Number) ▪ People with access to clean cooking solutions under the project (Number) ▪ Commercial and productive uses beneficiaries of grid, mini-grid, off-grid access (Number) ▪ Public institutions provided with grid and off-grid access under the project. (Number) ▪ Public institutions provided with clean cooking solutions (Number) ▪ Industrial parks electrified under the project (Number) ▪ Generation capacity of energy constructed or rehabilitated (CRI, Megawatt) ▪ Renewable energy generation capacity (other than hydropower) constructed under the project (CRI, Megawatt) ▪ Annual greenhouse gases emissions avoided (tCO2) (Number) 13 https://www.worldbank.org/en/topic/fragilityconflictviolence/brief/ugandas-progressive-approach-refugee-management. February 5, 2021 Page 10 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) Project Components 24. Component 1: Grid Expansion and Connectivity (US$295 million IDA Credit). This component targets the scale-up of last mile national grid and mini-grid connectivity under the Electricity Connections Policy (ECP), while supporting the necessary MV/LV network strengthening and extensions to transport 100 percent renewable electricity generated from the hydropower and solar energy to electrify households and commercial, including female-headed households and female-led enterprises, and industrial consumers along with public institutions. The component will be implemented by the REA in close collaboration with all SPs (other than Umeme) for harmonizing technical specifications and procuring distribution network and connection materials. 25. The REA will appoint a planning, design and supervision consultant (PDSC) to identify priority interventions and least-cost technology requirements (for example, grid or mini-grid connectivity) based on the geospatial master plan for Uganda which is under preparation. To enhance the REA’s implementation capacity, a material logistic agent (MLA) will be appointed to manage the delivery, storage, local distribution, and supervision of materials for network strengthening/expansion and service connections. Both the PDSC and the MLA will form a part of the REA Project Implementation Unit (PIU). REA may also appoint an Independent Verification Agency (IVA) for verification, as deemed necessary. The component will finance necessary consultancy services identified by REA for the successful implementation of the project. 26. Sub-component 1-1: Last-mile connections will maximize the number of connections nationwide by leveraging on the high number of customers lacking connectivity and requiring the least amount of construction material and civil works. This sub-component will finance no-pole and one pole service connections in alignment with the ECP. Within the Umeme footprint, Umeme will finance connections and will be compensated at the established regulated connection rates 27. Sub-component 1-2: Network expansion and strengthening will finance network expansion and strengthening outside the Umeme footprint through MV and LV grid extension, upgrades and intensification. Grid extension will involve investments in MV and LV network, together with transformer installations, to enable connection of households and high-priority areas for example, industrial parks, commercial consumers, and public institutions. The project will finance construction of internal distribution networks and MV networks to be connected to the main transmission system in the industrial parks. The project may select parks which have either been connected by 132 kV and 220kV transmission network or have secured financing for the same. 28. Component 2: Financial Intermediation for Energy Access Scale up (US$25 million IDA Credit, US$25 million CTF Contingent Recovery Grant, and US$37 million Private Sector) will support the Uganda Energy Credit Capitalization Company (UECCC) scale-up and expand the scope of its existing line of credit facility with guarantees against technical failure of innovative technologies. Access to finance through working capital loans, micro finance, asset financing through differentiated loan products, and medium-term loans to private entrepreneurs and end-users on a first-come, first-served basis, will be provided to promote modern energy technologies, including: stand-alone solar, productive uses technologies such as solar water pumps, solar refrigeration, milling units, efficient appliances units, clean cooking, and internal wiring. Lines of credit will be channeled through participating Commercial Financial Institutions (CFIs). In addition, UECCC would also provide direct financing to several project beneficiaries to start up the market and provide demonstration impact to build market confidence of CFIs. A Project Operations Manual (POM) will detail the eligibility of the entrepreneurs and line of credit terms and conditions. 29. Sub-component 2-1: Financial Intermediation through participating Commercial Financial Institutions. UECCC will extend line of credit to participating CFIs including commercial banks, micro finance institutions (MFIs), leasing companies, and funds. Private companies will borrow at favorable market terms to finance their working February 5, 2021 Page 11 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) capital and liquidity needs. End consumer will borrow to meet the capital cost toward acquiring new technologies and pay over an agreed period. To mitigate the risk exposure of the CFIs toward promoting innovative technologies, a first-loss guarantee toward technological failure risk will also be provided. To address the affordability challenges of many potential consumers, this component will benefit from targeted grant support provided under Sub-component 4-2. The POM will detail the eligibility criteria of the CFI, private companies, and technologies that would benefit from this component, which would include stand-alone solar systems, clean cooking solutions, efficient electric appliances including for productive uses such as solar water pumps, solar refrigeration units, etc. 30. Sub-component 2-2: Electrification of public institutions by stand-alone solar technologies. This sub- component will mobilize private sector investment to electrify public institutions including public schools, public health centers, public water supplies, and so on. through stand-alone solar technologies under performance- based service contracts. This component will identify public institutions to be electrified with remotely monitorable stand-alone solar technologies, set key performance indicators (KPIs) to assess performance of the public institutions’ electricity consumption, and structure a suitable contractual framework. UECCC will provide debt financing to the private SPs to reach financial closure. To mitigate the non-payment risk from the GoU to the private SPs, a portion of the IDA financing will be used to create an escrow account which would be maintained at a level of 12 months of payments, for the duration of the service contract. To mitigate high cost of entry barriers, this component may benefit from grant funding support provided under Sub-component 4-2. 31. Component 3: Energy Access in Refugee and Host Communities (US$50 million IDA WHR Grant, US$6 million IDA Grant, and US$15 million Private Sector) This component will increase access to renewable electricity through grid and off-grid technologies, efficient appliances including productive use, and clean cooking solutions for refugees and their host communities, thereby expanding the resilience of vulnerable communities impacted by COVID and delivering both mitigation and adaptation co-benefits through the project. Activities will support recovery from shocks (e.g. COVID-19 pandemic) and improve resilience of refugees and their hosting communities. Financing support for internal wiring of houses and facilities, will be provided to electrify commercial, industrial and public institution consumers within the refugee host communities through support from this component. In addition, this component will support ongoing efforts under the leadership of the Office of the Prime Minister (OPM), to ensure the sustainable socio-economic inclusion of vulnerable refugees and equitable access to development opportunities for social stability in Uganda 32. Sub-component 3-1: Grid Connectivity and Expansion (US$25 million IDA WHR Grant, US$3 million IDA Grant). The REA will implement this subcomponent to connect household, commercial, industrial, and public institution consumers with renewable electricity either through extending MV/LV grid networks or mini grids. The grant resources available from this component will ensure that refugees and host communities will benefit from the project interventions, even if they are not selected following least cost expansion analysis. 33. Sub-component 3-2: Financial Intermediation through participating Commercial Financial Institutions (US$25 million IDA WHR Grant, US$3 million IDA Grant, and US$15 million Private Sector). UECCC will implement this subcomponent following the implementation design of Component 2 to promote access to renewable electricity through stand-alone solar technologies, financing of internal wiring of houses and facilities, promotion of efficient appliances for productive uses, and clean cooking solutions in refugee settlements and their host communities. UECCC may rely on the network of Tier 4 financial intermediaries to leverage on and expand the outreach of MFIs and savings and credit cooperative organizations (SACCOs) already servicing refugees and their host communities in the 12 districts. Some of these institutions have already engaged in lending for off-grid solar technologies. UECCC will determine level of grants that would be provided under this component. On the demand side, the grants will bridge the gap in affordability of end-users, while debt financing will be provided at market February 5, 2021 Page 12 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) rates to avoid distortions. Private sector service delivery will be incentivized through the availability of partial grants supporting the additional costs associated with market assessments for the new segment of beneficiaries (currently perceived as highly risky) and establishment of operations in the areas. To sustain energy access over time, private sector enterprises will be required to provide training and create jobs, specifically targeting women, in these areas to reduce the dependency on grants through income generation. The terms of lending and criteria for private sector participation to the scheme will be detailed in the POM. 34. Electrification of public schools, public health centers and public water supplies for refugees and their host communities will follow the contractual structure stated in component 2-2 and benefit from grant funding of this component to bridge the affordability gap and make the electrification initiative more attractive to private service providers. 35. Component 4: Project Implementation Support and Affordable Modern Energy Solutions (US$20 million IDA Credit, US$4 million IDA WHR Grant, US$5 million CTF Grant, US$10 million CCF Grant, US$3 million GoU, and US$10 million Private Sector). This component will finance the establishment and operations of the Project Coordination Unit (PCU) at the MEMD, and PIUs at the REA and UECCC through the recruitment of adequate staff, consultancy services, capacity building, implementation support activities and TA. The component will also raise the awareness on climate change mitigation and importance of renewable energy technology along with efficient appliances not only within the government institutions but also among the public; and establish an enabling environment for planning and targeting for and consumer access of modern energy solutions, including implementation of needed policies and regulations. In addition, the component will provide grant financing to remove the entry barrier and affordability barrier and incentivize performance to promote energy solutions for productive uses, efficient appliances, clean cooking solutions and public institutions. It will also ensure clear coordination functions across government between MEMD, REA, UECCC and OPM on refugee issues. 36. Sub-component 4-1: Project Implementation Support (US$14 million IDA Credit, US$2 million IDA WHR Grant and US$3 million GoU). Disbursement under this sub-component will be against the Performance based Conditions (PBCs) to enhance the achievement of results under the project. The total allocated amount to PBCs is US$16 million. This component will cover recurrent expenditures associated with the operation of the PCU at the MEMD and PIUs at the REA and UECCC. The PCU and PIUs will be responsible for the day-to-day oversight, coordination, planning and implementation of all activities under the project. Disbursement against the operational cost of PCU/PIUs will be subject to the fulfilment of the PBCs linked to timely appointment and retention of key PIU staffs, establishing a Project Steering Committee (PSC) and holding routine review of project progress, stakeholders’ consultations (e.g. inter-Ministerial; between REA and SPs), adequate and timely submission of monitoring and reporting documentation. In addition, the PBC instrument will provide an incentive for the timely execution of tasks, activities, assessments, regulatory reform required for the successful implementation of the project and the establishment of an enabling environment for access scale-up, including for public institutions. 37. Sub-component 4-2: Enabling environment (US$6 million IDA credit, US$2 million IDA WHR Grant, US$4 million CCF Grant). This subcomponent will provide technical assistance to carry out studies, workshops, trainings, etc. to strengthen the enabling environment to achieve the project results and to build implementation effectiveness of the PCU/PIUs. This subcomponent will establish the key capacity and conduct the key assessments to inform implementation of the priority areas identified for closing the gender gaps, that is: (a) enhancing equitable energy service delivery, (b) enhancing availability of data and knowledge around female and male consumers and beneficiaries, (c) enhancing skills development and employment and entrepreneurship opportunities for women supporting COVID-19 impacted socio-economic recovery. The activities will establish an February 5, 2021 Page 13 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) enabling environment for improved targeting of females as household and commercial enterprises and establish a more comprehensive data driven framework for monitoring and evaluation of results. 38. Preliminary activities could include: (a) COVID sensitive awareness and communication campaign (market activation) for energy access and renewable energy scale up, to ensure behavioral change and support productive uses of renewable energy), with targeted messages for women consumers and business owners, (b) removal of policy and regulatory barriers to renewable energy access and scale-up, (c) supporting delivery of the Sustainable Energy Refugee Response Plan (d) financial profiling of beneficiaries for customized debt instruments under UECCC, (e) development of a market attractiveness index for local off-grid solar markets, (f) productive uses market assessment update, (g) clean cooking technical and market and COVID-risks assessment, (h) improving business efficiency of private entrepreneurs in the energy access market, (i) capacity building for women entrepreneurs for increased participation in the energy access market, (j) development of a Quality Assurance Framework for component-based solar technologies, and (k) capacity building for CFIs in support of lending for energy access – all these activities will contribute to incentivizing the energy efficiency investment, expanding the renewable energy market, promoting high efficiency and clean energy technologies. 39. Sub-component 4-3: Equitable Access Scale-up (US$6 million CCF Grant, US$5 million CTF Grant, and US$10 million Private Sector). Grant financing will be blended to support private sector entrepreneurs remove certain barriers preventing them from scaling up the innovative energy technologies to promote electrification in Uganda. The grant will be provided toward removing market entry barriers, information and communication campaign costs, affordability constraint of the consumers, high operating cost to serve customers in remote areas, and so on. The grants support price setting at a level accessible to lower-income beneficiaries. 40. Grant support will be linked to verifiable outputs to help private companies enter into the solar and clean cooking businesses and take the risk of serving consumers, which they otherwise would not consider. Grant support will bring in additionality and equity as the ECP currently provides free electricity access to only grid- connected households. The eligibility criteria of end users and private sector companies and verification protocols for the partial grant scheme will be detailed in the POM. The POM will also detail the processes for revoking the grant in case of non-performance. The grant amounts available for public institutions will be identified and detailed in the POM. Grant amounts will be revised as needed over implementation with World Bank approval. Grant amounts towards specific interventions will be revised as needed over the implementation period with Word Bank approval. 41. Component 5: Contingent Emergency Response (US$0 million IDA Credit). This component is included in the project in accordance with paragraphs 12 and 13 of the Investment Project Financing (IPF) Operational Policy (OP) 10.00, pertaining to Situations of Urgent Need of Assistance and Capacity Constraints. This will allow for rapid reallocation of credit or grant uncommitted funds in the event of an eligible emergency as defined in OP 8.00. An Annex to the Project Operations Manual (‘CERC Annex’) will be prepared within three months of credit/grant effectiveness and the Project’s ESMF includes the CERC E&S assessment and initial requirements. For the CERC to be activated, and financing to be provided, the GoU will need (i) to submit a request letter for CERC activation and the evidence required to determine eligibility of the emergency, as defined in the CERC Annex; and (ii) an Emergency Action Plan, including the emergency expenditures to be financed; and (iii) to meet the environmental and social requirements as agreed in the Emergency Action Plan and ESCP. WHR funds reallocated to the CERC will only be used to benefit refugees and host communities. Project Cost and Financing . . February 5, 2021 Page 14 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) Legal Operational Policies Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Areas OP 7.60 No Summary of Assessment of Environmental and Social Risks and Impacts . 42. The project will be subject to the World Bank Environmental and Social Framework and its set of 10 Environmental and Social Standards (ESSs). The Government has prepared environmental and social instruments that will guide the management of risks and impacts associated with the project, namely, (a) Environmental and Social Management Framework (ESMF), including a Social Assessment, (b) Resettlement Policy Framework (RPF), (c) Vulnerable and Marginalized Group Framework, (d) Stakeholder Engagement Framework, and (e) Environmental and Social Commitment Plan. Site specific ESIAs/ESMPs will be prepared for the subprojects during implementation. The project will also apply the requirements of the World Bank Group Environmental Health and Safety Guidelines (EHSGs) due to mainly to the construction of distribution networks and off-grid facilities. Construction contractors will be required, as a condition of their contracts under the project, to implement and comply with ESMPs. The Contingent Emergency Response Component (CERC) has been included in the ESMF. When CERC is triggered, the activity (ies) will be screened for its likely environmental and Social risks and ESMP prepared for activities that have material adverse risks or impacts. 43. The project has positive environmental and climate change interventions in subcomponents promoting institutional solar use, efficient cookstoves, and clean fuel technologies (improved cookstove models, liquified petroleum gas (LPG), biogas, briquettes, ethanol cooking fuel, and so on) In general, the likely negative environmental, health, and safety effects of the program activities are expected to be localized and temporary in nature, limited to minimal vegetation clearances to enable pitting of poles for grid intensification schemes, occupational and community health and safety concerns during the stringing process (in the case of component 1 activities), and directives for displacement of solar components including batteries after end of life that will be generated for off-grid technologies. The distribution lines will be routed to avoid traversing ecologically sensitive and protected areas like wildlife reserve, national parks, forests and wetlands. The safeguards instruments developed under the project will provide mitigation measures for addressing these risks and impacts. Uganda has national laws and institutions for environmental and social management; There are however, weaknesses in the national environmental system performance related to institutional linkages, staffing level, and budget allocation, as well as human resource skills, thus, the project will have a Project Implementation Unit (PIU), with E&S staff and capacity building activities on applicable ESSs will be supported by the Bank. 44. To address the environmental risks and impacts arising from project component 2 and 3, an Environmental and Social Management System (ESMS) will be developed for UECCC as FI providing direct retail lending, credit guarantees (to standalone solar equipment distributors, companies providing electricity to public institutions, and companies selling cookstoves and clean fuel technologies); and also wholesale on lending to participating Commercial Financial Institutions (CFIs). The ESMS will cover solar technologies, modern energy technologies to be promoted through the project (for example, productive uses technologies clean cooking technologies, for household, commercial, industrial and institutional consumers) and internal wiring of facilities. UECCC will develop and maintain in the form of an Environmental and Social Management System (ESMS), effective environmental and social systems, procedures and capacity for assessing, managing and monitoring risks February 5, 2021 Page 15 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) and impacts of sub-projects derived from both wholesale and direct lending practices. The development of the ESMS will be project’s disbursement condition. 45. The project’s Environmental and Social Risk Summary (ESRS), Environmental and Social Commitment Plan (ESCP) and the Stakeholder Engagement Plan (SEP) were disclosed on January 25, 2021 while the Environmental and Social management Framework (ESMF), Resettlement Policy Framework (RPF), and Vulnerable and Marginalized Groups Framework (VGMF) were disclosed on January 28, 2021 E. Implementation Institutional and Implementation Arrangements 46. Project implementation will be carried out by the MEMD, REA, and UECCC, in close collaboration with the MoFPED, OPM, electricity distribution SPs, and other stakeholders. 47. A Project Steering Committee (PSC) will be established for ensuring effective coordination and project oversight, while providing strategic guidance during project implementation. The PSC will be chaired by the Minister of State for Energy and will comprise of representatives from the implementing agencies (IAs), MoFPED and so on. Representatives from other stakeholders may be invited to attend PSC meetings as needed. The PSC will review project progress at least once in every quarter. A PCU will be established at the MEMD for day to day coordination of all project components and implement activities cross-cutting across such components. . CONTACT POINT World Bank Raihan Elahi Lead Energy Specialist Federico Querio Senior Energy Specialist Borrower/Client/Recipient Republic of Uganda Implementing Agencies February 5, 2021 Page 16 of 17 The World Bank Uganda Electricity Access Scale-up Project (EASP) (P166685) Rural Electrification Agency (REA) Joan Kayanga Mutiibwa Board Secretary and Accounting Officer jmutiibwa@rea.or.ug Ministry of Energy and Mineral Development (MEMD) Robert Kasande Permanent Secretary psmemd@energy.go.ug Uganda Energy Credit Capitalization Company (UECCC) Specioza Ndagire Managing Director sndagire@ueccc.or.ug FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects APPROVAL Raihan Elahi Task Team Leader(s): Federico Querio Approved By Practice Manager/Manager: Country Director: Antony Thompson 05-Feb-2021 May 15, 2020 Page 17 of 17