The World Bank Ghana: Energy Development and Access Project (P074191) REPORT NO.: RES39243 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF GHANA: ENERGY DEVELOPMENT AND ACCESS PROJECT APPROVED ON JULY 26, 2007 TO THE REPUBLIC OF GHANA ENERGY & EXTRACTIVES AFRICA Regional Vice President: Hafez M. H. Ghanem Country Director: Pierre Frank Laporte Regional Director: Riccardo Puliti Practice Manager: Ashish Khanna Task Team Leader(s): David Vilar Ferrenbach, Juliana Chinyeaka Victor The World Bank Ghana: Energy Development and Access Project (P074191) ABBREVIATIONS AND ACRONYMS ACGF Africa Catalytic Growth Fund AF Additional Financing AfDB African Development Bank CMS Commercial management system ECG Electricity Company of Ghana ERP Enterprise Resource Planning FY Fiscal Year GEDAP Ghana Energy Development and Access Project GEF Global Environmental Fund GESTIP Ghana Energy Sector Transformation Initiative Project GoG Government of Ghana GPOBA Global Partnership on Output-based Aid IDA International Development Association IFR interim financial report MCC Millennium Challenge Corporation OMS Outage Management System PDO Project Development Objective PDS Power Distribution Services Ghana PSP Private Sector Participation SECO State Secretariat for Economic Affairs TA Technical Assistance TF Trust Fund WB World Bank The World Bank Ghana: Energy Development and Access Project (P074191) BASIC DATA Product Information Project ID Financing Instrument P074191 Specific Investment Loan Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 26-Jul-2007 31-Jan-2020 Organizations Borrower Responsible Agency The Republic of Ghana Electricity Company of Ghana,VRA (TF090542) Project Development Objective (PDO) Original PDO To improve the operational efficiency of the electricity distribution system and increase the population s access to electricity. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-56290 30-Apr-2015 11-Nov-2016 29-Nov-2016 31-Jan-2020 60.00 26.92 31.96 IDA-47300 29-Jun-2010 08-Sep-2010 06-Dec-2010 31-Jan-2019 69.84 68.24 0 IDA-43560 26-Jul-2007 08-Aug-2007 06-Dec-2007 31-Jul-2017 89.63 90.92 0 TF-90450 08-Aug-2007 08-Aug-2007 06-Dec-2007 30-Nov-2012 49.82 49.82 0 TF-90542 08-Aug-2007 08-Aug-2007 08-Aug-2007 31-Mar-2015 5.49 5.49 0 The World Bank Ghana: Energy Development and Access Project (P074191) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The Ghana Energy Development and Access Project (GEDAP; P074191) is supported by International Development Association (IDA) financing of SDR 148 million (US$220.0 million equivalent). The first IDA financing was approved by the Board on July 26, 2007 in the amount of US$90 million equivalent (IDA Credit 43560-GH) (100 percent disbursed). On June 29, 2010, the Board approved the first additional financing (AF) of US$70.0 million equivalent (IDA credit 47300-GH) to concentrate efforts on improving the operational performance of Electricity Company of Ghana (ECG) in high loss regions (Ashanti East and West). This credit is 100 percent disbursed. The second AF2 to the GEDAP was approved by the Board on April 30, 2015 for US$60.0 million equivalent (IDA Credit 56290-GH). This credit is 45.78 percent disbursed (with commitments about 72 percent). The project also included funds from the Global Environmental Fund (GEF) for renewable energy initiatives in the amount of US$5.5 million (TF-90542), which is fully disbursed and funds from Africa Catalytic Growth Fund (ACGF) in the amount of US$50 million (TF-90450), which is fully disbursed. Other financiers included the African Development Bank (AfDB), the State Secretariat for Economic Affairs (SECO, Switzerland), the Government of Ghana (GoG) through the ECG and the Global Partnership on Output-based Aid (GPOBA). Progress on Project Implementation: 2. The AF2 credit suffered serious delays in achieving effectiveness due to delays in the approval of the Financing Agreement by Parliament. Effectiveness was achieved in November 29, 2016, and the closing date of the project was subsequently extended to January 31, 2019 to compensate for the delays. Due to procurement delays, the project was further extended for additional 12 months, to January 31, 2020. The contracts have been implemented in this timeframe and there is a remaining uncommitted balance of around US$18 million that is available. 3. Since 2007, GEDAP supported the improvement of the operational performance of the ECG until 2014 when the Millennium Challenge Corporation (MCC) committed US$498 million for investments in the distribution sector with the condition to award a Private Sector Concession, Power Distribution Services Ghana (PDS) for the distribution utility. The award of concession was terminated in October 2019 by GoG and as a result the expected reform of ECG has stalled because the required investments to improve the performance of ECG have not materialized. In November 2019, the GoG requested the World Bank (WB) to support the reengagement of Private Sector Participation (PSP) in the distribution utility. The WB recommended the preparation and implementation of a detailed roadmap that focuses on the reengagement of PSP with realistic timelines of two years, and also to urgently undertake key actions and investments to improve ECG’s performance and governance. MCC’s existing commitments of US$308 million continue to be implemented till September 2021 The World Bank Ghana: Energy Development and Access Project (P074191) where the results from these investments could be compromised if critical informative technology investments that were foreseen as a priority but could not be completed due to withdrawal of US$190 million of MCC, are not taken as a priority. Some of the key investment requirements to improve the commercial and operational performance of ECG could be financed utilizing the remaining funds of the GEDAP because they are consistent with its PDO. II. DESCRIPTION OF PROPOSED CHANGES 4. The Ministry of Finance, on behalf of the GoG, requested to extend the closing date of IDA Credit 56290 for 24 months to finance key investments to improve the commercial and operational performance of ECG. This project restructuring proposes to extend the closing date of IDA Credit 56290 until January 31, 2022. 5. The proposed investments to be financed by GEDAP during the proposed extension are the following: (i) the supply and installation of an Enterprise Resource Planning (ERP) system to support management of corporate resources of ECG and of an Outage Management System (OMS) to enable effective reception and resolution of complaints from customers for outages and other incidents in electricity supply; (ii) the improvement of commercial performance through reengineering of all commercial processes and upgrade of the commercial management system (CMS) incorporated under the project; and (iii) the upgrade of the data center. 6. The WB team carefully assessed the timeline to procure and fully execute the contracts for the above described components, which is estimated to be around 24 months. In particular, six months will be required to complete the procurement and 18 months to supply and install the equipment and software and implement all the reengineered processes making adequate use of the functionalities of the systems to support efficient, transparent and accountable execution of operations in key business areas. The procurement timeline for these contracts is provided below: Contract RfP finalization Contract Implementation signing completion ERP and OMS installation February 2020 July 2020 January 2022 Improvement of CMS February 2020 July 2020 January 2022 Upgrade of data center March 2020 October 2020 October 2021 7. The team explored several options to reduce the duration of the proposed extension period of GEDAP: (i) other WB financing instruments available for the sector: the only existing operation is a US$20 million TA Loan (Ghana Energy Sector Transformation Initiative Project (P163984)) and limited TFs that are not sufficient nor eligible for these type of investments; (ii) splitting the contracts for installation of ERP and OMS and upgrade of CMS by financing the supply of equipment and software with GEDAP (required extension of 15 months) and installation and process implementation under an upcoming Program-for-Results operation to be delivered in FY21. The latter option is not recommended, as it goes against best practices in international experience in the matter, in which reengineering of processes (also known as “business blueprint”) is considered a key component of the contract for incorporation of the information systems (ERP, OMS, CMS). The supply and installation of software packages without implementation support will be ineffective in terms of the impact on operational performance and governance. Besides, the implementation risk is high if a contract is linked to a financing not yet approved; (iii) to finance other investments related to The World Bank Ghana: Energy Development and Access Project (P074191) the improved performance of the utility that would require a shorter procurement period (although not less than twelve months) such as additional prepayment meters and other distribution equipment, however, these investments are not key for the intended reform of ECG. 8. The WB team confirms that the requirements under the World Bank Investment Project Financing Policy and Directive regarding closing dates are met, specifically: (i) the project objectives continue to be achievable; (ii) the performance of the Borrower is satisfactory; and (iii) the WB and the Borrower agreed on actions that will be undertaken by the Borrower to complete the project. With respect to the requirement that there be no outstanding audits or interim financial reports (IFRs) for the project, the team confirms that, to date, the project has complied fully with the submission of timely, acceptable IFRs. With regards to the submission of acceptable annual audits the project has had challenges in fully complying with the submission dates. As per project design there are two sets of audit report due, namely the Project Financial Audits and the Entity (ECG) financial audits. The Project has fully complied with the timely submission of the project financial audits for each of the years under implementation. However, there has been a challenge with delays in submitting the entity (ECG) audits by the due date of not later than six months after the year end. Presently, the entity audit for the year ended December 2018 which was due for submission by June 30, 2019 is outstanding. The Borrower stated that the audit has now been completed by the Ghana Audit Service and a draft copy has been submitted to the Board of ECG for review, acceptance and signing. It is expected that the audit report will be reviewed at the next Board meeting schedule for end of January 2019 and after which a copy will be formally submitted to the World Bank. The task team is working with the Borrower to ensure timely submission of the ECG audit. 9. There is a Volcker Trigger in the proposed operation. INT had completed investigation into allegations of fraud related to operations in this sector in Ghana. A Final Investigation Report was issued by INT in relation to Western Africa: the First Phase of the Inter-Zonal Transmission Hub Project of the WAPP (APL 3) Program (P094919) in June 2019 III. SUMMARY OF CHANGES Changed Not Changed Loan Closing Date(s) ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ The World Bank Ghana: Energy Development and Access Project (P074191) Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 30-Nov-2013, 31-Jul- IDA-43560 Closed 30-Nov-2012 2015, 31-Jul-2017, 19-Dec-2017 31-Jul-2015, 31-Jul- IDA-47300 Closed 30-Nov-2013 2017, 31-Jan-2019, 26-Jun-2019 31-Jan-2019, 30-Sep- IDA-56290 Effective 31-Jul-2017 31-Jan-2022 31-May-2022 2019, 31-Jan-2020 TF-90450 Closed 30-Nov-2012 13-Jun-2013 30-Sep-2014, 31- TF-90542 Closed 30-Nov-2012 Mar-2015, 19-Aug- 2015 . The World Bank Ghana: Energy Development and Access Project (P074191)