@#&OPS~Doctype~OPS^blank@afpidisdsaprcoverpage#doctemplate _FOR OFFICIAL USE ONLY_ Report No: ISDSIA0005 The World Bank () Combined Project Information Documents / Integrated Safeguards Datasheet (PID/ISDS) Appraisal Stage | Date Prepared/Updated: 13-Dec-2024 nly Page 2 of 15 @#&OPS~Doctype~OPS^dynamics@afpidisdsaprbasicinformation#doctemplate BASIC INFORMATION A. Basic Project Data Beneficiary Country(ies) Operation ID Operation Name Geographical Identifier Benin, Burkina Faso, Cabo Verde, P160708 Regional Off-Grid Western and Central Cameroon, Central African Electricity Access Project Africa Republic, Chad, Cote d'Ivoire, Gambia, The, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, Togo Estimated Appraisal Date Estimated Board Date Practice Area (Lead) Product 28-Aug-2024 22-Apr-2025 Energy & Extractives Investment Project Financing (IPF) Borrower(s) Implementing Agency Economic Community of West Economic Community of Africa States (ECOWAS), West West Africa States African Development Bank (ECOWAS), West African (BOAD) Development Bank (BOAD) Current Development Objective (Last approved as part of Approval on 17-Apr-2019) PDO for SOP1 is to increase electricity access of households and businesses using modern stand-alone solar systems through a harmonized regional approach. Components 1B: Entrepreneurship Technical Support 1C: Entrepreneurship Financing Support 2A: Line of Credit for Stand-alone Solar Businesses 1D: Barrier Removal for Challenging Markets 2B: Contingent Grant Facility for CFIs 1A: Enabling Environment @#&OPS~Doctype~OPS^dynamics@afpidisdsaprprojectfinancing#doctemplate COSTS & FINANCING SUMMARY Last Approved Proposed Additional Total Total Operation Cost 338.70 6.80 345.50 The World Bank Regional Off-Grid Electricity Access Project (P160708) Total Financing 313.20 6.80 320.00 Of which IBRD/IDA 155.00 0.00 155.00 FINANCING DETAILS Equity Last Approved Financing Proposed Additional Total Proposed Financing Financing Government Contribution 155.00 0.00 155.00 IDA 155.00 0.00 155.00 Non-Government 158.20 6.80 165.00 Contribution Private sector Equity 69.00 0.00 69.00 _For Official Use Only_ Trust Funds 89.20 6.80 96.00 Total 313.20 6.80 320.00 Debt Last Approved Financing Proposed Additional Total Proposed Financing Financing Total 0.00 0.00 0.00 Payment/Security Guarantee Last Approved Fiancing Proposed Additional Total Proposed Financing Financing Total 0.00 0.00 0.00 IDA Resources Credit Amount Grant Amount SML Amount Guarantee Total Amount Amount Western and Central 0.00 0.00 0.00 0.00 0.00 Africa Scale-Up Window 0.00 0.00 0.00 0.00 0.00 (SUW) Total 140.00 0.00 0.00 0.00 140.00 Environmental Assessment Category Financial Intermediary Assessment (F) Page 2 The World Bank Regional Off-Grid Electricity Access Project (P160708) Have the Safeguards oversight and clearance function been transferred to the Practice Manager? No Decision The review did authorize the preparation to continue _For Official Use Only_ Other Decision (as needed) B. Introduction and Context 2. Country Context 1. Countries in Western Africa are facing increasing development challenges. The region has a population of 420 million people, with the majority living in rural areas. In 2021, the average gross domestic product (GDP) per capita in the region was less than US$2,000, with Niger and Sierra Leone having GDPs as low as US$595 and US$516, respectively1. Within the Economic Community of West African States (ECOWAS), eight countries are members of the West African Economic and Monetary Union (WAEMU) and share the same currency, the CFA franc, along with common monetary policies. 2. Political instability and the threat of civil conflict hinder economic growth. Five countries—Burkina Faso, Guinea- 1 World Bank Data (2021). GDP per capita (current US$). Page 3 The World Bank Regional Off-Grid Electricity Access Project (P160708) Bissau, Mali, Niger, and Nigeria—are classified as fragile or conflict-affected states (FCS) 2 . 3. Western Africa is severely impacted by climate change. Climate change is expected to affect the region, in particular the Sahel, with increasing incidences of drought, floods, desertification, and rising temperatures. The countries in the region are committed to addressing climate change, as evidenced by their Nationally Determined Contributions (NDCs) and the Paris Agreement. The African Union (AU) has also recently approved the AU Climate Change and Resilient Development Strategy and Action Plan (2022-2032), reaffirming its commitment to digital transformation and climate change. In The Gambia, the flood risk in the Greater Banjul Area could increase by 32 percent over the next 20 years unless measures are taken to mitigate climate change impacts. The vulnerability of telecommunications and digital infrastructure in Western Africa underscores the need for increased reliability and resilience to climate variability and risk. _For Official Use Only_ Sectoral and Institutional Context 1. In 2020, electrification rates in Benin, Burkina Faso, Cote d’Ivoire, Ghana, Guinea, Senegal, and Togo, seven CwA countries that are the focus of the proposed support, stood at 40%, 18%, 68%, 86%,47%, 70%, and 54% respectively 2 The World Bank fiscal 2022 list of fragile and conflict-affected situations includes Burkina Faso, Guinea-Bissau, Mali, Niger, and Nigeria. (https://thedocs.worldbank.org/en/doc/bb52765f38156924d682486726f422d4-0090082021/original/FCSList-FY22.pdf) Page 4 The World Bank Regional Off-Grid Electricity Access Project (P160708) 3 2. . Access rates were as expected higher for urban populations, with 65% in Benin and Burkina Faso and greater than 90% in the other five countries having access to electricity. Consistent with the disparate urban- rural energy access divide prevalent across Sub-Saharan Africa, access was substantially lower in rural areas: 17% (Benin), 5% (Burkina Faso), 42% (Cote d’Ivoire), 74% (Ghana), 20% (Guinea), 47% (Senegal), and 24% (Togo). 4Although these numbers have been steadily improving, a continuation of these trends including reliable energy access is not guaranteed5. Vigilance and enhanced efforts on boosting energy access and reliability are thus not only warranted; but considering global climate change, investments must be purposefully aligned with the low-carbon transition. 3. Presently, more than three-quarters of electricity generated in the seven countries is sourced from fossil fuels. Moreover, less than one-third of residents have access to clean cooking fuels.6 Scientists also project that all seven countries, despite being among those that have least contributed to climate change, will be hardest hit by its impacts. Combined with the fact that these are among the least prosperous nations in the world, they require support for both adaptation to climate change and to implement a low-carbon development strategy. Such support will not only bolster global efforts to curb climate change but have positive impacts on local economic _For Official Use Only_ development and wellbeing via improved health outcomes, enhanced productivity, and improved resource allocation and deployment. 4. Off-Grid Solar (OGS) provides a clean source of energy and can play a crucial role in meeting the ongoing energy needs and support adaptation in the seven focal countries. Its standalone nature means that it can be easily deployed in rural areas where grid electricity is unavailable and tends to be cost-ineffective. Even for those already connected to the grid, having a reliable and affordable energy source can save on energy expenditures thereby boosting discretionary incomes. As a clean source of energy, OGS helps countries attain their NDCs while also contributing to global mitigation efforts. Moreover, a vibrant standalone solar industry creates jobs, helping boost economic growth and shared prosperity. While East Africa has relatively more experience with solar financing and solar business models, the potential in West Africa is still tremendous given the relative infancy of the solar industry in the region. 5. In the seven focal countries, several factors favor OGS. First, strong OGS electricity demand than utilities can offer. Second, demand for consumer appliances that require electricity. Third, a generally supportive policy environment. Fourth, proliferation of innovative payments solutions. Fifth, enthusiastic private sector engagement. Sixth, strong donor presence and support from the international development community that provides financial policy and technical support to develop the OGS market. Finally, interconnected regional markets and integration bodies offering opportunities for a regional approach in scaling up OGS. 6. Small- and Medium- scale Enterprises (SMEs) in the four focal countries have crucial roles in the OGS supply chain as both suppliers and users of OGS of equipment. Supply-side SMEs are typically active in the import, distribution, and installation space. Demand-side SMEs employ OGS for productive uses in for instance cell- phone charging, tailoring, barbershops, saw milling, irrigation, refrigeration, etc. The scope for solar in displacing and replacing fossil fueled generators is substantial and this is reinforced by the keen interest that supply-side 3 World Bank 2020: https://data.worldbank.org/ 4 Market study on scaling up of off-grid solar in Benin, Burkina Faso, Cote d’Ivoire, Ghana, Togo and Senegal done by CIDR Pamiga – November 2023 5 For context, Sub Sahara’s population without access to electricity increased in 2021 after declining for 6 years. 6 Sub-Saharan Africa as currently contributes less than 5% to global CO2 emissions, and even less historically. Page 5 The World Bank Regional Off-Grid Electricity Access Project (P160708) SMEs have indicated to participate in developing the OGS market particularly for areas without grid electricity. 7. As also revealed by a recent market study in the seven countries, that was funded and carried out by and under the guidance of the CWA program, SMEs report several factors hampering their efforts in scaling up solar including: (i) lack of an enabling policy and regulatory environment, (ii) lack of standards and regulation to verify quality of solar products, (iii) fragmented market data on consumer electricity needs, usage, or experience, (iv) lack of consumer awareness of standalone solar systems, (v) lack of consumer financing options, (vi) lack of local capacity (or qualified technicians) to help maintain systems, and (vii) a lack of financing for working capital and term loans for home-grown solar companies, and (viii) inconsistency in the way that regulation and policy is applied. 8. Local Commercial Financial Institutions (CFIs), as crucial providers of liquidity, have also on their part indicated that their hesitancy to lend to companies in the solar value chain stems from a higher perceived lending risk due to the novelty of solar business models, the nascent local markets, lack of information on payment capacity of both consumers and solar SMEs, and a lack of established business relationships. Financial institutions report that besides and economic and political environment that in some cases is not conducive for lending to the OGS _For Official Use Only_ sector, lack of expertise and appetite to finance the sector has not led to an underdeveloped of adapted (risk- sharing) products to incentive lending to local solar businesses and consumers of solar products. C. Proposed Development Objective(s) Original Development Objective PDO for SOP1 is to increase electricity access of households and businesses using modern stand-alone solar systems through a harmonized regional approach. Current Development Objective No change in PDO. Proposed New Development Objective No change in key results. This Additional Financing encourage the Commercial Financial Institutions to on-lend to the private OGS players by de-risking on-lending transactions. D. Project Description 1. The Compact with Africa (CwA) grant includes three main activities, totaling USD 6.8 million: i) support for policy dialogue and creating an enabling environment, ii) capacity building for CFIs, and iii) a contingent callable grant for Page 6 The World Bank Regional Off-Grid Electricity Access Project (P160708) CFIs. The first two activities, amounting to USD 0.8 million, will be implemented by ECOWAS, while the third activity, totaling USD 6 million, will be carried out by the West African Development Bank (BOAD). These activities aim to collectively promote the adoption of solar energy in the seven focal countries, benefiting climate-smart SMEs. The following three paragraphs will detail each of these activities. a. Policy dialogue and creating an enabling environment: The CwA grant to be directed to the ECOWAS–ROGEAP Project Implementation Unit (PIU) will support target countries in the adoption of the ECOWAS’s new comprehensive and codified legislation on tariffs, VAT, and other charges on quality-verified solar products. With oversight and consultation of the ROGEAP and CwA project team at the World Bank, the assistance will also be directed at training and capacity building of customs officials to ensure the consistent application of solar-friendly regulation where such regulation is on the books but inconsistently applied. b. Capacity building for CFI: CwA is also providing a grant for capacity building of CFIs to achieve several objectives. The capacity of CFIs intending to use the guarantee facility is to be built around understanding World Bank lending guidelines associated with the risk-sharing grant facility. These CFIs will also need a comprehensive understanding of the scope of the comprehensive risk guarantee facility being provided and _For Official Use Only_ the quality of due diligence necessary for the WB to consider a guarantee call valid. In addition, participating CFIs will need to become conversant with World Bank environmental and social frameworks tied to the guarantee facility as lack of this training can be a barrier for BOAD to extend the facility to CFIs. It is envisioned for the capacity building resources to also entail training and capacity building of banks on understanding solar business models. This activity will be implemented by ECOWAS PIU in close cooperation with BOAD. c. Contingent grant coverage for payment default risks: Since the onset of the COVID19 global pandemic, CFIs have become more cautious about lending to solar companies, something that also became apparent from the market study that was conducted. In addition, while quality of solar products has historically been a source of risk, combined with rising interest rates abroad, domestic investment opportunities have increasingly become less compelling for investors and financial institutions alike7. These developments have meant that FIs have found it increasingly costly to access guarantees to drive the same impactful levels of lending, and yet, guarantees are what FIs indicate to be most crucial in incentivizing them to enhance their lending to solar SMEs. In this regard CWA has committed to providing a grant for the setup of partial credit guarantee risk-sharing facility. 2. The proposed CwA grant has a strong additionality for two reasons: (i) it provides cover for three countries that CTF does not cover namely Senegal, Togo and Guinea; and (ii) since the CwA grant covers all payment default risks, it has provided the impetus to restructure the CTF grant to cover the same risks thus making the CTF grant much more useful. 3. The CTF risk mitigation facility will be restructured to extend the scope of the risk cover to include all payment defaults related to new and innovative solar technology and business models on Sub-Credits, not just payment defaults directly caused by technology failure risk. This change in the CTF risk mitigation facility terms does not 7 Among the various solar-specific factors disincentivizing lending is greater perceived: cashflow risk of solar SMEs due the economic vulnerability of their customer base, credit default risk due to small and concentrated solar industry that curbs the ability of CFIs to diversify their solar lending portfolio, and market risk due to a policy environment that has been improving but is still dominated by entrenched fossil-fuel use and policies. Page 7 The World Bank Regional Off-Grid Electricity Access Project (P160708) involve additional funding. CFIs that lend to solar companies will have access to this de-risking facility to cover up to 80% of the non-recoverable loan amount for Stage 2 companies and 50% for Stage 3 companies as accredited by ROGEAP-PIU8. In addition, it will also be a callable grant, meaning that funds will remain at the World Bank until the facility is called. It is important to reiterate that the grant is a de-risking facility for CFIs, with the ultimate beneficiaries being SMEs and solar businesses. SMEs and Solar businesses will be able to access more financing as CFIs will have additional coverage that de-risks their lending. This may enable CFIs to relax their collateral and other lending requirements. BOAD will determine whether to charge a guarantee fee to CFIs for managing the facility, based on maintaining the marketability of the risk cover to CFIs while covering administrative costs to the extent possible. E. Implementation Institutional and Implementation Arrangements _For Official Use Only_ 4. The CwA facility is to be administered by ECOWAS for the activities related to capacity building and improving the enabling environment and by BOAD for the provision of guarantees to eligible CFIs operating within the target countries. 5. Both CwA and CTF will be available in four of the countries, Benin, Burkina Faso, Cote D’Ivoire, and Ghana. To avoid double claiming, CFI’s will be restricted to receiving either CwA or CTF risk mitigation, not both. BOAD will determine whether CTF or CwA cover is used for sub-credits in countries where both facilities are available. 6. Since the CTF facility is much larger than the CwA facility it is expected that CTF will be used more at first in these countries so that some CwA cover remains available for the three countries where only CwA is available. As with its sister CTF grant, the CwA risk facility will also be triggered on a case-by-case basis. @#&OPS~Doctype~OPS^dynamics@afpidisdslegalpolicyandscreeningrisk#doctemplate F. Project location and Salient physical characteristics relevant to the safeguard analysis (if known) G. Environmental and Social Safeguards Specialists on the Team Sophie Lo Diop, Environmental Specialist Mohamed Youba Sokona, Environmental Specialist Eloise Sophie Fluet, Social Specialist SAFEGUARD POLICIES THAT MIGHT APPLY 8 One form of accreditation here is that the solar companies that are beneficiaries of the loan or guarantee facility must be only deal in VeraSol certified products. Page 8 The World Bank Regional Off-Grid Electricity Access Project (P160708) Safeguard Policies Triggered? Explanation (Optional) Projects on International Waterways (OP) (BP 7.50) Projects in Disputed Area (OP) (BP 7.60) Environmental Assessment (OP) (BP 4.01) Performance Standards for Private Sector Activities OP/BP 4.03 Natural Habitats (OP) (BP 4.04) Forests (OP) (BP 4.36) _For Official Use Only_ Pest Management (OP 4.09) Physical Cultural Resources (OP) (BP 4.11) Indigenous Peoples (OP) (BP 4.10) Involuntary Resettlement (OP) (BP 4.12) Safety of Dams (OP) (BP 4.37) @#&OPS~Doctype~OPS^dynamics@afpidisdssfgdassesment#doctemplate I. KEY SAFEGUARD POLICY ISSUES AND THEIR MANAGEMENT A. Summary of Key Safeguard Issues 1. Describe any safeguard issues and impacts associated with the Restructured project. Identify and describe any potential large scale, significant and/or irreversible impacts. Overall, the key environmental and social risks are expected to be of low scale, site-specific, reversible, and easily mitigated with the E&S mitigation measures. Key environment and social risks are expected to include waste management (disposal and recycling of solar panels and used solar equipment, and especially lead acid and lithium- ion batteries, which are considered hazardous waste), water quantity and quality for panel washing, occupational health and safety practices for solar companies’ workers, and labor issues (potential instances of child or forced labor, absence of proper grievance redress and fair terms of employment). The key social risks of the project include the risks of complaints, elite capture, and the exclusion of vulnerable and disadvantaged beneficiaries associated with the selection of beneficiaries of the financial and technical assistance. Other social risks include those associated with providing financing to commercial banks or solar businesses: the risk of financing entities with high exposure in the supply chain with solar panels and equipements manufacturers with ties to forced labor, and the occupational risks associated with the installation of solar panel (working in heights, electrocution). The project 2. Describe any potential indirect and/or long-term impacts due to anticipated future activities in the project area. Page 9 An indirect impact is potential indirect financing of manufacturers with ties to forced labor . To mitigate this risk, the project has introducted specific E&S due diligence and requirements on forced labor in the supply chain. No impacts on anticipated future activities have been identified. The World Bank Regional Off-Grid Electricity Access Project (P160708) 2. is not expected to lead to physical and economic resettlement, as PV panels will be installed on existing public 4. institution buildings (schools and health centers), and that the project will exclude any activities that involve 3. 5. physical or economic land acquisition financial assistance from financing. Risks associated with SEA/SH are considered low. @#&OPS~Doctype~OPS^dynamics@afpidisdssfgddisclosure#doctemplate B. Disclosure Requirements (N.B. The sections below appear only if corresponding safeguard policy is triggered) @#&OPS~Doctype~OPS^dynamics@afpidisdssfgdcompliance#doctemplate C. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) (N.B. The sections below appear only if corresponding safeguard policy is triggered) The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank for disclosure? _For Official Use Only_ Yes Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? Yes All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? Yes Have costs related to safeguard policy measures been included in the project cost? Yes Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? Yes Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? Yes Page 10 The World Bank Regional Off-Grid Electricity Access Project (P160708) @#&OPS~Doctype~OPS^dynamics@afpidisdscontactpoint#doctemplate CONTACT POINT World Bank Elisa Portale Senior Energy Specialist Madina Tall Energy Specialist Raihan Elahi Lead Energy Specialist _For Official Use Only_ Borrower/Client/Recipient Economic Community of West Africa States (ECOWAS) West African Development Bank (BOAD) Implementing Agencies Economic Community of West Africa States (ECOWAS) Sediko Douka Commissionner Energy & Mines sdouka@ecowas.int West African Development Bank (BOAD) Toussaint Badolo Deputy Director of Enterprises and Financial Institutions tbadolo@boad.org 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 @#&OPS~Doctype~OPS^dynamics@afpidisdsapproval#doctemplate Page 11 The World Bank Regional Off-Grid Electricity Access Project (P160708) APPROVAL Task Team Leader(s): Elisa Portale, Madina Tall, Raihan Elahi Approved By Safeguard Advisor: Emeran Serge M. Menang Evouna 09-Dec-2024 Practice Manager/Manager: Kwawu Mensan Gaba 09-Dec-2024 Country Director: Boutheina Guermazi 13-Dec-2024 _For Official Use Only_ Page 12