The World Bank Electricity Distribution Improvement and Strengthening through Commercialization and Transformation (P504630) @#&OPS~Doctype~OPS^blank@pidconpfrcoverpage#doctemplate Program Information Document (PID) Concept Stage | Date Prepared/Updated: 19-Jun-2024 | Report No: PIDPC00072 The World Bank Electricity Distribution Improvement and Strengthening through Commercialization and Transformation (P504630) @#&OPS~Doctype~OPS^dynamics@pidpfrbasicinformation#doctemplate BASIC INFORMATION A. Basic Program Data Project Beneficiary(ies) Region Operation ID Operation Name Electricity Distribution Armenia, Turkiye, Improvement and EUROPE AND CENTRAL Uzbekistan, Uzbekistan, P504630 Strengthening through ASIA Uzbekistan Commercialization and Transformation Financing Instrument Estimated Appraisal Date Estimated Approval Date Practice Area (Lead) Program-for-Results 20-Sept-2024 27-Nov-2024 Energy & Extractives Financing (PforR) Borrower(s) Implementing Agency JSC ‘Regional Electric The Republic of Uzbekistan Power Network’ Proposed Program Development Objective(s) To improve efficiency and reliability of electricity service delivery, enable the integration of the increased renewable energy capacity into the power distribution network, and enhance financial sustainability of the power distribution company @#&OPS~Doctype~OPS^dynamics@pidpfrprojectfinancing#doctemplate COST & FINANCING (US$, Millions) Maximizing Finance for Development Is this an MFD-Enabling Project (MFD-EP)? Yes Is this project Private Capital Enabling (PCE)? Yes SUMMARY Government program Cost 3,800.00 Total Operation Cost 350.00 Total Program Cost 339.50 IPF Component 10.00 Other Costs (Front-end fee,IBRD) 0.50 Page 1 The World Bank Electricity Distribution Improvement and Strengthening through Commercialization and Transformation (P504630) Total Financing 350.00 Financing Gap 0.00 FINANCING Total World Bank Group Financing 300.00 World Bank Lending 300.00 Total Government Contribution 50.00 @#&OPS~Doctype~OPS^dynamics@pidpfrconceptdecision#doctemplate Concept Review Decision The review did authorize the preparation to continue B. Introduction and Context Country Context 1. Uzbekistan’s development goal is to become an industrialized upper-middle-income country by 2030. The country has maintained high and stable economic growth at 5.9 percent on average over the past decade. The World Bank (WB) projections suggest that the national poverty rate fell from 22.8 percent in 2019 to less than 14.1 percent in 2022. The Government of Uzbekistan (GoU)’s Reform Roadmap (2017-2021) outlined the GoU’s economic reform priorities: (i) maintain macroeconomic stability; (ii) accelerate the market transition; (iii) strengthen social protection and citizen services; (iv) strengthen the GoU’s role in a market economy; and (v) preserve environmental sustainability. In late 2021, the GoU announced a new National Development Strategy (NDS) for the Development of New Uzbekistan for 2022-2026 that will reduce the poverty rate by half by 2026 and enable the country to become an upper middle-income level in per capita Gross Domestic Product (GDP) by 2030. 2. A new set of reforms will present more complex institutional challenges and require a greater focus on converting high level policy agendas into tangible change for people, including in the face of climate change. At present, Uzbekistan’s economy is characterized by its reliance on natural resource use and minerals extraction, and its export basket mostly consists of primary sector products such as natural gas and metals (gold and copper), with these three commodities making up about half of the total merchandise exports. Yet these products offer limited scope for productivity growth and even more limited scope for job creation that is needed to reduce poverty further and reach higher income levels. The natural resource sector, including energy, is dominated by Stated Owned Enterprises (SOEs) with poor financial position, weak governance and accountability, and untransparent regulation. Page 2 The World Bank Electricity Distribution Improvement and Strengthening through Commercialization and Transformation (P504630) 3. The new NDS builds on the successful completion of the 2017-2021 Reform Roadmap and continues the GoU’s commitment to the economic transition. In this context, reforming energy SOEs and removing energy infrastructure bottlenecks have become even more important for sustaining the economic growth, promoting private businesses, creating jobs, protecting the environment, including energy sector decarbonization and maintaining social support to the reform process. 4. Climate change poses serious and immediate risks to the economic development of Uzbekistan. The country is highly susceptible to climate change, facing elevated risks from a variety of natural and climate-related hazards such as earthquakes, droughts, wildfires, floods, heatwaves, landslides, and avalanches1. These climate impacts have the potential to reverse progress made in poverty reduction and negatively impact food security and economic growth in vulnerable rural regions. Uzbekistan has committed to addressing climate change mitigation and adaptation through its updated NDC (Nationally Determined Contributions), submitted to the UN Framework Convention on Climate Change in 20212. These commitments include reducing specific greenhouse gas emissions per unit of GDP by 35 percent by 2030 compared to the levels in 2010. Sectoral (or multi-sectoral) and Institutional Context of the Program 5. Electricity demand is expected to continue growing steadily at six to seven percent annually in conjunction with the planned economic growth, development trends, and changes in the structure of the national economy. Current demand for electricity in Uzbekistan is primarily driven by industrial and residential customers, and the supply demand balance is generally tight. While power generation growth rates from 2012-2019 were recorded only at 2.6 percent per annum on average, demand is estimated to have increased much faster. It is generally accepted that supply shortages averaged at about 9.4 percent of demand in the last few years. Electricity demand is expected to grow at seven percent per annum until 2026, then six percent per annum until 2030, and therefore almost double to above 130 TWh in 2030, according to the World Bank-supported Least-Cost Generation Expansion Plan (LCP; base-case scenario). To meet the increasing electricity demand, all elements of electricity supply chain have to be expanded and upgraded. 6. Electricity distribution investments have been lagging and assets are highly obsolete, leading to inefficient and unreliable electricity supply. JSC ‘Regional Electric Power Network’ (REPN) manages and operates the entire electricity distribution business in the country. Electricity access rate is around 100 percent. Almost all customers are covered with advanced metering infrastructure and consequently tariff collection efficiency is high (95-97 percent). Most of the electricity infrastructure is operating beyond their useful lifetime, including 66 percent of the transmission, 62 percent of the distribution networks, 74 percent of substations, and more than 50 percent of transformer stations, resulting in frequent equipment failures. With a national System Average Interruption Duration Index (SAIDI) of 0.409 hours in 2021, Uzbekistan is below peer countries such as Kazakhstan (0.07 hours in 2020) with some regions performing worse at as low as 1.36 hours for Syrdarya and 1.03 hours for Fergana in 2021. To meet the rapidly increasing electricity demand, distribution networks, particularly low-voltage (i.e. 0.4 kV) networks, have been expanded in a suboptimal manner, generating high technical losses estimated at around 14 percent is mainly in distribution, which is about three times of the average in high-income and some middle-income countries. Moreover, distribution transformers are frequently overloaded, leading to electricity rationing in peak demand periods. 1 Climate Country Risk Profile: Uzbekistan (2021): The World Bank Group and the Asian Development Bank. 2 Republic of Uzbekistan. Updated Nationally Determined Contribution (2021) Page 3 The World Bank Electricity Distribution Improvement and Strengthening through Commercialization and Transformation (P504630) 7. The financial situation of the power sector remains precarious while the GoU is committed to tariffs reaching cost recovery level by 2026, while protecting the poor. The poor sector financial performance of the sector is caused by: (1) years of below cost recovery tariffs; and (2) increasing indebtedness in foreign currencies, which has added to the currency mismatch between the revenues and expenditures of the sector. Since the adoption of the Resolution on tariff reform by Cabinet of Ministers in April 2019, retail tariff, primarily for non-residential consumers, was increased three times in August 2019, May 2022, and October 2023. While the 2019 and 2022 tariff increases largely compensated the cost increase for power generation and had little positive impact on the financial position of the transmission and distribution segment, the last tariff increase, which became effective from October 1, 2023, increased electricity tariffs for legal entities (non-residential consumers) at between 13 and 100 percent depending on the consumer category. On average, this increase brought the average cost recovery of electricity tariffs from 60 to around 75 percent by end 2023. Another tariff increase for residential and non-residential consumers is planned in mid-2024. With this staged approach, the GoU plans to reach the tariff cost recovery by the end of 2026. In terms of the tariff structure, it should be noted that there is no separate distribution tariff. Instead, the distribution sector receives 11% of the total sales revenue of the sector, which is well below the international average of 20-30 percent for distribution. As a result, despite the increase in overall tariff in recent years, the total financial revenue in 2022 for the distribution segment merely covers operational expenditures with no financial capacity to repay interests and principles of loans, nor to finance much needed capital expenditures. Tariff reform remains a priority for the sector development and the government is committed to achieving cost recovery tariff level. 8. The GoU sets an ambitious target of scaling up renewable capacity up to 12 GW (200 MW in 2022) to increase its share in generation mix to 30 percent (from less than 1 percent in 2022) by 2030. In this regard, with support from the World Bank, the GoU has recently developed an Energy Sector Decarbonization Pathways Assessment Study, that suggests that a significant expansion of renewables capacity between 2022 and 2050 is part of the least-cost pathway for power sector decarbonization in Uzbekistan. Renewables, including hydropower, are expected to account for 95 percent of the electricity generation in 2050, in the Decarbonization 2050 scenario. To achieve the target, the GoU has been actively developing utility scale solar and wind projects with IFIs’ support including the WBG Scaling Solar Program. While the current efforts are focused on large scale projects, the GoU has also introduced regulation develop Distributed Energy Resources (DERs)3, particularly rooftop solar, for which distribution networks have to ensure sufficient hosting capacity, i.e. the total capacity of DERs that can be added to distribution system. With the Presidential Decree #57, the GoU has set a target of 1,200 MW rooftop solar. REPN has currently connected rooftop solar from 35,000 residential households with a total capacity of 150 MW with compensation to households at three times the tariff for electricity fed into the grid4. 9. The GoU has been implementing the ambitious energy sector reform to improve performance and promote private sector participation (PSP). GoU has the following five pillars in the electricity sector reform: (i) market and institutional reforms aimed at corporatizing and commercializing SOEs and creating a single buyer market structure. ; (ii) further energy tariff reforms toward cost recovery by 2026, while protecting the poor; (iii) enhancing energy efficiency and deployment of renewable energy; (iv) enhancing supply security and operational efficiency; (v) attracting private participation in generation initially; and (vi) promoting regional connectivity and trade. The reform program started with the unbundling of the vertically integrated power company - Uzbekenergo JSC - into generation, transmission and distribution companies back in 2019. Following the Cabinet Resolution in April 2019, tariff reform commenced in 2020 and a significant number of solar PV and wind projects have been developed with financing from IFIs and the private 3 Distributed energy resources (DERs) are small-scale energy resources usually situated near sites of electricity use typically connected to distribution network, such as rooftop solar panels and battery storage. 4 The enabling of residential rooftop solar is authorized under [title and date of decree]. Page 4 The World Bank Electricity Distribution Improvement and Strengthening through Commercialization and Transformation (P504630) sector. Following the success in power generation, the GoU intends to invite private sector to the electricity distribution sector. The SOEs have started commercialization by introducing internationally accepted accounting standards and other commercial management practices. However, the overall reform process is still in the very early stage and requires further efforts to successfully attract the private sector. 10. The proposed operation builds on and is an evolution of the World Bank’s energy program in Uzbekistan. The World Bank has been supporting the transformation of the energy sector in Uzbekistan by focusing on three transitions: (i) transition from an obsolete power system towards a modern digitized system; (ii) transition from a fossil-based power generation system towards a renewable energy dominated power supply system with private sector participation; and (iii) transition from a financially precarious towards a financially viable energy sector. The Bank has been supporting the transitions through both analytical works, including the Programmatic ASA (P168487), and lending. Scaling Solar Independent Power Producer Project (P174322) supported renewable energy development by the private sector. The recently approved Innovative Carbon Resource Application for Energy Transition (P180432) supports the reduction of carbon emissions through subsidy reforms and leveraging policy-based climate and carbon funds. The Electricity Sector Transformation and Resilient Transmission (ESTART) (161683) project under implementation aims to strengthen the performance of the National Electricity Grid of Uzbekistan and improve the capacity and reliability of the power transmission system to integrate large scale renewable energy sources. As the energy programs evolves in Uzbekistan, the proposed operation aims to support the transformation of the distribution sector toward a more efficient, flexible and reliable system, better adapted to support the planned energy transition. Relationship to CAS/CPF 11. The proposed operation aims to contribute to the World Bank’s mission and is consistent with World Bank Group (WBG)’s new Country Partnership Framework (CPF) for Uzbekistan (FY2022–26) approved May 24, 2022.. By supporting investments in upgrading the distribution infrastructures and increasing digitization of distribution operation, the proposed operation will contribute to driving down the cost of electricity, mitigating global and local environmental impacts, and improving the quality of services to current and future consumers. This includes improving the competitiveness and sustainability of commercial businesses and industries, which are essential for job creation and poverty reduction. The proposed operation also directly contributes to CPF Objectives 1.2 Enable private sector growth and investment and 1.4 Improve the infrastructure for competitiveness and connectivity under HLO1; and Objectives 3.1 Decarbonization and the greener development of industry and the economy under HLO3. 12. The proposed Operation supports the achievement of GoU’s goals set in the Updated Nationally Determined Contribution 2021 (NDC), the Country Climate and Development Report (CCDR) 2023, the Law on the Use of Renewable Energy Sources and is likely to be aligned with the Paris Agreement. The GoU’s new NDC target of reducing specific GHG emissions per unit of GDP by 35 percent by 2030 from the 2010 levels will be achieved through both energy efficiency improvement and large-scale renewable energy deployment. The updated NDC under the UN Framework Convention on Climate Change highlights that the "introduction of energy saving technologies�, “halving the energy intensity of GDP� and “increasing the share of renewable energy� are among the mitigation measures aligned with the national policies of Uzbekistan. Additionally, diversifying the energy consumption and the use of renewable energy sources is a core goal of the Strategy for Transition to a Green Economy 2019-2030 and the reduction of electricity distribution losses is a key priority in the Concept Note for Ensuring Electricity Supply in Uzbekistan in 2020-2030. The operation aims to promote climate change mitigation by improving energy efficiency of the distribution system and integrating renewable energy thus resulting in a decrease in greenhouse gas emissions. This operation will undergo an evaluation for climate change Page 5 The World Bank Electricity Distribution Improvement and Strengthening through Commercialization and Transformation (P504630) and disaster-related impacts, and appropriate resilience-strengthening actions will be determined and accurately integrated into project documentation before appraisal. No specific risks with respect to the mitigation and adaptation aspects of the Paris Alignment Assessment are flagged at this stage. 13. The proposed operation supports the implementation of the Maximizing Finance for Development (MFD) approach laid out in the World Bank’s Development Committee paper by addressing the key infrastructure, quality of electricity supply, which is critical to attracting private sector investment in the industrial and business sectors. The operation supports financial performance improvement of the distribution sector, which is essential for attracting commercial financing and for promoting private participation in generation, particularly distributed solar PV. The operation directly supports GoU’s efforts to pilot private participation in the distribution sector. 14. The inclusion of the proposed PforR into the ECARES MPA (P502473) serves multiple purposes. First, the MPA provides a framework that could facilitate a longer-term engagement between Uzbekistan and the World Bank around RE scale-up and integration, which is crucial given the magnitude of the challenge lying ahead. Second, the MPA provides a partnership platform for bilateral donors, climate funds, and multilateral development agencies for streamlining concessional co-financing and harmonizing preparation and implementation approaches, which could help Uzbekistan attract further private capital for RE scale-up. Third, the MPA learning agenda encourages participating countries and institutions to learn from each other and collaborate to disseminate new knowledge. Rationale for Bank Engagement and Choice of Financing Instrument 15. There is a strong development rationale for public sector support and Bank engagement in the proposed operation. Under the current institutional structure and regulatory framework, the distribution system will continue to be regulated, while there is a lack of clear rules on setting tariff and establishing services standards. The newly established state-owned distribution company has no track record of borrowing from the financing market and the financial position of the company is still not viable. In the short term, the majority of the distribution sector remains to be operated by the public entity, REPN, especially to fulfill the significant investment needs for the sector. While the Bank’s recent support in Uzbekistan has been focused on transmission and renewable energy, the Bank has significant experience and global knowledge in electricity distribution sector covering various important aspects including loss reduction, Advanced Metering Infrastructure (AMI), digital technologies and integration of DERs. 16. The proposed operation will help improve efficiency and reliability of electricity supply, support integration of distributed renewable energy, and create enabling conditions for commercial financing and private sector participation in electricity distribution. It will also strengthen REPN’s capacity to integrate DERs, enabling the deployment of private investments in areas such as rooftop solar PV and EV charging stations to scale. 17. The PforR instrument is best suited for the World Bank’s financial support to the Government’s distribution modernization and energy sector reform program. The proposed Program for Result (PforR) will support the Government’s program in the amount of US$ 3.8 billion to expand, rehabilitate and modernize the country’s electricity distribution network. The US$3.8 billion Government program aims to improve the efficiency, resilience and quality of electricity supply services through rehabilitating and modernizing outdated distribution infrastructures and optimizing distribution network configurations. The PforR instrument is best suited to the World Bank’s support to the Government’s distribution modernization program as: (i) the low voltage distribution activities are simpler in nature with limited environmental and social impacts anticipated, and could be done with small value of contracts; (ii) the proposed financial Page 6 The World Bank Electricity Distribution Improvement and Strengthening through Commercialization and Transformation (P504630) assistance will support the implementation of the government’s overall program; (iii) the focus of the program is on achievement of results rather than specific investments; and (iv) the instrument will help strengthen the institutional capacity of the whole program. While the implementation agency has no prior experience in the World Bank’s PforR, the World Bank’s assessment confirmed that its implementation capacity is suited to the deployment of the PforR instrument given its prior experience in similar investments financed by government budget, ADB and other financiers. 18. The proposed Operation encompasses an IPF TA component. The IPF TA focuses on supporting REPN to strengthen financial, operational and commercial capability of REPN. C. Program Development Objective(s) (PDO) and PDO Level Results Indicators Program Development Objective(s) To improve efficiency and reliability of electricity service delivery, enable the integration of the increased renewable energy capacity into the power distribution network, and enhance financial sustainability of the power distribution company PDO Level Results Indicators 19. Progress toward PDO will be monitored using the following indicators: (a) Electricity losses reduced in the distribution network (percentage); (b) Distribution network reliability improved (SAIFI/SAIDI indices); (c) Renewable energy capacity enabled (MW); (d) Projected lifetime net greenhouse gas (GHG) emissions from results achieved (tCO2e). D. Program Description PforR Program Boundary 20. The proposed Program for Result (PforR) will support specific activities within the overall Government program in the amount of US$3.8 billion to modernize and digitalize the country’s electricity distribution network through the proposed financing in the amount of US$300 million covering the period of 2024-2030. The proposed PforR would take advantage of the latest modern digital solutions to support the sector’s enhanced automation and remote control so that the system is better adapted to load change on the demand side and the fluctuation on the supply side as a result of large- scale variable renewable energy. Digital technologies to be deployed and improve under the proposed PforR could range from Advanced Metering Infrastructure (AMI) including smart meters, Meter Data Management System (MDMS), Supervisory Control and Data Acquisition (SCADA), Enterprise Resource Planning (ERP) system, and Geographic Information System (GIS), to more advanced grid modernization technologies such as smart grid and Advanced Distribution Management System. In the meantime, the proposed Program aims to rehabilitate and construct about 20,000 km of medium voltage (10 and 6kV) and low voltage (0.4kV) lines/cables and replace and add about 6,000 distribution transformers (0.4-10 kV) throughout the country including Karakalpakstan, Andijan, Bukhara, Jizzakh, Kashkadarya, Navoi, Namangan, Samarkand, Syrdarya, Surkhandarya, Tashkent, Fergana, Khorezm regions and Tashkent Page 7 The World Bank Electricity Distribution Improvement and Strengthening through Commercialization and Transformation (P504630) city. These MV/LV infrastructures have been left for rehabilitation for many years and thus are aged and outdated, leading to high losses, over-loadings, and frequent disruptions of electricity supply caused by equipment failures and over- loadings. Moreover, the distribution networks particularly 0.4kV have been expanded in an unorganized manner and thus created many too long 0.4kV lines, resulting in high losses and low supply quality. These aged distribution networks were not designed and constructed to account for the increased impacts of climate change and are most vulnerable to impacts of nature events like strong wind and flood which are becoming more frequent as a result of climate change. Government program Program supported by the Reasons for non-alignment PforR (PforR Program) Objective Increase system efficiency Increase system efficiency and and DRE hosting capacity and DRE hosting capacity and improve quality of electricity improve quality of electricity supply supply Duration 2021-2030 2024-2030 Supporting remaining phase Geographic All the country All the country coverage Results areas • Improved quality of • Improved quality of electricity supply electricity supply • Increased efficiency of • Increased efficiency of electricity supply electricity supply • Increased DRE hosting • Increased DRE hosting capacity capacity Overall Financing US$3.8 billion, of which US$300 million, of which • REPN • World Bank IDA: US$300 • World Bank million • Private investors • Development partners 21. The following results areas will be supported under the Program (PforR) and Disbursement Linked Indicators (DLIs) are distributed across three Results Areas. The following targets are tentative and under discussion with REPN: (a) Results Area I: Improved quality of electricity supply through building more resilient distribution infrastructures and addressing network overloading. (b) Results Area II: Increased efficiency of electricity supply through upgrading distribution lines and transformers and thus reducing fuel consumptions and GHG emissions. (c) Results Area III: Enable low carbon electricity supply with increased DRE hosting capacity through modernization and digitization of the distribution system and its controls and operations. Results Area 1: Improved quality of electricity supply 22. The Program will support electricity distribution network rehabilitation and strengthening to increase the reliability of electricity supply. REPN plans to rehabilitate and construct 30,000 kilometers of 0.4 – 10 kV distribution lines and replace and install 10,000 units of distribution transformers all over Uzbekistan by 2025 in its distribution modernization Page 8 The World Bank Electricity Distribution Improvement and Strengthening through Commercialization and Transformation (P504630) program. The newly constructed lines and installed transformers will be technically sound and operational reliable. They will be designed and constructed to ensure robustness for and resilience to natural disasters as a result of increased climate impacts. The configurations of the network will be optimized with more distribution transformers and shorter low voltage lines to avoid overloading and voltage dropping. All these measures will help reduce the supply interruption frequency and duration caused by equipment failure and natural disasters as well as voltage violation and thus improve the service quality of electricity supply. The strengthened network will also increase the overall network capacity to meet the growing electricity demand. REPN currently has an estimated financing gap of US$300 million in its US$3.8 billion investment plan for distribution lines and transformers. The proposed Program will support REPN’s efforts to expand and strengthen its distribution network infrastructure in Uzbekistan. Furthermore, with the use of advanced digital technologies, distribution network operations and maintenance will be optimized for more reliable electricity supply. REPN expects the proposed operation will reduce the number of outages by up to 80 percent. Results Area 2: Increased efficiency of electricity supply. 23. The operation will increase efficiency of electricity supply and thus reduce overall GHG emissions from conventional electricity generation, which accounts for 80 percent of the total electricity supply. While the country has been developing many large scale solar and wind projects, approximately 14 percent of produced electricity is lost in the distribution networks, which requires more generation from conventional gas and coal power plants to compensate losses. The Program is expected to reduce the distribution losses from 14 percent to 10 percent through the optimization of the MV/LV network, replacement of long 400 v lines with higher voltage lines, wide use of more efficient distribution transformers. With the help of the proposed Program, GHG emissions are expected to be reduced by XX mton compared with the no project scenario. Results Area 3: Increased hosting capacity of DRE 24. The operation will improve the operational flexibility of the distribution network to increase DRE hosting capacity through modernizing REPN’s Supervisory Control and Data Acquisition (SCADA), Distribution Automation System (DAS) and Advanced Distribution Management System (ADMS). The fully digitized distribution system and its remotely and automated operation will provide the capability and flexibility needed to balance supply and demand in real-time. This will facilitate the integration of large-scale variable renewable energy directly connected to the distribution system, like roof-top solar system and help respond to demand side’s load management measures. Integration of DERs such as roof - top solar, battery storage and EV creates various operational challenges on voltage regulation, relay protection, and workers safety. The Program will address those issues through modernization of the distribution network and thus enable integration of more DERs. E. Initial Environmental and Social Screening 25. The overall environmental and social outcome of the Program is expected to be positive. The Program is expected to generate substantial and long-term positive social and environmental benefits by improving the quality of electricity services to businesses and the general populations and reducing GHG emissions and air pollution. 26. The environment risk rated as moderate while social risk is from moderate to substantial at this stage. An initial screening has been carried out for the proposed PforR Program following review of available information regarding the magnitude of potential impacts, likely locations, and existing arrangements in REPN to handle the likely issues that may Page 9 The World Bank Electricity Distribution Improvement and Strengthening through Commercialization and Transformation (P504630) arise during Program preparation and implementation. Rehabilitation/construction works to be supported under the Result Area 1, and depending on eventual choice of AMI configuration/s, some activities in Results Area 2, could generate adverse environmental and social effects which will be low to moderate in intensity, reversible in nature, and mainly construction related and a few related to operation and maintenance – such as safety and handling of chemicals. Environmental and social risks and impacts are expected to be temporary, mitigable, and in limited locations in or around the existing settlements. The Program will include rehabilitation and construction of low voltage distribution transformers and low voltage lines/cables. The proposed civil works, construction, and rehabilitation activities, dismantling or installing new lines/cable and transformers may generate some adverse environmental impacts and risks. These include air, soil, water and noise pollution, waste generation, health and labor safety issues related to work at heights, hazardous waste resulted from replacement of old transformers, loss of natural vegetation. Proposed construction works will be caried out in the urban settlements and there could be moderate to substantial temporary/permanent land acquisition impacts due to national norms for 10 kV transmission lines which requires 10 meters of right of way as safety zone. REPN shall use public or government owned lands to the extent possible, however, moderate to substantial temporary and permanent resettlement is anticipated at this stage. The program shall exclude any activity that may have substantial adverse environmental and social impacts are sensitive, diverse, or unprecedented. These risks and impacts are expected to be within a small footprint area mostly along existing alignments of distribution lines – with widest being 10 m for 10kV lines. Since the distribution network will pass through densely populated urban areas, there could be some temporary impacts on the small businesses and non-title holders along the alignments of the distribution network. The negative list of the project will include large scale land acquisition and resettlement as these are not permissible under the P4R. Another important potential risk during the construction stage is that of SEA/SH due to workers on the construction sites which may be located close to the habitations. Since the construction work under the project will be linear in nature, there would perhaps be needed to set up labor camps for the workers and this could pose potential risks to the host populations. The potential environmental/safety impacts during operation phase could also arise from hazardous waste generation, fire and explosion risk from faulty wiring or accidental electrocution. These impacts can be avoided, minimized/mitigated by alternative site location / alignment selection, adoption of state-of-art technologies, good engineering design. REPN has recent experience of working on a project supported by the ADB, but has not worked on a Bank supported PforR operation yet. Following the concept review decision, a more detailed environmental and social system assessment (ESSA) will be undertaken in consultation with REPN to confirm the extent to which the existing arrangements to manage E&S issues aligns with the Core Principles for PforR and recommend necessary measures to effectively manage the Program in line with these. Adequacy of legislation for the type of proposed rehabilitation and construction works, availability of a human resource (in terms of its capacity, number and technical knowledge) and financial resources proportionate to the scale of the PforR Program will be assessed in the ESSA. Its draft report will be publicly available before appraisal, and be publicly consulted on with representatives of government, civil society, the development community, and other relevant stakeholders. The Program Appraisal Document and Program Action Plan (PAP) will reflect the recommended measures from the different stakeholders for managing environmental and social risks in the ESSA as appropriate. 27. Since an IPF based TA is being processed in parallel, a C-ESRS has been prepared with an assignment of Moderate environmental and social risks. 28. Gender and citizen engagement. The proposed operation will integrate, where feasible, gender activities in alignment with the WB gender priorities. Gender gaps in Uzbekistan are primarily characterized by a notable underrepresentation of women in STEM fields and engineers and leadership positions in the Energy sector, including roles within government energy ministries, state-owned energy companies, and private sector firms. During preparation, the team will further discuss synergies with the WeSEE Initiative under development (Women’s Empowerment in Sustainable Energy in ECA). Existing gender diagnostic for Uzbekistan including the Gender Gap Assessment Report as well as ongoing Page 10 The World Bank Electricity Distribution Improvement and Strengthening through Commercialization and Transformation (P504630) government strategies and initiatives on increasing female employment such as the incentive of setting a 30 percent gender quota for women in state-owned enterprises (including REPN) to build a gender inclusive work culture5 will be leveraged and expanded as needed. The project may aim to advance gender inclusivity within the energy sector through two key entry points: (1) increasing job opportunities for women in the sector and (2) enhancing women's voice and agency in decision-making processes. Potential actions to close these gaps include (a) facilitating internship programs with universities and the implementing agency or the distribution company to encourage women to enter the energy sector, (b) Ensuring female representation in the steering committee and technical working group, (c) Providing technical and leadership training for women, and (d) Implementation of a gender strategy within the implementing agencies, which will offer women-friendly policies and facilities to increase female representation and retention in the energy sector including gender sensitivity training for mentors. For example, as of (b), the project may want at least 30 represented in the steering committee and technical working group. The project will identify citizen engagement approaches to support proposed changes and reforms and specify the activities which will be captured under the Beneficiary Feedback indictors. @#&OPS~Doctype~OPS^dynamics@legalpolicyandscreeningrisk#doctemplate Legal Operational Policies Triggered? Last approved Current Projects on International Waterways OP 7.50 No Projects in Disputed Area OP 7.60 No Summary of Screening of Environmental and Social Risks and Impacts of the IPF Component The environmental and social risks are considered "Moderate" at this stage. The proposed IPF TA focuses on activities such as technical assistance and capacity-building that will have no environmental and social footprints. The proposed IPF TA doesn’t involve any land acquisition nor impacts on people’s properties and livelihoods. The risks and impacts are likely to be quite limited, given the nature of activities proposed for support under the project. Since the TA will have few field activities, the key issues that could require management would pertain to labor management issues, and if activities like IT facilities or equipment are supported, managing wastes from discarded/damaged equipment. Hence, overall the environmental and social risk level is currently assessed as moderate and will be reviewed during the preparation phase to confirm at appraisal. In order to manage any risk and impacts, a streamlined ESMF will be prepared for use during the implementation of the TA activities, including provisions of labor welfare, Occupational Health and Safety, in cases where fieldwork is involved, and e-waste management, if supported under the project. @#&OPS~Doctype~OPS^dynamics@contactpoint#doctemplate 5 Government of Uzbekistan. 2022. Presidential Degree UP-87: National program to increase the activity of women in all spheres of the economic, political and social life of the country for 2022–2026. Tashkent. Page 11 The World Bank Electricity Distribution Improvement and Strengthening through Commercialization and Transformation (P504630) CONTACT POINT World Bank Koji Nishida Senior Energy Specialist Bahodir Amonov Energy Specialist Jianping Zhao Senior Energy Specialist Borrower/Client/Recipient The Republic of Uzbekistan Implementing Agencies JSC ‘Regional Electric Power Network’ TBC TBC TBC pmu@het.uz 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 Page 12