FOR OFFICIAL USE ONLY Report No: ICR00050 IMPLEMENTATION COMPLETION AND RESULTS REPORT CREDIT NUMBER 5468-ET GRANT NUMBER TF017206 ON A CREDIT IN THE AMOUNT OF SDR 115.5 MILLION (US$178.5 MILLION EQUIVALENT) AND SCF-SREP GRANT IN THE AMOUNT OF US$24.5 MILLION TO THE Federal Democratic Republic of Ethiopia FOR THE Ethiopia Geothermal Sector Development Project July 18, 2024 Energy and Extractives Global Practice Eastern and Southern Africa Region The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT CURRENCY EQUIVALENTS Exchange Rate Effective Jul 16, 2024 Currency Unit = BIRR BIRR 57.77999 = US$1 US$1.32620 = SDR 1 FISCAL YEAR July 1 – June 30 For Official Use Only Regional Vice President: Victoria Kwakwa Country Director: Maryam Salim Regional Director: Wendy E. Hughes Practice Manager: Erik Magnus Fernstrom Task Team Leaders: Kenta Usui, Abdulhakim Mohammed Abdisubhan ICR Main Contributor: Reynold Duncan The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT ABBREVIATIONS AND ACRONYMS AFD French Development Agency (Agence Française de Développement) CDP Community Development Program CPS/F Country Partnership Strategy/ Framework DA Designated Account E&S Environmental and Social EEA Ethiopia Energy Authority EEP Ethiopian Electric Power EIRR Economic Internal Rate of Return ESIA Environmental and Social Impact Assessment ESA Environmental and Social Assessment FM Financial Management GoE Government of Ethiopia GRM Grievance Redress Mechanism GSDP Geothermal Sector Development Project GSE Geological Survey of Ethiopia GTP Growth and Transformation Plan For Official Use Only GWh Gigawatt-hour ICRR Implementation Completion and Results Report IDA International Development Association IFC International Finance Corporation ISR Implementation Status Report LDP Livelihood Development Program M&E Monitoring and Evaluation MoM Ministry of Mines MoWE Ministry of Water and Energy MS Moderately Satisfactory MU Moderately Unsatisfactory MW Megawatt NPV Net Present Value OCHSS Occupational and Community Health, Safety and Security PAD Project Appraisal Document PDO Project Development Objective PIU Project Implementation Unit PRIME Power Sector Reform, Investment, and Modernization in Ethiopia SREP Scaling-up Renewable Energy Program WBG World Bank/Group The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT TABLE OF CONTENTS DATA SHEET .....................................................................................................................................................i I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ..................................................................................... 2 II. OUTCOME ..................................................................................................................................................... 8 III. KEY FACTORS AFFECTED IMPLEMENTATION AND OUTCOME ................................................................... 15 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME ............................ 17 V. LESSONS AND RECOMMENDATIONS ........................................................................................................... 20 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ......................................................................................... 22 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ....................................................... 27 ANNEX 3. PROJECT COST BY COMPONENT .......................................................................................................... 29 ANNEX 4. EFFICIENCY ANALYSIS .......................................................................................................................... 30 ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ................................. 32 For Official Use Only ANNEX 6. SUPPORTING DOCUMENTS (IF ANY) .................................................................................................... 35 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT DATA SHEET @#&OPS~Doctype~OPS^dynamics@icrbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P133613 Ethiopia Geothermal Sector Development Project Product Operation Short Name Investment Project Financing (IPF) Ethiopia Geothermal Development Project Operation Status Approval Fiscal Year Closed 2014 For Official Use Only Original EA Category Current EA Category Full Assessment (A) (Restructuring Data Sheet - 13 Dec Full Assessment (A) (Approval package - 08 Aug 2017) 2023) CLIENTS Borrower/Recipient Implementing Agency Government of Ethiopia Ethiopian Electric Power DEVELOPMENT OBJECTIVE Original Development Objective (Approved as part of Approval Package on 07-Aug-2017) The Development Objective of Geothermal Sector Development Project (GSDP) is to develop geothermal resources in Ethiopia. s s @#&OPS~Doctype~OPS^dynamics@icrfinancing#doctemplate FINANCING Financing Source Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 178,500,000.00 105,870,000.01 85,556,161.72 IDA-54680 178,500,000.00 105,870,000.01 85,556,161.72 i The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT World Bank Administered 24,500,000.00 24,426,958.75 24,500,000.00 Financing TF-17206 24,500,000.00 24,500,000.00 24,426,958.75 Non-World Bank Financing 15,500,000.00 0.00 0.00 ICELAND: Icelandic 3,500,000.00 0.00 0.00 International Development Authority Borrower/Recipient 12,000,000.00 0.00 0.00 Total 218,500,000.00 130,370,000.01 109,983,120.47 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Type Amount Disbursed (US$M) Key Revisions • Components • Results • Disbursements Estimates 05-Jun-2020 Portal 36.17 • Loan Closing Date Extension For Official Use Only • Loan Cancellations • Reallocations • Implementation Schedule 27-Jul-2020 Portal 36.17 • Results • Risks 21-Dec-2021 Portal 61.00 • Loan Closing Date Extension • Implementation Schedule • Components 13-Dec-2023 Portal 81.04 • Loan Cancellations • Reallocations @#&OPS~Doctype~OPS^dynamics@icrkeydates#doctemplate KEY DATES Key Events Planned Date Actual Date Concept Review 31-Jul-2013 20-Jun-2013 Decision Review 04-Apr-2014 03-Apr-2014 Authorize Negotiations 23-Apr-2014 15-Apr-2014 Approval 29-May-2014 29-May-2014 Signing 10-Jun-2014 ii The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT Effectiveness 05-Aug-2014 ICR/NCO -- Restructuring Sequence.01 Not Applicable 05-Jun-2020 Restructuring Sequence.02 Not Applicable 27-Jul-2020 Restructuring Sequence.03 Not Applicable 21-Dec-2021 Restructuring Sequence.04 Not Applicable 13-Dec-2023 Mid-Term Review No. 01 28-Feb-2017 28-Feb-2017 Operation Closing/Cancellation 31-Dec-2023 31-Dec-2023 @#&OPS~Doctype~OPS^dynamics@icrratings#doctemplate RATINGS SUMMARY Outcome Bank Performance M&E Quality For Official Use Only Moderately Satisfactory Moderately Satisfactory Modest ISR RATINGS Actual Disbursements No. Date ISR Archived DO Rating IP Rating (US$M) 01 09-Jul-2014 Satisfactory Satisfactory 0.00 Moderately 02 14-Apr-2015 Moderately Satisfactory 0.00 Satisfactory Moderately 03 24-Nov-2015 Moderately Satisfactory 8.00 Satisfactory Moderately Moderately 04 07-Jun-2016 8.00 Unsatisfactory Unsatisfactory 05 19-Dec-2016 Unsatisfactory Unsatisfactory 8.00 06 27-Jun-2017 Unsatisfactory Unsatisfactory 8.00 07 31-Aug-2017 Unsatisfactory Unsatisfactory 8.00 08 13-Mar-2018 Unsatisfactory Unsatisfactory 8.35 Moderately Moderately 09 14-Jun-2018 8.35 Unsatisfactory Unsatisfactory Moderately Moderately 10 12-Oct-2018 8.35 Unsatisfactory Unsatisfactory iii The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT Moderately Moderately 11 17-Jan-2019 8.35 Unsatisfactory Unsatisfactory Moderately 12 27-Apr-2019 Moderately Satisfactory 13.89 Satisfactory Moderately 13 01-Nov-2019 Moderately Satisfactory 21.24 Satisfactory Moderately 14 21-May-2020 Moderately Satisfactory 36.17 Satisfactory Moderately 15 24-Nov-2020 Moderately Satisfactory 45.05 Satisfactory Moderately 16 27-May-2021 Moderately Satisfactory 54.80 Satisfactory Moderately 17 03-Dec-2021 Moderately Satisfactory 61.00 Satisfactory 18 16-Jun-2022 Satisfactory Satisfactory 75.19 19 04-Jan-2023 Satisfactory Satisfactory 75.19 Moderately For Official Use Only 20 01-Dec-2023 Moderately Satisfactory 78.64 Satisfactory @#&OPS~Doctype~OPS^dynamics@icrsectortheme#doctemplate SECTORS AND THEMES Sectors Adaptation Mitigation Major Sector Sector % Co-benefits (%) Co-benefits (%) Energy and Extractives Renewable Energy Geothermal 100 0 100 Themes Major Theme Theme (Level 2) Theme (Level 3) % Environment and Natural Climate change Mitigation 98 Resource Management Private Sector Public Private Partnerships 10 Development Public Sector Legal Institutions for a Rule of Law 2 Management Market Economy iv The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT ADM STAFF Role At Approval At ICR Practice Manager Lucio Monari Erik Magnus Fernstrom Regional Director Jamal Saghir Wendy E. Hughes Global Director Demetrios Papathanasiou Practice Group Vice President Guangzhe Chen Country Director Guangzhe Chen Maryam Salim Regional Vice President Makhtar Diop Victoria Kwakwa ADM Responsible Team Leader Raihan Elahi Kenta Usui Co-Team Leader(s) Abdulhakim Mohammed Abdisubhan ICR Main Contributor Reynold Duncan For Official Use Only Page 1 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL Context 1. In June 2014, the Federal Democratic Republic of Ethiopia, and the International Development Association (IDA) signed a Financing Agreement for SDR 115.5 million and a Grant Agreement for US$24.5 million to assist in financing the Geothermal Sector Development Project (‘the Project’), P133613, under IDA-54680 and TF-17206). Later, under a separate agreement, the Icelandic International Development Authority, through the Government of Iceland (GoI) provided an additional grant of US$3.5 million for technical assistance. 2. At the time of the appraisal, the energy sector was grappling with a significant challenge due to insufficient electricity supply to satisfy the swiftly growing demand. In pursuit of an 11 percent GDP growth target over the forthcoming five years, the Government (“GoE”) aimed to accelerate the development of the industrial and service sectors, achieve universal electricity access, and establish Ethiopia as a regional power hub. Consequently, domestic electricity demand was projected to surge by over 25 percent annually and massive investment in the electricity sector was necessary. For Official Use Only 3. Ethiopia's energy mix was heavily reliant on hydropower and the dependency posed risks due to climate variability and changing rainfall patterns, highlighting the need for energy diversification to ensure energy security and sustainability. The strategic approach for the energy sector emphasized further expansion and substantial investments in energy infrastructure. Geothermal resources, predominantly located in the Rift Valley region, and whose potential is estimated at 5,000 – 10,000 MW (about the largest in Africa), presented an untapped opportunity to diversify the country's energy mix. Endowed with its even higher hydro potential, its past effort in developing its geothermal resource was insignificant. However, recognizing the critical role of sustainable energy in achieving the country’s developmental goals, and the need for enhanced complementation between variable and steadier energy resources, GoE decided to put more effort in development of its geothermal potential as part of its broader energy strategy. 1 4. With no capacity within the country due to loss of leadership and expertise to develop geothermal resources 2, the sector faced several challenges at the time of appraisal. These included limited exploration and development activities, insufficient institutional and regulatory frameworks, and a lack of technical and financial capacity within the sector. The nascent stage of geothermal development in Ethiopia was characterized by the absence of operational geothermal power plants and limited private sector participation. 5. The Project was conceived against this backdrop, to address the critical barriers to geothermal energy development. The Bank understood that the exploration phase, which includes drilling to confirm geothermal resources, was the riskiest in developing a geothermal power plant business. This high level of upstream risk had previously limited private sector involvement in geothermal resource development, and it was essential for the public sector to absorb this risk. 1 As was noted in the PAD (paragraph 16): “Diversification of generation resources is an essential part of the expansion strategy. At present, about 92 percent of Ethiopia’s electricity generation is derived from hydropower resources and is entirely dependent on rainfall. Rainfall in Ethiopia has wide seasonal variation and is further vulnerable to fluctuations due to climate change.” 2 Previously trained staff had left the country or had retired. Page 2 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT 6. The Project was in line with GoE’s aspirations to exploit renewable energy resources, contributing to energy security, climate change mitigation, and economic development. It was designed to provide a comprehensive approach to catalyze geothermal sector development, encompassing capacity building, risk mitigation, and the establishment of an enabling environment for private sector engagement. It was structured to facilitate the exploration and development of geothermal sites, enhance the institutional and regulatory framework, and foster public-private partnerships in geothermal development. Earlier support had begun to help mitigate the unique risk of geothermal resource development by undertaking the riskiest part of geothermal energy development by public finance. Recognizing that continuous engagement was necessary, the Project aimed to further expand the past efforts. In this regard, the Project was expected to lay the groundwork for sustainable geothermal energy development in Ethiopia, contributing to the diversification of the energy mix, reducing reliance on hydropower, and supporting the country's green growth ambitions. The Project was aligned with the World Bank Group's (“WBG”, “the Bank”) twin goals of ending extreme poverty and promoting shared prosperity, as well as the strategic priorities of the Sub-Saharan Africa region, including fostering resilience through climate change adaptation and mitigation and supporting infrastructure development for inclusive growth. 7. Through its earlier engagement the Bank had, in 2010, facilitated exploration and test drilling activities through the Additional Financing for Energy Access Project (P120172 and P049395, Credit no. 3712). The Project For Official Use Only (GSDP) aimed to continue the support and contribute to the higher-level objectives of the WBG’s Country Partnership Strategy (CPS, FY2013–16), 3 building on the progress Ethiopia had achieved and aiming to help GoE address structural transformation and the implementation of its Growth and Transformation Plan (GTP). It aimed to support “Fostering competitiveness and employment” (Pillar 1) and “Enhancing resilience and reducing vulnerabilities” (Pillar 2) which consisted of improving the delivery of social services and developing a comprehensive approach to social protection and risk management. Theory of Change (Results Chain) 8. The Project’s desired long-term outcome was improvement in the electricity generation mix in Ethiopia, which would in turn improve the reliability of Ethiopia’s electricity supply and increase its electricity access. It would also enable electricity exports to neighboring countries. These outcomes were meant to be achieved by enabling the development of geothermal resources in Ethiopia, to better attract downstream private sector investment, through the drilling and testing at two potential geothermal sites and the development of suitable legal, institutional, and regulatory frameworks. The outcomes were aligned with the outputs and activities, as described in the Project Theory of Change4 shown in Figure 1. 3 Report No. 71884-ET 4 The results matrix (PAD, Annex 1) provides data on the process through which project inputs were to be converted into outputs and translated into intermediate and outcome indicators, with the latter being set at the level of the desired outcomes. From this data, the Implementation Completion and Results Report (ICRR) has derived a logical framework for theory of change, mapping the project’s four components (Aluto Geothermal Site Development; Alalobad Geothermal Site Development; Drilling Rigs, Associated Accessories, and Spare Part; and Legal, Institutional, and Regulatory Framework Development) to their relevant outputs, outcomes, project development objectives and long-term goals as shown in Figure 1. Page 3 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT Outputs/ Intermediate PDO Outcomes Activities Long-term Impact Outcomes Aluto Geothermal Site Development - 2 sites tested - 26 geothermal wells • Increase access to - 4 test wells drilled drilled and tested electricity Alalobad Geothermal Site • Increase reliability of - Feasibility study (for - 2 geothermal sites Development power supply geothermal power plant) confirmed completed - 13 geothermal wells • Increase revenues with potential to generate Private from electricity electricity investment in exports Drilling Rigs, Associated geothermal Accessories, and Spare Part - 4 training/ workshops held - 70 MW geothermal capacity confirmed (SREP) sector enabled - 45 EEP staff trained - 45 GSE/ MoWIE/ MoM staff trained Legal, Institutional, and - Geothermal sector - 4 EEP procurement staff Regulatory Framework strategy developed retrained Development Critical Assumptions: (1) Technical assistance will address limited capacity of public sector personnel (2) Geothermal panel of expertise will help minimize risk of unproductive wells (3) Fiduciary shortfalls will be adequately addressed For Official Use Only (4) Environmental and social safeguards will be adequately implemented Project Development Objectives (PDOs) 9. As stated in the Financing Agreement, Grant Agreement, and the Project Appraisal Document (PAD), the PDO was to develop geothermal resources in Ethiopia. Key Expected Outcomes and Outcome Indicators 10. At appraisal the outcome indicators were as follows: (a) Geothermal wells drilled and tested (26); (b) Geothermal wells with potential to generate electricity (13); and (c) Geothermal sites confirmed (2). 11. The outcome indicators were changed during restructuring, as explained below in section I.B. Components 12. The Project had four components. IDA and Scaling-up Renewable Energy Program (SREP) financing was expected to be utilized for all components. Table 1 shows the original component cost estimated and the revised estimates, which are discussed in Section B. Page 4 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT Table 1. Component Cost Estimates (US$ million) Component Description IDA SREP GoI GoE Original Revised Total Cost Estimated Cost 5 Component 1: Aluto 92.2 24.5 1.5 8.0 126.2 108.7 Geothermal Site Development Component 2: Alalobad 19.8 0 2.0 4.0 25.8 Dropped Geothermal Site Development Component 3: Drilling Rigs, 63.5 0 0 0 63.5 Integrated Associated Accessories, and to Spare Parts Component 1 Component 4: Legal, 3.0 0 0 0 3.0 1.0 Institutional, and Regulatory Framework Development Total 178.5 24.5 3.5 12.0 218.5 109.17 13. Component 1: Aluto Geothermal Site Development (estimated cost of US$126.2 million, of which IDA loan US$ 92.2 million, SREP grant US$ 24.5 million, GoI grant US$1.5 million, GoE’s own fund US$8.0 million). This component was to finance the cost of materials needed for drilling, services related to drilling and management, drilling and testing of approximately 22 wells, and the creation of a system to connect steam-producing and For Official Use Only injection wells. The site was located at the Aluto geothermal site in the Oromia Regional State, about 200 km southeast of Addis Ababa, between Lake Ziway and Lake Langano. A small geothermal power plant, operational since 1998 and producing about 7 MW of electricity, was already on this site. The funding aimed to support further drilling and testing to assess the geothermal site’s potential for energy production. 14. Component 2: Alalobad Geothermal Site Development (estimated cost of US$25.8 million, of which IDA loan US$19.8 million, GoI grant US$2.0 million, and the GoE’s own fund US$4.0 million). The amount was to finance the procurement of drilling materials and associated goods, drilling services, including supervision, and drilling and testing of about four wells. The aim was to utilize IDA’s funding for production drilling and testing to evaluate the economic feasibility of the geothermal resources and to complete a feasibility study. Alalobad is in Dubti Woreda, within the Afar Regional State, approximately 600 km northeast of Addis Ababa. The project area spans around 100 square km and is believed to encompass multiple distinct geothermal reservoirs. 15. Component 3: Drilling Rigs, Associated Accessories, and Spare Parts (estimated cost US$63.5 million, fully financed by IDA loan). This component was for acquiring two modern, full-size diesel-electric drilling rigs equipped with all necessary tools, accessories for directional drilling, capabilities for both over-pressure and under-pressure drilling operations, and a comprehensive set of spare parts. The introduction of two modern rigs was designed to enhance operational efficiency by allowing crew interchangeability, reducing downtime caused by equipment malfunctions, and significantly upgrading the then current drilling capabilities. 16. Component 4: Legal, Institutional, and Regulatory Framework Development (estimated cost US$3.0 million, fully financed by IDA loan). This component was dedicated to consultancy services aimed at preparing the Geothermal Development Policy and corresponding laws. It also encompassed technical support, advisory services, and capacity-building measures intended to bolster the geothermal development expertise of key 5 Estimates after final restructuring, of December 2023. Page 5 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT entities such as the Ethiopian Electric Power (EEP), the Geological Survey of Ethiopia (GSE), and the Ministry of Water, Irrigation, and Energy (MoWIE). B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) Revised PDOs and Outcome Targets 17. There were no changes to the PDO, but there were revisions to the outcome targets in June 2020 through a Level Two restructuring, as shown in Table 2. Table 2. Outcome Targets Pre- and Post- Restructuring Outcome Indicator Original Target (2014) Revised Target (2020) Geothermal wells drilled and 26 14 tested (number, custom) Geothermal wells with potential 13 8 to generate electricity (number, custom) For Official Use Only Geothermal sites confirmed 2 1 Revised PDO Indicators 18. The original PDO indicators were not revised, but one indicator was added for development of a geothermal sector strategy and the target for “Geothermal sites confirmed” was reduced to 1. Revised Components 19. The following changes were made to the components as part of the June 2020 Level Two restructuring: (a) Alalobad Geothermal Site Development (Part 2) was cancelled. (b) Aluto Geothermal Site Development (Part 1); and Drilling Rigs, Associated Accessories, and Spare Parts (Part 3) were combined. (c) Under Part 4 (Legal, Institutional and Regulatory Framework Development), a specific sub- component to develop a Geothermal Sector Strategy was added. Other Changes 20. The changes of the first restructuring (June 2020) were necessitated partly by the Government’s request to cancel US$50 million from the Project to finance supplementary budget support to Second Ethiopia Growth and Competitive Programmatic Development Policy Financing (PXXXXXX), to cope with macroeconomic impacts of COVID-19 on Ethiopia. The IDA financing was reduced to US$131.8 million, and GoE’s contribution from US$12 million to US$8 million. SREP and GoI financing were unchanged. This restructuring also extended the closing date of the Project by 18 months, to December 2021. Page 6 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT 21. The second restructuring (July 2020) reduced the SREP target for power generation potential from 70 MW to 35 MW; the third restructuring (December 2021) extended the closing date by a further 24 months, to December 31, 2023; the fourth restructuring (December 2023) cancelled US$22.63 of the IDA Credit, leaving a total IDA amount at closing of US$109.17 million as shown in Table 1. 22. Revision of the components and part cancellation resulted in several changes to the Intermediate Indicators and reallocation of the Credit and Grant proceeds. All indicators pertaining to Alalobad Geothermal Site Development (Part 2) were dropped, and new process indicators pertaining to the combination of parts 1 and 3 were introduced. The revision of targets of the revised components is shown in Table 3. Table 3. Intermediate Targets Pre- and Post- Restructuring Intermediate Original Target at 1st Target at 2nd6 Target at 3rd Target at 4th Indicator Target Restructuring Restructuring Restructuring Restructuring (June 2020) (July 2020) (Dec. 2021) (Dec. 2023) Number of test 4 4 0 0 0 wells drilled For Official Use Only Number of sites 2 1 1 1 1 tested Training/ 4 4 4 4 4 workshops held (Number) Number of EEP 45 45 45 45 45 staff trained Number of EEP 4 4 4 4 4 procurement staff retrained Number of 45 45 45 45 45 GSE/MoWIE/MoM staff trained Feasibility study Yes Yes Yes Yes Yes completed (Yes/No) Rationale for Changes and Their Implication on the Original Theory of Change 23. As explained in paragraph 20, the primary reason for the partial cancellation, which GoE requested, was to provide some funding to cope with the macroeconomic impact of COVID-19. This was coupled with the 6 The second restructuring was for the SREP part of the financing and may be considered as part of the first restructuring. Page 7 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT realization that the Project could not be completed as planned due to delays that were encountered up to the first restructuring. The implication was that a fewer number of wells would be drilled, and they would be drilled at only one of the two sites. Therefore, the probability of identifying geothermal wells with potential to generate 70 MW of electricity was reduced and the pace at which the long-term impacts would be achieved was slowed down. II. OUTCOME A. RELEVANCE OF PDO Assessment of Relevance of PDOs and Rating 24. The relevance of the PDO is rated High. The PDO and outcomes contributed directly to the Country Partnership Framework (CPF) for Ethiopia for FY2018-22 (Report 119576-ET), which was extended to cover FY2023-24, in which increased access to energy supply is a high priority. It contributed directly to focus area 1.2: “Increased access to reliably energy supply”. The PDO outcomes also contributed to pillars 1 and 4 of Regional Integration and Cooperation Assistance Strategy for FY2021-23 (Report 154458-AFR) 7 in that it supported increasing energy access (Pillar 1) and reinforcing resilience through the development of low carbon energy For Official Use Only systems (Pillar 4). Specifically, the CPF notes: “Going forward, as structural reforms are necessary to ensure the long-term technical and financial sustainability of the sector, Ethiopia seeks to invite private sector participation in the power generation segment (as independent power producers (IPPs)) and to bring in private sector capital and sustainable financing structures, augment technical know-how, and to help improve the implementation speed of the energy sector 8”. The Project aimed to de-risk upstream geothermal development, thereby facilitating private sector entry downstream. GoE remained committed to enhancing its energy mix as evidenced by its request for Bank support to continue with de-risking geothermal sector development through the PRIME project. The PDO therefore remained relevant at the Project’s closing. B. ACHIEVEMENT OF PDOs (EFFICACY) Assessment of Achievement of Each Objective/Outcome 25. The assessment in the following sections follows a split evaluation approach due to the first and second restructuring, which led to significant changes to the outcome targets. There were no changes to the outcome indicators in the last two restructurings. It assesses the extent to which the PDO was being achieved up to the time the outcomes related to components 1, 2 and 3 were reduced, and the extent of achievement thereafter. 26. Whereas the PDO was to develop geothermal resources in Ethiopia, the ultimate target of the Project was the preparation of a feasibility study based on the outcome of the drilling. This was explained in the first restructuring 9, which states: “The scope of the restructured GSDP project will be limited to the confirmation of geothermal resources for electricity generation in the Aluto site”. The assessment of efficacy is therefore based 7 The strategy was still applicable when the Project closed. 8 Country Partnership Framework for Ethiopia FY2018-2022; Report No. Report 119576-ET; World Bank (Box 5: Leveraging Private Participation in Energy) 9 Proposed restructuring of Ethiopia Geothermal Development Project, June 2020, Report No. RES42846 Page 8 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT on the understanding that development refers to drilling, testing and preparation of a feasibility study, and not to the subsequent development of power plants 27. At the time of the restructuring, six years after the Project was approved and a month before the original closing date, minimal progress had been made towards achievement of the outcome targets, except progress on the procurement of drilling rigs (Component 3) 10. Two out of twenty-six wells had been drilled and tested, no geological sites had been confirmed and it had not been established if any of the two wells had potential to generate electricity. Drilling at the Alalobad site had not commenced yet. As a result, the restructuring dropped the Alalobad site and retained the Aluto site, where the two wells had been drilled. Nonetheless, issues that contributed to the slow progress, mainly concerning procurement, had been mostly resolved prior to the restructuring. Good progress was achieved after the two restructurings; however, the Project had to be suspended due to a security situation three months before the closing date. The suspension, coupled with the delays caused by the COVID-19 pandemic (about 16.5 months), were responsible for the revised outcome indicators not to be fully achieved. 28. At project closing, the outcome indicator “Wells with Potential to Generate Electricity” was exceeded – nine wells were proven, compared to a target of eight. Twelve out of fourteen wells were drilled and the sole Aluto site was confirmed. The additional outcome – Geothermal Sector Strategy Developed – was also completed, but the additional (SREP) target for generation capacity and annual energy production capacity For Official Use Only confirmed (35 MW and 276 GWh respectively) were partially achieved – 28.6 MW and 225.5 GWh. 29. Intermediate level. Prior to restructuring, the results framework consisted of thirteen intermediate results indicators, which were reduced to eleven at the restructuring. As some were consolidated, the Implementation Completion Report (ICR) only considers progress towards achievement of the eleven, as shown in Table 4. Table 4. Achievement of intermediate targets Target after Status at No. Intermediate Indicator Restructurin Closing g 1 Civil work and water supply construction finalized Yes Yes (Yes/No, Custom) 2 First rig installed in Aluto site (Yes/No, Custom) Yes Yes 3 Second rig arrival in Aluto site (Yes/No, Custom) Yes Yes 4 First rig drilling operation starts (Yes/No, Custom) Yes Yes 5 Second rig drilling operation starts (Yes/No, Custom) Yes Yes 10 Refer to paragraph 43 on the dialogue that took place during this period. Page 9 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT 6 Geothermal capacity confirmed for electricity 35 28.6 generation (Megawatt, Custom) 7 Training/Workshops held (Number, Custom) 4 2 8 EEP Staff trained (Number, Custom) 45 28 9 EEP retrained procurement staff (Number, Custom) 4 2 10 GSE/MoWIE/MoM staff trained (Number, Custom) 45 18 11 Feasibility study completed (Yes/No, Custom) Yes No 30. The PAD noted limited capacity as a major issue to geothermal development 11; therefore, the ICR finds the lower number of GoE staff trained an issue in achievement of the long-term impacts. 31. The procurement of two new rigs was a key step in ensuring continuation of geothermal exploration, irrespective of whether the public or private sector would be responsible for this stage of geothermal development. Since the purchase and operation of drilling rigs is the most expensive component in geothermal For Official Use Only exploration, provided the equipment is properly operated and maintained, the two rigs will enable a significant cost reduction in, and facilitate more rapid, exploration. 32. The causal relationship is provided in Figure 1 and further explained in paragraph Error! Reference source not found.. The planned outcomes were partly achieved since although wells with potential to generate electricity were identified, their number and cumulative production capacity fell short of both the original and revised levels. In addition, the delay in preparing the feasibility study for Aluto, which was yet to be completed at the time of preparing the ICR, will delay implementation of the envisaged geothermal power plant(s). 33. The Project commenced without a proper institutional setup to champion the sector and the specific operation. The Project was implemented by EEP, a company whose expertise was in hydropower development and operation and needed to develop capacity in this new sector. Nonetheless, the Project and other initiatives that took place during the Project’s implementation have reinvigorated geothermal development in Ethiopia. Apart from preparation of the Geothermal Strategy, which formed part of the Project, several proclamations and directives were also passed during the Project’s implementation. They were not strictly part of the Project, but the Bank played a role on their review. They included: (a) Geothermal Resource Development Amendment Proclamation, 2020; (b) Geothermal Drilling Operations Directive, July 2021; (c) Customs Duty- and Tax-Free Directives, 2018; (d) Directive to Provide Service for Export Geothermal Samples for Laboratory Test, 2019; (e) Licensing Directives, 2019. 34. In addition, two private developers were undertaking exploration activities when the ICR was being prepared, and their concessions included power plant development and power supply. Discussion with one of 11 PAD, Geothermal Sector Development Project, paragraph 21, and paragraph 7 of Annex 8 Page 10 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT them demonstrated the Project’s comparative success in de-risking geothermal development despite partial achievement of the Project’s targeted outcomes. The other project had drilled several wells, with no success in confirming power potential and there were issues as to who should pay for the cost overruns. In comparing the two development strategies (de-risking by public sector and by private sector), the developer was of the view that the former or risk-sharing between the public and private sector from the outset were more efficient. In this respect, the Project should be considered successful in confirming the best way of engaging the private sector in geothermal development. 35. Despite the Project not having fully achieved its outcome targets, it made significant progress towards the country’s goal of development of its geothermal resource and has established the necessary elements to continue with the explorations to mitigate private sector risk and thus attract private developers. Examples are the establishment of the enabling legal framework, the procurement of drilling rigs and the experience the country has gained in Environment, Social, Health and Safety aspects. Due to this partial success and GoE’s rekindled interest in the sector, which has put geothermal back on the radar screen, the Bank has agreed to continue supporting the de-risking initiative through continued drilling, including at Aluto, as part of the proposed multi-phase operation, Power Sector Reform, Investment and Modernization in Ethiopia (PRIME) project, approved on March 26, 2024. Paragraph 11 of the PAD for PRIME notes: “Progress is being made towards tapping into the country’s large geothermal potential, but greater efforts are needed to scale up its exploration and utilization.” However, to ensure success going forward the remaining institutional bottlenecks For Official Use Only that impacted the Project need to be addressed. Ongoing conflict in most areas with geothermal potential is another key issue that needs to be addressed and is covered in Section III. Justification of Overall Efficacy Rating 36. In accordance with the split evaluation approach (Refer to Table 6), Efficacy is rated Modest for the period before the first restructuring and Substantial for the remaining period. The justification is summarized in the following two paragraphs. 37. Pre-restructuring period. Little progress towards the Project outcomes was achieved in the first period, which resulted in restructuring to adjust the outcomes to a more realistic level. As shown in Table 6, the only substantial progress was on Component 3 (Drilling Rigs, Associated Accessories, and Spare Parts) since procurement for the revised implementation strategy commenced in this period, before the restructuring formally combined this component with Component 1 (Aluto Geothermal Site Development) -- the contract for the revised strategy was signed in February 2019. Progress on components 1 and 4 (Legal, Institutional, and Regulatory Framework Development) were modest (two out of twenty-six wells had been drilled at Aluto and some procurement was underway for Component 4). Progress on Component 2 (Alolabad Geothermal Site Development) was negligible since no drilling had yet taken place. For Aluto, only two out of a planned twenty- six wells had been drilled in six years, a month before the Project was due to close. Therefore, the combined efficacy for this period is rated modest. The total disbursement during this period was US$42.07 million (41.4 percent of total). 38. Post-restructuring period. Although the revised outcome targets were not fully achieved in the second period, these and the overall process towards their achievement laid the foundation for scaling up the development of the geothermal sector. Comparison with parallel private sector operations confirmed the need for the upstream de-risking to be handled by the public sector. This in turn confirmed the rationale for the Bank to further support implementation of this strategy under the PRIME project. As shown in Table 6, substantial progress was achieved on Component 1, but for Component 4 it was modest, resulting in a combined (weighted) Page 11 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT efficacy of substantial for this period. The total disbursement in this period was US$59.5 million (58.6 percent of total). C. EFFICIENCY 39. Economic and financial analyses and efficiency of resource use: The completion stage economic analysis yielded lower NPV and EIRR compared to appraisal stage estimates as shown in Table 5, for the following reasons described below. 40. Later-than-projected commencement of electricity generation. The delays in drilling resulted in slower implementation and delayed the potential 12 commencement of the power generation. In addition, the timing of the generation investment in the appraisal analysis was unusual as electricity generation and associated economic benefit from the Project were to commence before the power plant construction was completed. The post-completion analysis assumes that power generation would start three years after the drilling activities and makes the same adjustment to the appraisal analysis. The adjusted appraisal results are shown in paratheses in Table 5. The post-completion NPV and EIRR remain lower that the appraisal results. 41. Lower-than-projected capacity. At the appraisal, the potential power plant capacity was expected to be 70 MW, but due to the delays only 28.6 MW was confirmed. For Official Use Only Table 5. Economic Analysis NPV (US$m) EIRR (%) Discount Rate At Appraisal On Completion At Appraisal On Completion 10% 427 (168) -23 30 (14) 8 12% 314 (73) -38 42. It should be noted, however, that potential uses of geothermal heat (directly from wells with not enough heat for power production and from the outlet of the power plant before reinjection) may increase the value of the project. This aspect was not considered in the appraisal analysis and has also not been considered in the post-project analysis. 43. Efficiency of project implementation. As explained in Section I.B, the Project experienced long delays and had made only minimal progress when the Project was being restructured the first time, six years after approval. After restructuring and reducing the Project’s scope, the project was not fully implemented by the closing date. Whereas an inadequately staffed Project Implementation Unit (PIU) when the Project commenced significantly contributed to the delay, a security incident at the Project site caused the Project to be closed earlier than the scheduled closing date. Just before the closure, GoE had requested a nine-month extension during which the Bank had assessed that the reduced outcomes would have been fully achieved since the start-up issues had been resolved. As explained in Section IIIB, some of the delay (caused by the COVID-19 pandemic), was due to issues beyond the control of any of the stakeholders. Furthermore, during the apparently inactive period to the change in procurement strategy, records show that there was ongoing discussion between EEP, GOE and the Bank, accompanied by analyses, that resulted in the strategy change. 12 The analyses included an indicative investment in power plant, for complete development of the geothermal potential. Page 12 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT 44. Despite the delays the important outcome of identifying wells with potential to generate electricity, albeit to a lesser extent, was achieved, and scale-up will be done under the proposed (PRIME) program. 45. Efficiency of design. The Project’s appraisal cost estimate amounted to US$218.5 million, to finance the drilling of 26 wells at two sites and identify at least 13 wells with potential to generate electricity. In addition, the SREP results framework stipulated the potential identified to be 70 MW, which would lay the foundation for scale-up to 1,000 MW. At the end of the Project, 12 wells were drilled at one site, out of which 9 had potential to generate electricity, but not all were considered economically viable for generation. The cumulative potential was 28.6 MW, and the amount disbursed was US$101.6 million. Pro-rating the capacities and cost and considering the large, fixed costs demonstrates an efficient design, except for the scope and scheduling. The scope may have been over-ambitious, and a focus on one site from the outset would have been more efficient. Assessment of Efficiency and Rating 46. Efficiency is rated Modest. The Project delayed in completing the reduced scope, which would have needed an additional nine months from the closing date if implementation had continued. The post-project economic rate of return is less than at appraisal even if a less optimistic schedule for construction of the power generation facility is applied. The implementation schedule and scope should have been less optimistic in view of the weak institutional and expertise base the Project started from. For Official Use Only D. JUSTIFICATION OF OVERALL OUTCOME RATING 47. The split assessment results in an outcome rating of moderately unsatisfactory before the two restructurings and of moderately satisfactory thereafter, and an overall efficiency of modest. The combined outcome rating is Moderately Satisfactory. It marginally exceeds the borderline between Moderately Unsatisfactory and Moderately Satisfactory (3.5 vs 3.58) as per the guideline for split evaluation. 48. Although the Project achieved the goal of identifying production wells with potential to generate electricity, the capacity identified was less than planned at appraisal and at the first and second restructuring. Component 4 (Legal, Institutional, and Regulatory Framework Development) remained incomplete at closing – training of some staff needed for continued geothermal development and preparation of a feasibility study for development of geothermal power plant were outstanding. 49. Nonetheless, considering the importance of geothermal-based electricity generation in Ethiopia (refer to paragraph 3), the Project’s achievements were significant. They have set a foundation for scaling upstream work and incentivizing the private sector (refer to paragraph 34). Table 6. Split Rating Assessment Original objectives and targets Targets after Restructuring Relevance of PDO High Efficacy Modest Substantial Page 13 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT Component 1 Outcome Modest Substantial targets Component 2 Outcome Negligible - targets Component 3 Substantial Substantial- Intermediate targets Componet 4 Modest Modest Intermediate target Efficiency Modest 1 Outcome ratings Moderately Unsatisfactory Moderately Satisfactory 2 Numerical value of outcome ratings 3 4 3 Disbursement US$42.07 million US$59.53 million 4 Share of disbursement 41.4% 58.6% 5 Weighted value of outcome rating 1.24 2.34 For Official Use Only (Row 2 x Row 4) 6 Final outcome rating Total 3.58 Rounded up to (4): Moderately Satisfactory *Note: Highly Unsatisfactory (1), Unsatisfactory (2), Moderately Unsatisfactory (3), Moderately Satisfactory (4), Satisfactory (5), Highly Satisfactory (6) E. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender 50. Since the Project involved construction and drilling, it was not expected to have a direct impact on the ultimate end-users and beneficiaries at the household level. It therefore it did not adopt a gender-sensitive analysis or monitoring and evaluation. Nonetheless, the provision of piped potable water supply and establishment of a loan and credit scheme for women as part of the Community Development Plan (CDP) are two benefits that were expected to be provided to women. The activities were incomplete at the time of the Project’s suspension but are planned to be complete when the situation improves. Institutional Strengthening 51. Component 4 -- Legal, Institutional and Regulatory Framework Development -- consisted of several capacity building and institutional development components. For example, a rules and regulations working group reviewed and developed rules for licenses for exploration, use and development, and competitive bidding and the drilling of deep geothermal wells. A Geothermal Roundtable involving key government entities, development Page 14 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT partners, and private entities was held to discuss the possible roadmaps for developing the geothermal sector in Ethiopia. A geothermal development strategy was also developed but is yet to be adopted by GoE or EEP. Mobilizing Private Sector Financing 52. Whereas the Project did not mobilize private capital, it helped lay the foundation for scaling up the development of the geothermal sector by demonstrating that the upstream works were better handled by the public sector (refer to paragraph 38). It therefore achieved the objective of enabling private sector investment in the geothermal sector as shown in the ToC. In additional to the drilling, other enablers included finalization of Ethiopia’s “geothermal proclamation “, which came into effect in September 2016. The proclamation provides for geothermal development by both private and public entities, including through competitive tendering. The proclamation also established Geothermal Licensing Authority within Ethiopian Energy Authority (EEA), and the authority’s regulatory role has since been assigned to the Ministry of Mines. Regulations to implement the proclamation were drafted with support from IFC and were issued. Poverty Reduction and Shared Prosperity 53. Paragraph 30 of the PAD stated that the Project would support the Bank’s goal of reducing poverty in that it would help increase job opportunities in project areas during the well-drilling phase. Over the longer term, the For Official Use Only power plant’s construction and operation phases would create more jobs, and the increase in electricity supply would support Ethiopia’s rural electricity access program and support the creation of jobs through industrial development. However, the latter outcomes were beyond the Project’s scope of identifying geothermal wells with potential for generating electricity. The direct benefits from the Project were the jobs it created – 230 male and 40 female at the peak of implementation. Other benefits were from the construction of a school and a piped water system (refer to Section IV.B). Other Unintended Outcomes and Impacts 54. The Project commenced soon after the sector was unbundled, and EEP was created as a separate company responsible for power generation. At the split the separation of accounts had not been completed, which was the cause of the financial management (FM) issues the Project experienced. The Project assisted in addressing this issue and procurement weaknesses (refer to Section IV.B). III. KEY FACTORS AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION Objectives and design 55. The design was based on a well-structured geothermal power development sequence -- test drilling by the public entity to de-risk the geothermal power development in the project sites, followed by (anticipated) private investment. The design was appropriate for achieving the objectives. The four components were clearly articulated at the time of approval. However, the structure of the Project, especially drilling 22 wells in Aluto and 4 wells in Alalobad, may have been too ambitious to complete, in view of limited facilities and know-how on Page 15 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT commencement. A significant setback occurred when one of the planned drilling rigs was found to be unavailable due to inadequate maintenance by the implementing agency. This issue resulted in a decrease in the number of wells drilled as part of the project. Results Framework design and monitoring plan 56. The Results Framework was clear, with the intermediate and outcome targets aligned with the objectives. The targets were appropriate and were adjusted accordingly at restructuring. Similarly, an appropriate monitoring plan was in place. However, issues arose related to PIU capacity and institutional arrangements (refer to section IVA). Selection of stakeholders 57. Good coordination among financiers occurred prior to the Project and continued during preparation and implementation, including coordination between the Bank, the Government of Iceland (GoI, the co-financier for the Project) and the Government of Japan which provided the technical assistance in the drilling activities supervision to the GoE in parallel with the Project. The GoI co-financed the Project and provided technical assistance. Legal, institutional development and capacity building involved a wide range of stakeholders expected to play significant roles in development of the geothermal sector, including public and private sector stakeholders For Official Use Only and development partners. Risk and mitigation measures and readiness for implementation. 58. A key risk that materialized during implementation relates to insecurity at the Project site because of civil conflict. This risk was not identified during preparation, yet it caused implementation to be suspended three months before the closing date. In October 2023, the security incident at the site led to the evacuation of the project personnel from the project site, which caused the suspension of the project activities until the project closing date. Other key risks were identified, and mitigation measures were explained, at the time of approval. The key risks identified were Implementing Agency Risk (particularly Capacity risk) and Project Risk (particularly Design risk). Both materialized during implementation, but their mitigation measures were delayed in implementing. For example, at the time of approval, EEP had already appointed a Project Coordinator and key technical and fiduciary staff; however, once the Project started, several of the key positions became vacant for long periods of time. The Project design included the use of short-term consultants, but their appointment was delayed. When the issue with the implementation modality arose, the needed adjustment took a long time to reach agreement on, further adding to the delays. Additional preparatory work was needed for the Project to be ready for implementation. B. KEY FACTORS DURING IMPLEMENTATION 59. As explained in Section III.A, several of the factors during preparation had consequences on implementation. The following were additional key factors: (a) Factors subject to the control of the Government and/or implementing entities. 60. The fact that the Project suffered from inadequate capacity in the PIU has been explained in Section III.A. It was the main cause of delays, the cause of the first restructuring, and the reason the Project ultimately did not Page 16 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT achieve several of its intermediate targets and did not fully achieve its outcome. The Government and EEP should have ensured that the PIU was always adequately staffed. 61. When the original implementation strategy of separating rig ownership from drilling proved not to be efficient, it took close to two years for the EEP and GoE to agree to the Bank’s advice to combine the two. This and delayed procurement were responsible for most of the delay – about 2 years. (b) Factors subject to World Bank control. 62. The Bank should have been more assertive to ensure a timely adjustment of the implementation strategy). (c) Factors outside the control of the Government and/or implementing entities. 63. The COVID-19 pandemic caused some implementation delays due, for example, to the delayed arrival of drilling crews, absence of the Owner’s Engineer and absence of the Project Coordinator who had been infected with the virus. 64. Exceptionally heavy rainfall in 2020 caused a substantial increase in the water level of Lake Ziway, which required design modifications of water supply infrastructure and caused a delay in the supply of water for the For Official Use Only community and for the drilling operation. 65. One reason for the delayed implementation was the civil conflict that affected the Project site and caused work to be suspended three months before the closing date. At the time of preparing the ICR, work had not resumed, and the Borrower had earlier requested a nine-month extension to complete the remaining scope, by September 2024. IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 66. Based on the understanding that the project outcomes did not extend to power plant construction, the four outcome indicators -- Geothermal wells drilled and tested, geothermal wells with potential to generate electricity, geothermal sites confirmed, and development of geothermal sector strategy -- were adequate to measure achievement of the PDO. Additionally, eleven intermediate-level indicators were identified to measure and monitor progress toward the PDO. Specific aspects of the drilling were also to be monitored, e.g. results of all well tests (production, injection, and interference); conceptual and numeric reservoir models; and implementation of measures for local communities. Finalization of the outcome indicators followed extensive consultations with stakeholders, and adjustments were made to reflect stakeholder feedback. As discussed in Section III.A, the ICR considers that the outcome indicators were a good gauge of the PDO’s achievement. The PIU design included M&E staff. M&E reporting was agreed with the Bank and would consist of annual reporting on outcomes and bi-annual reporting on intermediate indicators. The Bank would undertake at least two supervision missions per year and the Bank team was comprised of both HQ and Country Office staff. Page 17 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT M&E Implementation 67. Annual and bi-annual reports containing the required data were submitted, although sometimes late or needing follow-up for clarifications. An example is the submission of unacceptable EEP financial audits, which took four years to resolve. Another example is the submission of progress reports, a covenant which was not complied with for over a year after the Project was approved but was fully complied with for the remainder of implementation. At least two supervision missions were held per year, except for the first two years and the last year when one was held annually. However, the Bank’s implementation support took place more frequently as the Bank team included members based in the Addis Ababa Country Office. The missions were followed by aide memoires and ISRs. The Bank provided additional implementation support as needed, such as through bi-weekly teleconferences to follow up on the action plan that was agreed in 2017 to speed up implementation. M&E Utilization 68. A major issue that delayed implementation was disagreement between GoE and the Bank on whether to contract out drilling operations to a Full-service Drilling Contractor (FSDC) or for the drilling contractor to used EEP-owned rigs which would be procured separately under the Project. Despite analyses showing that the latter strategy would be more efficient, and delays in procurement, the Project was restructured to adopt this strategy only a year before the original closing date. On the positive side, practical experience in resettlement and access For Official Use Only restrictions resulted in timely adjustments to the Grievance Redress Mechanism. Justification of Overall Rating of Quality of M&E 69. The design, implementation, and utilization of the M&E system is rated Modest. While the design and implementation were satisfactory, there were major shortcomings in M&E utilization that were responsible for the delays in the Project’s implementation and its inability to achieve the original outcome targets. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Environmental and Social 70. The overall E&S implementation performance of the Project is rated Moderately Satisfactory. The following World Bank Operation Policies were triggered: Natural Habitats (OP) (BP 4.04), Physical Cultural Resources (OP) (BP 4.11), Indigenous Peoples (OP) (BP 4.10), Involuntary Resettlement (OP) (BP 4.12). The Project’s ESIA was prepared and disclosed timely, on March 13, 2013. The ESIA was updated in 2020, when site- specific management plans were prepared to ensure safe implementation. The following plans were prepared and implemented including Emergency Response, Health and Safety Management, Waste Management, Labor Influx Management, Security Risk Management, Gender-based Violence Action, Livelihood Restoration, Stakeholder and Consultation Management, and Air Quality Monitoring. A Resettlement Action Plan (RAP) was prepared and disclosed in August 2019. Implementation of the RAP was completed, and a RAP audit was conducted by an independent auditor between May and July 2023. The audit found that its implementation was in reasonably good compliance but noted the need to improve trust-building, awareness of communities, and safe, separate inclusion of women in all stages. 71. The Overall Safeguards Rating remained Satisfactory for the first five years, until drilling was due to commence. It was then reduced to Moderately Satisfactory until the Project closed due to delayed completion of Page 18 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT OCHSS requirements, which caused a delay in commencement of the drilling. At the time of the Project’s suspension, the Livelihood Restoration Plan (LRP) and CDP were progressing well but had been suspended as well. They would be continued when the security situation improved, under the proposed (PRIME) project. The Project completed the construction of a school near the project site as part of the CDP. There was a delay in implementation of the CDP and the LRP – installation of the water supply system and provision of electricity to the community were incomplete at the time of suspension. Financial Management 72. The overall FM performance is rated Moderately Satisfactory. Throughout most of implementation, until the first restructuring, FM was reported as either Unsatisfactory or Moderately Unsatisfactory. The main issues were delayed opening of the Designated Account, delayed revision of the FM manual, lack of counterpart budget at the beginning and low disbursement later. After the restructuring, until the closing date, the ratings were Satisfactory, but the issues had already had a negative impact on the pace of implementation. The issues faced in the initial stages of the Project were mainly the result of unbundling of the power sector, during which the separation of accounts had not been properly done. Procurement For Official Use Only 73. The overall procurement performance of the Project is rated Unsatisfactory. Delays in procurement were the main contributor to delayed implementation and for the Project not fully achieving its outcome targets. The issues arose due to poor staffing of the PIU at the beginning, partly because of unbundling, and delays in addressing this issue. The original procurement strategy, of solely relying on drilling rigs to be supplied by EEP, also contributed to the delays (refer to paragraph Error! Reference source not found.). Apart from the first year after approval, the Procurement rating ranged from MU and HU until the fifth year when it was updated to MS but was never fully satisfactory. C. BANK PERFORMANCE Quality of Supervision 74. Action taken by the Bank to address implementation issues was delayed, with project restructuring taking place only a year before the original closing date and three years after the mid-term review which had revealed serious implementation issues. Nonetheless, the Bank team played its due role in proving to the Borrower that a change in the procurement and implementation strategy would improve performance. Justification of Overall Rating of Bank Performance 75. The Bank’s overall performance is rated Moderately Satisfactory. The Project was not quite ready for implementation due to inadequate capacity and systems in the PIU and implementing agency at effectiveness. Although addressing the main issues that caused implementation delays took long and caused the Project not to fully achieve the reduced outcome targets agreed when the Project was restructured, the Bank endeavored to take corrective action. Page 19 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT D. RISK TO DEVELOPMENT OUTCOME 76. The aim of the Project was to minimize implementation risk of geothermal development and thus to better-attract private sector investment. A major risk pertains to GoE and EEP not continuing with or scaling up the upfront activities needed to minimize risk to private developers of the generation plant, especially due the prevailing security situation. Continued Bank support the PRIME will help mitigate this risk. 77. A second risk is associated with the lack of a proper institutional setup to lead geothermal development and the risk of the good practices resulting from the Project, such as the OCHSS practices, not being mainstreamed. There is a need to establish a separate entity or dedicated department within EEP for geothermal development. Such a dedicated entity would help address the issues of lack of sustained public sector knowledge in geothermal development and inadequate leadership of the program. 78. Third, the macroeconomic situation the country faces, especially the unstable local currency, poses a risk to private sector participation as has been experienced in other sectors. V. LESSONS AND RECOMMENDATIONS For Official Use Only 79. Proper analysis, strategy formulation and implementation planning need to be conducted ahead of project commencement. Time was lost in deciding on an optimal implementation plan after implementation issues arose. If a good assessment had been done during appraisal, or earlier, the delays would have been minimized. The country had already had trouble in maintaining and operating a rig and the existing rig was in poor condition. In addition, the country had lost expertise in the sector. An earlier appreciation of this situation (at project entry) would have pointed EEP, GoE and the Bank to the strategy that was eventually adopted. 80. Public sector de-risking of geothermal development in early stages of development ensures success. Whereas the Project was not able to achieve all the intermediate and outcome indicators, valuable lessons were learned on the most effective way of approaching geothermal development. Comparison between the Project and parallel private sector concessions demonstrated the high risk (cost) of combining the upstream and downstream activities, especially the uncertainty in cost if the two are combined or if the early stage is handled by the private sector. 81. Ensuring adequate implementation capacity and systems should be a continuous process. It is imperative that readiness for implementation be assessed periodically. The Bank team ensured that a PIU was established and properly staffed but the due diligence appears to have had some shortfalls. Not all systems were ready, including systems for procurement and financial management. Procurement capacity needed strengthening through outsourcing but the process, which should desirably have started prior to approval, was delayed. The FM system was also not fully in place. A competent project manager had been appointed by approval but left soon after. Prior to approval, all the expertise and systems needed for effective performance of the PIU should have been in place and retained throughout implementation. 82. Project design should consider capacity and other resource limitations, and targets should be realistic. Time was lost at the beginning by attempting to work concurrently at two sites and deciding to focus on one only a year before the closing date. The limited capacity within EEP and the PIU, and the design that separated Page 20 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT procurement of drilling rigs and drilling services, added to implementation risk. Starting with a combined contract for supply of drilling rigs and drilling would have been more efficient, as would have been a focus on a single site. 83. A dedicated institution is paramount for effective development of such a nascent yet critically important sector (refer to paragraph 77). EEP’s core business is in hydropower, and EEP has little expertise and experience in geothermal development. For the country to increase its focus on this sector it needs not only to outsource expertise but to also have dedicated leadership that effectively uses such expertise and ensures sustainability of . the geothermal sector development program. For Official Use Only Page 21 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS @#&OPS~Doctype~OPS^dynamics@icrresultframework#doctemplate A. RESULTS FRAMEWORK PDO Indicators by Outcomes Develop Geothermal Resources in Ethiopia Indicator Name Baseline Closing Period (Original) Closing Period (Current) Actual Achieved at Completion Result Month/Year Result Month/Year Result Month/Year Result Month/Year 0.00 Apr/2014 8.00 Dec/2023 9.00 Nov/2023 Geothermal wells with potential to Comments on achieving targets The project found 9 wells with electricity generation potential. Some may not be directly generate electricity (Number) used for electricity generation considering the economic viability, but could be used as reinjection wells. 0.00 Apr/2014 14.00 Dec/2023 12.00 Nov/2023 Geothermal wells drilled and tested (Number) Comments on achieving targets EEP may drill selected remaining geothermal wells under PRIME project. 0.00 Apr/2014 1.00 Dec/2023 1.00 Nov/2023 Comments on achieving targets The End Target for 'Geothermal sites confirmed' is now 1 as opposed to 2. This change was Geothermal sites confirmed formalized when the Alalobad site development component in the original project design (Number) was dropped in the project restructuring in 2020, but the figure in the system was not updated accordingly. This ISR reflects the change. No May/2020 Yes Dec/2023 No Nov/2023 Geothermal sector strategy developed (Yes/No) Comments on achieving targets Expected to be completed by the project closing. Intermediate Indicators by Components Page 22 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT Aluto Geothermal Site Development Indicator Name Baseline Closing Period (Original) Closing Period (Current) Actual Achieved at Completion Result Month/Year Result Month/Year Result Month/Year Result Month/Year No May/2020 Yes Dec/2023 Yes Nov/2023 Civil work and water supply Comments on achieving targets The essential civil works for drilling operation are substantively completed. While there are construction finalized (Yes/No) still some minor remaining civil works, these will not be needed for drilling operation under GSDP given the pause of drilling operation and project closing in December 2023. No May/2020 Yes Aug/2020 Yes Dec/2020 First rig installed in Aluto site (Yes/No) Comments on achieving targets The first drilling rig arrived at the project site. No May/2020 Yes Aug/2020 Yes Feb/2021 Second rig arrival in Aluto site (Yes/No) Comments on achieving targets The second drilling rig arrived at the project site. No May/2020 Yes Aug/2021 Yes Aug/2021 First rig drilling operation starts Comments on achieving targets The first drilling rig arrived at the project site and the drilling works started substantively in (Yes/No) August 2021 with adequate safety protocols (EEP paused drilling operation until all priority safety action items were duly completed). No May/2020 Yes Oct/2020 Yes Aug/2021 Second rig drilling operation starts Comments on achieving targets The second drilling rig arrived at the project site and the drilling works started substantively (Yes/No) in August 2021 with adequate safety protocols (EEP paused drilling operation until all priority safety action items were duly completed). 0.00 Jun/2014 35.00 Dec/2023 26.00 Nov/2023 Comments on achieving targets So far, wells drilled and tested under the project show approximately 26MW generation Geothermal capacity confirmed for electricity generation (Megawatt) capacity in technical potential. The capacity that can a actually be utilized will be confirmed through a resource assessment. The estimated capacity is only for Aluto-Langano, while there may be additional capacity at Aluto-Bobessa. Legal, Institutional and Regulatory Framework Development Indicator Name Baseline Closing Period (Original) Closing Period (Current) Actual Achieved at Completion Result Month/Year Result Month/Year Result Month/Year Result Month/Year Page 23 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT 0.00 Apr/2014 4.00 Dec/2023 2.00 Nov/2023 Comments on achieving targets In May to June 2016, a rules and regulations working group meeting was held to review and develop rules for the licen ses for exploration, use and development, and competitive Training/Workshops held (Number) bidding and the drilling of deep geothermal wells. In May 2023, the Geothermal Roundtable participated by key government entities, development partners, and private entities was held to discuss the possible roadmaps for developing the geothermal sector development in Ethiopia. 0.00 Apr/2014 45.00 Dec/2023 28.00 Nov/2023 EEP Staff trained (Number) Comments on achieving targets 20 EEP staffs were trained in 2022 based on its geothermal capacity building program, and 8 EEP staffs completed leapfrog software training in 2023. EEP retrained procurement staff 0.00 Apr/2014 4.00 Dec/2023 2.00 Nov/2023 (Number) 0.00 Apr/2014 45.00 Dec/2023 0.00 Nov/2023 GSE/MoWIE/MoM staff trained (Number) Comments on achieving targets Training has so far focused on EEP, and not other institutions No Apr/2014 Yes Dec/2023 No Nov/2023 Feasibility study completed (Yes/No) Comments on achieving targets Feasibility Study (Resource Assessment) is to be completed once all the wells' planned drilling and testing is done. Performance-based Conditions (PBC) Period Period Definition Period 1 Period 2 Period 3 Page 24 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT B. KEY OUTPUTS Develop Geothermal Resources in Ethiopia 1. Geothermal wells with potential to generate electricity 2. .Geothermal wells drilled and tested PDO Indicators 3. Geothermal sites confirmed 4. Geothermal sector strategy developed 1. 12 Geothermal wells drilled and tested Key Outputs 2. 9 Geothermal wells with potential to generate electricity (linked to the achievement of the PDO Outcome) 3. 1 Geothermal sites confirmed Page 25 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT Legal, Institutional and Regulatory Framework Development 10. EEP retrained procurement staff 11. GSE/MoWIE/MoM staff trained Intermediate Results Indicators 8. Training/Workshops held 9. EEP Staff trained 12. Feasibility study completed 1. 2 workshops held Key Outputs 2. 28 EEP staff trained (linked to the achievement of the Component) 3. 2 EEP prcurement staff retained 4. 18 GSE/MoWE/ MoM staff trained Aluto Geothermal Site Development 4. Second rig arrival in Aluto site 2. Civil work and water supply construction finalized 3. First rig installed in Aluto site Intermediate Results Indicators 5. First rig drilling operation starts 6. Second rig drilling operation starts 7. Geothermal capacity confirmed for electricity generation 1. Civil work and water supply construction finalized 2. First rig installed in Aluto site Key Outputs 3. Second rig drilling operation started (linked to the achievement of the Component) 4. Second rig arrival in Aluto site confirmed 5. First rig drilling operation started Page 26 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Kenta Usui Team Leader Abdulhakim Mohammed Abdisubhan Team Leader Bogalech Admasu Berhane Financial Management Specialist Meron Tadesse Techane Financial Management Specialist Amare Assefa Procurement Specialist Tamru Demsis Temam Environmental Specialist Moges Woyessa Bowuso Social Specialist Feben Demissie Hailemeskel Social Specialist Gizework Zewdie Mekuria Procurement Team Eleni Albejo Program Assistant Abiy Demissie Belay Team Member Takeshi Mori Team Member Meskerem Mulatu Legesse Team Member Dawit Seblework Taffesse Team Member Mikul Bhatia Team Member Elin Hallgrimsdottir Team Member Yun Wu Team Member Zemedkun Tessema Team Member @#&OPS~Doctype~OPS^dynamics@icrannexstafftime#doctemplate B. STAFF TIME & COST Staff Time & Cost Stage of Project Cycle No. of Staff Weeks US$ (including travel and consultant costs) Preparation Page 27 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT FY13 4.025 23,281.39 FY14 27.873 224,742.20 FY15 1.450 12,372.55 Total 33.35 260,396.14 Supervision/ICR FY14 1.850 8,987.30 FY15 12.700 142,967.43 FY16 27.596 302,496.59 FY17 17.496 233,465.08 FY18 23.859 258,470.56 FY19 26.802 258,087.76 FY20 56.483 284,775.29 FY21 30.076 211,993.04 FY22 30.049 204,779.93 FY23 50.839 285,342.33 FY24 35.781 196,545.04 Total 313.53 2387910.35 Page 28 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT ANNEX 3. PROJECT COST BY COMPONENT Component Amount at Approval (US$M) Actual at Project Closing (US$M) Aluto Geothermal Site Development 116.70 108.17 Legal, Institutional and Regulatory 3.00 1.00 Framework Development Total 119.70 109.17 Page 29 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT ANNEX 4. EFFICIENCY ANALYSIS 1. The post-completion economic analysis of the Project was conducted using the same conceptual approach as at the appraisal. The appraisal-stage economic analysis used a cost-benefit approach and was methodologically robust. While EEP, the Project Implementing Agency, is currently only responsible for power generation and transmission, for ease of comparison, the updated analysis was conducted as if EEP was a vertically integrated business, from the generation to the distribution, in the same manner as the vertically integrated utility that existed at the timing of the appraisal (EEPCo) did. Also, the updated analysis was conducted in 2013 US$ real prices to ensure comparability with the analysis at appraisal. Economic Analysis 2. The post-completion economic analysis was carried out based on: (a) economic discount rate of 10 percent and 12 percent which are considered reflective of the social opportunity cost of capital for Ethiopia at project completion and is also consistent with the rates used at appraisal; (b) actual project costs with specific disbursement profile for each year and the expected adjusted construction cost for the power plant and transmission lines based on the updated power plant’s capacity reflecting the project’s result; (c) the same value of the incremental sales (the amount of Willingness to Pay, US$0.30/kWh); (d) the same rate of the system losses (approximately 22% to 18%); (e) the updated project-related incremental electricity sales (based on the updated plant’s capacity); (f) the same rate of the average economic cost of supply (US$0.06/kWh); and (g) the same rate of the estimated operation and maintenance cost (2 percent of the capital cost invested). 3. Key inputs and assumptions. The following section summarizes the details on main inputs and assumptions used for the Project’s post-completion economic analysis. 4. Capital cost of the power plant and transmission lines. As the Project is composed of 2 phases [drilling under the WBG’s Credit (phase1)], and [power plant construction (phase2)], the power plant and transmission lines construction cost need to rely on assumption as they are still not implemented at the timing of the Project’s completion. The costs for the power plant and transmission lines are updated from US$110 million and 46 million to 41 million and 17 million respectively based on the ratio of the expected capacity of the power plant (70MW at the appraisal and 28.6 MW at the phase 1 completion). (a) Value of incremental sales per kWh. The value of incremental sales is assumed to be at the same value as the willingness to pay for electricity in Ethiopia and is US$0.30/kWh, which is the same as the rate used at the timing of the appraisal, throughout the project life (30 years). The price is based on the client’s available study result conducted at the timing of the appraisal as no updated data was available at the time of preparing the ICR. (b) Incremental electricity sales (GWh). The project-related incremental electricity sales are calculated based on the assumption that (a) the power plant’s capacity is 28.6 MW (compared to 70MW at appraisal), (b) the power plant’s capacity factor is 90 percent (the same as at appraisal), and (c) the system losses are 22 percent to 18 percent (same assumption with the appraisal). These rates are applicable throughout the project life (30 years). (c) Average economic cost of supply per kWh. The average economic cost of supply is US$0.06/kWh (same assumption as at appraisal). This is applicable throughout the project’s life (30 years). (d) The post-completion economic analysis was done for the 2 discount rate cases, 10 percent and 12 percent. 5. Summary of economic costs and benefits of the Project. The main economic costs of the Project include: (a) the capital invested for (i) drilling wells including rig purchase, (ii) the construction of the power plant, and (iii) the Page 30 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT construction of the transmission lines from the plant to the grid, (b) average economic cost of supply, and (c) incremental O&M costs associated with the power plant. The main economic benefits of the Project are kept the same as at the appraisal stage: (a) the avoided cost of alternative fuels for applications such as lighting and information/entertainment; and (b) the value attached to having access to electric appliances (refrigerators, air conditioners, etc.) that would not be available without electricity. Both are measured based on the willingness to pay for electricity (WTP). 6. Results of the economic analysis. The following table summarizes the results of the economic analysis under all three scenarios. TABLE 1. ECONOMIC RETURNS Discount Rate 10% Discount Rate 12% At appraisal NPV * US$427 million (US$167 million) US$427 million (US$73 million) EIRR* 30% (14%) At completion NPV US$ -23 US$ -38 EIRR 8% * Figures in parentheses result from the assumption that generation commences 3 years after the drilling is completed as compared with the appraisal results where generation commences together with the drilling. 7. Results: The completion stage economic analysis yielded lower NPV and EIRR compared to appraisal stage estimates for the following reasons. (a) Later-than-projected commencement of electricity generation. The delays in drilling resulted in slower implementation and delayed the potential 13 commencement of the power generation. In addition, the timing of the generation investment in the appraisal analysis was unusual as electricity generation and associated economic benefit from the Project were to commence before the power plant construction was completed. The post-completion analysis assumes that power generation would start 3 years after the drilling activities and makes the same adjustment to the appraisal analysis. The adjusted appraisal results are shown in paratheses in Table 5. The post-completion NPV and EIRR remain lower that the appraisal results. (b) Lower-than-projected capacity. At the appraisal, the potential power plant capacity was expected to be 70MW, but due to the delays only 28.6 MW was confirmed. 8. It should be noted, however, that potential uses of geothermal heat (directly from wells with not enough heat for power production and from the outlet of the power plant before reinjection) may increase the value of the project. This aspect was not considered in the appraisal analysis and has also not been considered in this analysis. 13 The analyses included an indicative investment in power plant, for complete development of the geothermal potential. Page 31 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS 5.1 Borrower’s Comments We have reviewed the ICR and have no comment. It is well prepared and you can proceed to the next steps. 5.2 Implementing Agency’s (EEP) comments. EEP Comments on Draft Implementation Completion and Results Report on Ethiopia Geothermal Sector Development Project. Overview The Geothermal Sector Development Project (GSDP), with a total budget of US$ 218.5 million (funded by IDA, SREP, ICEIDA, and GoE), started on August 5, 2014, and was supposed to end on June 30, 2020. The main components of GSDP were to: (I) Drill and test geothermal wells at the Aluto geothermal field; (2) Drill and test exploratory wells at the A1a1obad geothermal prospect; (3) Procure two drilling rigs complete with ancillary equipment; (4) Develop a Legal, Institutional and Regulatory Framework for the geothermal sector. The project faced major delays due to repeated procurement processes for the purchase of the new drilling rigs and drilling services. The Ethiopian Electric Power (EEP) finally entered into a Contract Agreement on February 23, 2019, with a Consortium composed of Shandong KERUI Petroleum Equipment Co. Ltd.; Shandong KERUO Oilfield Service Group CO Ltd. And Kenya Electricity Generating Co. Ltd. (KenGen) to manufacture and supply of two new drilling rigs and associated equipment/spare parts and to provide the required drilling and testing services for eight (8) wells with possibility of extending the contract for drilling of the other remaining 12 wells at the Aluto project site based on the outcome of the first eight wells. EEP had also entered into two (2) contract agreements, one for Civil Engineering Works on February 4, 2019, to design and build the infrastructure elements, i.e. roads, well pads and sumps, camps, offices, warehouses, etc., and the second one on March 9, 2019, for design and installation of the Water Supply System from Lake Ziway to the Aluto project site. The majority of the project activities such as drilling operation activities, well testing and monitoring, additional water supply equipment installation, remaining civil works, Livelihood restoration plan activities implementation for the community...etc were suspended before completion because of the security incident. The project also performed social and environmental safeguard activities by EEP/local Contractor. Under the community development plan (CDP) construction of new schools and maintenance of existing schools by MET Metal Engineering Work PLC was completed 100% and the Water supply works/installation by Kalachaa Construction PLC's progress was 15%). The activities are suspended because of the justified security incident. Page 32 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT Comments on Draft Implementation Completion and Results Report (ICR) The implementation agency GSDP within the EEP and responsible staff have reviewed the draft ICR. The EEP and GSDP were satisfied with the draft and had the following comments to share. ► Closing of the GSDP by the World Bank was done without consultation of the client and this has suspended the project's ongoing activities which caused the project to fail in achieving overall project objectives. ► During the implementation of GSDP, the HSE requirements set by the Bank were helpful and exercised in full force by EEP & FSDC and this experience will have a positive impact on future geothermal projects such as PRIME. ► The Procurement of Construction Equipment is now suspended due to the closing of GSDP. As the machinery is important to expedite future geothermal developments, we strongly require the bank to finalize the procurement of Construction Equipment by direct contracting via the PRIME Project. ► The Bank was supportive in understanding & providing time extensions, technical assistance, continuous follow-ups, and timely interventions while the project faced problems 111 the implementation of project activities for the successful completion of GSDP in meeting outlined project objectives. ► Overall, the principal objective of the Project which aimed to de-risk upstream geothermal development and thereby facilitate private sector entry downstream has proved a successful start. Achievements of GSDP so far Drilling and testing activities continued in 2022 and 2023. By October I, 2023, the project had reached important results: ► The first procurement package design was not well organized. Because of that, we have re tendered the rig supply and the service contract. After a long discussion with the bank procurement specialist, we customized the goods procurement template with the works template, and finally, the rigs have been procured and the service contract has been on board lately. ► The 8 wells originally foreseen by the FSDC contract were successfully drilled to depths between 2,700 and 3,000 m; ► Four wells were successfully tested for a cumulative power capacity of more than 20 MW. ► The FSDC's original contract was extended from 8 to 12 wells. The first 2 wells of the 4 additional wells were completed (wells no. 9 and no. 10). ► Testing of wells from no. 7 out of IO were completed and the rig's refurbishment is in progress. ► Refurbishment of drilling rigs and ancillary equipment and Handover of drilling rigs and ancillary equipment to EEP is near completion. Performance of Aluto field resource assessment as originally foreseen by the ELC contract 5.3 Co-financier’s comments (SREP) Page 33 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT Many thanks for allowing us to review the ICR. We do not have any major comments. However, since the project had been flagged several times by the CIF secretariat for being an implementation risk, it would be great to show the final results. I know that you are constrained by the ICR template and so I would like to recommend that an annex be included to report on the achievements of SREP: - Annual electricity output (target earlier recorded was 276,000 MWh - No of ppl, business and community services benefitting from improved assess to electricity and fuels (target recorded was 550,000) – target/actuals need to be disaggregated by gender - Final government co financing amount (target was indicated as 8 mn) - need to know the actual financing leveraged - Bilateral (Japanese funding target was recorded as 61 Mn) – need to know the actual financing leveraged - GHG emission target (earlier recorded as 219,061) These are the indicators against which we would need to report for SCF funds. Kindly share the final ICR so that we can submit it to the CIF secretariat. Thank you. Page 34 The World Bank Ethiopia Geothermal Sector Development Project (P133613) ICR DOCUMENT ANNEX 6. SUPPORTING DOCUMENTS (IF ANY) 1. Geothermal Regulation; Federal Democratic Republic of Ethiopia; 22 July 2019 2. Geothermal Strategy (Consultant Report); Africa Energy Services Group; 25 November 2023 3. Geothermal Proclamation (No. 981/2016); Federal Democratic Republic of Ethiopia; 16 September 2016 4. Geothermal Drilling Operations Directive (no. 837/2021); Ethiopia Energy Authority; July 2021 5. Directive to Provide Service for Export Geothermal Samples for Laboratory Test; Ethiopia Energy Authority; 2019 6. Directive for Implementation of Geothermal Resource Proclamation Amendment (No 90/2020); Ethiopia Energy Authority 7. Country Partnership Framework for Ethiopia FY2018-2022; Report No. Report 119576-ET; World Bank; 8. Project Appraisal Document; Report No. Report No: 83994-ET; Geothermal Sector Development Project; World Bank; May 5, 2014 9. Restructuring Paper; Report No. Report No.RES29290; Geothermal Sector Development Project; World Bank; June 2020 10. Restructuring Paper; Report No. Report No. Report No. RES42846; Geothermal Sector Development Project; World Bank; July 2020 11. Restructuring Paper; Report No. Report No. Report No. RES48687; Geothermal Sector Development Project; World Bank; December 2021 12. Restructuring Paper; Report No. Report No. Report No. RES56710; Geothermal Sector Development Project; World Bank; December 2023 13. Implementation Status Reports; 2014-2023; Geothermal Sector Development Project; World Bank 14. Draft Project Appraisal Document, Report No: PAD00161; Power Sector Reform, Investment and Modernization in Ethiopia (PRIME-1); February 22,2024 Page 35