Document of The World Bank Report No: ICR3523 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-44460, TF-92315, IDA-47920, TF-97260) ON A CREDIT IN THE AMOUNT OF SDR 33.7 MILLION (US$53 MILLION EQUIVALENT) AN ADDITIONAL CREDIT IN THE AMOUNT OF SDR 13.6 MILLION (US$20 MILLION EQUIVALENT) AND A GLOBAL ENVIRONMENTAL FACILITY GRANT IN THE AMOUNT OF US$4.5 MILLION TO THE REPUBLIC OF ZAMBIA FOR AN INCREASED ACCESS TO ELECTRICITY SERVICES PROJECT January 30, 2016 Energy and Extractives Global Practice Country Department AFCS1 CURRENCY EQUIVALENTS (Exchange Rate Effective November 30, 2015) Currency Unit = Zambian Kwacha (ZMW) ZMW 1.00 = US$ 0.08 US$ 1.00 = ZMW 12.59 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS BP Bank Procedures CEC Copperbelt Fluorescent Corporation CFL Compact Fluorescent Lamp CO2 Carbon Dioxide DO Development Objective DSM Demand-side Management EE Energy Efficiency EIRR Economic Internal Rate of Return ERB Energy Regulation Board ESMF Environmental and Social Management Framework EU European Union FIRR Financial Internal Rate of Return FM Financial Management GDP Gross Domestic Product GEF Global Environment Facility GEO Global Environment Objective GoZ Government of Zambia GPOBA Global Partnership on Output-Based Aid HH Household IAES Increased Access to Electricity Services Project IDA International Development Association IFR Interim Financial Report IP Implementation Progress IRR Internal Rate of Return ISR Implementation Status and Results Report JBIC Japan Bank for International Cooperation JICA Japan International Cooperation Agency M&E Monitoring and Evaluation MEWD Ministry of Energy and Water Development MoE Ministry of Education MoH Ministry of Health MW Megawatt i NPV Net Present Value O&M Operations and Maintenance OP Operational Policy PAD Project Appraisal Document PDO Project Development Objective PREP Priority Rural Electrification Project PV Photovoltaic RAP Resettlement Action Plan REA Rural Electrification Authority REF Rural Electrification Fund SAPP Southern Africa Power Pool SHS Solar Home Systems SIDA Swedish International Development Agency SSMP Sustainable Solar Market Packages TA Technical Assistance WA Withdrawal Applications WTP Willingness to Pay ZESCO ZESCO Limited ZPPA Zambia Public Procurement Authority Vice President Makhtar Diop Senior Global Practice Director Anita Marangoly George Director Charles M. Feinstein Country Director Guang Zhe Chen Practice Manager Lucio Monari Project Team Leader Raihan Elahi ICR Team Leader Joseph Mwelwa Kapika Primary Authors Kenta Usui, Eugene McCarthy ii ZAMBIA Increased Access to Electricity Services Project CONTENTS DATA SHEET  A. Basic Information  B. Key Dates  C. Ratings Summary  D. Sector and Theme Codes  E. Bank Staff  F. Results Framework Analysis  G. Ratings of Project Performance in ISRs  H. Restructuring (if any)  I. Disbursement Profile  1. Project Context, Development and Global Environment Objectives Design ............. 1  2. Key Factors Affecting Implementation and Outcomes ............................................ 12  3. Assessment of Outcomes .......................................................................................... 17  4. Assessment of Risk to Development Outcome and Global Environment Outcome 26  5. Assessment of Bank and Borrower Performance ..................................................... 27  6. Lessons Learned ....................................................................................................... 29  7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 31  Annex 1. Project Costs and Financing .......................................................................... 32  Annex 2. Outputs by Component ................................................................................. 34  Annex 3. Economic and Financial Analysis ................................................................. 37  Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 41  Annex 5: Training of DoE, ZESCO and REA Staff ..................................................... 44  Annex 6. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 56  iii DATA SHEET A. Basic Information Zm: Increased Access Country: Zambia Project Name: to Electricity Services IDA-44460,IDA- Project ID: P077452,P076320 L/C/TF Number(s): 47920,TF-92315,TF- 97260, ICR Date: 1/19/2016 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: SIL, SIL Borrower: ZAMBIA Original Total USD 33.00M Disbursed Amount: USD 51.38M Commitment: Environmental Category: B Focal Area: C Implementing Agencies: Rural Electrification Authority (REA) Zambia Electric Supply Corporation Ltd. (ZESCO) Co-financiers and Other External Partners: Global Environment Facility, European Commission B. Key Dates Zambia: Increased Access to Electricity Services - P077452 Revised / Actual Process Date Process Original Date Date(s) Concept Review: 02/19/2004 Effectiveness: 02/19/2009 02/19/2009 09/03/2010 Appraisal: 07/30/2007 Restructuring(s): 08/14/2013 Approval: 05/20/2008 Mid-term Review: 04/30/2012 04/20/2012 Closing: 12/31/2013 06/30/2015 Zambia: Increased Access to Electricity & ICT Services - GEF - P076320 Revised / Actual Process Date Process Original Date Date(s) Concept Review: 02/19/2004 Effectiveness: 02/19/2009 02/19/2009 Appraisal: 07/30/2007 Restructuring(s): Approval: 05/20/2008 Mid-term Review: 03/05/2011 Closing: 12/31/2013 06/30/2015 iv C. Ratings Summary C.1 Performance Rating by ICR Outcomes Moderately Satisfactory GEO Outcomes Moderately Satisfactory Risk to Development Outcome Moderate Risk to GEO Outcome Moderate Bank Performance Moderately Satisfactory Borrower Performance Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Quality at Entry Government: Moderately Satisfactory Unsatisfactory Implementing Quality of Supervision: Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance Performance C.3 Quality at Entry and Implementation Performance Indicators Zambia: Increased Access to Electricity Services - P077452 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Project at any time No None (QEA) (Yes/No): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA) DO rating before Moderately Closing/Inactive status Satisfactory Zambia: Increased Access to Electricity & ICT Services - GEF - P076320 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Project at any time No None (QEA) (Yes/No): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA) GEO rating before Moderately Closing/Inactive Status Satisfactory v D. Sector and Theme Codes Zambia: Increased Access to Electricity Services - P077452 Original Actual Sector Code (as % of total Bank financing) Energy efficiency in Heat and Power 32 26 Hydropower 18 2 Other Renewable Energy 18 6 Transmission and Distribution of Electricity 32 66 Theme Code (as % of total Bank financing) Infrastructure services for private sector development 100 100 Zambia: Increased Access to Electricity & ICT Services - GEF - P076320 Original Actual Sector Code (as % of total Bank financing) Central government administration 22 20 General finance sector 11 0 Other Renewable Energy 67 80 Theme Code (as % of total Bank financing) Climate change 40 30 Environmental policies and institutions 20 10 Infrastructure services for private sector development 20 20 Rural services and infrastructure 20 40 E. Bank Staff Zambia: Increased Access to Electricity Services - P077452 Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Guang Zhe Chen Michael Baxter Practice Lucio Monari Subramaniam V. Iyer Manager/Manager: Project Team Leader: Raihan Elahi Xiaodong Wang ICR Team Leader: Joseph Mwelwa Kapika ICR Primary Author: Kenta Usui Eugene D. McCarthy vi Zambia: Increased Access to Electricity & ICT Services - GEF - P076320 Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Guang Zhe Chen Michael Baxter Practice Lucio Monari Subramaniam V. Iyer Manager/Manager: Project Team Leader: Raihan Elahi Xiaodong Wang ICR Team Leader: Joseph Mwelwa Kapika ICR Primary Author: Kenta Usui Eugene D. McCarthy vii F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of this project is to increase access to electricity services and improve efficiency and quality of the electricity distribution system in targeted areas. Revised Project Development Objectives (as approved by original approving authority) Global Environment Objectives (from Project Appraisal Document) The project global environmental objective, in line with GEF Operational Program No. 6, is to remove barriers to renewable energy technologies to help mitigate greenhouse gas emissions. Revised Global Environment Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Household electricity connections provided under the project. Value (quantitative or 0.00 65,000 51,000 92,265 Qualitative) Date achieved 05/01/2008 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Target exceeded, achieved 181 percent of the revised target. achievement) Number of households in urban areas provided with access to electricity under Indicator 2 : the project. Value (quantitative or 0.00 31,000 49,500 89,655 Qualitative) Date achieved 05/01/2008 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Target exceeded, achieved 181 percent of the revised target. achievement) Number of households in rural areas provided with access to electricity under the Indicator 3 : project. Value (quantitative or 0.00 34,000 1,500 2,610 Qualitative) Date achieved 05/01/2008 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Target exceeded, achieved 174 percent of the revised target. achievement) Number of households in rural areas provided with access to electricity under the Indicator 4 : project (grid extension). Value 0.00 18,000 1,000 47 viii (quantitative or Qualitative) Date achieved 05/01/2008 12/31/2013 06/30/2015 06/30/2015 Comments Not achieved. 4.7 percent of the revised target reached due to delay in (incl. % procurement and construction. achievement) Number of households in rural areas provided with access to electricity under the Indicator 5 : project (Solar PV). Value (quantitative or 0 10,000 500 2,563 Qualitative) Date achieved 05/01/2008 12/31/2013 06/30/2015 06/30/2015 Comments Target exceeded, achieved 513 percent of the revised target (1,134 solar home (incl. % systems and 5,714 solar lanterns; four lanterns counted as equivalent of one solar achievement) home system). Indicator 6 : Electricity losses per year in the project area (Percentage). Value (quantitative or 23 14 14 11 Qualitative) Date achieved 05/01/2008 12/31/2013 06/15/2015 06/30/2015 Comments (incl. % Target exceeded, achieved 133 percent of the target. achievement) Indicator 7 : Average interruption frequency per year in the project areas (times/year). Value (quantitative or 50 30 30 30 Qualitative) Date achieved 09/30/2010 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Target fully achieved. achievement) (b) GEO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Load reduction through demand side management (MW) Value (quantitative or 0.00 36 45 57 Qualitative) Date achieved 05/01/2008 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Target exceeded, achieved 127 percent of the revised target. achievement) Indicator 2 : Reduced tones of CO2 emissions. (Tones/year, Custom) Value 0.00 20,000 5,600 5,600 (quantitative or ix Qualitative) Date achieved 05/01/2008 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Revised target fully achieved. achievement) (c) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Direct project beneficiaries, of which Female (51 percent) Value (quantitative or 0.00 832,450 808,500 1056,190 Qualitative) Date achieved 09/30/2010 12/31/2013 06/30/2015 06/30/2015 Comments Target exceeded, achieved 131 percent of the revised target. The composition of (incl. % female beneficiaries was not monitored. achievement) Indicator 2 : Distribution lines constructed/rehabilitated (km). Value (quantitative or 0.00 1,100 155 654.1 Qualitative) Date achieved 09/30/2010 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Target exceeded, achieved 422 percent of the revised target. achievement) Indicator 3 : Distribution lines constructed (km) Value (quantitative or 0.00 800 140 654.1 Qualitative) Date achieved 09/30/2010 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Target exceeded, achieved 467 percent of the revised target. achievement) Indicator 4 : Distribution lines rehabilitated (km) Value (quantitative or 0.00 300 15 15 Qualitative) Date achieved 09/30/2010 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Revised target fully achieved. achievement) Indicator 5 : Number of CFLs installed by the project. Value (quantitative or 0.00 1,000,000 1,000,000 1,000,000 Qualitative) x Date achieved 05/01/2008 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Revised target fully achieved. achievement) Indicator 6 : Number of new community electricity connections under the project. Value (quantitative or 0.00 250 100 104 Qualitative) Date achieved 05/01/2008 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Target exceeded, achieved 104 percent of the revised target. achievement) Indicator 7 : Number of new community electricity connections under the project (school). Value (quantitative or 0.00 83 100 Qualitative) Date achieved 09/30/2010 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Target exceeded, achieved 120 percent of the revised target. achievement) Indicator 8 : Number of new community electricity connections under the project (hospitals) Value (quantitative or 0.00 17 4 Qualitative) Date achieved 09/30/2010 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Not achieved. 23.5 percent of revised target achieved. achievement) Indicator 9 : % of ZESCO Unmetered customers (unmetered/ total) Value (quantitative or 39 12 12 2 Qualitative) Date achieved 05/01/2008 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Target exceeded, achieved 137 percent of the target. achievement) REA: Total number of projects implemented (grid extension/ solar PV/ Indicator 10 : mini/hydro) Value (quantitative or 274 450 450 586 Qualitative) Date achieved 05/01/2008 12/31/2013 06/30/2015 06/30/2015 Comments (incl. % Target exceeded, achieved 130 percent of the target. achievement) xi G. Ratings of Project Performance in ISRs Actual Date ISR Disbursements No. DO GEO IP (USD millions) Archived Project 1 1 12/24/2008 S S S 0.00 2 04/14/2009 S S S 0.00 3 12/19/2009 MS MS MS 1.00 4 06/28/2010 MS MS MS 1.08 5 03/27/2011 MS MS MS 2.37 6 12/03/2011 MS MS MS 2.75 7 06/30/2012 MS MS MS 5.07 8 04/12/2013 MS MS MS 9.35 9 11/11/2013 MS MS MS 17.40 10 07/07/2014 MS MS MS 23.50 11 04/01/2015 MS MS MS 31.87 12 07/09/2015 MS MS MS 36.64 xii H. Restructuring (if any) Amount Disbursed ISR Ratings at Board Approved at Restructuring in Reason for Restructuring Restructuring USD millions Restructuring & Key Date(s) PDO GEO Project1 Changes Made DO GEO IP Change Change Improve implementation and scale-up project outcomes: Extension 09/03/2010 MS MS 1.09 of closing date changes in key indicators, additional finance. Improve implementation: 08/14/2013 MS MS 13.89 Extension of closing date, changes in key indicators I. Disbursement Profile P077452 xiii 1. Project Context, Development and Global Environment Objectives Design 1.1 Context at Appraisal 1. In 2008, when the Increased Access to Electricity Services Project (IAES) was submitted to the Board, Zambia was among the poorest countries in Africa, with approximately half of its population living on less than a dollar a day. Nevertheless, global economic trends were promising and world copper prices had rebounded from an extended decline to reach new record highs. The Highly Indebted Poor Countries completion and G8 debt relief agreements had also reduced Zambia’s heavy debt burden. Even though exports were still dominated by copper and cobalt mining (73 percent), the remaining contributors to the country’s exports (mainly agriculture, with some manufacturing and tourism) were outperforming mining in real terms. As a result, despite a number of adverse external shocks (e.g., drought, high oil prices, and fuel shortages due to oil refinery interruptions), the Zambian economy was beginning to turn around, with real GDP growth reaching 6 percent in 2006. 2. However, the electricity sector was facing problems and it was recognized that, if these were not overcome, the sector would impede future economic growth. Electricity sector challenges included frequent power shortages due to limited generation capacity, deteriorating financial performance of the country’s main power utility, ZESCO Limited Ltd. (ZESCO), as a result of electricity tariffs being below the marginal cost of supply, low rates of access to electricity (20 percent), and the limited development of renewable energy resources beyond large hydropower generation. Expansion of the electricity network while increasing efficiency in the sector was also important for the country’s Poverty Reduction Strategy. 3. The main sector institutions were the: (i) Ministry of Energy and Water Development (MEWD), which was responsible for sector policy, planning, and coordination; (ii) Energy Regulation Board (ERB), with a mandate covering the entire energy sector, and with responsibilities that included licensing, review and approval of power tariffs, and enforcement of quality and service standards; (iii) ZESCO, a vertically integrated, state-owned power utility; and (iv) Rural Electrification Authority (REA), a newly established institution with a mandate to administer and manage the Rural Electrification Fund (REF), develop plans for grid and off-grid rural electrification and monitor project implementation, and expand access to electricity in rural areas. In addition, a privately owned transmission company, Copperbelt Energy Corporation (CEC), supplied bulk electricity to the mining industry and accounted for more than 50 percent of ZESCO sales. 4. There had been no significant addition to the country’s generation capacity since the early 1970s. During this period, however, electricity demand had steadily increased and had accelerated to an average of 4 percent per annum in the years prior to project appraisal. As a consequence, the electricity network began to experience power shortages and the country transitioned from a net exporter to a net importer of electricity within the Southern African Power Pool (SAPP). Deteriorating sector conditions were compounded by ZESCO’s precarious financial situation due primarily to high system losses, high labor costs, and electricity tariffs being lower than the marginal cost of supply. As a result, there 1 were limited resources available for access expansion. Low electricity tariffs also increased the risk for private sector investment in the Zambian electricity sector. 5. In response to the weakening performance of the sector, the government embarked upon a series of measures aimed at addressing the situation. These included steps to: (i) improve the governance of ZESCO to enable it operate as a commercial entity; (ii) upgrade distribution lines to reduce losses; (iii) reduce ZESCO staff numbers and expand meter coverage; (iv) improve revenue collection; and (v) strengthen reliability of electricity supply. Overall, the government’s goal for the sector was to establish a stable and predictable policy and regulatory framework, and a market structure capable of promoting competition, efficiency and private sector involvement. 6. Access to basic electricity services was very low in Zambia – only 20 percent overall, comprising 40 percent and 2 percent access rates for urban/peri-urban and rural areas, respectively. Low access constrained economic progress and diminished the quality of life for Zambia’s poor. The government goal was to increase the overall electrification rate to 66 percent by 2030, comprising 90 percent and 50 percent access in urban and rural areas, respectively, and based on a Rural Electrification Master Plan that had been prepared with assistance from the Japan International Cooperation Agency (JICA). 7. Limited utilization of the country’s renewable energy potential had taken place with the exception of some of the large hydro resources. This was mainly due to the lack of a policy and regulatory framework for renewable energy. At appraisal, the government was giving priority to the development of renewable energy sources in order for basic energy services to be provided to public facilities, such as schools and health centers, in off-grid areas of the country. 8. The government also adopted a sector wide syndication approach for rural electrification, with a view to mobilizing large amounts of donor resources and helping establish a long-term program. This involved close collaboration with three other cooperating partners – the European Union (EU), Japan Bank for International Cooperation (JBIC), 1 and Swedish International Development Agency (SIDA). In addition to co- financing this project, the EU also funded a rural electrification project that undertook works in the Mumbwa and Kaoma districts of Central and Western Province, respectively. JBIC (later JICA) has financed grid extension works in the rural areas of the Central, Eastern, Luapula, Southern, and Western provinces of Zambia. The scope of work also includes mini-hydro power stations at Mwinilunga and Mujila. Meanwhile, SIDA provided support for capacity building activities at REA as well as through the REF financed grid extensions and off-grid electrification. 1 JBIC was financing a project similar to Increased Access to Electricity Services Project, but in a different geographical area of the country. 2 Rationale for Bank Involvement 9. The Bank had been involved in Zambia’s energy sector for over three decades. Both the Joint Assistance Strategy for Zambia, 2007-2010, and Country Assistance Strategy, 2008-2011, highlighted the energy sector as a priority area in the context of the country’s development plans. In the years prior to appraisal, the Bank supported ZESCO in the rehabilitation of three hydropower plants and segments of the transmission and distribution network. 10. The rationale for the overall Bank involvement in the energy sector had four main objectives. First, to provide much needed financing to support the power sector investment program, aimed at expanding access and improving the quality and reliability of electricity supplies. Second, to build up the capacity of the newly established Rural Electrification Authority (REA) while strengthening ZESCO’s operating and financial performance. Third, the Bank’s continuing presence in the sector would provide a vehicle for further dialogue with the government, in partnership with the donor community, on institutional, regulatory, and policy issues affecting the sector’s further development. Fourth, Bank involvement could help identify opportunities for an increased private sector presence. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 11. The project development objective was to increase access to electricity services and improve the efficiency and quality of the electricity distribution system in targeted areas. 12. The original key outcome indicators were:  Increased access to electricity services as measured by: (i) number of connections through grid and off-grid electrification; and (ii) increased access rate in terms of a larger share of population with access to electricity services;  Improvement in ZESCO’s operational efficiency in targeted investment areas as measured by a reduction in ZESCO’s distribution losses in those areas;  Improvement in service quality in targeted investment areas as measured by reduced unplanned outages in those areas; and  Mitigation of the power crisis as measured by the number of compact fluorescent lamps (CFLs) installed. 1.3 Original Global Environment Objectives (GEO) and Key Indicators (as approved) 13. The project global environmental objective was to remove barriers to renewable energy technologies to help mitigate greenhouse gas emissions. The key outcome indicators were:  Installed capacity of renewable energy systems; and 3  Avoided carbon dioxide emissions. 1.4 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 14. The PDO remained unchanged throughout the project. However, key indicators in the results framework changed following two project restructurings in 2010 and 2013. 15. In 2010, the project was restructured in order to improve implementation and scale- up overall project outcomes. The restructuring made changes to the original project indicators and included an additional financing operation. The connection targets for urban and peri-urban households were increased while the target for rural connections was reduced. Also, the project indicator for “reduced unplanned outages in targeted areas” was replaced by the more widely recognized and easier to measure “average interruption frequency per year in the project area”, which is an integral part of System Average Interruption Frequency Index (SAIFI). With regard to the intermediate outcome indicators, more specific targets were introduced (e.g., kilometers of distribution lines; number of community connections resulting from grid extensions and from off-grid renewable energy sources). 16. In the 2013 restructuring, the household connections target was reduced from an original target of 65,000 to 51,000. Also, the urban connections target was increased while that for rural areas was reduced. The main reason for reducing the rural connections target was due to the dropping of the isolated grids/mini-hydro sub-component, which was found to be far more costly than originally estimated. With respect to the intermediate outcome indicators, the target for distribution line construction and rehabilitation was significantly reduced due to delays in the implementation of the grid intensification component. Finally, the target for community access expansion through schools and health centers was also reduced due to REA’s limited capacity in procurement and the slow pace of implementation. Project Development Objective (PDO) Indicators Indicators Baseline Original 2010 target 2013 target target Electricity access rate (%) 20% 24% 24% Dropped This indicator was dropped as national electrification rate is not within the control of the project Household (HH) electricity 0 65,000 HH 54,400 HH 51,000 HH connections provided under the project This indicator is the sum of urban and rural household connections. Urban households with 0 31,000 HH 42,000 HH 49,500 HH access to electricity 4 Target increased by addition of connection subsidy program in 2010. The target was increased again in 2013 based on the success of the subsidy program. Rural households with 0 34,000 HH 12,400 HH 1,500 HH access to electricity This indicator is the sum of grid extension connections and isolated grids/mini-hydro connections. ‐ Through grid 0 18,000 HH 8,900 HH 1,000 HH extension Target reduced in 2010 with the realization that initial target did not reflect the number of households in targeted areas. Target further reduced in 2013 due to significant delay in implementation. ‐ Through isolated 0 6,000 HH 1,000 HH Dropped grids/mini-hydro Target reduced in 2010 to accommodate significant implementation delay. The indicator was dropped in 2013 as the sub-component of isolated grids/mini- hydro has been dropped. ‐ Through renewable 0 10,000 HH 2,500 HH 500 HH (solar PV) The target was reduced in 2010 and 2013 due to slow implementation of the project. Reducing electricity losses 23% 14% 14% 14% from distribution The target remained the same throughout the project. Reduced unplanned outages 32 hours/ 3 h/ month/ Dropped Dropped in targeted areas month/ customer customer This indicator was moved from component level to PDO level in 2010 restructuring in order to have an adequate measurement for quality of service provision. The indicator was also altered to the more widely used and recognized average interruption frequency as shown below. Average interruption 50 times/ 30 times/ 30 times/ frequency in the project year year year area 5 Intermediate Outcome Indicators Indicators Baseline Original 2010 target 2013 target target Component 1 – ZESCO Efficiency Number of direct project 0 832,450 808,500 beneficiary The target was reduced to reflect reduced number of household connection to electricity. ‐ % of female 51 percent 51 percent 51 percent The target remained the same throughout the project, but was not systematically monitored. Distribution lines 0 1,100 km 155km This indicator is the sum of constructed and rehabilitation distribution lines. ‐ Constructed 0 800 km 140km The target was reduced due to delay in implementing grid extension sub-component. ‐ Rehabilitated 0 300 km 15km The target was reduced because Lusaka Transmission and Distribution System Rehabilitation project took over distribution line rehabilitation. CFLs distributed/installed 0 1,000,000 1,000,000 1,000,000 The target remained the same throughout the project. Component 2 – REA Access Expansion Community connections 0 250 120/70 100 (grid extension/renewables) (renewables) The target was reduced in 2010 to reflect slow implementation of the project. Sub- indicators on hospitals and schools were added. ‐ Hospital 0 60/30 17 The target was introduced in 2010 restructuring, and overall target was reduced in 2013 to accommodate significant delay in implementation. ‐ Schools 0 60/40 83 The target was introduced in 2010 restructuring, and overall target was reduced in 2013 to accommodate delay in implementation. Component 3 Technical Assistance ‐ % of ZESCO 39 percent 12 percent 12 percent 12 percent unmetered customers The target remained the same throughout the project. 6 ‐ Number of projects 0 30 450 450 implemented ( by REA) The target was increased in 2010 to include non-IAES financed projects. ‐ Number of projects 14 40 70 Dropped in the pipeline ( by REA) The indicator was dropped in 2013 to simplify reporting practice by REA. ‐ Volume of grants for 0 US$ Dropped SSMPs approved 1,000,000 The indicator was dropped in 2013 to simplify reporting practice by REA. ‐ Pre-feasibility studies 12 30 Dropped for PREPs and SSMPs completed by REA The indicator was dropped in 2013 to simplify reporting practice by REA. 1.5 Revised GEO (as approved by original approving authority) and Key Indicators, and reasons/justification 17. The Global Environment Objective (GEO) remained unchanged throughout the project, but its indicators and targets changed as a result of the project restructuring in 2013, during which the isolated grids/mini-hydro sub-component of the project was dropped. This led to the source of CO2 reduction being changed from the development of mini- hydros to the installation of CFLs and resulted in a much lower CO2 reduction target. In addition, the target for renewable energy installation capacity was removed and a target for the load reduction, attributable to CFL distribution, was included. Global Environment Objective (GEO) Indicators Indicators Baseline Original 2010 target 2013 target target Installed capacity of 1.3 MW 5.3 MW 3 MW Dropped renewable energy systems CO2 reduced 0 20,000 tCo2 20,000 tCo2 5,600 tCO2 Load reduction 0 45 MW 45 MW 1.6 Main Beneficiaries 18. Direct project beneficiaries, as elaborated in the 2010 restructuring paper, were (i) people benefiting from household connections; and (ii) pupils, teachers, doctors, nurses, and business owners and employees etc. directly benefitting from community connections 7 to schools, health facilities or other community points in rural and urban areas. In addition, households receiving CFL lightning in their homes were also direct beneficiaries. The overall number of beneficiaries was monitored as a part of the result framework. 19. The project also contributed to the improvement of ZESCO’s efficiency and quality of service in targeted areas to the benefit of existing on-grid households, although the number of beneficiaries in such cases was not monitored. 1.7 Original Components (as approved) 20. The project had three components and eight sub-components when the project was approved, as summarized below. Component 1 - ZESCO Efficiency Improvement - implemented by ZESCO 21. Sub-Component 1a - Reinforcement (US$9 million): This component comprised the strengthening and upgrading of ZESCO’s existing distribution networks in selected areas of Lusaka. Work was planned at four sites – Lusaka 132kV ring, Coventry Street substation, Roma substation, and Chisamba and Figtree substations. 22. Sub-Component 1b - Intensification (US$11 million): This component comprised the intensification of connections within the existing ZESCO network in both urban and peri-urban areas. 23. Sub-Component 1c - Energy Efficiency and Demand Side Management (US$2 million): This component supported ZESCO in procuring, marketing, and distributing one million CFLs for use in households. Component 2 - Access Expansion - implemented by REA 24. Sub-Component 2a - Grid Extension (US$25 million): This component was to connect about 18,000 new customers in Northern, Central, and Eastern regions, as well as other rural areas. It included construction of 33 kV and 11 kV lines to enable connection of the project areas to the national grid, along with the installation of transformers, construction of low voltage distribution networks, and the provision of service connections. 25. Sub-Component 2b - Isolated grids/mini-hydro systems (US$14 million): This component supported the installation of one or two mini-hydro systems to provide electricity to about 6,000 new customers. Two business models were considered: (i) construction, by a private developer, of a mini-hydro power generation plant in Chikata that would feed electricity into the existing ZESCO isolated mini-grid network that was hitherto supplied by a diesel powered generator; and (ii) construction by private developers (supported by capital grants from REA upon meeting eligibility criteria) of stand-alone mini-grids, complete with generation and distribution facilities. 26. Sub-Component 2c – Solar PV Systems (US$9 million): This component was to fund about 10 “Sustainable Solar Market Packages (SSMP)” that would enable 250 public 8 institutions and 10,000 households in rural areas to have access to modern energy services. The SSMP was an integrated means of supplying, installing, and maintaining (for five years), on a semi-commercial basis, solar PV systems in public institutions (e.g., schools, health centers, and associated staff housing). Component 3 – Technical Assistance (TA) (US$5.5 million) – implemented by ZESCO and REA 27. Sub-Component 3a – TA to ZESCO: This component, funded by an EU grant, aimed at assisting ZESCO in: (i) developing a Performance Improvement Plan for enhancing revenues and reducing costs; and (ii) the technical design of programs/projects in distribution system improvement, loss reduction, grid extension and in intensification. 28. Sub-Component 3b – TA to REA: This component comprised: (i) capacity building and project implementation support for REA, including preparation of the additional small hydro Priority Rural Electrification Project (PREP) sites and SSMPs; (ii) support to the Ministry of Energy and Water Development (MEWD), Energy Regulation Board (ERB), Ministry of Education (MoE), Ministry of Health (MoH) on energy sector strategies, multi-year cost recovery tariff frameworks, renewable energy policy, regulations, outreach, capacity building, and environmental management guidelines; and (iii) advisory services for matching grants, and training to private developers and local financial institutions. This sub-component was to be financed with Global Environment Facility (GEF) funds. 1.8 Revised Components 29. The changes emanating from the 2010 and 2013 restructurings that were undertaken to improve implementation, achieve results, and scale-up outcomes, are described below by component. The first restructuring in 2010 was both corrective and adaptive. It addressed key project design issues, e.g., reducing the unrealistic target for solar PV household installations and introducing an integrated approach to the supply, installation, and maintenance of the solar systems; it also adapted to emerging issues by introducing additional reinforcement sub-components and the connection fee subsidy program. The second restructuring in 2013 was of a corrective nature: it further reduced the rural connection targets while dropping the mini-hydro component from the project scope. 30. 1a Reinforcement: Originally, the reinforcement component covered four sites – Lusaka 132 kV Ring, Coventry Street substation, Roma substation, and Chisamba and Figtree substations. In order to accelerate implementation, it was agreed with the Government of Zambia (GoZ) and ZESCO to convert some of the larger supply-and-install contracts to supply-only in order that ZESCO could procure materials more speedily and implement the activities on a fast track basis using several smaller local contractors. The 2010 restructuring also included the introduction of an “integrated approach” in Lusaka. This was targeted at specific sites and involved upgrading the network, increasing connections, metering customers, and improving revenue collection and customer service in a coordinated manner. 9 31. 2b Isolated grids/mini-hydro: Implementation of this component was delayed due to REA’s limited experience in promoting and packaging such projects, lack of adequate feasibility studies on potential sites, and the absence of a feed-in tariff and overall regulatory framework for mini-hydro grids. To improve implementation, it was agreed with the GoZ and REA that a transaction advisor would be hired to support the preparation and packaging of the mini-hydro projects for at least three sites. It was also agreed that ERB would be provided with the necessary technical assistance to develop the requisite feed-in tariff and capital subsidy grant framework to support mini-hydro grid development. However, following completion of engineering studies, the construction cost of the proposed mini-hydro developments turned out to be in excess of US$70 million, which was significantly higher than the US$5 million allocated for this subcomponent and also higher than international norms for similar sized hydro power development. The GoZ therefore requested cancellation of the mini-hydro component. 32. 2c Solar PV: Based on the results of an assessment of the issues and options for sustainable solar PV market development in Zambia that was carried out by REA and the Bank team along with consultations with private sector companies involved in solar PV installations, the GoZ and the Bank agreed that the original target of 10,000 new household connections by 2013 was unattainable. In addition to the limited ability of rural households to pay for solar home systems, the specific communities that were expected to benefit had not been identified at entry and hence the potential number of household connections was substantially overestimated. As a result, the 2010 restructuring reduced the original target to 2,500 households while retaining the original number of schools and health facilities to be electrified at 250. In the 2013 restructuring, the households target was further reduced to 500. This was based on the experience gained from implementing SSMPs in the previous two years, which showed that the greatest demand for solar PV systems was from rural schools, health centers, and associated staff housing. It was therefore agreed with REA that the focus be shifted from individual households to these facilities. Additional Financing (2010) 33. The additional financing, approved September 22, 2010, added two new components in response to the urgent need to reinforce the existing bulk supply point at Kanyama in Lusaka, eliminate the peak hour load-shedding in Livingstone, and reduce the burden of electricity connection fees for low-income families in electrified areas: o Construction of Kanyama Substation in Lusaka and Lusaka Road substation in Livingstone (US$ 12 million). The Kanyama substation was intended to reduce the load at the nearby Coventry substation, which had been gutted by fire in June 2009, and bring safe and reliable power to Kanyama Township and surrounding areas. The Lusaka Road substation (located in Livingstone) aimed at mitigating the risk of distribution system failure and address overload and capacity difficulties that were being experienced in the Livingstone distribution network. o Connecting New Low Income Households to the Grid in Electrified Areas (US$10 million). The connection fee subsidy program aimed at the provision of electricity grid 10 connections to households. It targeted the provision of electricity access to at least 30,000 low income households in peri-urban and rural areas. 34. The funding allocations over time are summarized in the table below (reallocations and cancellation of funds are discussed further below the table). Original Restructuring Restructuring Project 2008 and Additional 2013 (US$ Million) Financing 2010 (US$ Million) (US$ Million) Original project 1a Reinforcement 9.0 8.9 9.33 1b Intensification 11.0 10.21 10.21 1c Energy Efficiency/Demand 2.0 2.0 1.6 Side Management 2a Grid extension 25.0 13.21 13.21 2b Mini grids 14.0 11.0 1.0 2c Solar PV 9.0 6.5 6.5 3a TA to ZESCO 3.5 2.33 2.33 3c TA to REA 2.0 2.0 2.0 Additional Financing Kanyama and Lusaka Road 12.0 13.4 Livingstone substations Connecting low income 10.0 8.8 households Total IDA (US$ million) 75.5 78.15 68.38 1.9 Other significant changes Reallocation of Funds (overall) 35. In the 2013 restructuring, it was agreed to reallocate about US$1.834 million (IDA US$1.6 million and ZSESCO US$0.234 million) from unused funds to the grid reinforcement activities. In addition, in the 2013 restructuring, the mini-grids component was dropped, reducing the overall funding amount by US$10 million. Expansion of connection subsidy coverage 36. During the 2013 restructuring, the coverage of the connection fee subsidy program was expanded. The program had originally targeted areas covered only under the grid extension component. However, it was later modified to include other geographical areas covered under the grid reinforcement and grid intensification sub-components, based on the following three criteria: (1) high-density residential area; (2) low-income; and (3) ability of the network in the area to accommodate new connections. 11 Closing date extension 37. The closing date of the project was extended once from December 31, 2013 to June 30, 2015. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 38. The Project Concept Note was reviewed in February 2004, and the project was approved by the Bank’s Board in May 2008 and became effective in February 2009. At the time of project preparation, the GoZ was in dialogue with sector stakeholders on the establishment of the Rural Electrification Authority (REA) for the promotion of rural electrification in Zambia. As REA was expected to be the implementing agency for the project, preparation of the project was delayed until REA was established and operational, which took several years (thus the long delay between project concept and approval). Project Preparation 39. The grid related aspects of the project were adequately prepared. Sites were selected based on the areas that had exhibited capacity constraints during the course of ZESCO operations. Some of these sites had also been identified during the earlier Lusaka Distribution Rehabilitation Project funded by the Bank in 1997. Furthermore, the Priority Rural Electrification Projects (PREPs) activity, conducted as part of project preparation, undertook pre-feasibility studies for six grid intensification and seven grid extension sites selected based on clearly set criteria. During preparation, it became apparent that the cost of grid reinforcement had been underestimated and therefore two of the planned sites were dropped. With respect to the distribution of one million CFLs, this was undertaken based on a distribution plan that ZESCO had prepared. 40. The mini-grids and solar PV systems components were not as well prepared as the grid related components. Although the client’s demand for mini-grid and off-grid electrification was strong at entry, the specific mini-grid sites had not yet been identified and, consequently, their preparation could not progress. Similarly, preparation of the solar PV systems component had not gone beyond the conceptual stage. While the basic concept was to aggregate solar PV systems in schools, health centers, small rural businesses, and households, to help ensure commercial viability, the exact sites had not been identified and the overall market for household PV had not been fully assessed. Assessment of Project Design 41. The project PDO, “to increase access to electricity services and improve the efficiency and quality of the electricity distribution system in targeted areas,” was realistic. However, the expansive scope - which included eight sub-components covering grid and off-grid works, CFL distribution, and capacity-building- increased the complexity of the project. The project GEO was also ambitious, given that Zambia had no prior institutional experience in developing its off-grid or mini grid renewable energy potential. Equally 12 ambitious was the financing and coordination responsibilities for the grid extension and number of consumers to be connected by ZESCO and the newly established REA. Adequacy of government commitment 42. Although the project was approved in May 2008, it only became effective in February 2009 due to delays in fulfilling various effectiveness conditions that included the establishment of a project steering committee by the GoZ and the execution of subsidiary loan agreements between the GoZ and the implementing agencies. However, government commitment to the project did strengthen during implementation and enabled the two restructurings that the project underwent to improve implementation progress, scale-up outcomes, and help achieve the PDO. Adequacy of Risk Assessment 43. At appraisal a number of risks were identified. Of these, ZESCO’s financial sustainability due to inadequate tariffs, high costs, significant losses, and a history of under- investment was rated as substantial as was the weak institutional and implementation capacity of REA. Other identified risks were rated as moderate, which was also the rating for overall project risk. While the risk related to REA’s capacity was correctly anticipated, the mitigation measures were inadequate. Also, the difficulties in attracting private sector developers for the mini-grid component were not recognized. Finally, ZESCO did not have a track record in expanding access. This consideration alone might have suggested that the risk to achieving the overall project objectives was ‘substantial’ rather than ‘moderate’. Such a risk assessment of the project could have resulted in a simpler project design with fewer sub-components and a focus on either grid or off-grid works. Furthermore, capacity building measures might have been given more consideration to improve prospects for achieving the PDO at the outset rather than during implementation. Quality at Entry 44. No Quality at Entry review was carried out by the Bank’s Quality Assurance Group. 2.2 Implementation 45. Initially, implementation progress was slow. Implementation performance then improved after the first restructuring in 2010. Following the second restructuring and extension of closing date in 2013, the project completed the physical works for most project components. The project distributed the target number of CFL bulbs, provided electricity access to more than 90,000 households through grid and off-grid provisions, and provided capacity building activities to the Department of Energy, REA, and ZESCO staff. However, some grid extension and grid reinforcement works were only completed within six months of project closing in late 2015. 46. Implementation Delays: Slow implementation progress was attributable to various factors. Firstly, senior management changes at ZESCO in 2009 and 2010 delayed commencement of implementation. Secondly, the long lead times required for the turn-key procurement arrangements for the intensification and grid extension sub-components 13 pushed back progress. Thirdly, implementation of the SSMP model as initially designed proved to be problematic due to the low population density of rural Zambia as compared to other countries where the model had been applied. Also, the lack of an adequate regulatory and policy environment to support isolated grids and the REA’s capacity limitations resulted in very slow progress on this sub-component. Further delays were caused by the GoZ decision to revoke the project’s tax and duty exempt status, which slowed customs clearances for imported materials. 47. Project restructuring: The project underwent two restructurings – the restructuring in 2010 included additional financing, and the restructuring in 2013 extended the project closing date. The restructuring led to the alteration of procurement arrangements for the intensification and grid extension sub-components. The SSMP model was also redesigned based on an assessment that had revealed the limited demand for solar PV for rural households. As a result, this sub-component became focused on the off-grid electrification of rural public facilities and associated staff housing, which had the highest demand for this intervention. The isolated grids/mini-hydro sub-component was dropped due to slow progress and the higher than budgeted estimate for works 2 that resulted from a pre- feasibility conducted during implementation. Following the restructurings, implementation progress improved, resulting in most project sub-components being completed by project close. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization a) M&E design 48. The PDO was “to increase access to electricity services and improve the efficiency and quality of the electricity distribution system in targeted areas.” The following indicators were selected at appraisal: (i) improvements in operational efficiency of the electricity network; (ii) improvements in the quality of electricity service, in particular reductions in unplanned outages per year; (iii) progress made in the intensification of electricity service to new customers in peri-urban areas; (iv) the number of CFLs installed; (v) the number of new connections in both grid and off-grid areas; and (vi) the increased share of the population with access to electricity service resulting from the project. In general, the indicators were adequate to monitor progress towards the PDO and also reflected the complexity of the project with its grid and off-grid components, and both a rural and urban focus. 49. The GEO was “to remove barriers to renewable energy technologies to help mitigate greenhouse gas emissions.” Two standard indicators were used to measure progress towards the GEO: (i) generation capacity of renewable energy constructed under the project measured in MW; and (ii) CO2 emissions avoided (measured in tons). 2 At the 2010 restructuring, US$5million was allocated for the implementation of the mini-hydro works. However, the pre-feasibility estimate for these works was US$70 million, much higher than international norms for the development of similar sized hydro capacity. 14 50. ZESCO and REA were responsible for monitoring implementation progress and ensuring that the project objectives were achieved. Both implementing agencies prepared quarterly progress reports and submitted them to the government and the Bank. Overall, the performance of these two agencies in monitoring project progress was satisfactory. b) M&E implementation 51. During implementation, some indicators were revised in order to more specifically measure each aspect of the PDO, reflect more accurately outcomes directly attributable to the project, be more realistic, and align with changes in the scope of the project and the Bank’s core indicators. The final PDO level indicators were:  Number of people in urban areas provided with access to electricity by household connections;  Number of people in rural areas provided with access to electricity by household connections (by grid connection/off-grid renewable);  Electricity losses per year in the project area (share of technical losses (%)/ share of non-technical losses (%));  Average interruption frequency per year in the project areas (times/year). 52. The dropping of the isolated grids/mini hydro sub-component resulted in the GEO indicators being changed and the target for rural household connections being reduced. The renewable energy generation capacity indicator was replaced by “Load reduction through demand side management (MW).” Finally in regard to the Gender Indicator, the results framework in the PAD stated that 51 percent of beneficiaries should be women (as part of the project beneficiaries’ intermediate indicator). However, ZESCO/REA only measured the number of connections and did not distinguish by the gender of the beneficiaries. (c) M&E utilization 53. The M&E framework was used to inform project progress and aided project refinement during the course of implementation. The framework was also useful in determining the beneficiaries of the various project components and in distinguishing between urban and rural, and grid and off-grid. 2.4 Safeguard and Fiduciary Compliance Safeguard compliance 54. The project was classified as environmental category B and triggered four safeguard policies. Environmental Assessment (OP/BP 4.01) and Involuntary Resettlement (OP/BP 4.12) were triggered due to investments in grid and off-grid extension; Safety of Dams (OP/BP 4.37) and Projects on International Waterways (OP/BP 7.50) due to anticipated investments in mini-hydro development under the off-grid component of the project. As part of project preparation, an Environmental and Social Management Framework (ESMF) was prepared. 15 55. The overall safeguards rating remained Satisfactory until 2014 when a resettlement issue was raised during the implementation of the Kanyama substation reinforcement. ZESCO’s contractor proceeded to extend distribution lines in the proximity of Mwaboneka Market before an adequate Resettlement Action Plan (RAP) was in place. The Bank requested ZESCO to halt works and prepare a RAP. ZESCO subsequently prepared the RAP for the remainder of this distribution line. The Bank approved the RAP and appropriate compensation payments for the temporary shutdown of affected businesses were provided. Accordingly, the safeguard rating was downgraded to Moderately Satisfactory. However, by project closing this rating had been upgraded to Satisfactory. Fiduciary compliance 56. Overall, financial management (FM) performance of the project was moderately satisfactory. ZESCO submitted its project reports on time whereas REA had difficulties in submitting project reports, audited financial statements, and withdrawal applications (WAs) on time and in reconciling its designated accounts. As a result of late submission of WAs, REA experienced cash flow problems during the course of the project. Because of REA’s problems, the FM rating of the project was downgraded from satisfactory to moderately satisfactory in October 2014. In general, disbursements throughout implementation were slow. However, the project submitted its unaudited interim financial reports (IFRs) to document past expenditure on time and no major issues were identified. Procurement 57. The procurement performance rating for the project overall was satisfactory. Both ZESCO and REA were able to undertake their procurement activities on time, despite an initial slow start and challenges with cost estimation which affected the potential contracts that could be funded. During the course of the project, REA enhanced procurement capacity through the creation and staffing of a Procurement and Supplies Unit. In addition, ZESCO seconded a full time procurement specialist to the Project Implementation Unit for the duration of the project. The technical and procurement specific staff of ZESCO and REA also underwent procurement and contract management training over the life of the project, which enhanced the institutional capacities of the two entities to undertake procurement and manage the contracts. The skills learnt over the project implementation proved useful in determining the use of appropriate bidding documents, and in designing and carrying out procurement on two other World Bank funded projects, namely, the Lusaka Transmission and Distribution Rehabilitation Project (P133184) and Kafue Town – Muzuma - Victoria Falls Regional Transmission Line Reinforcement Project (P124351). 2.5 Post-completion Operation/Next Phase 58. Most of the core activities, including grid intensification, reinforcement, and extension, fall under the respective mandates of ZESCO and REA. Some of the capacity and institutional improvements as a result of this project will therefore support ongoing activities in these areas and enhance the chances that the results of the project will be sustained over time. The connection subsidy program, introduced under the project, will 16 also continue under the Electricity Access for Low-income Households in Zambia Project (P146636), funded by Global Partnership for Output-Based Aid (GPOBA). ZESCO is also distributing additional CFLs, at its own cost, as part of a demand side management intervention. 59. The Increased Access to Electricity Services Project also contributed to the introduction of solar PV systems in Zambia. Furthermore, the project supported the stimulation of private sector participation in the sale, distribution and installation of solar PV home-systems and products. 60. REA’s solar PVs installed under component 2c include a five year system maintenance which goes beyond the project’s closing date. REA was informed before signing the contracts, the last of which was signed in February 2015, that these contracts would remain eligible for Bank financing until the project closing date. Beyond this, REA would have to fund the contracts from other sources. To ensure sustainability, the Bank had proposed that this program be integrated into REA’s operations with the requisite budgetary provision. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Relevance of objectives (PDO) Rating: High 61. The project development objective was “to increase access to electricity services and improve efficiency and quality of the electricity distribution system in targeted areas”. This objective continues to be of relevance in relation to national priorities. The energy sector goal in the Revised 6th National Development Plan 2013-2016 is “adequate and reliable supply of energy at the lowest economic, social and environmental cost.” In order to achieve this goal, the government intends to “…increase rural and national access to electricity” from 4.25 percent and 26.25 percent in 2013 to 8 percent and 30 percent in 2016 for rural and urban households, respectively. The need to increase access to electricity is also stated in the Bank Country Partnership Strategy FY13-16. Meanwhile, in November 2015, the Central Statistical Office reported that national electricity access had reached 32 percent. This implies that a significant proportion of Zambian households still remain without access to electricity and consequently, further expansion of access and improvements in the efficiency of the distribution network continues to have high relevance in the country. Relevance of objectives (GEO) Rating: Substantial 62. The GEO was to “to remove barriers to renewable energy technologies to help mitigate greenhouse gas emissions”. The GEO is in line with the United Nations 17 Framework Convention on Climate Change, as well as Zambia’s national context of limited renewable energy capacity with the exception of large-scale hydropower. Relevance of design and implementation (PDO) Rating: Modest 63. The project design and implementation remained relevant and functional. All components under the project, namely (i) investment in reinforcement to strengthen the quality and reliability of electricity supply; (ii) investment in access expansion to extend electricity supply to both urban and rural areas; and (iii) provision of technical assistance to strengthen the institutional capacity of the two main implementing agencies, were closely linked to the project objective. 64. 61. Although all components were highly relevant to the project objective, the project had a very broad scope with a disparate number of sub-components. Project implementation would have been more efficient with a narrower scope. For the off-grid components, i.e., isolated grids and solar PV systems, background analysis at the appraisal stage was limited to describing the broad conceptual approach that would be followed. Notably, the cost of the isolated grid/mini-hydro sub-component was considerably underestimated. Similarly, for the solar PV systems, even though the target of 250 public institutions and 10,000 households was set, the specific communities that would benefit were not identified and the potential number of household connections was substantially overestimated. This led to a reduction of the households target to 2,500 during implementation as the chosen project sites did not have sufficient households to connect. This target was further reduced to 500 on account of implementation delays. The number of public institutions was reduced to 100. 65. While the project did help in stimulating private sector participation particularly in the sale, distribution, and installation of solar PV home systems and products, overall the interest of the private sector had not been adequately assessed at appraisal. For all components that involved the private sector, the project assumed that private capital would be available to support project implementation. The project appraisal assumed that US$11 million, approximately 15 percent of the total project cost, would come from private sponsors. However, there was no assessment of private sector appetite nor the policy and regulatory framework required to attract private investors. In addition, the institutional capacity of local entrepreneurs and/or local community organizations that were expected to become project sponsors was not examined. 66. Project implementation arrangements involved two main agencies: (i) ZESCO, the state-owned power utility, already experienced in expanding the grid network; and (ii) REA, established in 2006, which was at a formative stage and hence had limited experience in carrying out off-grid access investments. There was also a lack of readiness of some sub- components at project commencement, which contributed to slow implementation progress. However, this and the coordination between ZESCO and REA improved over time. 18 67. Despite these challenges, implementation accelerated gradually due to the timely restructurings and the provision of additional financing. The restructurings, which were well documented, allowed the project to adjust targets to more realistic levels and re- allocate funding as necessary. Also, the additional financing allowed the project to accommodate emerging needs, such as the Kanyama and Livingstone substation works and connection fee subsidies. These timely interventions ensured the realignment of the project towards the achievement of the PDO as illustrated by the number of households that gained access to grid electricity and solar PV home systems and products. Relevance of design and implementation (GEO) Rating: Modest 68. The original set of indicators (installed capacity of renewable energy systems and CO2 reduced) indicate that the project was originally aiming to promote the use of isolated grid/mini-hydro systems and thereby avoid CO2-intenstive diesel generation in off-grid rural areas. However, since isolated the mini/grid-hydro component was dropped in the second restructuring, the indicator relating to renewable energy system capacity was replaced by that of load reduction through CFL distribution. This change impacted the results chain, since CFL is not a renewable energy technology. In addition, despite the objective of removing barriers to renewable energy technologies, the project was not designed to directly address such barriers- for example, through enabling policies and tariffs. 3.2 Achievement of Project Development Objectives and Global Environment Objectives Achievement of PDO Rating: Substantial Achievement of the PDO 69. The project PDO was “to increase access to electricity services and improve efficiency and quality of the electricity distribution system in targeted areas”. For the purposes of assessing the achievement of this objective it can be viewed as being comprised of three parts: (i) increasing access to electricity services; (ii) improving efficiency of the electricity distribution system in targeted areas; and (iii) improving quality of the electricity distribution system in targeted areas. These three parts are weighted equally to derive the sub-rating for the achievement of the PDO. (i) Increasing access to electricity services Rating: High 70. Overall, the project surpassed the target for increasing access to electricity, mainly due to accelerated implementation over the last three years of the project. Increased access was measured by the number of households that were provided with electricity connections under the project. Both rural and urban households were targeted. Four components, namely grid intensification, grid extension, solar PV, and connection fee subsidy, contributed to increasing access to electricity services. It had also been expected that rural 19 households supplied by isolated hydro mini-grids would contribute to increased access to electricity. This component of the project was however dropped at the 2013 restructuring. Indicators Baseline Target3 Achieved Achievement rate Number of households in 0 49,500 89,655 181% urban areas provided with access to electricity under the project Number of households in 0 1,500 2,610 174% rural areas provided with access to electricity under the project Total 0 51,000 92,265 181% 71. The connections target was surpassed by a significant margin as shown in the table above. This outcome revealed the serious bottleneck that connection charges present to potential electricity consumers. Furthermore, surpassing of the target was also a reflection of improvements in implementation capacity within both ZESCO and REA over the project duration. The project would have registered an even greater number of new household electricity grid connections had the delays in implementing the grid extension sub- component been overcome. The off-grid electricity access that the project provided through solar PV systems also provided an important contribution towards increasing access and significantly surpassed the target of 500 systems distributed. Some 1,134 solar home systems and 5,714 solar lanterns were distributed, with fours lanterns counted as equivalent to one solar home system for the purpose of computing the project achievement. (ii) Improving efficiency of the electricity distribution system in targeted areas Rating: Substantial 72. The indicators for distribution system efficiency of the electricity distribution system were the percentage of distribution losses in the project areas. The grid reinforcement component and the Kanyama and Livingstone substation components that were included in the additional finance operation were intended to achieve this objective. Indicators4 Baseline Target Achieved Achievement rate Reducing electricity 23% 14% 11% 133% losses from distribution 73. The project exceeded the distribution loss target by a significant 3 percent. This level of distribution losses is comparable with the better performing electricity utilities in 3 Revised target after restructuring. 4 The target areas were Kanyama, Livingstone and Figtree and Chibombo. 20 sub Saharan Africa and results in increased revenue for ZESCO through increased consumption by existing consumers or via additional connections. (iii) Improving quality of the electricity distribution system in targeted areas Rating: Substantial 74. The indicators for distribution system quality of the electricity distribution system were the average interruption frequency per year in the project areas. The grid reinforcement component and the Kanyama and Livingstone substation components that were included in the additional finance operation were intended to achieve this objective. Achievement of the target implies that electricity consumers in the targeted areas would experience less unplanned power interruptions than prior to project implementation. Indicators5 Baseline Target Achieved Achievement rate Average interruption 50 times/ 30 times/ 30 times/ 100% frequency per year in the year year year project areas 75. The indicators show that, as compared to the baseline of 50 times per year, the project reduced the interruption frequency to 30 times per year. Hence, the second objective of “improving quality of electricity distribution system in targeted areas” was achieved (while this is a good achievement and met the target, the number of interruptions remains high and interruptions continue on a regular basis). 76. Based on the split evaluation methodology for restructured projects, the project outcomes have been assessed against the three phases of the operation: (i) project effectiveness to first restructuring, first restructuring – second restructuring, and second restructuring – project close). The result of the split evaluation indicates that the PDO has been substantially achieved. Pre- First 2nd Overall restructuring restructuring restructuring PDO Rating Moderately Moderately Moderately Moderately Satisfactory Satisfactory Satisfactory Satisfactory Rating value 4 4 4 -- Weight (%) 2.1% 21.9% 76% 100% Weighted 0.084 0.876 3.04 4 value 77. Although the achievement by project indicators exceeded targets at project closing, grid extension works at Mangango and Mukonchi that would have enabled more rural grid 5 The target areas were Kanyama, Livingstone and Figtree and Chibombo. 21 connections had not been completed. Furthermore, grid reinforcement works at the Fig- Tree and Chibombo substations, including the associated transmission line, remained outstanding. With respect to the efficiency and quality of electricity supply in the targeted areas, the annual frequency of outages reduced from 50 to 30, while distribution losses fell from 14 percent to 11 percent. However, all outstanding project works were completed within six months of project close. Achievement of the GEO Rating: Substantial 78. The GEO was “to remove barriers to renewable energy technologies to help mitigate greenhouse gas emissions.” For the purposes of assessing the achievement of this objective it can be viewed as being comprised of two parts: (i) removing barriers to renewable energy technologies; and (ii) reducing greenhouse gas emissions. The achievement of the GEO is assessed based on the following indicators derived from both GEO and PDO. Indicators6 Baseline Target Achieved Achievement rate Rural households with 0 HH 500 HH 2,563 HH 513% access to electricity through renewable (solar PV) Community connections 0 100 104 104% (grid extension/ renewables)7 CO2 reduced 0 tCO2 5,600 tCO2 12,005 tCO2 214% (i) Removing barriers to renewable energy technologies Rating: Modest 79. The project had two sub-components associated with renewable energy technologies – isolated grid/mini-hydro, which was dropped at the second restructuring, and solar PV systems. A total of 2,563 households8 and 104 public facilities were provided with solar PV systems reflecting a 513 percent and 104 percent achievement of the targets for these two categories, respectively. While the private sector is increasingly becoming active in marketing solar PV systems and other off-grid products in rural Zambia, barriers to renewable energy technologies, including relevant policies and investor confidence, continue in Zambia. 6 GEO indicators also included load reduction, with a target of 45 MW; 57 MW load reduction was achieved. 7 Although the indicator captures both connections by grid extension and solar PV, only connections by solar PV were reported. 8 1,134 solar home systems and 5,714 solar lanterns, with fours lanterns counted as equivalent of one solar home system. 22 (ii) Reducing greenhouse gases Rating: High 80. Greenhouse gas reduction from the project was computed based on the basis of two assumptions: demand-side management through CFL distribution; and the use of off-grid solar products. For demand-side management the 2013 restructuring targeted 5,600 tCO2 reduction through distribution of one million CFLs. Since the project successfully distributed one million CFLs, it is assumed that 5,600 tCO2 was reduced. For off-grid solar, it is estimated that 6,405 tCO2 was reduced. CO2 reduction per unit of solar lamp has been derived from the Clean Development Mechanism methodology AMS-III.AR "Substituting fossil fuel based lighting with LED/CFL lighting systems". For household and institutional solar home systems, CO2 reduction per unit is derived from the PAD estimates. Hence, a total of 12,005t of CO2 was reduced as a result of the project. 3.3 Efficiency Rating: Substantial Economic efficiency 81. A re-evaluation of the economic and financial analysis revealed that the project remained economically viable, with a positive economic internal rate of return (EIRR) and net present value (NPV) as show in the table below. Summary of economic analysis at Project Close Components EIRR (%) NPV (US$M) Grid reinforcement 40.9% 44,58 Grid access components (grid intensification, 45.6% 83,68 extension, and connection subsidy) Solar PV 15.2% 0.655 82. Grid reinforcement resulted in a higher EIRR and NPV than the appraisal estimate, as it takes into account the benefit of increased capacity of supply, which was not taken into account at the appraisal. Since power loads at reinforcement sites were reaching their maximum capacity, the reinforcement work, which more than doubled the transformer capacities, resulted in significant benefit of increased and more reliable electricity supply. 83. Grid access components (grid intensification, extension, and connection subsidy) resulted in a higher EIRR and NPV than at the appraisal estimate. This is attributable to two factors: (i) the original target of household connections was 65,000 but the project connected close to 90,000 households; and (ii) the original analysis assumed significant increases in tariff, but tariffs actually remained low. Low tariffs translated into low cost to be borne by electricity users. 84. Solar PV resulted in a lower EIRR and NPV than expected in the appraisal estimate. This is due to the fact that 10,000 solar home systems were planned to be installed at the appraisal stage but the actual number of installations was less than 3,000. 23 Financial Efficiency 85. A re-evaluation of the financial analysis also revealed that the project remained financially viable, with a positive financial internal rate of return (FIRR) and NPV as show in the table below Summary of financial analysis Components FIRR (%) Financial NPV (US$M) Grid reinforcement 24.6% 17.28 Grid access components (grid intensification, 29.4% extension and connection subsidy) 77.9 86. Grid reinforcement resulted in a higher FIRR and NPV than at the appraisal estimate, as it takes into account the benefit of increased capacity of supply, which was not taken into account at appraisal. 87. Grid access components (grid intensification, extension, and connection subsidy) resulted in a higher FIRR and NPV than at the appraisal estimate. This is due to the fact that the original target of household connection was 65,000 but the project actually connected close to 90,000 households. 88. Overall, investments in all components resulted in a satisfactory economic and financial IRR and a positive NPV. Grid reinforcement and grid access components generated higher economic and financial IRRs and NPV than the appraisal estimates. Solar PV component resulted in lower economic IRR and NPV than the appraisal estimate, as the analysis at appraisal was based on expected targets that were later revised downward. Detailed analysis and methodology for the economic and financial analysis are provided in Annex 3. 3.4 Justification of Overall Outcome and Global Environment Outcome Rating Overall Outcome Rating: Moderately Satisfactory 89. The project development objective was to “to increase access to electricity services and improve efficiency and quality of the electricity distribution system in targeted areas.” The outcome rating takes into account considerations of relevance, efficiency of the investments, and progress made towards the different targets. Increasing access to electricity services continues to have high relevance for the country; however, shortcomings in the original design and implementation arrangements constrained what could be achieved, especially in expanding rural access. With regard to efficiency, this has been satisfactory across the investments undertaken. In regard to achievement of the main project indicators, the project’s urban access connections target was exceeded, with an achievement rate of 181 percent. For rural areas, although the revised connection target was achieved, this was considerably less than the original target. Finally, despite improvements in reducing the average frequency of interruption, progress has been modest and interruptions continue on a regular basis. Over the last six months, the frequency of 24 interruptions has in fact registered a notable increase due to electricity supply shortages countrywide. Overall, there has been modest improvement in the reliability and efficiency of the distribution network in the project areas and limited progress in the expansion of access in rural areas. Despite significant urban access improvements, the PDO is rated Moderately Satisfactory overall. GEO Rating: Moderately Satisfactory 90. The project achieved its load reduction and CO2 avoidance targets. The barriers to off-grid solar products have been reduced, although general barriers to renewable energy technologies, including relevant policies and investor confidence, remain in Zambia. The GEO remained relevant, although load reduction through CFL distribution was inadequate as an indicator to measure either renewable energy technology barriers or CO2 avoidance. Based on these considerations, the GEO outcome is rated Moderately Satisfactory. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 91. Poverty Impact: The connection subsidy component had a direct link to reducing poverty since it targeted low-income households whose living conditions are expected to improve with access to electricity. It should also be noted that about 90 percent of the household connections achieved under the project were in urban/peri-urban areas and, therefore, the project’s main poverty impact is skewed towards the urban poor. 92. The project had a further impact through the provision of solar PV systems to the public facilities and associated staff housing of rural communities isolated from the main grid. The potential benefits include improved education and health outcomes promising an important social development impact on these communities. Private entrepreneurs are now showing interest in marketing solar products in rural Zambia. This demonstrates the potential of solar technology to become sustainable in Zambia. With government support, the pace of increasing electricity access through solar technology can be increased. 93. Gender Aspects: In regard to gender, the number of female beneficiaries from the investment was estimated at 51 percent. However, this was not explicitly measured due to the unavailability of disaggregated gender data since the ZESCO business information system was not configured to capture this data for new customers. 94. Social development: Access to electricity is positively correlated with social development. Furthermore, component 2, expanding electricity access, explicitly targeted rural schools and health facilities. Overall, some 104 public facilities, including schools and rural health centers, benefitted from the project. (b) Institutional Change/Strengthening 95. ZESCO’s and REA’s institutional capacity was strengthened by the project. Through formal training and implementation experience, the project management 25 capabilities of ZESCO and REA were enhanced. Additional training opportunities also strengthened the technical and administrative capabilities of the Department of Energy, ZESCO, and REA. The training provided and staff trained under the project is detailed in Annex 5. Implementing agency staff also gained greater awareness of safeguards related issues by implementing the Bank’s safeguards policies on the project. 96. The project also highlighted the significant barrier to access that the existing charge for a new electricity connection presents. Lastly, the project revealed the contribution to access that could be made through the provision of off-grid solar PV systems and products. (c) Other Unintended Outcomes and Impacts (positive or negative) 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 97. No beneficiary surveys or stakeholder workshops were carried out. 4. Assessment of Risk to Development Outcome and Global Environment Outcome Risk to Development Outcome Rating: Moderate 98. The main risks to the development outcome are considered to be Moderate. Encouraging progress has been made over the past two years in expanding the grid and reducing technical losses in the urban network. The demonstrable impact of the project in increasing electricity access has helped the government attract additional resources from different development partners to support its electricity access agenda. After the closing of this project, ZESCO received funds from GPOBA to connect 22,000 households and 5,000 micro and small enterprises of the households target had already been reached by November 2015 revealing the institutionalization of consumer connection program that the project engendered. 99. The EU and European Investment Bank are also considering providing finance to ZESCO to increase urban and rural electricity access in Zambia. KfW has also offered EUR80 million to promote electricity access in ZESCO’s southern division and indicated that the project design shall be similar to that of the consumer connections component of the Increased Access to Electricity Services Project. With such donor interest in supporting Zambia’s electrification program, there is a strong likelihood that a significant proportion of the funding requirements will continue to be met. The financial sustainability of the sector is, however, a key risk that will continue prevail for as long as tariffs remain below the costs incurred in electricity service provision. 100. After the project closure, a significant risk to grid connected electricity supply has emerged. Zambia’s electricity generation mix is dominated by hydropower that accounts for more than 90 percent of generation. However, due to lower than expected rainfall, the country’s main electricity generation reservoirs were not adequately replenished during the 2014/15 rainfall season and, as a result, their water levels have been lower than normal. This has forced a reduction in electricity generation and consequently, the implementation of rolling black-outs (load-shedding) for a minimum of eight hours daily per household. 26 To alleviate the situation, the government is undertaking measures that include the import of emergency generation, diversification of the generation mix to include solar PV among other primary energy sources, and further demand side management through the distribution of more CFL bulbs. Risk to Global Environment Outcome Rating: Moderate 101. The risk to the GEO outcome is considered Moderate. The project has contributed to the emergence of off-grid solar products in Zambia, and the there is a strong evidence of market growth led by private sectors. The Lighting Africa Program is now considering Zambia as one of its program countries. The growth of the market will contribute to the avoidance of greenhouse gas emissions. On the other hand, barriers for other on-grid renewable energies, except for hydropower, remain. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (b) Rating: Moderately Unsatisfactory 102. The decision to provide Bank financing for the project had a strong justification. The project objectives were closely aligned with the government’s poverty alleviation strategy and supported the goals of economic growth, private sector investment, a more efficient power sector, and the provision of basic social services to isolated rural communities. These goals were also consistent with the Bank’s own assistance strategy for Zambia. Project design focused on priority investment components needed to improve the operational efficiency of Zambia’s power sector and attract private investment. However, implementation arrangements – which combined an experienced power utility, ZESCO, with newly established REA – were not adequately assessed. 103. Further shortcomings during preparation, which had an adverse impact on project implementation, included the fact that none of the investment components were ready for implementation at Board, which led to extensive implementation delays; this was especially true of the isolated grids/mini-hydro component, which had not been properly evaluated and was later cancelled. A lack of readiness at start-up had the effect of delaying project benefits to first time electricity consumers. It also delayed needed improvements in the operation and reliability of the country’s electricity network. The decision to include both grid and off-grid investment in the overall design was, in retrospect, problematic in the absence of a policy and regulatory framework for rural electrification (despite good implementation of the off-grid investments in the final two years of the project). Taking into account the above considerations, Bank Performance during preparation is rated Moderately Unsatisfactory. 27 (b) Quality of Supervision Rating: Satisfactory 104. The project was supervised on a regular basis throughout the entire seven year implementation period with some 12 Implementation Status and Results Reports (ISRs) prepared by regular missions from headquarters to the field, supported by the country office in Lusaka. To respond to the evolving situation during implementation, two restructurings were undertaken. The first restructuring, in September 2010, provided additional financing and introduced more realistic project indicators. The second restructuring, in May 2013, cancelled the mini-grid component and revised the results framework. Overall, the Bank was proactive in supporting ZESCO and REA in project implementation. Based on this, Bank performance during supervision is rated Satisfactory. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 105. In general, the Bank provided adequate and pro-active supervision, which addressed effectively the shortcomings identified in the project scope and implementation arrangements, i.e., the combination of grid and off-grid elements in the project scope and having ZESCO and REA as joint implementing agencies. The Bank team remained engaged throughout the implementation of the project and was able to assess difficulties that arose, anticipate problems, and provide means for resolution that enabled progress towards the PDO. For these reasons, although project implementation progress at the beginning was slow, through active support, including two restructurings and the additional financing, the Bank team was able to work with counterparts to improve implementation progress. Overall, Bank performance is rated Moderately Satisfactory. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 106. The GoZ strongly supported the project development objective of increasing access and improving the reliability of the existing network through further investment. However, this was not adequately reflected in initial project implementation. The project only became effective nine months after project approval. The project also did not start implementation till 2010. Nonetheless, following management changes at ZESCO, project implementation progress steadily improved. Furthermore, the GoZ exhibited increased commitment to the project and supported the two restructurings, including the additional financing operation, which ultimately led to improved progress towards meeting the PDO. Overall, government performance is rated as Moderately Satisfactory. 28 (b) Implementing Agencies’ Performance Rating: Moderately Satisfactory 107. The project had two implementing agencies: ZESCO, the main power utility, and REA, with responsibility for developing rural electrification plans and monitoring their implementation. Despite a slow start due to a lack of readiness of the efficiency improvement investments, ZESCO implemented most of the reinforcement and intensification investments well. However, works at Fig Tree, Chibombo, Mukonchi, and Mangango did not complete at project close. Overall, the work that ZESCO carried out reduced network losses and expanded urban access above the target levels. In addition, ZESCO administered the procurement of civil works and equipment adequately. ZESCO’s performance is rated Moderately Satisfactory. 108. REA faced challenges in project implementation. It was affected by staff turnover, which adversely affected its already limited capacity. It also failed to advance preparation of the three mini-hydro developments, which were later abandoned. However, REA performance steadily improved, and it played an effective role in helping develop off-grid electricity supplies (based on solar PV systems). By the end of the project period, REA had connected more households than the agreed target. REA also installed solar PV systems in schools and health centers and exceeded the original target. REA’s performance can be considered as Moderately Satisfactory. 109. Based on the above, overall implementing agency performance is rated Moderately Satisfactory. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 110. Overall Borrower performance is rated Moderately Satisfactory. Improvements in implementation during the final two years resulted in the main project targets being met or exceeded. ZESCO was also able to cover its operational costs during the project period. 6. Lessons Learned (i) Need for a more selective project design 111. The project design needed more focus and prioritization. The initial design of the project was ambitious and complex, covering multiple grid and off-grid activities, demand- side management and capacity building. There were also coordination difficulties in the project implementing arrangements. For example, REA managed the funds for the grid extension and connection subsidy sub-components, while ZESCO undertook the actual physical works since these initially targeted rural areas that were with REA’s mandate. This arrangement created the need for additional payment transactions and work verification, which delayed implementation. Focusing on one single implementing agency might have resulted in a better project design and improved the prospects for a more 29 efficient implementation of the project. Country monitoring and evaluation systems also need to be adapted to respond to the project results framework. For example, a provision should have been made in the ZESCO business information system to include the capture of gender data for new customer connections. (ii) Appropriate Institutional Capacity and Implementation Arrangements 112. Given the complexity of the project design, successful implementation required that the implementing agencies had the necessary capacity and coordinated implementation arrangements between ZESCO and REA. This was not the case in the early stages of project implementation and delayed advancement towards the PDO. The team did however recognize this challenge and undertook measures to address it as part of the project restructurings. This lesson also implies that project preparation team should make realistic assessment on the capacity of the clients to implement diverse range of activities. (iii) The value of timely restructuring 113. Despite the challenge of a complex project design, the project benefited considerably from the flexible and timely restructurings and additional financing. Modifying the results indicators so that they were more reflective of the situation on the ground placed the project on a more realistic track. Also, the connection subsidy program that was part of the additional financing played a crucial role in first achieving, and then exceeding, the household connection target and advancing the project towards achieving the PDO. (iv) Importance of Readiness for Implementation 114. Project effectiveness was delayed by nine months after Board approval in 2008. Implementation only started after the first restructuring of the project in 2010. These are classic signs of approving projects which are not ready for implementation. The Bank should acknowledge that developing projects (particularly complex projects involving new implementation agencies) often takes a significant amount of time and approving projects when the borrower and implementing agencies are not ready results in slow implementation and disbursement and often requires restructuring and extensions of closing dates. 115. The mini-grid and off-grid components of the project were also clearly not ready for implementation due to the lack of the necessary background analysis at entry. If such analysis/assessment had been undertaken, the design of these components would have better reflected the country context and, hence, more realistic and achievable targets would have been established from the outset. (vi) Effectiveness of Connections Subsidy Program 116. The connections subsidy program, which was part of the additional financing in 2010, played an important role to rapidly increase household connections. It reduced the connection fee by approximately 80 percent, and significantly increased connection uptake by urban and peri-urban customers. The subsidy program is now funded by GPOBA, and 30 customer demand remains high. The success of this component reaffirms that connection fees are a significant barrier to potential electricity users, and reducing this barrier can be a cost-effective way to increase household connections. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 117. The borrower’s ICR is provided in Annex 6. (b) Co-financiers 118. The European Commission (EC) observed that during the early stages of the project there were delays by the Bank in reporting on implementation progress. During the latter stages of the project the EC observed that the Bank was providing implementation progress reports in a timely manner. (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) N/A 31 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Zambia: Increased Access to Electricity Services - P077452 Appraisal Actual/Latest Percentage of Estimate at Estimate Estimate Appraisal Components 2013 (USD (USD (at 2013 restructuring millions) millions) restructuring) 1a Reinforcement 7.2 9.3 8.1 87% 1b Intensification 8.8 10.2 6.8 67% 1c EE/DSM 1.6 1.6 1.8 114% 2a Grid extension 20.0 13.2 11.1 84% 2b Mini grids 11.2 1.0 0.8 80% 2c Solar PV 7.2 6.5 4.4 68% 3a TA-ZESCO 2.3 0.7 32% 5.5 3b TA- REA 2.0 0.9 46% AF1 Kanyama and 9.8 73% 13.4 Livingstone substation AF2 Connecting low 6.6 75% 8.8 income households (Designated Accounts) 0.2 Total Baseline Cost 61.5 68.3 Physical Contingencies 7.6 Price Contingencies 7.6 Total Project Costs 76.7 68.3 51.3 PPF 0.00 0.00 0.00 Front-end fee IBRD 0.00 0.00 0.00 Total Financing 76.7 68.3 51.38 Required (Data as of December 1, 2015) (b) Financing P077452 - Zambia: Increased Access to Electricity Services Estimate at Percentage Actual/Lat Appraisal 2013 of est Type of Estimate restructuri Appraisal Source of Funds Estimate Financing (USD ng (at 2013 (USD millions) restructuri millions) ng Borrower 12.0 4.0 N/A 0% EC: European Commission 15.0 11.65 8.7 74% International Development 39.9 83% 33.0 48.0 Association (IDA) 32 Global Environment Facility 4.5 4.5 2.7 60% Project Sponsors 11.0 0.0 0.0 0.0% Total 75.5 68.15 51.3 75% (Data as of December 1, 2015) 33 Annex 2. Outputs by Component Sub-Component 1a Reinforcement Additional Finance - Construction of Kanyama Substation in Lusaka Additional Finance - Construction of Lusaka Road Substation in Livingstone Reinforcement work was implemented in three sites. Reinforcement sites Output Lusaka 123 KV Ring Implemented under Lusaka Transmission and Distribution Rehabilitation Project Coventry substation Dropped Roma substation Dropped Figtree-Chibombo substation Completed with delay; 88-132/33kV substation and 88-132kV transmission line between Figtree and Chibombo Kanyama substation Completed; 22/11kV, 2x25MVA Livingstone substation Completed; 66/11kV 2x20MVA Sub-Component 1b Intensification Project Site Distribution Lines Connected (in km) Customers @30th June ‘15 Central Makululu 23.1 942 Central Foxdale 12.5 18 Central Chelstone Extension 21.7 380 Central Kabanana 11.5 1668 Copperbelt Kabushi (Ndola) 17.3 1421 Copperbelt Chipulukusu (Ndola) 36.6 1138 Copperbelt New Kawama (Kitwe) 13.8 620 Lusaka Kanyama 21 1740 Lusaka Misisi 15 120 Lusaka Garden 21 370 TOTAL 293.5 8,417 Sub-Component 1c Energy Efficiency and Demand Side Management One million CFLs were procured and distributed, reducing 57MW of peak load. 34 Sub-Component 2a Grid Extension Project Site Distribut Connected Status @ 30th ion Customers June 2015 Lines (in @ 30th km) June’15 Northern Lukulu – Mpika 18.5 4 Completed Northern Ipusukilo Mission- Luwingu 18.1 20 Completed Northern Lukulu Farm Block –Kasama 51 23 Completed Central Mukonchi Farm Block – 177 Nil Ongoing Kabwe Central Mangango Mission – Kaoma 96 Nil Ongoing TOTALS 360.6 47 Sub-Component 2b Isolated Grids/mini-hydro systems This sub component was dropped due to unexpectedly high cost. Sub-Component 2c Solar PV Systems SSMP Site Number PV systems verified by REA Total Systems Verified by REA Solar Lanterns Solar Kits Kalomo B1&B2 4,140 1,005 5,145 Isoka 600 43 643 Lukulu 974 86 1,060 Total 5,714 1,134 6,848 Sub-Component 3a TA to ZESCO Various trainings were implemented, including the following courses. ‐ ICT-Based Financial Management ‐ ICT-Based Financial Management and Disbursement ‐ Energy Industry EPC Contracts course ‐ Energy Industry EPC Contracts course ‐ Planning, Budgeting and Rolling Forecasts ‐ Attending the balanced scorecard certification course ‐ Contract Drafting, Negotiations Skills and procurement ‐ Best Practices in Human Resource Management ‐ Modernized Human Resource Management ‐ Risk Management ‐ Overhead lines ‐ Environmental Management ‐ Substation Engineering 35 Sub-Component 3b TA to REA Various trainings were implemented, and 35 REA staff received trainings. Additional Finance - Connecting new low income households to the Grid in electrified areas Connection subsidy was provided to 81,000 low-income households, exceeding the target of 51,000. The subsidy reduced connection fee from US$150 (ZMW769.00) for a standard connection to US$30 (ZMW150.00). 36 Annex 3. Economic and Financial Analysis Economic Analysis The economic analysis covers i) reinforcement (including reinforcement components under additional finance), ii) grid intensification, grid extension and connection subsidy, and iii) solar PV. It does not cover isolated grid/mini-hydro because it was dropped. Demand-side management components (CFL distribution) is not covered either because it was not analyzed in the PAD. The analysis focuses on the consumer surplus arising to electricity users. Common assumptions used in the analysis are the following: ‐ O&M cost: 1.2 percent of investment cost ‐ Payments of electricity users: 0.05 US$/kWh, computed based on ZESCO annual report 2011/2012 sales data. ‐ Willingness to Pay (WTP) of grid electricity users: 0.125 US$/kWh, based on IAES additional finance paper. ‐ Cost of power: 0.015 US$/kWh, as used in the appraisal. ‐ Discount rate: 10 percent was assumed, as in the appraisal. ‐ The actual disbursement figure provided by ZESCO (including ZESCO’s own contribution) is used. ‐ The project was exempt from taxation, hence the taxation is not deducted from disbursement figure i) Reinforcement The reinforcement component aimed to reinforce ZESCO’s distribution networks by adding, replacing and upgrading distribution lines, transformers and substations. The expected benefit was increased access to electricity services through reduced outages in the targeted areas and reduced technical distribution loss. The work was implemented in three sites – Kanyama, Livingstone and Figtree/Chibombo. Cost: The cost side consisted of investment cost, operations and maintenance (O&M) cost, and payments by electricity users. Benefit: The benefit includes increased electricity services through i) reduced outages, ii) reduced technical distribution losses, and iii) increased capacity of substations and transformers. The increased quantity of electricity services in kWh is calculated based on pre-project electricity consumption in the targeted areas, reduced hours of outage, percentage of reduced distribution, and conservative estimate of increased supply capacity. The benefit is the product of increased quantity of electricity consumption and willingness to pay (WTP) of electricity users. The key assumptions include the following. ‐ Operation years: 15 years, as per the PAD ‐ Electricity sales to the targeted areas: due to the unavailability of time-series data, electricity sales to Kanyama and Livingstone are estimated based in 2009 sales data (512 GWh per year). Figtree/Chibombo is not included due to data unavailability. 37 ‐ Technical distribution loss was reduced from 23 percent to 14 percent, as reported by ZESCO. ‐ Annual outage hours were reduced from 50 hours to 20 hours, as reported by ZESCO. ‐ 25 percent increase in the electricity sales is assumed as the result of increased supply capacity. The analysis showed economic IRR of 40.9 percent and NPV of US$44,578,474. This is a conservative estimate, since i) the benefit does not include reinforcement work in Figtree/Chibombo area, and ii) it assumes only 25 percent increase in electricity supply capacity, while in fact the transformer capacities in Kanyama and Livingstone more than doubled. ii ) Grid Intensification, extension and connection subsidy Grid intensification, extension and connection subsidy program are jointly analyzed, as they shared the same objective of increasing access to electricity services through on-grid connection. The intensification component aimed to intensify connections within ZESCO grids. The component covered 10 sites across Central region, Copperbelt region and Lusaka. Connection subsidy program was applied in all of these areas and also beyond. Grid extension component involved construction of distribution lines and installation of transformers in areas where no grids existed. Cost: The cost side consisted of investment cost, O&M cost, connection subsidies, customer contributions to connection fees, and payment of electricity users. Benefit: The benefit side was increased access to electricity services by newly connected customers. It was computed based on the users’ WTP, average electricity consumption per household, and total connections made. The key assumptions include the following. ‐ Operation years: 20 years, as per the PAD ‐ Average household electricity consumption: Based on ZESCO’s data, 300 kWh per month (3600 kWh per year) is assumed as a typical electricity consumption of a household. ‐ 85,961 connections made in total. The analysis showed economic IRR of 45.6 percent and NPV of $83,681,639. iii) Solar PV Solar PV component aimed to supply, install and maintain solar PV systems to schools, rural health centers and private households in rural areas. Cost: the cost side was the value of the contract given to the contractors, including procurement of equipment, installation and maintenance. 38 Benefit: The benefit side was electricity access to households and public facilities. The benefit was computed by the number of households/facilities with new access to electricity and WTP of public facilities and solar home systems (SHS). Distribution of 4 lanterns was converted to 1 SHS. ‐ Operation years: 10 years, as per the PAD ‐ WTP of public facilities: US$37 per facility per month. Provided in the appraisal as the WTP for high-capacity PV users. ‐ WTP of solar home system users: US$24 per household per month. Provided in the appraisal as the WTP for low-capacity PV users. ‐ PV distribution: 361 public facilities, 1134 SHS and 5714 solar lanterns (lanterns are converted as 1428.5 SHS) The analysis showed economic IRR of 15.2 percent and NPV of US$655,119. Summary of economic analysis Components Economic IRR (%) Economic NPV (US$) Grid reinforcement 40.9% 44,578,474 Grid access components (grid intensification, 45.6% 83,681,639 extension and connection subsidy) Solar PV 15.2% 655,119 Grid reinforcement resulted in higher EIRR and NPV than at the appraisal estimate, as it takes into account the benefit of increased capacity of supply, which was not taken into account at the appraisal. Since power loads at reinforcement sites were reaching their maximum capacity, the reinforcement work, which more than doubled the transformer capacities, resulted in significant benefit of increased and more reliable electricity supply. Grid access components (grid intensification, extension and connection subsidy) resulted in higher EIRR and NPV than at the appraisal estimate (US$73,000,000). This is attributable to two factors; i) the original target of household connection was 65,000, but the project connected close to 90,000 households, ii) the original analysis assumed significant increase in tariff, but the tariff actually remained low. Low tariff translated into low cost to be borne by electricity users. Solar PV resulted in lower EIRR and NPV than expected in the appraisal estimate. This is because, 10,000 SHS were planned to be installed at the appraisal stage, but the actual number of installation achieved was less than 3,000. Financial Analysis Financial analysis covers i) reinforcement (including reinforcement components under additional finance) and ii) grid intensification, grid extension and connection subsidy. Solar PV is not included as it was implemented by REA, which is not a revenue generating entity. 39 Analysis on demand-side management is not undertaken either. The analysis focuses on ZESCO as the revenue generating entity of the project. i) Reinforcement Cost: The cost side consisted of project, investment cost, O&M cost and cost of power. Revenue: Revenue was increased sales of electricity, computed by increased amount of electricity sales and average residential tariff. Increased amount of electricity sales is estimated as in the economic analysis. The analysis showed an FIRR of 24.6 percent and NPV of US$17,280,126. ii) Grid Intensification, extension & connection subsidy Cost: The cost side consisted of project investment cost, O&M cost and cost of power. Revenue: Revenue is the additional electricity sales by newly connected customers. This was computed based on average household electricity consumption, average residential and commercial tariff, and connected customers. Key assumptions were the following. ‐ Operation years: 20 years, as per the appraisal ‐ Average household electricity consumption: based on ZESCO’s data, 300 kWh per month (3600 kWh per year) is assumed as a typical electricity consumption of a household. ‐ 85,961 connections made in total Analysis showed and IRR of 45.1 percent and NPV of US$77,980,567 Summary of financial analysis Components Financial IRR (%) Financial NPV (US$) Grid reinforcement 24.6% 17,280,126 Grid access components (grid 45.1% 77,980,567 intensification, extension and connection subsidy) Grid reinforcement resulted in higher FIRR and NPV than at the appraisal estimate, as it takes in to the account the benefit of increased capacity of supply, which was not taken into account at the appraisal. Grid access components (grid intensification, extension and connection subsidy) resulted in higher FIRR and NPV than at the appraisal estimate (US$16,391,826). This is because the original target of household connection was 65,000, but the project actually connected close to 90,000 households. 40 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Arun P. Sanghvi Lead Energy Specialist AFTEG Team leader Malcolm Cosgrove-Davies Lead Energy Specialist AFTEG Team leader Xiaodong Wang Senior Energy Specialist AFTEG Team leader Raihan Elahi Senior Financial Analyst SASEI Wedex Ilunga Procurement specialist AFTPC Anil Cabraal Lead Energy Specialist EWDEN Raynold Duncan Lead Energy Specialist AFTEG Samuel O’Brien-Kumi Senior Energy Specialist AFTEG Marcus Wishart Water Resource Specialist AFTWR Chrisantha Ratnayake Senior Power Engineer AFTEG Baruany Elijah Luhanga Power Engineer AFTEG Helena Mamle Koffi Procurement Analyst Fenwick Chitalu Financial Management Specialist AFTFM Suzanne Morris Senior Financial Officer LOAFC Nicolette K. Dewitt Lead Counsel LEGOP Jonathan Pavluk Senior Counsel LEGAF Marjorie Mpundu Counsel LEGAF Paul Martin Senior Environmental Specialist AFTSD Gordon Appleby Social Impacts Specialist AFTS1 Anta Loum Lo Language Program Assistant AFTEG Supervision/ICR Bobak Rezaian Senior Energy Specialist AFTEG Team Leader Marjorie Mpundu Counsel LEGAF Suzanne Morris Senior Finance Officer CTRFC Monitoring and Evaluation Jutta Kern AFTRL Specialist Lungiswa Thandiwe Senior Environmental Specialist AFTEN Gxaba Richard H. Hosier Senior Environmental specialist ENVGC Fenwick Chitalu Financial Management Specialist AFTFM Andrey Gurevich Financial Analyst AFTEG Hiroshi Sumiyoshi Senior Operations Officer AFTEG Ahmad Slaibi Young Professional AFTEG Vonjy M. Energy Specialist AFTEG Rakotondramanana Bernadette T. Milunga Team assistant AFMZM 41 Raihan Elahi Senior Energy Specialist GEEDR Team Leader Andrey Gurevich Senior Investment Officer CMGMF Wedex Ilunga Procurement Specialist GGODR AFTG1 - Helena Mamle Kofi Procurement Analyst HIS AFTG1 - Hiroshi Sumiyoshi Senior Operations Officer HIS Marcus J. Wishart Sr Water Resources Spec. GWADR Paul Baringanire Senior Energy Specialist GEEDR Ravindra Anil Cabraal Consultant GEEDR Wedex Ilunga Senior Procurement Specialist GGODR Financial Management Lingson Chikoti GGO25 Specialist Renewable Energy Francesca Fusaro GEEDR Specialist Joseph Mwelwa Kapika Senior Energy Specialist GEEDR Kisa Mfalila Environmental Specialist GENDR Kristine Schwebach Safeguards Specialist GSURR Lien Thi Bich Nguyen Program Assistant GEEDR Sipiwe Janet Chihame Program Assistant AFCS3 Stephen Mugendi Counsel LEGAM Mukaindo (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) USD Thousands Stage of Project Cycle No. of staff weeks (including travel and consultant costs) Lending FY03 10.90 41,500.85 FY04 17.33 94,131.24 FY05 14.91 115,428.34 FY06 20.76 87,558.06 FY07 16.54 59,950.87 FY08 20.70 173,254.98 FY09 8.86 37,142.95 Total: 110 608,967.29 Supervision/ICR FY09 20.63 117,677.75 FY10 47.77 233,028.20 FY11 31.75 58,859.81 FY12 26.51 131,475.15 FY13 25.2 150,286.73 42 FY14 44.7 209,641.16 FY15 22.89 100,211.15 FY16 8.97 49,303.53 Total: 228.42 1,050,483.48 43 Annex 5: Training of DoE, ZESCO and REA Staff Department of Energy NO NAME COURSE INSTITUTION COUNTRY ATTENDED 1 Basilio Mwansa Electronic Records Info World Uganda Management 2 Brian Sinkala Monitoring and Global Cape town Mainza Evaluation of Energy Management South Africa Projects Training 3 Ngosa Mbolela Monitoring and Uhuru Institute Cape town Evaluation of Energy of Management South Africa Projects 4 Mafayo Ziba Monitoring and Uhuru Institute Cape town Evaluation of Energy of Management South Africa Projects 5 Biness Lukwesa Monitoring and Uhuru Institute Cape town Evaluation of Energy of Management South Africa Projects 6 Mandona Luhila Monitoring and Uhuru Institute Cape town Evaluation of Energy of Management South Africa Projects 7 Chola Chipampa Monitoring and Uhuru Institute Cape town Evaluation of Energy of Management South Africa Projects 8 Harriet Zulu Monitoring and Global Cape town Evaluation of Energy Management South Africa Projects Training 9 Jeff Chanda Monitoring and Uhuru Institute Cape town Evaluation of Energy of Management South Africa Projects 10 Florence K. Monitoring and Uhuru Institute Cape town Sikute Evaluation of Energy of Management South Africa Projects 11 William Masocha Monitoring and Uhuru Institute Cape town Evaluation of Energy of Management South Africa Projects 12 Beatrice Mukala Website Development Global Cape town Management South Africa Training 13 Aggrey Siuluta GIS standard Global Cape town Management South Africa Training 44 14 Agnelli Kafuwe Monitoring and Uhuru Institute Cape town Evaluation of Energy of Management South Africa Projects 15 Arnold Simwaba Strategic Leadership Uhuru Institute Cape town of Management South Africa 16 Misheck Monitoring and Uhuru Institute Cape town Mubuyaeta Evaluation of Energy of Management South Africa Projects 17 Sozi Chikoko Monitoring and Uhuru Institute Cape town Evaluation for of Management South Africa Executive Secretaries 18 Lawrence Monitoring and Uhuru Institute Cape town Musalila Evaluation of Energy of Management South Africa Projects 19 Annie Chandipo Monitoring and Uhuru Institute Cape town Evaluation of Energy of Management South Africa Projects 20 Lloyd Chinjenge Monitoring and Uhuru Institute Cape town Evaluation of Energy of Management South Africa Projects 21 Gretchen Supply Chain Uhuru Institute Cape town Mushinge Management in Energy of Management South Africa Sector Rural Electrification Authority S/N NAME POSITION COURSE DURATION TRAINING PROGRAMME OF PLACE COURSE 1 Nason Musonda Power Advanced Certificate 14 days Institute of Distribution in Project 6 April to 20 Management Dev. Officer Management April 2014 Training, Cape Town, South Africa 2 Leah Banda Advanced Certificate 14 days Institute of in Project 6 April to 20 Management Management April 2014 Training, Cape Town, South Africa 3 Faith Chilufya Assistant Office Management 14 days Institute of Administration and Administration 28 May to 11 Management Officer Skills June 2014 Training, Cape Town, South Africa 4 Thandiwe A/Personal Management 14 days Institute of Malupande Dube Assistant Development Management 45 Programme for 28 May to 11 Training, Cape Personal Assistants June 2014 Town, South Africa 5 Jacqueline Director- Strategic 14 days Institute of Musonda Support Management for 28 May to 11 Management Services Senior Managers June 2014 Training, Cape (Incorporating Town, South Fundraising and Africa Funds Management Techniques) 6 Victor Mapani Director- Strategic Skills for 14 days Globe Technical Senior Managers 18 January to Management Services 1 February Training Institute 2014 (GMT)-Cape Town, South Africa 7 Besa Chimbaka Economist Economic Modeling 14 days GMT-Cape & Financial 18 January to Town, South Forecasting 1 February Africa 2014 8 Laura Inonge Legal Counsel Arbitration and 14 days Uhuru Institute of Malao Labour Relation 18 January to Management Management 1 February Training, Cape 2014 Town, South Africa 9 Namakau Malembo Receptionist Front Desk 14 days Uhuru Institute of Management 18 January to Management 1 February Training, Cape 2014 Town, South Africa 10 Justin Mukosa Manager- Corporate Public 14 days Uhuru Institute of Corporate Relations 8 February to Management Affairs Management 22 February Training, Cape 2014 Town, South Africa 11 Christopher Senior Advanced Certificate 14 days Uhuru Institute of Chisense Environmental in Project 8 February to Management Officer Management 22 February Training, Cape 2014 Town, South Africa 12 Newton Ndhlovu Provincial Rural Advanced Certificate 14 days Uhuru Institute of Electrification in Project 8 February to Management Officer Management 22 February Training, Cape 2014 Town, South Africa 13 Brighton M. Human HRM (strategy & 14 days Cape Town, Chishimba Resources & Policy) From 21 South Africa Administration September to 7 Officer October 2013 46 14 Andrew Chilala Monitoring & Monitoring and 14 days Cape Town, Evaluation Evaluation of Energy From 21 South Africa Officer Projects September to 7 October 2013 15 Olga Mamonwa Provincial Rural Advanced Certificate 14 days Cape Town, Electrification in Project From 21 South Africa Officer Management September to 7 October 2013 16 Naomie Sidono Community Stakeholders 14 days Cape Town, Mobilization Engagement and From 21 South Africa Officer Management Course September to 7 October 2013 17 Chriscent Records Electronic Records 14 days Cape Town, Sialyainda Management Management 6 October to South Africa Officer 20 October 2013 18 Choolwe Kasamu Corporate Corporate 14 days Cape Town, Affairs Officer Communication & 6 October to South Africa Professional Writing 20 October for Publicity 2013 Practitioners 19 Felix Nyirongo Stores Officer Management of 14 days Cape Town, Stores and Inventory 6 October to South Africa 20 October 2013 20 Bruce Chilufya Assistant Managing and 14 days Cape Town, Accountant Accounting Public 27 October to South Africa Funds 10 November 2013 21 Wazingwa Mugala Provincial Rural Advanced Certificate 14 days Cape Town, Electrification in Project 27 October to South Africa Officer Management 10 November 2013 22 David Lungu Monitoring & Result-Based 14 days Cape Town, Evaluation Monitoring and 27 October to South Africa Specialist Evaluation (World 10 November Bank) 2013 23 Maxwell Z. Phiri Director-HRA Function of Human 14 days Cape Town, Resources 8 February to South Africa 22 February 2014 24 Patrick Mubanga Senior Power Advanced Certificate 14 days Institute of Distribution in Project 28 May to 11 Management Dev. Officer Management June 2014 Training, Cape Town, South Africa 47 25 Felix Munsaka Manager Public Procurement 14 days Globe Procurement & Programme From Management Supplies 12/10/2014- Training, Cape 25/10/2014 Town, South Africa 26 Katasha Ponya Corporate Public Relations 14 days From Globe Affairs Officer Protocol 16/11/2014- Management 29/11/2014 Training, Cape Town, South Africa 27. Eugene Kafupi Office Assistant Records and 14th April -28th Peniel information April 2015 Conferencing and Management Management 28. Limbikani Mwanza Driver/Messeng Transport and 14th April - Peniel er Logistics 28th April Conferencing and Management 2015 Management 29. Bright Chifulo Systems Certified Information 19th April – 2nd Peniel Administrator Systems Security May 2015 Conferencing and Professionals Management 30. Lavender Malama Provincial Rural Project Management 14th April -28th Uhuru Institute of Electrification April 2015 Management Officer Training 31. Moses Sakala Procurement Procurement and 14th April -28th Global Officer Contracts April 2015 Management Management, Training Monitoring and Controls 32. Haggai Muto’nga Accountant Donor Funding 26th April – 9th Sterling Africa Management and May 2015 Training and Financial control Consultancy 33. Joseph Ntanda Senior Financial Modelling, 19th April – 3nd Sterling Africa Accountant Financial forecasting May 2015 Training and and Analysis Consultancy 34. Siulapwa Lupupa Surveyor Project Management 19th April – 3rd Uhuru Institute of May 2015 Management Training 35. Geoffrey Musonda Chief Executive Leadership 4th July, 2015 RIPA – London, Officer – 11th July, United Kingdom 2015 ZESCO Limited Name Course Dates Location Joackim Mwanza PM 1 1-5 Oct, 2012 KGRTC Kennedy Chomba PM 1 1-5 Oct, 2012 KGRTC Percy Kaela PM 1 1-5 Oct, 2012 KGRTC Richard Chinyengo PM 1 1-5 Oct, 2012 KGRTC Kennedy Bwalya PM 1 1-5 Oct, 2012 KGRTC 48 Justine Kamungoma PM 1 1-5 Oct, 2012 KGRTC Vincent Sakeni PM 1 1-5 Oct, 2012 KGRTC Shezippie Nzovu PM 1 1-5 Oct, 2012 KGRTC Fidelis Ngalande PM 1 1-5 Oct, 2012 KGRTC Fainos Dube PM 1 1-5 Oct, 2012 KGRTC Moses Mweetwa PM 1 1-5 Oct, 2012 KGRTC Terence Tambatamba PM 1 1-5 Oct, 2012 KGRTC Isaac Chisanga PM 1 1-5 Oct, 2012 KGRTC Bright Sepiso PM 1 1-5 Oct, 2012 KGRTC Simon Sakala PM 1 1-5 Oct, 2012 KGRTC Nelson Milanzi PM 1 1-5 Oct, 2012 KGRTC Vincent Muchindu PM 1 1-5 Oct, 2012 KGRTC Lemmy Mweene PM 1 1-5 Oct, 2012 KGRTC Stephen Chipili PM 1 1-5 Oct, 2012 KGRTC Thomas Sinkamba PM 1 1-5 Oct, 2012 KGRTC Billy Nsotaulwa PM 1 1-5 Oct, 2012 KGRTC Mchokoliso Tembo PM 1 1-5 Oct, 2012 KGRTC Wakina Nchamba PM 1 1-5 Oct, 2012 KGRTC Davy Mambwe PM 1 1-5 Oct, 2012 KGRTC Lottie Gondwe PM 1 1-5 Oct, 2012 KGRTC Friday Mukupa PM 1 1-5 Oct, 2012 KGRTC Godfrey Sikazwe PM 1 1-5 Oct, 2012 KGRTC Alex Mbumba PM 1 1-5 Oct, 2012 KGRTC Moses Mubanga PM 1 1-5 Oct, 2012 KGRTC Ms. Temwani Chirwa PM 2 10-14 Oct, 2012 KGRTC Mr. Lovedale Mbewe PM 2 10-14 Oct, 2012 KGRTC Mr. Kalima Leon PM 2 10-14 Oct, 2012 KGRTC Mrs. Deophine Mulenga Luswili PM 2 10-14 Oct, 2012 KGRTC Leornard Mpundu PM 2 10-14 Oct, 2012 KGRTC Mr. Fiztpatrick Kapepe PM 2 10-14 Oct, 2012 KGRTC Mr. Chrispin Singoyi PM 2 10-14 Oct, 2012 KGRTC Mr. Prince Matambo PM 2 10-14 Oct, 2012 KGRTC Mayase Maipambe PM 2 10-14 Oct, 2012 KGRTC Sara Kasiya PM 2 10-14 Oct, 2012 KGRTC Mrs. Tina Sampa PM 2 10-14 Oct, 2012 KGRTC Josephe Chilongo PM 2 10-14 Oct, 2012 KGRTC Daniel Mvula PM 2 10-14 Oct, 2012 KGRTC Mr. Mwendaweli Chrispin PM 2 10-14 Oct, 2012 KGRTC Mr. Abel Chavula PM 2 10-14 Oct, 2012 KGRTC Mr. Readlay Makaliki PM 2 10-14 Oct, 2012 KGRTC Mr. Edgar Habeene PM 2 10-14 Oct, 2012 KGRTC Mr. Moses Nundwe PM 2 10-14 Oct, 2012 KGRTC Mr. Happy Mubanga Nkunde PM 2 10-14 Oct, 2012 KGRTC 49 Mr. Savior Kampamba PM 2 10-14 Oct, 2012 KGRTC Mr. Wilcliff Chipeta PM 2 10-14 Oct, 2012 KGRTC Mr. Simon Muwowo PM 2 10-14 Oct, 2012 KGRTC Mr. Greenson Bwalya PM 2 10-14 Oct, 2012 KGRTC Mr. Dobvious Habuzila PM 2 10-14 Oct, 2012 KGRTC Mr. Kelvin Kamwale PM 2 10-14 Oct, 2012 KGRTC Mr. Chiyombwe Chiyombwe PM 2 10-14 Oct, 2012 KGRTC Dennis Kapoya M&E 29 Oct-2 Nov, 2012 KGRTC Chrispin Kahongo M&E 29 Oct-2 Nov, 2012 KGRTC Shezipie Nzovu M&E 29 Oct-2 Nov, 2012 KGRTC Zingani Sakala M&E 29 Oct-2 Nov, 2012 KGRTC Lillian Sinyangwe M&E 29 Oct-2 Nov, 2012 KGRTC Alex Mbumba M&E 29 Oct-2 Nov, 2012 KGRTC Fidelis Ngalande M&E 29 Oct-2 Nov, 2012 KGRTC Happy Mubanga M&E 29 Oct-2 Nov, 2012 KGRTC Readlay Mkaliki M&E 29 Oct-2 Nov, 2012 KGRTC Masoka Daka M&E 29 Oct-2 Nov, 2012 KGRTC Justine Kamungoma M&E 29 Oct-2 Nov, 2012 KGRTC Vincent Muchindu M&E 29 Oct-2 Nov, 2012 KGRTC Brighton Kombe M&E 29 Oct-2 Nov, 2012 KGRTC Edward Mutumba M&E 29 Oct-2 Nov, 2012 KGRTC Mathew Phiri M&E 29 Oct-2 Nov, 2012 KGRTC Katongo Yamba M&E 29 Oct-2 Nov, 2012 KGRTC Frank Mushaukwa M&E 29 Oct-2 Nov, 2012 KGRTC Robinson Kabwe M&E 29 Oct-2 Nov, 2012 KGRTC Thomas Nyirenda M&E 29 Oct-2 Nov, 2012 KGRTC Henry Mumba M&E 29 Oct-2 Nov, 2012 KGRTC Gregory Mubanga M&E 29 Oct-2 Nov, 2012 KGRTC Dereck Chileshe M&E 29 Oct-2 Nov, 2012 KGRTC Eric Phiri M&E 29 Oct-2 Nov, 2012 KGRTC Temwani Chirwa M&E 29 Oct-2 Nov, 2012 KGRTC Vincent Sakeni EM 10 -14 Dec, 2012 KGRTC Lioko Sitali EM 10 -14 Dec, 2012 KGRTC Savior Kampamba EM 10 -14 Dec, 2012 KGRTC George Zulu EM 10 -14 Dec, 2012 KGRTC Justin Changala EM 10 -14 Dec, 2012 KGRTC Lovedale Mbewe EM 10 -14 Dec, 2012 KGRTC Kabamba Mbewe EM 10 -14 Dec, 2012 KGRTC Milika Chande EM 10 -14 Dec, 2012 KGRTC Chaali Kalebuka EM 10 -14 Dec, 2012 KGRTC Zingani Sakala EM 10 -14 Dec, 2012 KGRTC Mumpanshya Bowa EM 10 -14 Dec, 2012 KGRTC 50 Mathews Mkandawire EM 10 -14 Dec, 2012 KGRTC Kennedy Chomba EM 10 -14 Dec, 2012 KGRTC Edgar Habeene EM 10 -14 Dec, 2012 KGRTC Sarah Ngulube EM 10 -14 Dec, 2012 KGRTC Stella Kayope EM 10 -14 Dec, 2012 KGRTC Doreen M. C. Machona EM 10 -14 Dec, 2012 KGRTC Masiliso Mwiya EM 10 -14 Dec, 2012 KGRTC Tito Tembo EM 10 -14 Dec, 2012 KGRTC Francisca Maluke EM 10 -14 Dec, 2012 KGRTC Mwelwa N. Sata EM 10 -14 Dec, 2012 KGRTC Gladys Phiri EM 10 -14 Dec, 2012 KGRTC Martin Siame EM 10 -14 Dec, 2012 KGRTC Moses Mubanga EM 10 -14 Dec, 2012 KGRTC Simon Chashika EM 10 -14 Dec, 2012 KGRTC Victor Chisha EM 10 -14 Dec, 2012 KGRTC Francis Musonda EM 10 -14 Dec, 2012 KGRTC Duncan Lungu EM 10 -14 Dec, 2012 KGRTC Namwila Mfula FM 11 - 15 Jan, 2013 Cresta Hotel Helen Mukoboto FM 11 - 15 Jan, 2013 Cresta Hotel George Zulu FM 11 - 15 Jan, 2013 Cresta Hotel Christopher Phiri FM 11 - 15 Jan, 2013 Cresta Hotel Austin Mudenda FM 11 - 15 Jan, 2013 Cresta Hotel Chrispin L. Kahongo FM 11 - 15 Jan, 2013 Cresta Hotel Collins Mumba FM 11 - 15 Jan, 2013 Cresta Hotel Anna Lungu FM 11 - 15 Jan, 2013 Cresta Hotel Bornface Mwila FM 11 - 15 Jan, 2013 Cresta Hotel Chipili Banda FM 11 - 15 Jan, 2013 Cresta Hotel Victor Palangwa FM 11 - 15 Jan, 2013 Cresta Hotel Regina Chabala FM 11 - 15 Jan, 2013 Cresta Hotel Naarah Sinyangwe FM 11 - 15 Jan, 2013 Cresta Hotel Beatrice Kambo FM 11 - 15 Jan, 2013 Cresta Hotel Lillian Sinyangwe FM 11 - 15 Jan, 2013 Cresta Hotel Mchokoliso Tembo FM 11 - 15 Jan, 2013 Cresta Hotel Christabel Kangwa Mutale FM 11 - 15 Jan, 2013 Cresta Hotel Emmanuel M. Phiri FM 11 - 15 Jan, 2013 Cresta Hotel Gregory Mubanga FM 11 - 15 Jan, 2013 Cresta Hotel Kasaula Milambo FM 11 - 15 Jan, 2013 Cresta Hotel Temwani Chirwa FM 11 - 15 Jan, 2013 Cresta Hotel Mannaseh Phiri FM 11 - 15 Jan, 2013 Cresta Hotel Vivien Chiholyonga FM 11 - 15 Jan, 2013 Cresta Hotel Evarista L. M. Banda FM 11 - 15 Jan, 2013 Cresta Hotel Bupe Simwawa FM 11 - 15 Jan, 2013 Cresta Hotel 51 George Muyunda FM 11 - 15 Jan, 2013 Cresta Hotel Chibeza Mbulo FM 11 - 15 Jan, 2013 Cresta Hotel Lovedale Mbewe FM 11 - 15 Jan, 2013 Cresta Hotel Paul Mutale PPPs 21 - 25 Feb, 2013 KGRTC Masoka Daka PPPs 21 - 25 Feb, 2013 KGRTC Justin Kamungoma PPPs 21 - 25 Feb, 2013 KGRTC Chrispin Singoyi PPPs 21 - 25 Feb, 2013 KGRTC Namwila Mfula PPPs 21 - 25 Feb, 2013 KGRTC Ackson Mwale PPPs 21 - 25 Feb, 2013 KGRTC Chaali Kalebuka PPPs 21 - 25 Feb, 2013 KGRTC Tryson Kasempa PPPs 21 - 25 Feb, 2013 KGRTC Fred Mushili PPPs 21 - 25 Feb, 2013 KGRTC Helen Mukoboto PPPs 21 - 25 Feb, 2013 KGRTC Elida Mufuzi PPPs 21 - 25 Feb, 2013 KGRTC Susuki Wina PPPs 21 - 25 Feb, 2013 KGRTC Namakau Muchana PPPs 21 - 25 Feb, 2013 KGRTC Mchokoliso Tembo PPPs 21 - 25 Feb, 2013 KGRTC Lovedale Mbewe PPPs 21 - 25 Feb, 2013 KGRTC Beatrice Malonda PPPs 21 - 25 Feb, 2013 KGRTC Henry Lukali PPPs 21 - 25 Feb, 2013 KGRTC Shezzipie Ndhlovu PPPs 21 - 25 Feb, 2013 KGRTC Ricky Simfukwe PPPs 21 - 25 Feb, 2013 KGRTC Tito Tembo PPPs 21 - 25 Feb, 2013 KGRTC Bonje Muyunda PPPs 21 - 25 Feb, 2013 KGRTC Kandi Shikabi PPPs 21 - 25 Feb, 2013 KGRTC Regina Chabala PPPs 21 - 25 Feb, 2013 KGRTC Saviour Kampamba PPPs 21 - 25 Feb, 2013 KGRTC David Zimba PPPs 21 - 25 Feb, 2013 KGRTC Vivian K. Chiholyonga PPPs 21 - 25 Feb, 2013 KGRTC ICT-Based Financial Monica Mwape 4 - 17 Nov, 2012 Management Kenya ICT-Based Financial Leah Yamba 4 - 17 Nov, 2012 Management Kenya ICT-Based Financial Fred Mushili 4 - 17 Nov, 2012 Management Kenya ICT-Based Financial Laston Mbunda 4 - 17 Nov, 2012 Management Kenya ICT-Based Financial Fitzpatrick Kapepe 4 - 17 Nov, 2012 Management Kenya ICT-Based Financial Sarah Kasiya 4 - 17 Nov, 2012 Management Kenya 52 ICT-Based Financial 29th to 31st Aug, Management and Kennedy Sichone 2012 Disbursement Kenya ICT-Based Financial 29th to 31st Aug, Management and Julius Kampamba 2012 Disbursement Kenya ICT-Based Financial 29th to 31st Aug, Management and Francis Namakanda 2012 Disbursement Kenya ICT-Based Financial 29th to 31st Aug, Management and Leornard Mpundu 2012 Disbursement Kenya Energy Industry EPC Readlay Makaliki 21 -23 Jan, 2013 Contracts course South Africa Energy Industry EPC Chrispin Kahongo 21 -23 Jan, 2013 Contracts course South Africa Energy Industry EPC David Tembwe 21 -23 Jan, 2013 Contracts course South Africa Energy Industry EPC Mutema Chella 21 -23 Jan, 2013 Contracts course South Africa Nancy Chileshe Energy Industry EPC Sikazwe 21 -23 Jan, 2013 Contracts course South Africa Energy Industry EPC McRobby Chiwale 21 -23 Jan, 2013 Contracts course South Africa Energy Industry EPC Matthews Ndlovu 21 -23 Jan, 2013 Contracts course South Africa Energy Industry EPC Chiti Mulenga 21 -23 Jan, 2013 Contracts course South Africa Energy Industry EPC Godfrey Mwenda 21 -23 Jan, 2013 Contracts course South Africa Florida Kanyanti Energy Industry EPC Kapandula Lingela 21 -23 Jan, 2013 Contracts course South Africa 28th Jan, 2013 to 2nd ROI Methodology Morecome Mumba Feb, 2013 Certification South Africa 28th Jan, 2013 to 2nd ROI Methodology Ngoza C. Nkwabilo Feb, 2013 Certification South Africa Rhoda Kunda 28th Jan, 2013 to 2nd ROI Methodology Mwale Feb, 2013 Certification South Africa Florence Mbwili 28th Jan, 2013 to 2nd ROI Methodology Mutale Feb, 2013 Certification South Africa th nd Josephine 28 Jan, 2013 to 2 ROI Methodology Muwezwa Feb, 2013 Certification South Africa 18 to 20 February, Planning, Budgeting and Deophine Luswili 2013 Rolling Forecasts South Africa th th Matthews Wilson 18 to 20 February, Planning, Budgeting and Lungu 2013 Rolling Forecasts South Africa 18th to 20th February, Planning, Budgeting and Philip Wampata 2013 Rolling Forecasts South Africa th th 18 to 20 February, Planning, Budgeting and Fitzpatrick Kapepe 2013 Rolling Forecasts South Africa 53 18th to 20th February, Planning, Budgeting and Jeremiah Nyondo 2013 Rolling Forecasts South Africa George Mike 18th to 20th February, Planning, Budgeting and Chabu 2013 Rolling Forecasts South Africa 16 - 23 February, Witnessing FAT for Lusaka Thomas Sinkamba 2013 Road Substation India Attending the balanced Wazziah Phiri 7-15May, 2015 scorecard certification course Kenya Attending the balanced Bessie Banda 7-15May, 2015 scorecard certification course Kenya Attending the balanced Chileshe Luputa 7-15May, 2015 scorecard certification course Kenya Attending the balanced Beauty Phiri 7-15May, 2015 scorecard certification course Kenya Dambile Attending the balanced Kambemba 7-15May, 2015 scorecard certification course Kenya Attending the balanced Lazarous Chulu 7-15May, 2015 scorecard certification course Kenya Contract Drafting, Negotiations Skills and Wilbroad Chanda 8 - 19 June 2015 procurement Namibia Contract Drafting, Negotiations Skills and Taulino Banda 8 - 19 June 2015 procurement Namibia Contract Drafting, Negotiations Skills and Mayase Maipambe 8 - 19 June 2015 procurement Namibia Contract Drafting, Negotiations Skills and Vivienne Lesa 8 - 19 June 2015 procurement Namibia Contract Drafting, Negotiations Skills and Laston Mbunda 8 - 19 June 2015 procurement Namibia Contract Drafting, Negotiations Skills and Sara Kasiya 8 - 19 June 2015 procurement Namibia Namwiinga Best Practices in Human Ngándu 15 - 19 June 2015 Resource Management Swaziland Cassandra M Best Practices in Human Simulyamana 15 - 19 June 2015 Resource Management Swaziland Best Practices in Human Jean C Sakala 15 - 19 June 2015 Resource Management Swaziland Milimo R Best Practices in Human Malambo 15 - 19 June 2015 Resource Management Swaziland Modernised Human Resource Joster Choombe 22 - 26 June, 2015 Management Swaziland Modernised Human Resource Isaac Chisanga 22 - 26 June, 2015 Management Swaziland Modernised Human Resource Tina Sampa 22 - 26 June, 2015 Management Swaziland 54 Modernised Human Resource Valerian Samulela 22 - 26 June, 2015 Management Swaziland Francis Namakanda 18 - 21 May 2015 Risk Management South Africa Nshimwenamo Mulenga 18 - 21 May 2015 Risk Management South Africa Elijah Chabu 18 - 21 May 2015 Risk Management South Africa Caroline Banda 18 - 21 May 2015 Risk Management South Africa Daniel Mvula 18 - 21 May 2015 Risk Management South Africa Kennedy Sichone 18 - 21 May 2015 Risk Management South Africa Borniface Mutale 25-29 May, 2015 Overhead lines South Africa Abbyson Bwembya 25-29 May, 2015 Overhead lines South Africa Bowa Mumpanshya 25-29 May, 2015 Overhead lines South Africa Charles Khombe 25-29 May, 2015 Overhead lines South Africa Lewis Chileshe 25-29 May, 2015 Overhead lines South Africa John M Chirwa 25-29 May, 2015 Overhead lines South Africa Cecilia Kasonde 25-29 May, 2015 Overhead lines South Africa Stephen Chipili 25-29 May, 2015 Overhead lines South Africa George Muyunda 25-29 May, 2015 Overhead lines South Africa Bonje M Muyunda 1-15 May, 2015 Environmental Management Swaziland Providence Sepeti 1-15 May, 2015 Environmental Management Swaziland John M. Chirwa 1-15 May, 2015 Environmental Management Swaziland Jonas Nyondo 18-22 May, 2015 Substation Engineering South Africa Martin Chikwa 18-22 May, 2015 Substation Engineering South Africa Ned Mutambo 18-22 May, 2015 Substation Engineering South Africa George Muyunda 18-22 May, 2015 Substation Engineering South Africa Bright Mwaipopo 18-22 May, 2015 Substation Engineering South Africa Jeremiah Mtonga 18-22 May, 2015 Substation Engineering South Africa Haswell Mwamengo 18-22 May, 2015 Substation Engineering South Africa Alex Mbunda 18-22 May, 2015 Substation Engineering South Africa 55 Annex 6. Summary of Borrower's ICR and/or Comments on Draft ICR 1. Project Background 1. The Increased Access to Electricity Services (IAES) Project is a World Bank funded electrification project implemented in Zambia by ZESCO Ltd and Rural Electrification Authority (REA), on behalf of Government as Implementing Agencies. The Government signed credit agreements with the Bank to facilitate the funding of the project. 2. The project was conceived in May 2008 and became effective on 19th February 2009. It was originally scheduled to close on 31st Dec 2013 but was extended to 30th June 2015 to ensure successful completion of all project components. The project was structured into three main segments, namely, Efficiency Improvement (comprising Intensifications, Reinforcements and Energy Efficiency-EE); Access Expansion (Grid Extension to rural areas, Mini-hydro-power development for isolated grids and Sustainable Solar Market Packages (SSMP)); Technical Assistance and capacity building for all stakeholders including the Implementing Agencies - ZESCO and REA. 3. The objective of the project was to accelerate customer connections and increase electricity access rate which at the time of inception, stood at 21 percent of the national population. The increase in electrification was to be achieved through construction of new lines (Grid Extensions) in rural parts of the country; increased construction and connections of customers in areas with existing networks (Intensifications); selected network expansions to the existing system (Reinforcements) and the provision of solar systems under the Sustainable Solar Market Packages (SSMP) component. The implementation of the Grid Extension Project Component was to be coordinated by ZESCO, leading in the designs, specifications of technical requirements, supervision and implementation while the Rural Electrification Authority (REA) was to be Funds Manager for the Grid Extension components as well as a leading implementing agency for SSMP. 4. The project was conceived to address the bottlenecks identified as hindrance to customer connectivity, namely: - inaccessibility to the power grid in most areas; limited capacity of existing network and lack of adequate internal funds to facilitate expansion programs. Furthermore, the project also focused at improving power supply capacity as a result of generation shortages and Energy Efficiency component which involved distributing of Compact Florescent Lamps (CFL’s) to residential customers. 5. Additional Financing. Because of customers’ perception of high connection fees and the need to help low income communities access electricity services, the project added another portfolio for subsidized connection fee under the Connection Fee Subsidy Framework. This had to come under $10m Additional Financing from the Bank. It was envisaged that under the program, 51,000 connections would be made. Note is hereby made that under the same Additional Financing, another US$10m was mobilized for reinforcement works at Kanyama and Livingstone’s Lusaka Rd to bring the total additional financing to $20m. 56 6. The whole project concept was consistent with the framework laid down in the Poverty Reduction Strategy Paper (PRSP) and Country Assistance Strategy (CAS) of 2008, which sought to increase access to electricity as one way of contributing to poverty reduction. 7. The original cost was estimated at US$75.5m but with additional funding of US$ 20m, the project had to undergo additional project appraisal which was then documented in the additional Project Appraisal Document (PAD). 2. Scope of the Project 8. The project was designed to benefit rural communities that had no access to electricity through construction of Grid Extension Lines and installation of Transformers to facilitate connectivity. Furthermore, the project was also intended to construct additional lines and transformers in peri-urban areas which already had existing networks. Approximately 610km of Distribution Lines and 200 transformers were to be installed under the Grid Extensions and Intensifications programs in the following areas:  Kanyama, Garden and Misisi (in Lusaka)  Chipulukusu, New Kawama and Chibolya (Copperbelt)  Lukulu (Mpika), Lukulu Farming Block (Kasama), Ipusukilo Mission (Luwingu),  Makululu (Kabwe), Chelston Extension, Vorna Valley (later Foxdale-Chamba Valley, Kabanana).  Mukonchi Farm Block (Kabwe) and Mangango Mission (in Kaoma) 9. REA held interviews on 3rd October 2014 to shortlist a candidate for the position of Supervising Engineer (SE) under the IAES Grid Extension component. The overall objective of the SE was to effectively supervise all grid extension projects on behalf of REA. 10. Note that due to pressure to get connected, Vorna Valley residents could not wait for the project’s logistics of construction but pressurized internal ZESCO functionary to carry out connections. The scope for Vorna Valley was thus shifted to and spread in Foxdale and Kabanana areas of Lusaka. 11. The Lusaka 132kV Ring circuit design was to be reviewed under Reinforcement Component. In addition the construction of Lusaka Rd 66/11kV Substation in Livingstone and Kanyama 33/11kV Substation in Lusaka would be carried out under the same component. Others to be constructed were the Figtree-Chisamba 88-132/33kV works and the reinforcement of Coventry and Roma 132/33/11kV Substations. 12. On Demand Side Management under Energy Efficiency, one million Compact Florescent lamps (CFL’s) were to be procured and distributed to residential customers to encourage efficient use of energy and help mitigate power crisis by cutting demand by an 57 approximated 50MW. This would result in providing relief to the constrained power generation capacity. 13. The isolated grids and mini hydro development activities were intended to supply electricity to remote communities and to help replace existing diesel generation power stations. Three (3) sites were identified for further assessments and these included Chikata Falls in Kabompo District, Zengamina II and Kasanjiku Falls in Mwinilunga District of North-Western Province. 14. Sustainable Solar Market Packages (SSMP) Project I&II was to be implemented by REA with an aim to supply, install and maintain Solar PV Systems to schools, rural health centers and private households in project target areas where the grid would not be extended within the next five (5) years. The SSMP Project Component provided output- based performance grants aimed at buying down the upfront cost of Solar Photovoltaic (PV) systems being supplied to private households by the Contractor under the SSMP phase 1 Projects which are located in Kalomo, Isoka and Lukulu Districts. The main purpose of this project was to surmount the barrier of higher maintenance costs of Solar Photovoltaic (PV) systems and its smaller household market segment exacerbated by low affordability. 15. Technical Assistance (TA) Component was designed to support capacity building of stakeholders and assist ZESCO and REA in developing a Performance Improvement Plan which was based on the Institutional Performance Appraisal Framework. It was also intended to develop Technical Designs for optimization of distribution systems and preparation for future improvement works. Further, the TA was to address framework and master plan for the mini-hydro power development in Zambia. However, this could not be implemented due to short time-frame of implementation. 16. Under the Connection Fee Subsidy Framework, 51,000 customers from the project areas and other identified low-income communities were earmarked for connections by allowing them to pay only US$30 (ZMW150.00) out of the required standard fee of US$150 (ZMW769.00). This would be achieved by providing a service drop cable and prepaid energy meter for a standard connection and would include a ready-board for an enhanced connection. The framework would also support advance procurement of materials such as poles, cables and distribution transformers to facilitate connections in the said selected areas. 3. Project Schedule 17. The Increased Access to Electricity Services (IAES) Project was conceived on 20thMay 2008 and became effective on 19thFeb 2009. It was originally scheduled to close on 31st Dec 2013 but was extended to 30th June 2015 to ensure successful completion of all project components.The Project started as a five year (2008 – 2013) intervention to increase the electrification rate in Zambia; raise the efficiency and quality of ZESCO’s electricity distribution system and promote the use of renewable energy technologies. The Government of the Republic of Zambia secured funding from the World Bank, the Global 58 Environment Fund and the European Union amounting to US$ 5.5 million. However, most of the activities started to be implemented in 2011 which implied that the completion period of the project shifted forward to 2015. 4. Project Status 4.1 Awarded Contracts 18. In the course of the project implementation, a number of works and supply contracts amounting to just over US$ 55m were signed and awarded to various contractors. About eleven (11) Engineering, Procurement & Construction (EPC) or Turn-key contracts were awarded. In addition, Three (3) groups of Supply Contracts, namely for Figtree/Chibombo Power Transformers; Compact Florescent Lamps and varied materials under Subsidy Framework were awarded. For design and supervision, various Consultants were engaged to provide services to grouped project activities in Grid Extensions & Intensifications; Reinforcement and for Surveys. In addition, two (2) contractors were engaged to carry out the SSMP Implementation. 19. Due to limitation in funds, some project components could not be undertaken in the manner they were designed even after the provision of additional funding of about USD20m. The intended works on the 132kV Lusaka Ring for instance ended just at the Engineering Designs by the Consultant (under Reinforcement) for future preparations only. It can be noted here that this resulted in a Design Review Report that enabled the initiation of another project – The Lusaka Transmission & Distribution Rehabilitation Project (LTDRP) currently underway in ZESCO. Equally, works to reinforce Coventry and Roma substations lapsed for the same reason. Mopped up funds were restructured to focus on the Figtree-Chisamba reinforcement works which saw an introduction of 62km of 88-132kV Transmission Line to be constructed from Figtree to Chibombo, the location of a new bulk 88/33kV Substation. 4.2 Reinforcement Works 4.2.1 Construction of Lusaka Rd Substation in Livingstone 20. The construction of Lusaka Rd 66/11kV, 2x20MVA Substation was undertaken from 25/07/2012 to 31/12/2014 and was completed at a total cost of US$ 4.2m. The substation is currently in use with a few feeder bays for spare. So far, the substation has resolved some of the loading challenges in Livingstone and has also improved the security and reliability of supply in the area. 4.2.2 Construction of Kanyama Substation in Lusaka 21. The installation of Kanyama 33/11kV, 2x25MVA Substation was undertaken between 01/07/2012 and 31/10/2014 and was completed at a total cost of US$ 3.6m. The substation is in operation and has equally resolved supply quality challenges in the Kanyama Area and Mumbwa Rd Industrial Area of Lusaka. New buildings such as 59 Shopping Malls have already taken advantage of power capacity improvements and have been built around the area. 4.2.3 Construction Works in Figtree/Chibombo 22. As alluded to earlier, the remaining funds under Reinforcement were mobilized to undertake Figtree-Chibombo works. Here the works were divided into two contracts, namely; Refurbishment/Upgrading of Figtree and Construction of Chibombo 88-132/33kV Substation as one contract and the construction of the 88-132kV kV line to be initially powered on 88kV, as another contract. The contracts were given to different contractors to run concurrently. There was also a third contract but this involved the supply and delivery of power transformers separately for the two sites, due to inherent procurement long lead times. 23. Figtree and Chibombo substation works had a contract amount of US$5.99m while that of the 62km, 88-132kV line in-between cost US$6.0m. The supply of power transformers cost $1.2m 24. Both of these works contracts were scheduled to be completed by 30thJune 2015 but slightly went over by a few months. A combination of factors resulted in delayed completion of the contracts, the major one having been a change in the tax policy midway into project implementation. Having been originally exempt from tax, the project was taken aback when there was sudden insistence on the tax to be paid. This generally affected material flow as tax funds were being sourced and/or resolved. The other reason was the need to install two section tension towers, not originally in the scope, on the existing 88kV line before any landing Gantries could be erected at Figtree. This had to be resolved but not without delay. The contractor appointed to do the line had their in-house operational issues with subcontractors that too slowed down the pace of works. 25. The installation and commissioning works, as at compilation of this report, had been completed pending switching on procedures by the System Operations – the National Control Centre (NCC). Test commissioning reports, schematic and single line diagrams had all been submitted for review in line with the new Grid Code. 26. Completion of Figtree-Chibombo works will resolve long standing low-voltage problems in the Chisamba Farming Area. It will also reinforce supplies at Landles and Keembe 33/11kV Substations respectively and reduce pressure at Chisamba Substation and relieve Figtree. This will result in improved power quality in the affected areas that include, Mwachisompola Hospital and allow the newly created district of Chisamba carry on with its developmental construction unrestricted. 60 4.3 Intensification Works 4.3.1 Central Region, Copperbelt and Lusaka Intensifications 27. This involved construction of more distribution lines and installation of transformers in areas with already existing network. The following works were done in the given regional sites from 19th Feb 2013 to 30th April 2015. Table 4.3.1: Intensification Works Project Site Distribution 200kVA, Others, eg. Connected Status@ Lines (in 11/0.4kV 33/11kV Customers 30th June th km) Distribution Substation @30 June 2015 Transformers ‘15 Central Region: 1 Makululu 23.1 11 2.5MVA 942 Completed 2 Foxdale 12.5 08 18 Completed 3 Chelstone 21.7 15 380 Completed Extension 4 Kabanana 11.5 09 1668 Completed 68.8 43 3008 Copperbelt Region: 1 Kabushi 17.3 22 1421 Completed (Ndola) 2 Chipulukusu 36.6 19 1138 Completed (Ndola) 3 New Kawama 13.8 06 620 Completed (Kitwe) 67.7 27 3179 Lusaka – Integrated Approach 1 Kanyama 21 06 1740 Completed 2 Misisi 15 11 120 Completed 3 Garden 21 14 370 Completed 57 31 2230 TOTALS 293.5 121 1 8,417 As shown in the table above, the works were completed and an initial 8,417 number of customers (total) were connected in the three (3) project regions as at June 2015 with a total cost of US$2.55m, US$3.08m and US$1.82m respectively. Despite the projecting coming to an end, connecting of customers still continued. 61 4.4 Grid Extension works 4.4.1 Northern and Central Region Grid Extensions 28. This involved construction of distribution lines and installation of transformers in areas which previously had no networks at all. The following works were done in given locations, spanning from 30th June 2013 to 30th June 2015. Table: 4.4.1 Grid Ext Works Project Site Distribution 200kVA, Others, eg. Connected Status @ th Lines (in 11/0.4kV 33/11kV Customers 30 June km) Distribution Substation @ 30th 2015 Transformers June’15 Northern Region: 1 Lukulu – 18.5 4 4 Completed Mpika 2 Ipusukilo 18.1 5 20 Completed Mission- Luwingu 3 Lukulu Farm 51 23 23 Completed Block – Kasama 87.6 32 47 Central Region: 1 Mukonchi 177 24 2x1MVA; Nil Snags & Farm Block – 1x5MVA Commission Kabwe ing underway 2 Mangango 96 18 1x2.5MVA Nil Snags & Mission – Commission Kaoma ing underway 273 42 Nil TOTALS 360.6 74 4 47 29. As indicated works were completed and an initial 47 number of customers connected as at June 2015 with 970 potential settlers yet to be connected. The total cumulative cost was US$2.57m and US$8.11m for North and Central Grid Extension respectively. Connecting customers continued. 62 4.5 Mini Hydro 30. The feasibility study and detailed engineering designs for Zengamina II was finalised while the review of the draft feasibility study reports for the proposed Chikata Falls and Kasanjiku Hydropower Stations was also concluded and feedback provided to the Consultant, SMEC, to submit the final reports to REA which has since been done. 4.6 Technical Assistance 31. The capacity building programme under the IAES project facilitated the training of stakeholder staff in several fields. Officers were trained in various fields such as project management, monitoring and evaluation (M&E), strategic management among others. Thus, a total number of 35 members of staff from REA underwent training in various fields from September 2013 to 30th June 2015, with several others from ZESCO and DoE. 4.7 Sustainable Solar Market Packages (SSMP) Phase I & II 32. Sustainable Solar Market Packages (SSMP) Project was among the project components under the IAES Project that the REA was implementing with an aim to supply, install and maintain Solar PV Systems to schools, rural health centers and private households in project target areas where the grid would not be extended within a five (5) year period. The SSMP Project Component provided output-based performance grants aimed at buying down the upfront cost of Solar Photovoltaic (PV) systems being supplied to private households by the Contractor under the SSMP phase I Projects which are located in Kalomo, Isoka and Lukulu Districts. The main purpose of this project was to surmount the barrier of higher maintenance costs of Solar Photovoltaic (PV) systems and its smaller household market segment exacerbated by low affordability. 33. The SSMP projects were being implemented by the contractor, Communication and Accessories Int. (CAA) of Germany with assistance from the local sub-contractor, Village Power. The contractor was mandated to first install Solar PV Systems at eligible public schools and rural health centres as well as associated staff houses. The contractor was also expected to sell lanterns and solar home kits of different watt sizes to private households at a subsidised fee and thereafter claim the balance from REA which was paid upon verification of the sales of the systems to the private households. According to the contract, the contractor was expected to sell these systems to private households in designated project areas for a period of three (3) years and provide maintenance services for a period of five (5) years. 34. The Contractor, Communications and Accessories Int. GmBH (CAA), contracted under the first (1st) phase implementation of three (3) SSMP sites in Kalomo District of Southern Province, Lukulu District of Western Province and Isoka District of Muchinga Province submitted periodic invoices for Sales and Maintenance claims to REA and requested for verification and approval of payment. 63 35. REA conducted sales verification for private household for the three (3) SSMP sites in Kalomo, Lukulu and Isoka districts under the first (1st) of SSMP. The contractor sold 6,848 Photo Voltaic (PV) Systems out of the minimum target of 4,700 systems to be sold to private households Kalomo, Lukulu and Isoka SSMP sites as indicated in Table 4. Table 4: Number of PV Systems sold to private households and verified by REA SSMP Target Number of PV Systems Number PV Total Site sold (as invoiced by systems verified Systems Contractor) by REA Verified by REA Lanterns Kits Lanter Kits ns Kalomo 2100 4,140 1,011 4,140 1,005 5,145 B1&B2 Isoka 1200 600 43 600 43 643 Lukulu 1400 1,038 75 974 86 1,060 Total 4700 5,778 1,129 5,714 1,134 6,848 36. REA also undertook maintenance verification visits for the three (3) sites in Lukulu, Isoka and Kalomo districts under the first (1st) of SSMP. Generally, the sampled Solar Home Systems (SHS) were generally in good condition as maintenance was being undertaken by the Contractor, CAA. 37. The Contractor, Trans Africa Supply and Services Limited (TASS) of Uganda submitted invoice claims for the procurement of materials for undertaking works for the second (2nd ) phase of SSMP in Lundazi District (Lot 1), Chama District (Lot 2) and Mwinilunga District (Lot 4). Payment was withheld since the Contractor had not renewed the guarantee. A letter was written and sent to Uganda. The second contractor, Kantech for the second (2nd) phase of SSMP under Lot 3 in Zambezi District did not submit invoice claims for any procurement that could have been done. 4.9 Demand Side Management (DSM) 38. On the Demand Side, the project encouraged efficient use of energy in order to cut demand and save an estimated 45MW capacity through provision of one million energy saver lamps called Compact Florescent Lamps (CFL). From the one (1) million CFLs procured under this project component, costing US$ 1.35m, three (03) lamps were initially exchanged with incandescent bulbs from each beneficiary residential customer. This was later revised to six (06) to improve impact of energy saving per household. At the end of this exercise, 57MW of capacity was saved much to the satisfaction of all stakeholders. For this reason, the exercise was adopted by DSM Department of ZESCO and continued as an internal function. As at 30thJune 2015, over 2 million CFLs had been procured internally and the process of their distribution continued. 64 4.10 Connection Fee Subsidy Component 39. To encourage residential customers in low income communities to apply for new electricity connections, connection-fees were reduced from US$150 (ZMW769.00) for a standard connection to US$30 (ZMW150.00). The difference was the 80 percent subsidy sponsored by the project through this Connection Fee Subsidy Framework. Out of the target of 51,000 connections, over 81,000 customer connections were done as at 30th June 2015. The cumulative cost of this project component was US$9.5m and run from 1st June 2012 to 30th Sept 2014 but was allowed to continue up to 30th June 2015 because of the great benefits derived. 5. PROJECT EXPENDITURE & DISBURSEMENT A summary of project cost and disbursements is given below:- Table 5a: Cost & Disbursements by Component Total Project Total disbursement Project component (Works, No. component Cost @30th June 2015 in Consultancy etc.) (USD) (USD) 1 Grid Extension works 12,642,527.38 11,157,566.29 2 Mini Hydro for isolated grids 6,000,000.00 175,824.01 Sustainable Solar Market 3 6,500,000.00 3,683,241.84 Packages (SSMP) 4 Connection Fee Subsidy (CFS) 10,000,000.00 12,845,410.04 Technical Assistance 5 1,783,584.45 1,783,584.45 REA/ZESCO 6 Intensification 7,166,180.81 6,832,334.35 7 Reinforcement Works 22,971,807.34 19,447,472.75 Energy Efficiency -CFL 8 1,500,000.00 1,503,116.45 Distribution 9 Surveys 660,127.07 660,127.07 Total 69,224,227.05 58,088,677.25 It is noted that more payments were still being done as they were already invoiced by 30th June 2015. 6. Challenges Encountered During Project Execution 40. During the course of project implementation, there was policy shift on tax for project goods coming from outside the country, originally meant to be tax exempt. This put undue pressure on the finances and affected flow of goods as taxes were being resolved. 65 Demurrages were incurred at the borders as a result, for the same reason, coupled with constant blockage of the Tax Payer Identification Number (TPIN) for ZESCO. 41. The project, in its initial stages, experienced a number of delays in the procurement processes as No Objections were not given timely by the Zambia Public Procurement Authority (ZPPA) until January 2013 when ZPPA decentralized Public Procurement. However, delays were also encountered from the requirement to submit draft contracts to the Attorney General’s (AG) office for clearance before signing with the supplier/contractor. In some cases contracts were pending at the AG’s office for months before being cleared. This challenge continues though there are efforts by various stakeholders including the World Bank to resolve capacity at the AG’s Office. 42. The project encountered a situation of awarding some contracts to contractors with good credentials on paper but whose model of operation with their subcontractors caused delays in the project implementation. Perhaps it would be prudent in future to carry out a comprehensive due diligence of such contractors to establish physical evidence of works indeed done by them and conduct actual interviews with organizations with whom they have done business. This would especially be applicable to large contracts where timely completion is of the essence. 7. Environmental & Social Issues 43. The Environmental and Social Impact Assessment for all project sites were conducted in accordance with Zambia Environmental Management Agency (ZEMA) procedures and in congruence with World Bank policies and guidelines. ZESCO’s Environmental & Social Unit (ESU), having adequate capacity, conducted the assessments that were reviewed by ZEMA, an autonomous government authority. However, even with the Bank Safeguard policies being followed, there is need to employ sustainable ways to prevent future encroachment of way-leaves, which has become a general challenge in infrastructure development. 8. Project Outcomes 44. The project’s Results Framework was used for monitoring key project indicators as shown in the Annex. The outcomes of the project have largely been positive. The overall objective of the project –being increased access to electricity, has seen the set-target connections achieved in almost all project areas. The number of customers connected on subsidized fees surpassed all expectations too. 45. On the constructed network, over 650km of distribution lines (33, 11 and 0.4kV) have been done with about 195 transformers installed. The distribution transformers, together with other power transformers (the 2x1MVA, 2x2.5MVA and a 5MVA) introduced expanded capacity of approximately 50MVA. 66 46. There are three (3) bulk substations constructed (Kanyama, Livingstone and Chibombo) with one (1) rehabilitated and upgraded at Figtree. In addition, a 62km Transmission line between Figtree and Chibombo had to be constructed. 47. The contractor, under the SSMP phase 1, sold 6,848 Photo Voltaic (PV) Systems out of the minimum target of 4,700 systems which were to be sold to private households Kalomo, Lukulu and Isoka SSMP sites. This implies that more beneficiaries were reached and the impact of solar systems on social indicators on health and education will be significant. 48. On demand side management, there was remarkable load reduction of 57MW recorded as a result of CFL distribution exercise from the one million lamps sponsored under the project. This has contributed in mitigating impact of the national power crisis. 9. Lessons Learnt 9.1 Risk Assessments 49. Adequate Risk Assessment & Management was needed to mitigate issues such as position shift in tax and procurement policies; availability of project funds; performance of contractors and subcontractors alike, etc that the project experienced during implementation. 9.2 Capacity Building 50. Proper management of projects calls for prior understanding of the particular project concept and having insights of all knowledge areas of its project management. Therefore Capacity Building prior to project implementation would be one lesson learnt under this project where the same could have been given more attention. 9.3 Payment Method 51. The situation of signing contracts between ZESCO, as the Implementing Agency and various Contractors and/or Consultants but the latter being paid by REA, another Government Agency, was not easily comprehended as this was considered a risky undertaking. 9.4 Project Structural Design 52. The project design for REA, even after restructuring, still presented various challenges on its roles and functions. While ZESCO operates as an autonomous commercial entity, REA is a statutory body whose mandate is to meet the electricity needs of the rural population through provision of requisite infrastructure. 67 9.5 Contract Management 53. Adequate supervision of contractors and close monitoring of consultants should be integral to contract management and its implementation. There should be adequate clauses in the contracts to mitigate non-performance by some contractors to minimize risks. 9.6 Defining Criteria for Low Cost Communities 54. The Connection Fee Subsidy (CFS) did not distinguish the targeted communities from rural and urban customers to an extent that more urban communities benefited than rural communities, something that did not add much to the REA mandate, other than that of effecting payments. The low cost criterion was not easily understood. 68 MAP 69