Document of The World Bank FOR OFFICIAL USE ONLY

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 93.3 MILLION (US$144.5 MILLION EQUIVALENT) TO THE REPUBLIC OF LIBERIA FOR A Report No: AFR WEST AFRICAN POWER POOL (WAPP) - COTE D'IVOIRE, LIBERIA, SIERRA LEONE, AND GUINEA (CLSG) POWER INTERCONNECTION PROJECT AND A PROPOSED GRANT IN THE AMOUNT OF SDR 2.4 MILLION (US$31.5 MILLION EQUIVALENT) TO THE WEST AFRICAN POWER POOL (WAPP) FOR A WAPP INTEGRATION AND TECHNICAL ASSISTANCE PROJECT IN SUPPORT OF THE FIRST PHASE OF THE CLSG POWER SYSTEM RE-DEVELOPMENT SUB-PROGRAM OF THE WAPP APL PROGRAM May 4, 212 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective March 31, 212) 1 = US$ 1.33 SDR 1 = US$ FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AfDB CEB CLSG ECOWAS EIB EEP ERERA ESIA ESMP FIRR FMM FNPV JIC HV IDA IDC IPA IPP GRIDCO GWh KfW km kv kwh M&E MW NEPAD NPA NPV OMVG OMVS OPGW African Development Bank Communauté Electrique du Bénin (Electric Community of Benin) Côte d Ivoire, Liberia, Sierra Leone, and Guinea Economic Community of West African States European Investment Bank ECOWAS Energy Protocol ECOWAS Regional Electricity Regulatory Authority Environmental and Social Impact Assessment Environmental and Social Management Plan Financial Internal Rate of Return Financial Management Manual Financial net present value Joint Implementation Committee (see also WAPP JIC below) High voltage International Development Association Interest during construction International Project Agreement Independent Power Producer Ghana Grid Company Limited Giga Watt hours Kreditanstalt für Wiederaufbau Kilometer Kilo Volt Kilo Watt hours Monitoring and Evaluation Megawatt New Partnership for African Development National Power Authority (of Sierra Leone) Net present value Organisation de Mise en Valeur du Fleuve Gambie (Organization for the Development of the River Gambia) Organisation de Mise en Valeur du Fleuve Sénégal (Orgnization for the Development of the River Senegal) Optical Fiber Ground Wire i

3 PPA Power Purchase Agreement PIPES Planning, Investment Programming and Environmental Safeguards Department at the WAPP RAP Resettlement Action Plan RIAS Regional Integration Assistance Strategy RoW Right-of-way RTC CLSG Regional Transmission Company SCADA Supervisory Control And Data Acquisition SIEPAC Sistema de Interconexión Eléctrica de los Países de América Central or Central American Electrical Interconnection System SOGEM Société de Gestion de l Energie de Manantali (Energy Management Company for Manantali) SONABEL Société Nationale d Electricité de Burkina Faso (National Power Company of Burkina Faso) SPC Special Purpose Company SWER Single wire earth return system SWS Shield wire system TSA Transmission Service Agreement TSO Transmission System Operator WAPP West African Power Pool WAPP JIC West African Power Pool Joint Implementation Committee Regional Vice President: Acting Regional Director: Country Director: Sector Director: Sector Manager: Task Team Leader: Obiageli K. Ezekwesili Elizabeth Laura Lule Yusupha Crookes Jamal Saghir Lucio Monari Fanny Missfeldt-Ringius ii

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5 LIBERIA West African Power Pool (WAPP) - Côte d'ivoire, Sierra Leone, Liberia, and Guinea Power Interconnection Project WAPP WAPP Integration and Technical Assistance Project TABLE OF CONTENTS Page I. STRATEGIC CONTEXT...1 A. Regional Context... 1 B. Sectoral and Institutional Context... 6 C. Higher Level Objectives to which the Project Contributes... 8 II. PROJECT DEVELOPMENT OBJECTIVES...9 A. PDO... 9 B. Project Beneficiaries... 1 C. PDO Level Results Indicators... 1 III. PROJECT DESCRIPTION...11 A. Project Components B. Project Financing Lending Instrument Project Cost and Financing C. Program Objective and Phases D. Lessons Learned and Reflected in the Project Design IV. IMPLEMENTATION...21 A. Institutional and Implementation Arrangements B. Results Monitoring and Evaluation C. Sustainability V. KEY RISKS AND MITIGATION MEASURES...24 A. Risk Ratings Summary Table B. Overall Risk Rating Explanation iii

6 VI. APPRAISAL SUMMARY...25 A. Economic and Financial Analyses B. Technical C. Financial Management D. Procurement E. Environmental and Social Safeguards F. Environmental and Social Issues Annex 1: Results Framework and Monitoring for the WAPP CLSG Power Interconnection Project...37 Annex 2: Results Framework and Monitoring for the WAPP Integration and Technical Assistance Project...4 Annex 3: Detailed Project Description...41 Annex 4: Implementation Arrangements...53 Annex 5 Operational Risk Assessment Framework (ORAF)...7 Annex 6: Implementation Support Plan...73 Annex 7: Economic and Financial Analysis...78 Annex 8: Trading Potential and Arrangements...12 Annex 9: Institutional Structure for the CLSG Interconnector...17 Annex 1: Implementation Status of Projects of the West Africa Power Pool (WAPP) Adaptable Lending Program Annex 11: Environmental and Social Safeguards iv

7 PAD DATA SHEET Liberia West African Power Pool (WAPP) - Côte d Ivoire, Liberia, Sierra Leone, and Guinea Power Interconnection Project WAPP WAPP Integration and Technical Assistance Project PROJECT APPRAISAL DOCUMENT Africa AFTEG Basic Information Date: May 4, 212 Sectors: Power (9%); General Energy Sector (1%) Country Director: Yusupha Crookes Themes: Infrastructure services for private sector Sector Manager/Director: Project ID: Lending Instrument: Team Leader(s): Joint IFC: No Lucio Monari / Jamal Saghir EA Category: A (Full Assessment) P Adaptable Program Loan Fanny Missfeldt-Ringius Recipient: The Republic of Liberia, The West African Power Pool Responsible Agency: The CLSG Regional Transmission Company Contact: Shahid Mohammed Title: Chief Executive Officer Telephone No.: smohammad@mhi.mb.ca Responsible Agency: The West African Power Pool (WAPP) Secretariat Contact: Amadou Diallo Title: Secretary General Telephone No.: adiallo@ecowapp.org Project Implementation Period: Start Date: May 31, 212 End Date: June 3, 217 Expected Effectiveness Date: Expected Closing Date: December 31, 217 For the WAPP CLSG Project - December 1, 212; For the WAPP Integration and Technical Assistance Project June 15, 212 Project Financing Data(US$M) [ ] Loan [ X ] Grant Term: [X] Credit [ ] Guarantee Standard IDA credit terms For Loans/Credits/Others Total Project Cost : US$476 million Total Bank Financing : US$ 176 million Total Cofinancing : US$3 million Financing Gap : None v

8 Financing Source Amount(US$M) BORROWER/RECIPIENT 21 IBRD IDA: New 176 IDA: Recommitted Others, of which AfDB EIB KfW Financing Gap Total Expected Disbursements (in USD Million) Fiscal Year FY13 FY14 FY15 FY16 FY17 FY18 Annual Cumulative Project Development Objective(s) The Project development objectives of the WAPP CSLG Project are: (i) to reduce the cost of and increase the electricity supply at utility level; and (ii) to increase the export capability of Côte d'ivoire. The Project development objective of the WAPP Integration and Technical Assistance Project is to increase the technical integration of the WAPP s network. Components Component Name Cost (USD Million) Project 1: WAPP CLSG Power Interconnection Component 1.A: Power interconnection between CLSG Component 1.B: Institutional framework and project oversight 45.4 Unallocated 71.5 Project 2: WAPP Integration and Technical Assistance Project 31.5 Component 2.A: Supply alternatives studies and project preparation support 1. Component 2.B: Technical assistance and integration of WAPP interconnected network Policy Compliance Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] 21.5 Does the project require any waivers of Bank policies? Yes [ X] No [ ] Have these been approved by Bank management? Yes [X ] No [ ] Is approval for any policy waiver sought from the Board? Yes [X] No [ ] Does the project meet the Regional criteria for readiness for implementation? Yes [X] No [ ] Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.1 X Natural Habitats OP/BP 4.4 X Forests OP/BP 4.36 X vi

9 . Pest Management OP 4.9 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.1 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 Projects on International Waterways OP/BP 7.5 Projects in Disputed Areas OP/BP 7.6 X X X Special Conditions for Effectiveness for the WAPP CLSG Power Interconnection Project Name (a) The Subsidiary Credit Implementation Agreement has been executed on behalf of the Recipient and the Regional Transmission Company in form and substance satisfactory to the Association. (b) The execution and delivery of the Treaty on behalf of each Participating Country has been duly ratified by all necessary governmental action. (c) The execution and delivery of the International Project Agreement, in form and substance satisfactory to the Association, on behalf of each Participating Country and the Regional Transmission Company, has been duly ratified or authorized by all necessary governmental and/or corporate action. (d) The Establishment Agreements have been executed on behalf of the Participating Countries and the Regional Transmission Company in form and substance satisfactory to the Association. (e) The Power Purchase Agreement has been executed on behalf of the Utilities in form and substance satisfactory to the Association. Justification The Subsidiary Credit Implementation Agreement is expected to be entered into between Liberia and the RTC to pass onto the Regional Transmission Company the entire proceeds of the credit for the implementation of the Project. This agreement is expected to include many of the conditions on the use of credit proceeds that would normally be part of a Project Agreement with a Project implementing entity, and be the vehicle by which Liberia will collect revenue to repay the credit. The Treaty provides the legal framework under which the entire Project will be implemented (including for the Regional Transmission Company, which is a creature of this instrument), and its ratification is necessary to ensure enforceability of its obligations against each of the Participating Countries. While the Treaty provides the legal framework for implementation of the Project and the establishment of the RTC, the International Project Agreement (IPA) provides all of the detailed mechanics for operationalizing the Treaty s obligations and making the RTC operational. It is an agreement between the Participating Countries and the RTC whereby the Participating Countries grant the RTC the rights agreed to in the Treaty and obligate the RTC to implement the Project. For example, the IPA provides the RTC the right to the real property rights needed for implementation of the Project, the protections it needs in the event of action by a Participating Country in contravention of the terms of the Treaty, the basic tariff methodology that forms the core of the company s cost recovery, the obligations of the company with respect to the organs set up by the Treaty to monitor its implementation for the Participating Countries, the obligation of the Participating Countries (with which the Association does not have any direct contractual relationship, aside from Liberia) to provide the necessary financing for implementing the Project, etc. The Treaty stipulates that the RTC will enter into Establishment Agreements with the Participating Countries in which the company will establish offices to enable the company to carry out its obligations under the IPA. Without such Establishment Agreements in place, it would be very difficult, if not impossible, for the RTC to supervise construction of the Project. At the heart of the sustainability of the Project is the premise that Participating Countries will enter into transactions that use the transmission line constructed under Part A.1 of the Project. Although it is difficult to stipulate specific conditions for these transactions, at a minimum, there should be an anchor transaction agreement a Power Purchase Agreement - between one or more of the Utilities and/or other generators in the Participating Countries to demonstrate the viability of the Project. vii

10 (f) The Transmission Service Agreement has been executed on behalf of the Regional Transmission Company and an energy user in form and substance satisfactory to the Association. (g) Each of the Co-financing Agreements with Liberia has been executed and delivered and all conditions precedent to its effectiveness or to the right of the Recipient to make withdrawals under it (other than the effectiveness of this Agreement) have been fulfilled. (h) The Regional Transmission Company has been duly created, established and made operational in the territory of one of the Participating Countries, all in form and substance satisfactory to the Association. As part of such requirements, there shall be in place for the RTC: (i) the paid-in equity contribution pursuant to the provisions of the Treaty, including the amount required on behalf of each Participating Country to finance the Resettlement costs and the Interest During Construction; (ii) the Shareholders Agreement, in form and substance satisfactory to the Association, signed and effective; (iii) the RTC Project Implementation Manual, in form and substance satisfactory to the Association, adopted; (iv) a financial management assessment of the RTC completed to the satisfaction of the Association; (v) the representatives of the RTC s shareholders and the WAPP and two (2) independent directors appointed to the RTC s Board of Directors; and (vi) its General Manager and the key staff recruited, designated and/or appointed, all of them under terms of reference and with qualifications and experience satisfactory to the Association. Disbursement condition for withdrawal of the Credit proceeds to finance the construction of the 225kV converter substation in Yekepa, Liberia: the Côte d Ivoire Co-financing Agreement between Côte d Ivoire and the African Development Bank has been executed and delivered and all conditions precedent to its effectiveness or to the right of Côte d Ivoire to make withdrawals thereunder have been fulfilled. This condition relates to (e) above. As the RTC is expected to provide transmission service only, there should be a Transmission Service Agreement associated with the Power Purchase Agreement. The Project is being developed as a regional one with benefits to all of the Participating Countries. As IDA is financing only a portion of the Project, it is necessary to ensure that funding for Liberia is secured and available for Project start-up. As a practical matter, the RTC needs to be fully constituted and operational in order to undertake the various obligations and activities expected of it. For example, in order to execute the IPA and the Transmission Service Agreement, the company needs to have officers appointed and empowered by the Board of Directors to bind the company. Accordingly: (a) The Utilities, as the RTC's shareholders, must enter into the contemplated Shareholders Agreement that will govern their rights and responsibilities as the RTC's shareholders; (b) The shareholders must meet to appoint their own Directors to and constitute the company s Board to allow the company to take corporate action in accordance with the terms of its Articles of Association that is annexed to the Treaty; (c) the RTC Project Implementation Manual must be adopted, in form and substance satisfactory to the Association, to allow the RTC to operate in accordance with transparent principles and procedures consistent with the Bank's requirements; (d) The representatives of the RTC s shareholders and the WAPP and two (2) independent directors must be appointed to the RTC s Board of Directors; and (e) The General Manager (and key staff) of the RTC must be recruited and appointed by the Board, and the Board must give the General Manager the authority to enter into the various agreements to bind the company. In addition, because the financing plan for the RTC contemplates nominal equity contributions by the company s shareholders ($17 million) to cover the costs of implementing the ESMP and interest during construction, this equity needs to be made available for the company to carry out its related obligations. The Project assumes these costs to be the responsibility of the Participating Countries under Component A-5. This co-financing is necessary to ensure the Liberia transmission line financed by IDA can be operated and import power from Côte d Ivoire. Special Conditions for Effectiveness for the WAPP Integration and Technical Assistance Project WAPP shall have adopted the WAPP Project Implementation Manual in form and substance satisfactory to the Association. The WAPP Project Implementation Manual must be adopted, in form and substance satisfactory to the Association, to allow the WAPP to operate in accordance with transparent principles and procedures consistent with the Bank's requirements. viii

11 Legal Covenants for the WAPP CLSG Power Interconnection Project Description Recurrent Due Date Frequency The Association may suspend disbursements under the Credit if the Guinea Financing Agreement and/or the Sierra Leone Financing Agreements shall have failed to become effective. The Recipient shall require the Regional Transmission Company (RTC), except as the Association shall otherwise agree, to maintain a debt service coverage ratio of at least 1.3 under terms and conditions that have been agreed upon with the Association. The Recipient shall cause the RTC to recruit a qualified and experienced internal auditor and an accounts officer on the basis of terms of reference and with qualifications and experience satisfactory to the Association and to acquire and install an accounting information system for the Project. The Recipient shall cause the RTC to prepare and furnish to the Association as part of the Project Report not later than forty-five (45) days after the end of each quarter, interim unaudited financial reports for the Project covering the quarter, in form and substance satisfactory to the Association. The Recipient shall take all action required on its behalf to ensure that the Project is implemented in accordance with the provisions of the Liberia Environmental and Social Impact Assessment (Liberia ESIA), the Liberia Environmental and Social Management Plan (Liberia ESMP), and the Liberia Resettlement Action Plan (Liberia RAP), all in a manner satisfactory to the Association. The Recipient shall cause the RTC to collect, compile and furnish to the Association reports on the status of compliance with the Environmental and Social Impact Assessments (ESIAs), the Environmental and Social Management Plans (ESMPs), and the Resettlement Action Plans (RAPs) for the Participating Countries. The Recipient shall cause the RTC to acquire and install a suitable accounting information system for the Project. The Recipient shall ensure that the RTC employ an operations and maintenance contractor under terms of reference and with experience and qualifications satisfactory to the Association. The Recipient shall require the RTC to carry out the Project with due diligence and efficiency and in accordance with sound technical, economic, energy, financial, managerial, environmental, and social standards and practices satisfactory to the Association, including in accordance with the provisions of the ESMPs and the RAPs and pursuant to the RTC Project Implementation Manual and the Anti-Corruption Guidelines applicable to recipients of loan proceeds other than the Recipient. The Recipient shall ensure that the RTC conclude with the WAPP a Control Area Agreement in form and substance satisfactory to the Association. No December 31, 213 Once Yes Following effectiveness Annually No Yes 6 months after effectiveness Within 45 days after the end of the quarter to which the IFRs relate Once Quarterly Yes Following effectiveness Ongoing Yes No No Within a quarter following effectiveness 6 (six) months after effectiveness Two (2) months before the expected date of completion of the construction under Component 1.A.1 Quarterly Once Once Yes Following effectiveness Ongoing No Six (6) months before the expected date of completion of the construction under Component 1.A.1 Once ix

12 . The Recipient shall cause the RTC to review with the Association the mid-term review report and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof. No On or about January 31, 215 Once The Recipient shall exercise its rights and carry out its obligations under the Subsidiary Credit Implementation Agreement in such manner as to protect the interests of the Recipient and the Association and to accomplish the purposes of the Credit. Except as the Association shall otherwise agree, the Recipient shall not assign, amend, abrogate or waive the Subsidiary Credit Implementation Agreement or any of its provisions. Not later than six (6) months after the Effective Date: (i) to set up an audit committee under terms of reference and with a composition satisfactory to the Association to follow-up with management on any issues raised in the annual audits, thereby ensuring they properly addressed; and (ii) to develop an antifraud and anti-corruption policy satisfactory to the Association and set up an anti-fraud and anti-corruption committee under terms of reference and with a composition satisfactory to the Association to handle any fraud and corruption cases No withdrawal shall be made for payments made prior to the date of this Agreement, except that withdrawals up to an aggregate amount not to exceed SDR 65, equivalent may be made for payments made prior to this date but on or after April 1, 212, for Eligible Expenditures under Category (1)(b). Legal Covenants for the WAPP Integration and Technical Assistance Project Yes Following effectiveness Ongoing No No 6 months after effectiveness Once Disbursement Condition Description Recurrent Due Date Frequency Schedule 2, Section IV, B.1: No withdrawal shall be made for payments made prior to the date of this Agreement, except that withdrawals up to an aggregate amount not to exceed SDR 1,88, equivalent may be made for payments made prior to this date but on or after June 2, 211, for Eligible Expenditures under Category (1) No Disbursement Condition Bank Staff Team Composition Name Title Specialization Unit Fanny Missfeldt-Ringius Senior Energy Economist TTL and Economics AFTEG Zayra Romo Energy Specialist Engineering AFTEG Franklin Gbedey Energy Specialist Engineering AFTEG Issa Diaw Senior Power Engineer Engineering AFTEG Tjaarda Storm Van Leeuwen Consultant Inst. Framework & Financial Analysis AFTEG Arnaud Braud Financial Analyst Financial Analysis AFTEG Dukjoong Kim Financial Analyst Financial Analysis AFTEG Marcelino Madrigal Senior Energy Specialist Trading SEGEN Maria C. Cruz Paivi Koskinen-Lewis Lead Social Development Specialist Social Development Specialist Social Safeguards Social Safeguards AFTCS SDV x

13 .. Robert Robelus Consultant Environmental Safeguards AFTWR Allan Rotman Lead Procurement Specialist Procurement AFTPC Itchi Ayindo Senior Procurement Specialist Procurement AFTPC Mathias Gogohounga Procurement Specialist Procurement AFTPC Patrick Umah-Teteh Alain Hinkati Maxwell Bruku Dapaah Senior Financial Management Specialist Financial Management Specialist Financial Management Specialist Financial management Financial management Financial management AFTFM AFTFM AFTFM Luis M. Schwarz Senior Finance Officer Disbursement CTRLA Claudia Pardiñas Ocaña Senior Counsel Law LEGAF Sameh Mobarek Senior Counsel Law LEGPS Anthony Molle Senior Counsel Law LEGAF Anders Jensen M&E Specialist Monitoring and Evaluation AFTDE Manuel Berlengiero Energy Specialist Economics AFTEG Bipulendu Narayan Singh Operations Analyst Economics SEGES Anta Lo-Loum Language Program Assistant Administrative and Client Support AFTEG Non Bank Staff Name Title Office Phone City Fiona Woolf Legal Advisor - London Locations Country First Administrative Division Location Planned Actual Comments Côte d Ivoire Liberia Sierra Leone Guinea Dix-Huit Montagnes Region (Departments of Man and Danane) Counties of Nimba, Grand Bassa, Montserrado, Bomi, and Grand Cape Mount. Eastern province (Kenema and Kono districts), Northern province (Bombali, Kambia, Koinadugu and Tonkolili districts), and Southern province (Pujehun district). Administrative regions of Kindia (Madina-Oula and Sougueta), Labe (Linsan) and Nzerekore (Nzerekore and Yalenzou). Man to border (Côte d Ivoire/Liberia). Border (Côte d Ivoire/Liberia) and border (Guinea/Liberia) - Yekepa Buchanan Mount Coffee - Monrovia Mano border (Liberia/Sierra Leone). Border (Liberia/Sierra Leone) Kenema Bikongor Bumbuna Yiben Kamakwie border (Sierra Leone/Guinea). Border (Guinea/Liberia) - Nzérékoré; and border (Sierra Leone/Guinea) Linsan. xi

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15 Liberia West African Power Pool (WAPP) Côte d Ivoire, Liberia, Sierra Leone, and Guinea Power Interconnection Project And WAPP WAPP Integration and Technical Assistance Project I. STRATEGIC CONTEXT A. Regional Context Regional Overview 1. The 15 member states 1 of the Economic Community of West African States (ECOWAS) occupy some five million square kilometers and are currently home to about 25 million people. Half of the present population lives in poverty, with per capita income barely above US$3 per year. Despite the region s large energy endowment, the per capita consumption of electricity is among the lowest in the world with approximately 171 kwh per capita and year in Faced with this power system expansion challenge, ECOWAS Member States have acknowledged that past efforts to achieve national self-sufficiency in electricity supply have been uneconomical due to the high cost of establishing power generation and transmission infrastructure. They also acknowledge two major shortcomings in the region at the present time: (a) low-cost, sizeable, and complex hydro-based power plants and systems are difficult to develop in the national context alone, but are key to providing low-cost electricity in a region that has among the highest electricity prices in the world, and (b) the lack of adequate transmission infrastructure (within and between national power systems) is a key constraint in the drive towards greater cooperation in power sector development. ECOWAS Vision West Africa Power Pool 3. To address these challenges ECOWAS has formed and put in place the West African Power Pool (WAPP) a cooperative power pooling mechanism for integrating national power system operations into a unified regional electricity market with the expectation that this mechanism would, over the medium to long term, assure their citizens a stable and reliable electricity supply at affordable cost. To this end, ECOWAS states adopted an ECOWAS Energy Policy in 1982 and decided to establish a West African Power Pool (WAPP) in To operationalize this mission, the 29th Summit of the Heads of State and Governments of the 1 Benin, Burkina Faso, Cape Verde, Côte d Ivoire, The Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo. 1

16 ECOWAS Member States adopted the "Articles of Agreement," which formally set up the WAPP Secretariat as a "Specialized Institution of ECOWAS." 2 4. As a flagship infrastructure project of the New Partnership for African Development (NEPAD), 3 the WAPP directly contributes to the broader ECOWAS agenda to establish an open, unified, regional economic space in West Africa. The vision for WAPP is also embodied in the ECOWAS Energy Protocol (EEP) that of creating a "level playing field" to facilitate the balanced development of diverse energy resources of the ECOWAS Member States for their collective economic benefit, through long-term energy sector co-operation, unimpeded energy transit and increasing cross-border electricity trade. To this end, the WAPP has been helping countries in the ECOWAS region to develop regional priority projects. These priority projects are identified through a regional Masterplan, which is regularly updated, and subsequently endorsed in WAPP fora. The Masterplan was most recently updated in December In July 26, the "WAPP Organization" was formally inaugurated as an all-inclusive organization of (public and private) electric power utilities based in ECOWAS member states. The governance structures of the WAPP organization is constituted of, (i) the General Assembly, which comprises representatives of all members and is the highest decision making body; (ii) the Executive Board, which consists of six elected members and the Secretary General and is responsible for policy, overseeing WAPP operations and planning for future development; (iii) the WAPP Organizational Committees, which include the Engineering and Operations, the Strategic Planning and the Finance & Human Resources Committees and are composed of technical experts of WAPP Membership to provide support and advice to the Executive Board; and, (iv) the WAPP Secretariat, which is the administrative organ headed by the Secretary General and is responsible for the day-to-day operations of the WAPP. 6. The Implementation "road map" of the WAPP Infrastructure Program is based on realizing distinct but mutually reinforcing infrastructure sub-programs, which when fully realized will converge into a unified, well functioning regional power pooling mechanism in West Africa. The five (5) sub-programs being implemented by WAPP are the following (see also Graph 1): (a) Coastal Transmission Backbone Subprogram (Côte d'ivoire, Ghana, Benin/Togo, Nigeria): aims to establish a robust interconnection link between the ECOWAS Coastal Member States. (b) Inter-zonal Transmission Hub Sub-program (Burkina Faso and Mali via Ghana, OMVS via Mali, Liberia-Sierra Leone-Guinea via Cote d'ivoire): aims to establish more secure, reliable transmission corridors for transfer of low cost energy to displace diesel-based sources especially in Burkina Faso through Ghana and Côte d Ivoire, and OMVS through Mali. 2 ECOWAS/ CEDEAO (26). 29th Session of the Authority of Heads of State and Government. Decision A/Dec. 18/1/6 Adopting the Articles of Agreement Relating to the Establishment and functioning of the West African Power Pool, Niamey, 12 January 26; and Decision A/Dec.2/1/6 Granting the Status of a Specialized Institution of ECOWAS to the WAPP Organization. Niamey, 12 January NEPAD was established to implement an integrated socio-economic development framework for Africa, and was formally adopted at the 37 th Summit of the Organisation for African Unity in July 21. 2

17 (c) OMVG/OMVS Power System Development Subprogram (The Gambia, Guinea, Guinea Bissau, Mali, Senegal): aims to interconnect national systems of The Gambia, Guinea, Guinea Bissau, Mali, Senegal and secure access to sources of low cost energy to be built on the Gambia River, the Senegal River and the Konkoure River Basins. (d) North-core Transmission Sub-program (Nigeria, Niger, Burkina Faso, Benin): aims to upgrade and extend existing capacity to transfer low cost energy supply to Niger, Burkina Faso, and northern Benin and Togo. (e) Côte d'ivoire Liberia-Sierra Leone-Guinea Power System Re-development Subprogram (Côte d'ivoire, Liberia, Sierra Leone, Guinea): aims to interconnect Côte d'ivoire, Liberia, Sierra Leone, and Guinea into the WAPP Energy System and to develop the hydropower resources in the sub-region. Figure 1: Implementation Roadmap of the Core WAPP Programs Interconnecting Côte d Ivoire, Liberia, Sierra Leone and Guinea 7. In early 212, Liberia and Sierra Leone are still recovering from the civil wars that have devastated large parts of both countries, and in the case of Liberia led to the complete destruction of it public power system. Guinea is also only stabilizing after getting to the brink of 3

18 civil war in 21. Cote d Ivoire s situation only normalized in 211. Both the power systems in Sierra Leone and Guinea are marked by heavy investment needs. Electricity connection rates are among the lowest in the world and the cost of generating power in these countries remains high, primarily due to the small size of the power systems and the reliance on fossil fuel-based generation. The unavailability of public power supply and high costs of power generation are recognized to be one of the major impediments to economic recovery and poverty reduction in Liberia, Sierra Leone, and Guinea. 8. Liberia is only slowly rebuilding its power utility Liberia Electricity Corporation (LEC) that had ceased operating during the civil war, and in early 212 has about 5 customer. In Guinea s forest region, no grid-provided power is available. The national power utility, Electricité de Guinea (EdG), has been unable to restore service in the forest region since the end of the war in the area and there is still heavy load shedding in areas served by EDG. In Sierra- Leone, public electricity services are currently only available in selected parts of Sierra Leone for about 25 percent of the time only. The operations of the two utilities, the National Power Authority (NPA) and the Bo Kenema Power Service Ltd, have been stagnant since the civil war. 9. However, the efforts that are underway in Liberia, Sierra Leone, and Guinea should both improve the current performance of the of the energy sectors and broaden the electricity access rates. In Liberia, a management contractor, Manitoba Hydro International, has been in place since July 211. Since the contractor s arrival, both the technical and financial performance of LEC has improved, and the number of customers has more than doubled. In addition, an investment package in the amount of US$5 million has been made available by the World Bank, GPOBA, the Government of Norway, and USAID to support the expansion of customer connections to 33, by In Sierra Leone, the new electricity law ratified in early 212 should lead to greater financial accountability of the energy sector. In addition, a World Bank financed energy project is expected to reach financial closure in early 213. The proposed project should significantly improve the distribution network and increase customer connections of Sierra Leone s power utility, the National Power Authority (NPA). In Guinea, the Government endorsed a new sector strategy in February 212. With ongoing support from AfDB and new support planned by the World Bank, the performance of the power sector is also put on target to improve. 11. Nevertheless, the energy sectors of Liberia, Sierra Leone, and Guinea in their own right are too small to be able to lower the cost of electricity to levels that are internationally competitive. By interconnecting these small systems, however, this structural challenge can be overcome. 12. In recognition of these benefits and following the return to peace in Liberia and Sierra Leone, the 25 WAPP Master Plan already retained the interconnections between Man (Côte d Ivoire) Monrovia (Liberia) and Conakry (Guinea) Bumbuna (Sierra Leone) on the priority list of projects. In 26, the WAPP undertook a detailed review of the power systems in Liberia, Sierra Leone, and Guinea, which led to the drafting of the Concept for Liberia, Sierra Leone, 4

19 Guinea Power System. 4 Under this review, these individual projects were aggregated into a single transmission line project to interconnect Côte d Ivoire, Liberia, Sierra Leone, and Guinea, and to develop the systems of these three countries as a single network and within one subprogram. The wider WAPP LSG concept seeks the following outcomes: Provide residents of the greater Monrovia area in Liberia; Bo, Kenema and Western Areas in Sierra-Leone; and, the Forest Region of Guinea, with improvements in power supplies in the short term. Pursue a regional infrastructure developmental approach that will provide over the medium to long term adequate electricity to the people in a more efficient and cost effective way, boosting economic and social development. Establish a regional regulatory framework for the sector that is conducive to the participation of private/strategic partners in the development of the power sector. The participation of the private sector and strategic partners is critical to obtaining the required capital investment and effective management for the electricity sector. This will also enable Government to concentrate on other social needs; and Ensure the technical capacity, management competence and the financial viability of the institutions of the electricity sub-sector for the sustainable provision of services and specifically, the viability of those agencies that are responsible for operating an open access transmission network and associated support services that enable competitive delivery of power to consumers. 13. The project will contribute to economic recovery and poverty reduction through improved access to essential power supplies in the LSG area. This will be accomplished through the re-construction of essential infrastructure and strengthening of institutional capabilities to plan, procure, operate, maintain and sustainably manage these services. It will provide support for targeted critical investments with the aim of developing the most economic power resources in the LSG area and making services available from a regional power system that overcomes the structural inefficiencies presented by the small sizes of the individual economies. The realization of the CLSG Power Network will also interlink the WAPP Coastal Transmission Backbone and the OMVG/OMVS Power System. The proposed CLSG Power Network project was confirmed as one of the high priority projects in the revised WAPP Master Plan (211). 14. The regional context of the program will have a transformational impact in the national power systems by building its own backbone transmission line. While the CLSG interconnector transmission line represents the initial stage for enabling energy trade in the region, the project will also transform the domestic power systems by building the backbone transmission lines in Liberia and Sierra Leone at the time when both domestic generation and distribution infrastructure are limited in these countries. The small size of the power sector prevents economies of scale, making it difficult for governments to afford and operate large infrastructure investments while the nascent national systems emerge from emergency response mode. In turn, the combined regional and domestic impacts will support the transition to 4 Arthur Energy Advisors (26). Concept for LSG Power System covering Liberia, Sierra Leone, and Guinea. Commissioned by the WAPP Secretariat. 5

20 normally functioning power utilities in these countries with lower cost, more sustainable generation and more effective means to control and optimize system expansion and operations. 15. Grid connection of mining sites would allow a number of alternative power supply models to be developed. The CLSG countries are endowed with vast areas of world class iron ore deposits that once developed could represent a major demand on the CLSG line. Once the CLSG Regional Transmission Company (RTC) is established and the CLSG line constructed, the cost of extending the transmission grid to connect the major mining sites would be low. Indeed the CLSG line goes closely past the most significant mining areas and the potential amount traded by the mining companies is high. If mining demand were interconnected to the grid, different supply arrangements could be developed that would allow the energy supply surplus from mining to be sold to the grid (either bilateral or to the utilities) or allow the development of large supply generation plan to meet the mining demand while using the CLSG line. Taking into consideration the impact of the mining demand on the design of the line, a two phase construction approach was adopted. The line is expected to be upgraded by 22 with the second circuit equipped (i.e. an additional capacity of 145 MW) to accommodate higher demand. 16. In recognition of the benefits that this project will bring to the CLSG countries, it was singled out by the G2 as a priority project at the 211 Cannes meetings. World Bank Support of the WAPP 17. On June 3, 25, the World Bank's Executive Board of Directors endorsed the application of the adaptable program lending (APL) instrument, within the framework of the World Bank's Regional Integration Assistance Strategy (RIAS) for West Africa, as the vehicle for providing IDA credit support to the WAPP initiative. The Bank earmarked US$35 million in IDA resources under the IDA Regional Pilot Program to put in place a multi-year programmatic framework to help close the financing gap and thereby ensure timely implementation of priority WAPP investments and technical assistance activities of the Revised WAPP Master Plan. 18. The APL instrument provides the framework for the IDA credit support to the original set of WAPP priority projects. It is a useful and relevant tool, as it reinforces policies through dedicated policy triggers, such as country commitments and ratification of the ECOWAS Energy Protocol. The APL original umbrella envelope of US$35 million has been depleted. 19. Future WAPP priority projects that are being considered for World Bank financing include the Mount Coffee Hydropower Plant Rehabilitation in Liberia, the Adjarala Hydropower Plant between Benin and Togo, and the Gouina Hydropower Plant in Mali. Annex 1 provides an overview of the implementation status of projects of the WAPP APL program. B. Sectoral and Institutional Context 2. The Heads of State of Côte d Ivoire, Liberia, Sierra Leone, and Guinea (CLSG) project have entrusted the preparation of the CLSG power interconnection project to the WAPP Secretariat. The Energy Ministers then established the WAPP Joint Implementation Committee (JIC), which gathers representatives from all four countries ministries in charge of energy and the power utilities. Following the adoption of the WAPP Cote d Ivoire Liberia-Sierra Leone- 6

21 Guinea (LSG) sub-program and the setting up of the WAPP JIC in 27, the four countries have jointly pursued the preparation of this project, which has been considered a high priority project for the sub-region. Once constructed, it will constitute the first interconnection of power systems ever among these four countries. 21. The WAPP JIC has overseen the preparation of the project s feasibility study, the Environmental and Social Impact Analyses (ESIAs), and the institutional studies that have defined the institutional framework for the project. They have endorsed final reports and studies, as well as concepts for moving forward. 22. In 28, the ECOWAS Heads of State endorsed the establishment of Special Purpose Companies (SPC) as a major vehicle for the implementation of WAPP regional priority projects. A few examples of such SPCs exist in the ECOWAS region. These include SOGEM, which runs the Manantali (and soon also the Felou) hydropower plants in Mali, which are jointly owned by Mauritania, Senegal and Mali. This also includes the CEB, which owns and operates key generation plant and transmission lines for the Governments of Benin and Togo. The experience of these SPCs in the ECOWAS region has been mixed, and the WAPP JIC is aiming to take the lessons learned from these experiences to setting up a better structured SPC for the WAPP CLSG project (see below discussion in the lessons learned section). 23. After the technical and safeguard studies were well underway, the WAPP JIC began to tackle the setting up of the SPC (CLSG Regional Transmission Company or RTC ) in 211. In a first instance, the WAPP JIC adopted in Guinea in June 211 an interim institutional mechanism, the Project Implementation Unit (PIU), which would initially be located with the WAPP Secretariat, and then will be strengthened and transferred to the RTC, once the later is established. At the WAPP, the PIU is to have a light structure. Once the RTC is established, and presumably construction of the line has begun, the PIU would be reinforced and merged into the RTC to ensure the construction can properly supervised. The PIU would not only be directly responsible for the management of the Contractor(s) of the line, but also for the management of the Owner s Engineer, who in turn will directly oversee the Contractors work. 24. In , the WAPP and JIC began developing the legal framework for implementation of the CLSG Transmission Line. As discussed in more details in Annex 9, this structure is primarily based on creating a RTC by treaty among the States to design, construct, own, operate, maintain, and develop the line. The RTC, a supranational entity with commercial character, would be set up based on articles of association annexed to the treaty that provide for the entity's governance structure. An international project agreement (IPA) implements the provisions of the treaty by agreement among the CLSG states and this RTC. 25. The IPA provides for the countries' obligations towards the RTC and gives the RTC the mandate to implement the CLSG Transmission Line. The RTC's shareholding will be divided in equal shares among the national utilities designated for the role by the States and subject to a shareholders' agreement that governs the utilities' respective rights and responsibilities. Users of the CLSG transmission line are expected to enter into power purchase agreements for the sale and purchase of power, and use the line to move the power pursuant to a transmission service agreement with the RTC. The ownership structure of the RTC is illustrated in the graph below. 7

22 26. On 5 and 18 March 212 the draft treaty was initialed by the Ministers of Energy of the CLSG states. By the end of April 212 the outstanding legal documents are to be finalized, and the Heads of State are expected to sign the treaty by the end of May 212. The treaty is expected to be ratified by the CLSG parliaments by early September 212. The RTC is expected to be fully staffed by end 212. Figure 2: Ownership Structure of the CLSG Regional Transmission Company CLSG TREATY ARTICLES OF ASSOCIATION S H A R E H O L D E R S Énergies de Côte d'ivoire (CI-Energies) Liberia Electricity Corporation National Power Authority Electricité de Guinée SHAREHOLDERS AGREEMENT CLSG Regional Transmission Company a supranational entity with a commercial character C. Higher Level Objectives to which the Project Contributes 27. The project is aligned with the goals and strategies of relevant regional and subregional organizations namely, NEPAD, ECOWAS and the WAPP Organization. The WAPP is part of NEPAD s development strategy toward regional integration of electricity networks. As a result of this strategy, the WAPP aims to create an open, unified regional economic space through the integration of markets for infrastructure services. The WAPP s regional infrastructure development program for ECOWAS states fully aligned with the goals of NEPAD. It provides the power utilities of the region with a vehicle to achieve the vision embodied in the ECOWAS Energy Protocol that of creating a level playing field to facilitate the balanced development of diverse energy resources of the ECOWAS Member States for their collective economic benefit, through long-term energy sector cooperation, unimpeded energy transit and increasing cross-border electricity trade. The CLSG countries have shown their commitment to the project by endorsing the updated WAPP Master Plan (211) that identifies the proposed project as a priority project for the sub-region. 8

23 28. The Project is consistent with the criteria of engagement and selectivity set out in key assistance strategies. These include the World Bank s Regional Integration Assistance Strategy (RIAS), 5 which under its Pillar 1 recognizes the need for improving access to clean energy and improving supply reliability. The Program also meets the three key criteria for regional projects: (a) involvement of more than two countries (b) economic benefits that will accrue to several countries, and (c) evidence of regional ownership and commitment of the participating countries and provision of a platform for policy harmonization in power sector development. 29. The Project will reduce greenhouse gas emissions. The interconnection results in reduced use of hydrocarbon fuels in the four countries and helps avoid more than 5.6 million tons of carbon over the lifetime of the project in comparison to the without project scenario. Assuming a damage cost value of US$2 per ton, overall gains from avoided carbon emissions can be valued at US$62.5 million in net present value (NPV) terms. II. PROJECT DEVELOPMENT OBJECTIVES A. PDO 3. The Project development objectives of the WAPP CSLG Project are: (i) to reduce the cost of and increase the electricity supply at utility level; and (ii) to increase the export capability of Côte d'ivoire. 31. The Project development objective of the WAPP Integration and Technical Assistance Project is to increase the technical integration of the WAPP network. 32. While all CLSG countries will benefit of reduced costs and increased electricity supply over the lifetime of the investment of the CLSG transmission line, the impact of the CLSG project over the five-year lifetime of the present project is more differentiated as follows: (i) Liberia and Sierra Leone are expected to exhibit reduced costs of electricity supply at the utility level; and (ii) Liberia, Sierra Leone, and Guinea are expected to experience an increase of electricity supply at the utility level. 33. The WAPP CLSG project will increase Côte d'ivoire's capacity of exporting electricity by interconnecting Côte d'ivoire with Liberia, and through Liberia with Sierra Leone and Guinea as well. Export could initially come both from Côte d'ivoire and Ghana. The increased revenue stream from exports to Côte d'ivoire's power sector would be a combination of revenue of sale of electricity and transmission wheeling charges. In the medium term, the project would also help unlock Guinea s large hydropower potential. It is estimated that with the Project Guinea would add about 2,8 MW of hydropower capacity and generate an additional 133,4 GWh over the period of Without the project, there would be lower demand for hydropower from Guinea, and only 1,6 MW of Guinea s potential would be developed generating about 67,5 GWh over the same period. 5 Regional Integration Assistance Strategy, IDA and IBRD, April 28. 9

24 34. For the WAPP Integration and Technical Assistance Project, increasing the technical integration of the WAPP network means enhancing the synchronization of the WAPP transmission network by installing equipment to enhance such trades and to provide technical assistance to the WAPP to ensure better operation of networks. B. Project Beneficiaries 35. The WAPP CLSG Power Interconnection Project. The project beneficiaries are the existing and future customers of the power utilities in Côte d Ivoire, Liberia, Sierra Leone, and Guinea, who will be provided with more and lower cost power. This cost reduction will help make electricity more affordable for households and along with greater security of supply, will improve the competitive edge of firms in Liberia, Sierra Leone and Guinea to create jobs and spur economic growth. At the end of the project s life, a total addition of 5.2 million people is expected to benefit from the electricity provided through the line, of which 2.6 million are women. Both men and women are expected to benefit equitably from the proposed project. 36. In Côte d Ivoire, revenues from electricity exports will help the newly created Énergies de Côte d'ivoire (CI-Energies) to increase its income substantially. 37. The WAPP Integration and Technical Assistance Project. The direct beneficiaries of this project are the power utilities in the ECOWAS region, which will benefit from more efficient electricity trades, in turn rendering their own operation more efficient. C. PDO Level Results Indicators 38. The key PDO Level Results Indicators for the WAPP CLSG Power Interconnection Project are the following: Annual electricity supply from CLSG imports at utility level (GWh) disaggregated by Liberia, Sierra Leone, and Guinea. Annual weighted cost of electricity supply at power utility level in Liberia and Sierra Leone (USD/kWh). Cote d Ivoire export capability to CLSG countries (MW). Direct project beneficiaries (number), of which female (%). 39. The key PDO Level Results Indicators for the WAPP Integration and Technical Assistance Project are the following: WAPP Master Plan Priority projects prepared to financial closure (number). Ratio of annual total hours of synchronization of WAPP Zone A against total hours in a year within TCN-CEB-GRIDCO interconnection (%) 4. Annex 1 presents the detailed results framework for project 1, and Annex 2 provides the detailed results framework for project 2. 1

25 III. PROJECT DESCRIPTION A. Project Components 41. Two Projects are presented under this phase of the Program, each of them being implemented independently. The first project is dedicated to the implementation of the WAPP CLSG Power Interconnection, while the second project is dedicated to the implementation of the supply and technical integration of the WAPP network. Total costs are respectively US$444 million and US$31.5 million (project 1 includes US$71 million for physical and price contingencies). The overall cost is therefore US$476 million (excluding duties and taxes), of which IDA is financing US$176 million. A detailed project description is presented in Annex 3. The WAPP CLSG Power Interconnection Project Component 1.A: Power interconnection between Côte d Ivoire, Liberia, Sierra Leone, and Guinea (US$321.9 million, of which IDA US$84.8 million, AfDB US$16.9 million, EIB US$82.9 million, KfW US$37. million, CLSG Governments US$1.1 million) 42. Under this component, the infrastructure of the 1,349 km transmission interconnection between Côte d Ivoire, Liberia, Sierra Leone, and Guinea is being financed. The component will be implemented by the CLSG Regional Transmission Company (RTC), and it will be cofinanced by AfDB, EIB, KfW, and IDA. The co-financing structure is based on parallel financing. A coordinated procurement strategy for the structuring of the bidding process and bidding documents has been adopted. Sub-Component 1.A-1: Transmission and Distribution Interconnection 43. This component will finance the construction of 1,349 km of 225kV double circuit overhead transmission line interconnecting Côte d Ivoire, Liberia, Sierra Leone and Guinea. The line will have a transmission capacity of 29 MW once completed (see detailed explanation in Annex 3). This component is estimated to cost about US$193 million excluding contingencies, taxes and duties. The line will be co-financed by AfDB, EIB, and IDA. 44. The IDA credit will finance the sections of this transmission line within Liberia, from Yekepa, to Buchanan, and onwards to Mount Coffee up to the border with Sierra Leone in Mano. The IDA credit will also finance the construction of two lines totaling a total length of 5 km of 66kV overhead distribution lines in Liberia from Mount Coffee to Monrovia. The agreed financing plan foresees for the remaining co-financiers 6 the following breakdown: (i) the EIB will finance the transmission line between Yiben (Sierra Leone) to the border between Sierra Leone and Liberia; (ii) the AfDB will finance the remaining transmission lines as follows: from Linsan (Guinea) to Yiben (Sierra Leone), from Nzérékoré (Guinea) to Yekepa (Liberia), and from Yekepa (Liberia) to Man (Côte d Ivoire). 45. To ensure the sizing of the transmission line responds to the actual needs on the ground and to reduce the initial investment costs, a two-stage implementation of the proposed 6 Co-financiers include all multilateral and bilateral institutions involved in the project (AFDB, EIB, KfW, and WB). 11

26 component has been adopted. The CLSG interconnection transmission line will be built as a 225 kv double circuit line with one circuit equipped and with a capacity of 145 MW. The transmission towers will be built to support a double circuit line. Under phase 2 the line will be upgraded to include the second circuit, with a total transmission capacity of 29 MW. The second phase is expected to be undertaken about 3 years after operation of the line is initiated, when the load on the line is expected to increase. The financing for this second circuit is not part of the present project. 46. The transmission line has a provision of Optical Fiber Ground Wire (OPGW) in Sub- Component 1-A-1. As per the normal international practice for OPGW, supply, installation, and commissioning will be part of electricity wire tender. The AfDB is considering exploring the feasibility of using the line for purposes of telecommunications as part of its financing, which could add to the revenue of the line. Sub-Component 1.A-2: Substations 47. This sub-component will finance the construction of kV substations in Yekepa, Buchanan, Mount Coffee and Mano in Liberia; in Kenema, Benkongor, Bumbuna, Yiben, and Kamakwie in Sierra Leone; and in Linsan and Nzérékoré in Guinea. Additionally, this component will provide financing to the required compensation system. The feasibility study identified that compensation equipment would need to be installed in the substations of Mount Coffee (Liberia), Bumbuna (Sierra Leone), Linsan (Guinea), and Man (Côte d Ivoire). The Owner s Engineer will verify the location of the compensation equipment as part of his assignment. 48. The financing plan for the construction of the 11 substations, compensation system and reinforcement of specific substations has been confirmed as follows: (i) the World Bank will finance Yekepa sub-station in Liberia; (ii) KfW will finance Mano, Monrovia, and Buchanan substation in Liberia; (iii) EIB will finance Bikongor, Kenema, and Bumbuna Substations in Sierra Leone; and (iv) AfDB will finance Linsan and Nzérékoré sub stations in Guinea, Kamakwie and Yiben substations in Sierra Leone, and Man substation in Côte d Ivoire. Sub-Component 1.A-3: Supervisory Control and Data Acquisition (SCADA) 49. This sub-component will finance the procurement and installation of the supervisory control and data acquisition (SCADA) system that will monitor and control the interconnected transmission line in the four countries to ensure proper exchange of power and operating control of the system. The estimated cost of the SCADA is US$6.4 million and will be financed by AfDB. The finances will go towards the financing of a new control center in Guinea, and towards the upgrading of the capabilities of the SCADA system and control center in Côte d Ivoire so that it can accommodate operation of the WAPP CLSG transmission line. Sub-Component 1.A-4: Installation and Supply of Compensation and Frequency Regulation Equipment 12

27 5. This sub-component will finance measures to enhance compensation and frequency control along the CLSG transmission line, which are to be determined by the Owner s Engineer at a time closer to commissioning of the transmission line. This would include measures to minimize reactive power and enhance frequency control in transit situations. This subcomponent is financed by IDA. Sub-Component 1.A-5: Implementation of the Environmental and Social Management Plans (ESMPs) and Resettlement Action Plans 51. The cost of implementation of the Environmental and Social Management Plans (ESMPs) (which includes the cost of the Resettlement Action Plans or RAPs) in the amount of US$ 1.1 million will be covered by the respective Governments as part of their counterpart financing. The costs of the implementation of the environmental mitigation measures under the ESMPs will be almost entirely included in the contractor contract, while the costs of the social mitigation measures will be directly born by the CLSG Governments. The measures to be adopted in relation to the ESMPs are discussed in the section pertaining to safeguards further below as well as in Annexes 4 and 11. Component 1.B: Institutional framework and project oversight (US$45.4 million, of which IDA US$45. million, AfDB US$.4 million) 52. Under this component key institutional features of the project will be supported and developed that will ensure the sound implementation of the WAPP CLSG transmission interconnector. The component will be implemented or administered by the Regional Transmission Company (RTC) and it will be financed by IDA and EIB. Sub-Component 1.B-1. Establishment of the Regional Transmission Company 53. This sub-component will cover the operating costs of the RTC during the construction of the line. It will cover support for the development of the institutional framework of the RTC, the setting-up of the RTC, including setting up of systems such as procurement and financial management systems and recruitment of staff, and the operational costs during the construction phase of the CLSG power interconnection. The AfDB will finance part of the auditing costs. Sub-Component 1.B-2. Implementation support through the Owner s Engineer 54. The proposed project will finance an Owner s Engineer to assist the RTC with (i) overall project management and supervision of the procurement, design, construction and preparation for operation and maintenance of the complete investment, including the full transmission line, construction and upgrade of substations; (ii) supervision and monitoring of the implementation of the Environmental and Social Management Plans (ESMPs) and the Resettlement Action Plans (RAPs), based on an agreed monitoring plan; (iii) the carrying out of a compensation and frequency regulation studies and measures, to re-evaluate the compensation requirements for the line, including reactive power and frequency control in transit situations, and further dimension the scope and the scale of compensation and frequency regulation required; and (iv) the carrying out of the audits of the Regional Transmission Company. 13

28 55. The pre-award (pre-construction) activities for the Owner s Engineer will be financed by the EU-Africa Infrastructure Trust Fund through the European Investment Bank (EIB) under a single contract and will be lump-sum. Funding for post award (construction) activities of the Owner s Engineer will be provided by IDA under a separate single contract. This contract will be time-based. As agreed with the EIB, the overall assignment for the Owner s Engineer will be bid out as a single procurement, and World Bank procurement rules will be used. Moreover, the World Bank will provide no objections to the client during the recruitment process. Only if the Owner s Engineer is performing well under the first phase will the firm s contract for the second phase be signed. This type of contracting is standard best practice for Owner s Engineer s contracts. The WAPP Integration and Technical Assistance Project Component 2.A: Supply Alternatives Studies and Project Preparation Support (US$1 million, all of which financed by IDA) 56. Under this component a key studies will be conducted to ensure that in the medium to long-term the generation capacity along the line will be developed in a timely manner and in accordance with least cost principles. More specifically, technical assistance will be provided for preparatory institutional, legal, pre-feasibility/feasibility, and environmental and social impact assessment studies for the CLSG transmission line and potential hydropower plant candidates along the transmission line. The potential hydropower plant candidates may include (i) Bikongor hydropower plant (Sierra Leone); (i) Kassa B hydropower plant (Guinea); and (iii) Souapiti hydropower plant. These project sites have been identified as part of the least cost expansion plan along the WAPP CLSG interconnection through the updated WAPP Masterplan (211). This component will be implemented by the WAPP Secretariat, and it will be financed by IDA. In addition, this component will support project preparation, including the WAPP CLSG JIC, through studies and support of decision meetings, training, staffing and outfitting of a Project Implementation Unit (PIU). Component 2.B: Technical Assistance and Integration of WAPP network (US$21.5 million, all of which financed by IDA) 57. This component financed by IDA proposes to support the integration of WAPP networks and to provide technical assistance. Sub-Component 2.B-1: Technical Integration of WAPP Network 58. The establishment of a sub-regional market for electricity is conditioned by the interconnection and synchronous operation of transmission networks. Frequency and load/supply control is one of the challenges of a synchronous interconnection. The proposed synchronization component will address this issue, thereby reducing supply costs and increasing supply volume in the WAPP. The WAPP will implement this component in at least five power utilities in the ECOWAS region. An updated feasibility study will determine the equipment needs. Then a single contractor will install the equipment. WAPP will retain ownership of this equipment and 14

29 lease it on a gratis basis to the power utilities subject to them adequately undertaking the O&M of the equipment. Sub-Component B-2: Strengthening of the WAPP 59. This sub-component aims to speed up WAPP project implementation by strengthening the Planning, Investment Programming and Environmental Safeguards (PIPES) Department and for the Information and Coordination Center and build capacity. Technical assistance will also include supporting the certification process of network operators and will assist the development of standardized market operating rules for the WAPP zone. 6. The project costs (see further below) also include provision for an unallocated amount, which reflects both physical and price contingencies for the project. B. Project Financing Lending Instrument 61. The proposed lending instrument is an Adaptable Program Lending (APL). This project is a natural continuation of the previous West African Power Pool (WAPP) Adaptable Program Lending (APL) that was developed in 26 as part of the World Bank s support to the regional program of the WAPP. It is a horizontal APL4, which covers the sub-region of the CSLG countries and connect previously not yet interconnected countries in the sub-region. It is also the first phase of a vertical APL. Phase 2 of the APL 4 is expected to be the Mount Coffee Hydropower Plant, which is a regional hydropower resource located in Liberia along the CLSG Power Interconnection. Principles for advancing to the next phase of an APL within the geographical area that delineates the APL s (for example APL 4 covers the CLSG countries), are (i) the readiness of the subsequent project; (ii) the level of advancement of the preceding phases within the geographical area; and (iii) the adherence to WAPP principles, such as the ECOWAS Energy Protocol (EEP). Project Cost and Financing 62. The table below presents a summary of the project costs in thousand US$ and the percentage contribution of IDA financing per component. Annex 3 includes a more detailed cost breakdown by component. The co-financiers for this project are AfDB, EIB, and KfW. The Governments will also contribute to the project. Table 1: Project Cost and Financing Project Components Project Cost (US$ thousand) IDA Financing (US$ thousand) % Financing Project 1 Component 1.A: Power interconnection between Côte d Ivoire, Liberia, Sierra Leone, and Guinea. 321, ,8 26% 15

30 Component 1.B: Support for the institutional framework and project oversight. 45,42 45,7 99% Project 2 Component 2.A: Supply Alternatives Studies and Project Preparation Support. 1, 1, 1% Component 2.B: Technical Assistance and Integration of WAPP Network. 21,5 21,5 1% Total Baseline Costs 398, ,37 4% Physical and Price Contingencies 77,18 14,63 19% Total Project Costs 475, , 37% 63. The table below gives a more detailed breakdown of the project costs and the financing by respective co-financier. Table 2: Breakdown of Project Costs and Financing Component Activity WAPP CLSG Power Interconnection Project AfDB EIB KfW WB Governments Total [kus$] [kus$] [kus$] [kus$] [kus$] [kus$] Power interconnection between Côte Component 1.A d Ivoire, Liberia, Sierra Leone, and Guinea 16,986 82,951 37,67 84,8 1, ,948 1-A-1 Transmission Interconnection 58,793 6,748 73,2 192,74 1-A-2 Substations 41,773 22,24 37,67 1,1 111,144 1-A-3 SCADA 6,42 6,42 1-A-4 Compensation and frequency control measures 15 1,5 1-A-5 Implementation of the ESMPs and RAPs 1,143 1,143 Institutional framework and project Component 1.B oversight ,7-45,42 Establishment of the Regional Transmission 1-B-1 Company 35 19,17 19,52 1-B-2 Owner's Engineer 25,9 25,9 Unallocated and Interest During Construction 25,758 22,228 3,77 14,63 1,695 77,18 Total Costs WAPP CLSG Power Interconnection Project 133,94 15,18 4, ,5 2, ,385 WAPP Integration and Technical Assistance Project Component 2.A Studies and Project Preparation Support 1, 1, Technical Assistance and Integration of Component 2.B WAPP Network 21,5 21,5 2-B-1 Technical Integration of WAPP Network 18, 18, 2-B-2 Technical Assistance to WAPP 3,5 3,5 Total Costs WAPP Int. and Tech. Assist. Project 31,5 31,5 Overall Costs 133,94 15,18 4, , 2, ,885 Note: The project financing costs include 1% of physical contingencies and 4.5% of price contingencies for the World Bank financed parts. 64. Indicative terms for the financing are shown in the table below: Table 3: Indicative terms of Financing Lender Amount (US$ ) Tenor (Years) Grace Period (Years) Interest Rate EIB 15, % Service Charge 2 Mil Euro AfDB(Loan) 28, % % On-lending Term Same as Gov. Same as Gov. 16

31 Lender Amount (US$ ) Tenor (Years) Grace Period (Years) Interest Rate Service Charge On-lending Term AfDB (Grant ) 14, IDA 176, 4 1 %.75% Same as Gov. KfW 4, The four governments have agreed to finance the cost of implementation of the Environmental and Social Management Plans (ESMPs), including the Resettlement Action Plans (RAPs) (US$ 1.1 million), and the Interest During Construction (IDC) (US$5.5 million) as part of their counterpart financing. The Government of Liberia will also provide about US$5.1 million for cost contingencies. The table below shows the indicative amount per country and the expected timeline for disbursement: Table 4: Counterpart Financing Country ESMP (US$ mil.) IDC (US$ mil.) Unallocated (US$ mil.) Cote d Ivoire Liberia Sierra Leone Guinea C. Program Objective and Phases 66. The project is part of a wider program by the Bank to support the WAPP priority projects. The goal of the WAPP APL program is as stated earlier, to establish a well-functioning, cooperative, power pooling mechanism for West Africa, as a means to increase access of the citizens of ECOWAS to stable and reliable electricity at affordable costs. The WAPP has a rigorous process of selecting priority projects on the basis of a regional Masterplan (last updated in 211), which uses least cost expansion principles. 67. Support under the program is accorded in four WAPP zones as follows: (i) WAPP zone A core countries; (ii) WAPP zone B core countries; (iii) interconnection of zone A and zone B countries; and (iv) targeted support of most vulnerable WAPP countries. The WAPP CLSG project inscribes itself in the support of the most vulnerable countries. Next WAPP possible candidate projects include the Mount Coffee Hydropower Plant in Liberia, the Adjarala Hydropower Plant between Benin and Togo, and the Gouina Hydropower Plant in Mali. D. Lessons Learned and Reflected in the Project Design 68. The WAPP CLSG project has been designed taking into account broad lessons from the the setting up of the SIEPAC project in Central America (Sistema de Interconexión Eléctrica de 17

32 los Países de América Central or Central American Electrical Interconnection System), which has similarities with the proposed WAPP CLSG project, especially with regard to the arrangements for the creation of a cross-border transmission infrastructure. In addition, lessons learned from the design of comparable Bank financed regional APLs for Southern Africa Power Pool (SAPP), the Energy Community of South East Europe (ECSEE), and the existing WAPP program have been applied. The project has also benefitted from lessons learned from a five decades long evolution of the best known regional power market - the Nordic power market which is operated by NordPool. 69. Lack of transmission line usage: lessons of experience from projects show that the construction of cross-border transmission line is a necessary condition for trades to take place, but not a sufficient condition to enable the flow of trades when excess power is not available to be traded on the line. The demand-supply balance for Côte d Ivoire and Ghana indicate that both countries would be able to export power in direction of Liberia, Sierra Leone, and Guinea. Moreover, Côte d Ivoire s Minister of Energy confirmed in a joint Memorandum of the four CLSG Ministers of Energy dated 5 and 18 th of March 212 the availability of 83 MW for the export along the transmission line once the construction is complete. In the medium term, Guinea can also become a large exporter through development of its hydropower resources. Annex 8 gives a detailed breakdown of availability of power along the CLSG line. 7. Even if supply is available in principle, as the demand-supply balance seems to indicate, the question is how power trades can best be incentivized due to a sound institutional framework and market design. Beyond the mere availability of trade, the WAPP JIC is envisaging the incorporation of the following mechanism in the institutional framework in order to incentivize trade: Establishing a clear and transparent framework for trades along the line with required use of a standardized Transmission Service (TSA) by including a standard form for this agreement in the International Project Agreement of the RTC; A simple, yet effective, method to price transmission whose main objective to ensure transmission cost are recouped. The more complex the tariff methodology, the more difficult it is for future investors in power generation to anticipate transmission costs. A postage-stamp methodology is easier to understand and apply by the entity determining prices. A postage stamp tariff methodology has indeed been adopted to determine transmission usage costs under the WAPP CLSG Project. As part of the tariff methodology, the Governments have adopted in principle a cost recovery scheme for the RTC that puts the onus on payment in case of insufficient trades on the shareholders, namely the four power utilities. This mechanism inherently incentivizes the shareholders of the RTC to ensure that the usage of the line is maximized; Another rather basic means of ensuring trades on the line is to ensure that a Power Purchase Agreement is signed. Efforts to getting this done are underway, and it is expected that an anchor PPA be concluded by November 212. The conclusion of an anchor PPA is a condition for effectiveness of the proposed project. 18

33 71. Financial viability of the Regional Transmission Company: The financial viability of the RTC can be affected in two ways. Firstly, the operating costs can be structurally superior to the income stream. Secondly, the income stream may be coming in late, thus affecting the cashflow of the RTC and its ability to pay its own costs in a timely manner. Financial viability is a serious challenge generally speaking among the power utilities in ECOWAS. It has also been a challenge for the few existing SPCs in the region: SOGEM and CEB. 72. With respect to the first issue, the financial viability of the RTC is directly linked with the trading volume on the line, as this normally determines the financial viability of the line. As a consequence, if trading volumes are low in the beginning of the operation of the line, the RTC has a risk of running a financial shortfall. To hedge against this risk, the WAPP JIC has endorsed a tariff scheme that requires the shareholders of the RTC to pay for any shortfall from trading revenue to ensure the operating costs of the RTC are covered. Arguably this approach is justified, because the CLSG transmission line not only provides for an inter-country connection but constitutes also backbone transmission lines for the national grid at a minimum for Liberia and Sierra Leone: Costs of national transmission lines are commonly incorporated in the overall costs of operations of the power utilities. 73. A cash flow shortfall can arise when payments due to the line are not settled in a timely manner. A first course of action is to ensure that payments are settled in a timely manner. This can be done by making the RTC the intermediary for any payments on the line, and in accordance with a waterfall scheme giving the RTC the right to take off any payment due to it before it goes to a third party such as a seller of electricity. A second course of action is to give the RTC some financial security that it can draw on in the event that a shortfall occurs. The EIB is proposing additional grant financing and is considering using this to extend the grace period for the EIB credit with the aim of reducing the financial burden of the RTC in the initial years of operation. Other mechanisms that had been discussed include a reserve account facility held in escrow from which the RTC could draw under certain conditions. However, stakeholders participating in the preparation of the project felt that such a mechanism may be too complex to set up and monitor. 74. Tariff methodology for the determination of wheeling charges across borders: lessons learned from the international experience indicate the importance of a clear regulatory framework for recouping the cost of transmission across borders. When there is lack of transmission, it is important to design transmission rules that ensure cost recovery while at the same time not inhibiting trade. For this reason transmission pricing methodologies should balance two objectives: ensuring cost recovery and facilitating trade. To ensure cost recovery the WAPP CLSG JIC adopted a methodology that charges the cost of transmission in terms of the relative share of the trade that each power purchasers occupies. If there is a short-fall in revenue with respect to the operating costs of the RTC, it is recouped by shareholders contributions. In order to facilitate trade, a postage-stamp methodology was adopted. The methodology provides a very simple, yet stable, framework to anticipate transmission costs by generators. 75. Ensuring efficient operation of transmission line trades. A lesson learned from the Scandinavian experience is that regional multi-country power pooling arrangements, such as the one envisaged for the WAPP, the active involvement of all transmission system operators is 19

34 helpful. In the Nordic power market, NORDEL, an association that was comprised of the TSOs of Denmark, Finland, Norway and Sweden, put in place a robust cooperative mechanism as a means to create a secure and reliable platform for the progressive development of the increasingly unified and competitive regional electricity market in Scandinavia. 7 Under the WAPP program, such an overarching system is being developed, and the technical assistance provided under this project targets the support of this mechanism. The WAPP CLSG project specifically clearly identifies the roles and responsibilities of future TSOs, which will be located in Côte d Ivoire and in Guinea. The physical infrastructure to be put in place is fully financed under the project. 76. Development of a well-defined policy and institutional framework: the design of policy and institutional framework for the WAPP CLSG project should be grounded in a welldefined policy and institutional framework, have full backing of the beneficiary countries and move at a pace tailored to each country's situation. The WAPP CLSG project design has been fully adapted to the high risk and fragile country nature of the four countries concerned. The focus has been to work through (i) a single institutional arrangement for the preparation of the project (WAPP JIC) and for the maintenance of the project (RTC) in order to simplify policy decision-making processes; and (ii) to establish clear and simple rules of operation and trading that can be readily implemented in the fragile country environment of the four countries concerned. 77. Uniform implementation of the entire transmission line: stakeholders at both the national and regional levels should have a combined ownership of the program implementation arrangements and institutions, so as to promote uniformity of purpose. In the past, all Bankfinanced WAPP transmission line projects have relied on the existing power utilities to prepare the segment of the line that were located in their territory. This has led to delays of completion for the overall line, as different power utilities operated at different levels of speed. To counter such challenges, the four countries concerned are in the process of establishing a single and dedicated Regional Transmission Company (RTC) that will oversee both the construction and the maintenance and further development of the line. This institutional framework is seen as key to overcoming the lack of experience especially of the power utilities in Guinea, Sierra Leone, and Liberia in operating transmission systems. 78. Cost overruns are generally caused by deficient cost estimates, delays in the procurement process and changes in the global demand that cause increase in the price of raw materials and labor associated with the manufacturing and fabrication of goods. Cost estimates developed under the feasibility of the project have been compared with bid results in similar projects and country contexts within the Bank's operations. Similarly, in developing the procurement strategy (especially with respect to the sizing of the bid packages), the team has closely assessed lessons learned in similar recent projects were closely assessed, such as the transmission lines financed by the Bank in DRC, Tanzania, and the WAPP s Coastal Transmission Backbone. Accordingly, the bidding documents for the WAPP CLSG Project are envisaged to be available by mid Nordel existed since 1963, and was wound up in 29 after the creation of the European Network of Transmission System Operators for Electricity (ENTSO-E). 2

35 79. Implementation delays especially in the earlier WAPP program have been caused by a piecemeal approach to constructing the transmission line. For example, in the context of the WAPP Coastal Transmission Backbone, and as traditionally the case in cross-border projects financed by the Bank, the financing and construction of each segment was subject to the responsibility of each country and respective national power utility. In the case of the Coastal Transmission Backbone, which was to establish a transmission highway between Ghana, Togo, Benin and Nigeria, the Government of Togo was unable to receive sufficiently concessional financing in a timely manner. As a result the middle segment of the Coastal Transmission Backbone located in Togo was significantly delayed, pushing the benefits of the overall line into the future. Against this background, the WAPP CLSG project was developed as a single project under the auspices of the WAPP Secretariat and through the WAPP Joint Implementation Committee (JIC), which was set up by the four Governments. Further, the project will to be owned and operated by a single entity, the Regional Transmission Company (RTC), which will oversee the construction of the entire line. Nevertheless, given that the RTC is a new entity with lacking experience in procurement, procurement delays could occur. 8. Monitoring and evaluation of outcomes: A good project monitoring and evaluation system is necessary for effective evaluation of project outcomes. At the regional level, the WAPP CLSG project is included in the established mechanism for policy oversight of the ECOWAS Energy Protocol, which is the WAPP Steering Committee composed of the "Committee of ECOWAS Energy Ministers". The WAPP CLSG project will also benefit from the existing monitoring mechanism under the ECOWAS Commission, including the "Meeting of WAPP donors." In addition, the WAPP General Secretariat, supported by USAID and the Bank through existing activities, is assisting the development and deployment of an integrated WAPP monitoring and evaluation system to report on overall program outcome indicators. IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 81. The Regional Transmission Company (RTC) will implement the WAPP CLSG project. The WAPP Secretariat will implement the WAPP Integration and Technical Assistance Project. 82. The RTC will independently implement each of the components of the WAPP CLSG Project. The bulk of its activities will be to oversee the construction of the proposed transmission line. Among the legal documents that are under development for the setting up of the RTC, the International Project Agreement (IPA) sets out precisely what the roles and responsibilities of the RTC are with respect to its shareholders, and vice-versa. 83. One of the key effectiveness conditions for the Credit is the establishment of the RTC under terms and conditions acceptable to the World Bank. An acceptable draft treaty, Articles of Association, and Shareholder Agreement have been endorsed by all four Governments. The International Project Agreement is expected to be finalized by the end of June 212. All World Bank comments have been reflected in the draft legal documents. It will be important to closely monitor the establishment of the RTC, in accordance with the timeline that the WAPP JIC has adopted. 21

36 84. In terms of this proposed credit, the Association will enter into a Financing Agreement with the Government of Liberia, but no Project Agreement with the RTC. The later follows, because the RTC was not established at the time of negotiations. Instead, the subsidiary credit implementation agreement between the RTC and the Government of Liberia will become one of the conditions for effectiveness of the Financing Agreement. 85. Until effectiveness of the Credit, the WAPP Secretariat will continue implementing the Project Preparation Advance granted to Liberia for its project. Ongoing activities include (i) the finalization of the institutional framework, including the full setting up of the RTC; (ii) assistance with brokering a first Power Purchase Agreement; (iii) assistance for the setting up of the Project Implementation Unit (PIU), which is located at the WAPP, and will be moved to the RTC by effectiveness; and (iv) assistance with the development of distribution networks along the substations of the transmission line. The WAPP also receives assistance from the EIB to start the process for the recruitment of the Owner s Engineer. 86. The WAPP Secretariat will independently implement the WAPP Integration and Technical Assistance project, which focuses on technical assistance type of activities and implementation of synchronization equipment in Zone A of the WAPP. B. Results Monitoring and Evaluation 87. The RTC will be responsible for results monitoring and evaluation for the CLSG project. Activities to be monitored include the timely and efficient construction and commissioning of the regional transmission line, and effective implementation of the Environmental and Social Management Plans (ESMPs) and Resettlement Action Plans (RAPs). An Environmental and Social Advisory Panel (ESAP) will not be required because of the relatively minimal impacts that the project is expected to have on the physical environment and the affected persons. 88. The WAPP Secretariat will be responsible for the monitoring and evaluation of the WAPP Integration and Technical Assistance project. The main activities to be monitored are the completion of studies as foreseen under these components, the implementation of technical assistance measures at the level of the WAPP Secretariat, and the implementation of synchronization equipment in power utilities in the WAPP region to allow for more efficient trading. 89. Annex 1 presents the WAPP CLSG Project's results framework and Annex 2 presents the WAPP Integration and Technical Assistance Project. Both annexes define specific outcomes and results to be monitored under the Projects. In addition, the Bank will carry out the normal review processes, including through at least bi-annual supervision missions, including technical/engineering quality, procurement, financial management and analysis, safeguards, institutional framework (including training), and governance. The supervision will be conducted on the basis of a number of reports, including quarterly project reports, independent annual financial audits, and Financial Monitoring Reports (FMRs) of the project. 9. In order to minimize the burden of supervision on the client, the co-financiers have agreed in principle that joint supervision missions would be conducted, and that the responsibility of supervision would be shared among the co-financiers as follows: 22

37 Procurement: WB and AfDB per each respective tendering documents Institutional Setting-up and Assessment: WB Environmental and Social Safeguards: WB Financial Management: AfDB/WB Monitoring and Evaluation: KfW Technical aspects/engineering: EIB 91. The RTC will report on project progress on a quarterly basis using a single report format for monitoring progress on the project that has been agreed in principle by the four co-financers. The quarterly report will contain information on the status of project implementation, financing, procurement, updated results indicators, and a detailed overview of awarded contracts and disbursements by contract and co-financiers. It will also include a tracking mechanism for the implementation of the ESMP and the RAP. 92. The Association will also carry out a mid-term review of both Projects by January 31, 215 (approximately 24 months after the effectiveness of the Projects) and will receive an Implementation Completion and Results Reports (ICR) at the end of the Projects. Both the midterm review and the ICR will be coordinated with the other co-financers. C. Sustainability 93. Key factors contributing to the sustainability of the project are as follows: The Commitment of Governments to the project has been unique, as Governments recognize the potential economic benefits that the line may bring. The sequence of meetings on the WAPP JIC and the comprehensive representation of government officials showed this commitment. The WAPP JIC meetings in late 211 and early 212 have been attended by authorized representatives from the Ministries of Finance, Planning and Economy, and Justice in addition to the Ministries of Energy. Mindful of their own country contexts, Governments have sought to ensure that the draft legislation for the setting up of the RTC be governance proof. The WAPP plays a key role in the project, and has led the project preparation of this project from identification. Recently, the role the WAPP has played in this context was recognized by the G2, which has nominated the WAPP and the WAPP CLSG Interconnection specifically as a best practice project. 94. Key for the sustainability of the project is to achieve financial viability of the WAPP CLSG RTC and to ensure that trading will be enabled along the line. A more detailed description of why these factors matter for the project, and how they are proposed to be addressed is given in Section III.D on Lessons Learned, Section V on risks, and Annex 8. 23

38 V. KEY RISKS AND MITIGATION MEASURES A. Risk Ratings Summary Table Table 5: Risk Ratings Stakeholder High Design Moderate Capacity High Social and Environmental High Governance High Program and Donor High Implementation and Sustainability High Financial Viability High Overall Implementation Risk High B. Overall Risk Rating Explanation 95. The overall risk rating for the CLSG project is high. This follows mainly due to the high risk country environments of Côte d Ivoire, Liberia, Sierra Leone, and Guinea and the fact that the Regional Transmission Company (RTC) for the project is still to be set up. Annex 5 presents a detailed project framework (the ORAF ) for the overall project. The key risks are as follows: 96. Project Stakeholder Risk: The implementation of this project will involve 4 governments, 12 national institutions (at least 2 ministries and 1 utility company per country), and international entities (WAPP Secretariat; Committees of the CLSG Treaty). Risks of institutional interferences are therefore high at all levels of the chain of decision. Moreover, CLSG countries are fragile states that face political economy constraints that might impact the proposed project. Finally, the national power utilities, which will be the off-takers of power from the transmission line and their shareholders, suffer from lack of capacity, financial viability, and political economy challenges especially in Liberia, Sierra Leone and Guinea. The key mitigation measures are: (i) The involvement of the WAPP Secretariat, which will continue to play an important role in promoting regional integration among the CLSG countries; and (ii) The establishment of the single Regional Transmission Company (RTC) which will own, maintain and develop the transmission line, will minimize the responsibility of the national public utilities and will aggregate various levels of interest into a single advocator for regional transmission. 97. Lack of track record at the RTC: The RTC that will own, maintain and develop the transmission line. It is still to be set up. While there is a clear plan of the staffing going forward with requisite terms of reference that are acceptable to the Bank, the RTC does not yet exist and therefore the risk rating is high for the RTC s capacity. For the WAPP Integration and Technical Assistance Project, instead, the WAPP, through its Secretariat, will implement the Project and it has a proven track record of implementing donors grants. Furthermore, with the recent recruitment of a new procurement officer, the WAPP has sufficient capacity available to handle its Project. 98. Financial viability of the project (high): the poor financial health of the power sector in the four countries as a whole threatens the sustainability of any project or operation. Although the problem of tariffs being below cost is known to the authorities, there is no firm indication of 24

39 how or when the problem will be addressed. The exception is Liberia, which has tariffs that are close to cost recovery, and which has a tariff adjustment mechanism. A number of measures were considered to ring-fence the RTC from these risks. These include: (i) a letter of credit that the RTC holds with a commercial bank to ensure that payments are being made in a timely manner and that the RTC does not experience cash-flow problems; (ii) the setting up of a dedicated reserve account for the RTC; (iii) a provision for all shareholders to provide for any shortfall the RTC would face if one of its users did not pay. VI. APPRAISAL SUMMARY A. Economic and Financial Analyses Economic Analysis 99. The main economic benefit of the proposed interconnection would be to enable electricity trade between the participating countries, and in the regional network. The CLSG transmission line will allow for the transfer of surplus generation from the country/region with the least/lower future generation costs to the system with the higher/highest generation costs. As per the feasibility study from AETS/Sogreah, the electricity could up until 22 come from Côte d Ivoire and Ghana. Even marginal plant in both countries is lower cost that the average cost of electricity in Liberia, and the average cost of supply in both Sierra Leone and Guinea. Post-22, it is expected that the low-cost hydropower resources in Guinea can be developed, which would further lower the cost of electricity supplied along the line. 1. The main economic benefits of the line are (i) fuel and other energy cost differentials among countries/locations in the CLSG region and beyond, (ii) the reduction of the need for spinning reserve; and (iii) ability to smoothen the load curve. 11. The economic justification for the proposed interconnection line was assessed by a study 8 commissioned by the WAPP Secretariat. The study compared the following two scenarios over the time horizon: Reference scenario: this is the optimal expansion plan of the electrical system of the four countries (Côte d Ivoire, Liberia, Sierra-Leone and Guinea) without the interconnection line. This is the without project scenario; and Integrated Planning Scenario: this is the optimal expansion plan, which includes the interconnection line and adjusts the power generation investments in the participating countries to derive the maximum benefit from the interconnection. This is the with project scenario. 12. This analysis was updated with current assumptions and for the entire lifetime of the project. Based on the difference in net present value (NPV) between the two scenarios, the project has a positive NPV of US$57 million (with a 1 percent discount rate) and an economic 8 AETS/Sogreah (29) Feasibility Study on the Man (Côte d Ivoire) Yekepa (Liberia) Nzérékoré (Guinea) Buchana (Liberia) Monrovia (Liberia) Bumbuna (Sierra Leone) Linsan (Guinea) Interconnection Project. Feasibility Study, Final Version, Volume 1. Load Forecast and Power Exchanges, December

40 rate of return (EIRR) of 36% for the four countries under the base case assumptions. The EIRRs of the project for the CLSG countries are: Côte d Ivoire 73%, Liberia 42%, Sierra Leone 15%, and Guinea 18%, suggesting that both Côte d Ivoire and Liberia will benefit most from the project. Benefits for Sierra Leone and Guinea are somewhat lower, because they are assumed to fully absorb the cost of investment for the large hydropower investments in the least cost expansion plan. In as much as these are regional resources, the participation of Côte d Ivoire and Liberia in the investment costs could lead to a more equitable distribution of benefits of the CLSG transmission interconnection. More details are presented in Annex 7. Financial Analysis 13. Financial Performance of the RTC and the CLSG Project: The financial analysis confirms that the RTC will be financially viable and able to cover its cash operating costs, to make provisions for the renewal of the assets and to meet its debt service obligations under the revenue and tariff assumptions detailed in annex 7. However, based on these assumptions, the project has a financial internal rate of return (FIRR) of minus 2. percent and a financial net present value (FNPV) of minus US$194 million. The reason the project has a negative FIRR and FNPV is that the tariff is designed to ensure that the RTC can meet its debt service obligations but also that it is as low as possible in order to encourage trade. 14. The Project is financed by relatively large grants from the AfDB and KfW (more than US$15 million) that do not need to be reimbursed. The balance of the financing will come from concessional loans with relatively long maturities and at rather low interest rates as well as equity provided by the participating States. No return on equity is expected, at least during the initial years of operation. 15. If tariffs would be set higher in order to produce a positive FIRR and NPV, it could: (i) discourage trade on the line and undermine the key objective of this project (reducing electricity cost in the CLSG countries) and (ii) create a relatively large cash surplus over the life of the project. Such a surplus is not needed. With the current tariff, as designed, the RTC will have all the revenues it needs to operate, maintain and renew its assets (through normal as well as major maintenance), and service the debt (the cumulative debt service ratio will always remain above at least 1.5). These tariff policies are fully in line with the development objective of the Project. 16. Financial Performance of the National Power Utilities: The distribution utility in Côte d Ivoire is financially profitable and creditworthy but the overall sector is making losses. Utilities in Liberia, Sierra Leone, and Guinea are not creditworthy. 17. We find that the estimated cost of import is less than the marginal cost of generation (assumed to be HFO or diesel) in Liberia, Guinea, and Sierra Leone. Given that the final tariff structure does not contain a large fixed part, the project will improve the financial situation of the utilities in Liberia, Guinea, and Sierra Leone. Cote d Ivoire will also benefit; first from increased export opportunities and in the medium term through importing lower cost power (from hydropower developments in Guinea for instance). 26

41 18. The WAPP CLSG project will improve the financial performance of at least some of these utilities significantly, as the energy imported would displace more expensive generation sources. In addition, projects are underway with the power utilities in Liberia, Sierra Leone, and Guinea that are expected to improve the financial viability of the power utilities. The RTC nonetheless needs to be protected against non-payments, as the enforcing actions (disconnecting customer) that the RTC can take are harsh and thereby not easily usable. The financial viability issue related to the non-creditworthiness of utilities can be mitigated by the four states agreeing to be responsible for the all-in cost of RTC to be capped at maximum of 6 Mil Euro per each state. It is anticipated that some clauses in the International Project Agreement (IPA) for the RTC will note such obligations. B. Technical 19. The proposed project includes (a) the construction of 1,349 km of 225kV double circuit overhead transmission line interconnecting Cote d'ivoire, Liberia, Sierra Leone and Guinea, (b) construction of associated 11 new substations and compensation systems in 4 substations and the extension of one substation. 11. Although the transmission line is long, the project presents no unusual construction and operational challenges. The equipment and the technologies involved in construction and operation of transmission lines are well known and proven including in Sub-Saharan Africa. The design, including technical parameters and estimated project costs for the transmission line have been established by a feasibility study prepared by AETS/Sogreah and approved by the four power utilities involved and the WAPP Secretariat. The consultant is also responsible for preparing technical specifications, bill of quantities, bid documentation, and a procurement strategy for the project, which are under preparation As part of the Project's implementation arrangements and as is common for these types of projects, an Owner s Engineer will be contracted to assist both in the procurement of the contractor(s) that are to construct the line and in the supervision of design and construction of the line. C. Financial Management 112. The WAPP Secretariat that will implement project 2 is satisfactorily implementing the project preparation advance. The WAPP Secretariat has a well functioning financial management system with the finance unit staffed with experienced financial specialist and accountants who will be in charge of the implementation of this project using the existing and adequate multiprojects accounting software. The Regional Transmission Company (RTC) under creation for the implementation of project 1 has to put in place financial management arrangements required before effectiveness as per the Action Plan set out in Annex 4 to meet the Bank s minimum requirements under OP/BP1.2. The other actions to be achieved within six months after effectiveness are also essential in strengthening the financial management systems of the project. At this stage, the overall financial management residual risk rating is moderate for the WAPP Secretariat and substantial for the RTC. This will require the project to have on-site supervisions at least twice a year for RTC and once a year for the WAPP Secretariat. 27

42 D. Procurement 113. It is expected that the RTC to be created will be the main implementing agency for procurement activities conducted under the project. Until the establishment of the RTC, Governments of the CLSG countries have agreed that procurement activities for the project be carried out by the WAPP Secretariat on behalf of the four (4) CLSG countries through a Project Implementation Unit (PIU), which is located at the WAPP. This PIU will subsequently become part of the RTC once it is established A procurement capacity assessment of the WAPP Secretariat was conducted during project preparation that has led to the recruitment of a Procurement Specialist for the WAPP Secretariat, and to the preparation of a procurement manual. The responsibility for undertaking procurement under the project as well as the day-to-day implementation of procurement activities will be transferred to RTC, following the Bank's prior approval, and after Bank's procurement capacity assessment of this company. The RTC will recruit a suitably qualified procurement specialist The project implementation involves CLSG countries; thus, it has been agreed that the World Bank Procurement and Consultant Guidelines (January 211) 9 and related procurement documents (for example: prequalification documents, bidding documents, Requests for Proposals (RfP) and sample evaluation reports) will be used under the project for those elements that are being financed by the World Bank. Also for certain procurement packages, the World Bank procurement procedures will be used for contracts financed by certain co-financing partners (i.e. currently planned under a joint procurement process with separate contracts co-financed under parallel arrangements). Due to the volume and complexity of procurement packages and the involvement of several co-financing partners in the procurement processes, the project procurement risk is rated substantial. In addition to the World Bank s procurement guidelines, the World Bank Guidelines for the Prevention of Fraud and Corruption do apply. 1 E. Environmental and Social Safeguards 116. As summarized in Annex 11, Bank safeguards work was based on the review of information collected since 29, and following a series of consultations held between with affected communities and stakeholder groups. It is a Category A project with the following safeguards policies triggered: OP4.1 (Environmental Assessment); OP4.4 (Natural Habitats); OP4.11 (Physical Cultural Resources); and OP4.12 (Involuntary Resettlement). Corresponding safeguards policy documents were prepared for each country, including an Environment and Social Impact Assessment (ESIA), Environment and Social Management Plan (ESMP), Chance Finds procedures in construction Contracts, and a Resettlement Action Plan (RAP) as shown in the table below. 9 More specifically: (i) Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers dated January 211; and (ii) Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers dated January Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 15, 26 and revised in January

43 Table 6: Safeguards Table Bank Safeguards Policies OP/BP4.1 Environmental Assessment OP/BP4.4 Natural Habitats OP/BP4.11 Physical Cultural Resources OP/BP4.12 Involuntary Resettlement Safeguards Instruments/Reports Environment and Social Impact Assessment (ESIA) Environment and Social Management Plan (ESMP) Report containing analysis of alternative line route; circumvents several protected areas, some of which with a high level of biodiversity. No offsets are required. A chance find procedure is included in the construction contracts for the transmission line and substations Resettlement Action Plans (RAPs): Comments ESMP contains the measures to eliminate or reduce environmental impacts and actions to carry out these measures during implementation; transmission line passes through generally uninhabited bush land, secondary succession forests, and small-scale agricultural areas. During implementation, there will be further evaluation of potential cumulative impacts, given the coverage and length of the transmission line, on natural habitats, including forests. Based on historical records and from consultations with Chiefs, elders and local leaders, it was verified that there were no known cultural or historical properties of significance along the RoW. In fact, the transmission line deliberately avoids a sacred forest and water body. Procedures for managing such properties will be applied if these are encountered during construction of substations and towers. The RAPs were prepared starting in November 29 (cut-off date). The baseline socio-economic survey and consultations were completed in 21, and field verification for valuation of land and other assets was finalized in November 211, except for Guinea and Cote d Ivoire due to problems with security Environmental Assessment Safeguard Policy OP4.1: Environmental and Social Impact Assessments (ESIAs) and associated Environmental and Social Management Plans (ESMPs) have been prepared for each country following guidelines stipulated in OP4.1 (Environmental Assessment). The ESIAs and ESMPs cover the entire transmission line route from Man in Côte d Ivoire to Yekepa to Buchanan to Monrovia (substation located at the Mt. Coffee Hydropower Plant) and Mano in Liberia, with a spur from Yekepa to Nzérékoré in Guinea, further from Kenema, to Bumbuna and Yiben in Sierra Leone and to Linsan in Guinea The total length of the 225 kv transmission line across the WAPP Interconnection, which covers Côte d Ivoire, Liberia, Sierra Leone, and Guinea, is 1,349 km, including two 66 kv distribution lines (in total 5 km) from Mount Coffee to Bushrod Island and Paynesville in Liberia. World Bank environmental and social safeguard missions visited almost the entire length of the transmission and distribution lines. The transmission line goes through mostly farm lands or bush areas (farm-bush); in some cases, it also passes through degraded forest areas, urban, and peri-urban areas. Annex 11 includes more details on the line route and its environmental and social impacts. 29

44 119. Paragraph 4 of OP 4.1 requires that, for Category A projects, the recipient retains independent environmental assessment experts not affiliated with the project design to carry out the Environmental Assessment. In line with this, footnote 7 to said paragraph 4 requires for EAs and engineering design studies to be conducted by different consultants in order to avoid conflict of interest. In the case of the CLSG Project, the safeguards studies and the line route study were conducted by the same consultant, while the feasibility study was conducted by another consultant. Nonetheless, as the line routing study feeds into the design of the Project, a waiver is sought to the application of the requirements under said footnote 7 of OP4.1 to the proposed Project. 12. The line routing study was complemented by an Analysis of Alternatives survey (see paragraph 125 below) additionally undertaken by KEPCO and verified by the Bank s team to ensure that environmental and social impacts of different line routings were adequately assessed. The grounds for such waiver include the fact that: (i) the preparation of the Project commenced only following a concept review on February 1, 29, and by this time, the study of the consultants was well underway; (ii) the Project team has done extensive due diligence during Project preparation to ascertain that any environmentally and socially sensitive areas have been avoided. This included a viewing of almost the entire length of the line (with the exception of small segments in Sierra Leone). All areas close to potential environmental hot spot areas have been visited and it has been confirmed that these have been adequately avoided; (iii) the direct involvement of the environmental consulting firm has de facto facilitated the selection of the optimal line route, because its expertise allowed it to anticipate potential environmental challenges in the line routing and therefore avoid them. Had the line routing been selected by the consultant undertaking the feasibility study, the line routing would have in all likelihood been subject to more iterations than it actually has been; and (iv) the bulk of the engineering design of the Project was conducted under the feasibility study, which was prepared by a different consultant. Furthermore, the ESIAs and RAPs required under OP4.1 and OP4.12 have been completed to the satisfaction of the Bank, and the Region will closely monitor and supervise the implementation of safeguards requirements Côte d Ivoire: The WAPP Interconnection line segment from Man in Côte d Ivoire via Danane to the Liberian border is flat to hilly and passes through farm-bush, which is fallow land and is part of the agricultural system in the area. In this section there are no sensitive forest areas. One protected forest area, one sacred forest and one sacred water body have been avoided Liberia: The line section from the Côte d Ivoire/Liberian border to Yekepa passes mostly through flat to hilly country consisting of farm-bush. The only sensitive forest area on this line stretch is the East Nimba Reserve, one of the last remaining biodiversity hotspots in West Africa and supported by a World Bank funded GEF project, has been completely avoided. The line route will not increase access in this sensitive area, which could result in an increase in illegal logging and poaching, since the line follows the existing main road The line segment from Yekepa to the Guinea border passes through the valleys of a mountainous area consisting mainly of farm-bush. On the mountain slopes most of the economically valuable trees have already been logged. The area can be accessed through bush roads, which are used by trucks and leading to the border control in Bololewee village, a recently 3

45 constructed border crossing in Liberia and the Yalenzou border town in Guinea. The construction and presence of the transmission line will provide some improved access. Impacts such as increased illegal logging and poaching have been assessed as very limited since most of the area of the RoW is already accessible and almost all economically valuable trees have already been removed The line segment in Liberia from Yekepa to Buchanan, mostly along the existing railway and on to Mt. Coffee and Mano passes entirely through farm-bush. This area is accessible from existing roads. There are no sensitive forest areas on this stretch. The Right-of-Way on this line segment avoids two proposed Ramsar sites. The line route segment from Mano in Liberia to Kenema in Sierra Leone passes through farm-bush. The two 66 kv distribution lines pass from the Mt. Coffee Power Hydropower Plant site through flat farm-bush into the direction of Monrovia. The last few kilometers of these lines pass through the urban and peri-urban sections of Monrovia Sierra Leone: After the Liberia/Sierra Leone border, the line passes the Gola Forest National Park on its western side. The area can be accessed through existing bush roads. Impacts such as increased logging and poaching have been evaluated as limited. The line segment in Sierra Leone from Kenema to Binkongor and on to Bumbuna and Kamakwie passes through farm-bush. The protected area of Nimini Hills Forest Reserve has been avoided. The impacts of this line segment on illegal logging and poaching have been evaluated as minimal. The last stretch of the line in Sierra Leone to the Guinea border avoids the Outamba-Kilimi National Park within Sierra Leone. The RoW passes through flat farm-bush. Cattle herders heavily use the entire area Guinea: The line segment in Guinea from Yalenzou, at the north eastern border with Liberia, to Nzérékoré is hilly. The line on this stretch passes entirely through farm-bush. There are no sensitive forest areas on this stretch in Guinea. The site for the new sub-station in Nzérékoré, a town of around 8, inhabitants, is suitably located outside the town and does not pose a problem from an environmental or social point of view. The line segment from the Guinea/Sierra Leone border to Linsan is flat and consists of farm-bush. The site for the new substation near Linsan does not pose any environmental or social risk. The same can be said for all the other new sub-station sites OP4.4 (Natural Habitats) was triggered to address significant potential changes in critical natural habitats covered by the project. To avoid significance changes to critical natural habitats these areas have been avoided. The project will not cause any significant conversion of natural habitats. OP4.11 (Physical Cultural Resources) was also triggered due to the length of the transmission line where chance finds procedures were included in the construction contracts as guidelines in case there are areas with culturally and historically significant properties (e.g. artifacts, sacred sites). It is expected that the project will cause very limited cumulative impacts. However, any potential cumulative impacts on natural habitats, including surrounding forests resulting from the construction of roads, other energy transmission and distribution under the Project, small-scale mining, agriculture, and/or landfills will be monitored during construction and operation. Because the RoW does not overlap or affect any significant or primary forests and 31

46 induced impacts, such as increased illegal logging and poaching have been assessed as limited, OP4.36 (Forests) was not triggered An extensive Analysis of Alternatives survey, including relevant mitigation measures, was carried out by the consultant to ensure that there would be no significant environmental and social impacts. The consultant who did the Line Routing Study and identified the alternative routing took into consideration the potential impacts from a technical, environmental, social, economic, and financial point of view. Although this was deemed appropriate by WAPP as an acceptable way of demarcating the RoW line routing, and even though the feasibility study was carried out independently by another consulting firm, the line route study was viewed nonetheless as part of the project s technical feasibility. As explained in the preceding paragraph 117, in this connection a waiver is being requested following the Bank s policy in OP4.1 (Environmental Assessment, footnote 7) Natural Habitats Safeguard Policy OP4.4: The ESIA for the CLSG project analyzed all relevant environmental and social impacts of the proposed CLSG transmission line route and substations and found minimal impacts on forest areas in and around the demarcated RoW. It was also assessed that induced impacts, such as increased illegal logging and poaching would be limited. The shortest route of the transmission line would cross some critical natural habitat areas with sensitive biodiversity hotspots, which would cause unacceptable environmental impacts. To ensure that these areas are fully taken into account, as noted earlier, an Analysis of Alternatives was undertaken as part of the ESIA, and which elaborated on the various alternative line routes in order to avoid these high biodiversity areas. The additional costs for these diversions were estimated at approximately US$ 9 million. Similarly, the ESIA found that the line routing did not cross or affect any primary forests, and in fact, the RoW was characterized as having low impact vegetation such as farm-bush land, secondary succession forest, and agricultural land uses. The following biodiversity hotspots were identified and described in the ESIA and were subsequently avoided in the line routing. These include: (i) the East Nimba Reserve (one of the last biodiversity hotspots in West Africa), the Gbedin Wetlands a proposed Ramsar site, and the Lake Piso proposed Ramsar site all of which are in Liberia; (ii) the Gola Forest National Park, the Nimini Hills Forest and the Outamba Kilimi National Park all of which are in Sierra Leone (see figure in Annex 11). 13. World Bank environmental and social specialists visited the entire line route in Liberia, Guinea, and Côte d Ivoire, and a major part of the transmission line route in Sierra Leone in September 21. In December 211, site visits to the transmission line segment from Linsan in Guinea to the Sierra Leone border, and the area in Sierra Leone around the Outamba Kilimi National Park in Sierra Leone were completed. Lastly, in March 212, the areas in Liberia around Yekepa, in Guinea around Nzérékoré and around Man in Côte d Ivoire were also verified as generally having the same low impact land use characteristics as the rest of the line Environmental and Social Management Plan under the Construction Phase: The remaining environmental and social impacts are related to the construction phase. The ESMP, which is an integral part of the ESIA identified these construction related impacts. The contractor(s) will be required to prepare and implement their own Construction ESMP (CESMP). 32

47 For more complex environmental management issues the contractor(s) will be required to prepare Method Statements In order to prepare and implement the CESMP the contractor(s) will be required by contractual arrangement to recruit qualified environmental/social staff. The Owner s Engineer will be required by contractual arrangement to supervise the adequate implementation of these CESMPs on a day to day basis and will need to employ qualified environmental/social staff for this purpose. A Project Implementation Unit (PIU) will be established in the four countries. An environmental and a social specialist will be part of each PIU who will be responsible for the supervision of the implementation of the ESMPs and RAPs. The Regional Transmission Company (RTC) after it has been established will take over these responsibilities. The RTC will establish a dedicated environmental /social unit with qualified environmental/social staff, which will have the overall responsibility for environmental and social supervision and which will visit the construction sites on a very regular basis. By law the four countries environmental agencies will have the overall responsibility for appropriate environmental and social management to ensure compliance with national environmental legislation. Satisfactory public consultation was carried out on the ESIAs for all four countries including for the terms of reference and on the draft ESIA report. Most of the budget for the implementation of the ESMP will be included in the contractor(s) contracts Physical Cultural Resources Safeguard Policy OP4.11: Based on historical and official documentation, the selected RoW has avoided all culturally sensitive areas, cemeteries and sacred sites. Except for one sacred forest area in Côte d Ivoire, which was avoided in the Analysis of Alternatives, the entire RoW scoping confirmed that the areas did not have any sites with significant cultural or historical artifacts or physical properties. During implementation, the Contractor for the transmission line will be required by contractual obligation to adhere to the Chance Finds Procedure, which means that in case a physical cultural property will be found, or discovered, the Contractor will need to stop working on that site and adopt the necessary in-country procedures on the methods for appropriate handling and preservation of any archaeological find and other types of physical cultural properties Resettlement Action Plans (RAP): The RAPs describe relevant findings from a baseline census of project affected persons (PAPs), which was completed in November 29 (which also served as the project s cut-off date). 11 In 21, the Consultant completed a socio-economic survey. The total number of project affected households, covering the entire RoW and substations, is 1,634 (or 1,158 individuals). Of these, 71 households will be compensated for structures that need to be either physically removed or relocated. For this purpose, the local communities allocated lands near the substations or access roads, and along the RoW, for relocation. The compensation to these households covered the costs for replacement housing, income losses, and moving and transition (plus disturbance) allowances. The remainder of the PAPs households, who will lose some access to agricultural lands inside the RoW, will receive compensation for lost incomes from agricultural crops and trees. Following standard practices in 11 The cut-off date for Liberia, Sierra Leone and Guinea is 3 November, 29. For Cote d'ivoire, the cut-off date is 31 May, 21. There have been several verification visits since that date to ensure all affected persons have been accounted for properly. 33

48 transmission line RoWs, an update of the RAPs will be made since the exact locations of the towers are yet to be determined. The estimated cost of RAP implementation is about US$7.52 million, which will be paid through participating governments contributions to the project. The bulk of RAP implementation budgets will be spent on cash compensation; about 28 percent for livelihood restoration and community development programs; and 15 percent on the grievance mechanism, administration and monitoring and evaluation. 12 The costs for training of social safeguards staff in-country and in the RTC will be covered under the capacity building component of the project The distribution of the 1,634 households, by country is: 692 (7 to be relocated) in Côte d Ivoire; 416 (29 to be relocated) in Liberia; 414 (25 to be relocated) in Sierra Leone; and 112 (1 to be relocated) in Guinea. Efforts have been made during project planning and design to minimize the resettlement impacts while ensuring that access to electricity by nearby communities and towns can be facilitated in the future. The areas inside the RoW are generally unpopulated, except for a stretch of about 5 km along the two distribution lines planned for Monrovia, which are densely populated, and which will affect about 268 households (1,661 PAPs), of which, 25 structures need to be physically relocated. These structures include 6 schools, a health center, and 5 churches and replacement land were already identified by the communities Stakeholder Consultations: The ESIA and RAP consultations were organized with national stakeholder groups, local governments, and affected communities in all four countries. A consultation and participation approach is included in the RAP to continue the participatory process during implementation. A separate Communications Plan, involving different media (e.g. radio, newsletters, and in the case of Sierra Leone, town criers which are locally adapted forms of inter-village communications), was developed to enhance the consultative process The consultations with affected communities were coordinated by the relevant County Assemblies, the local chiefdoms, and village leaders and elders. There were 14 consultations (focus group and community meetings) which were conducted over a period of two years (in 29 to 211). A summary of the consultations feedback is provided in the RAP annexes. Some of the concerns raised during the meetings were: (i) potential employment of local people by the project; (ii) replacement of trees displaced by the project; and (iii) availability of electricity services to villages. There is sufficient awareness of the project by communities, including information on how the project may be extended to their area; environment management necessary for lands inside the RoW; and the responsibilities of the local leaders about maintaining the RoW There are expectations in the rural communities adjacent to the transmission line of receiving expanded electricity services. These expectations will be managed by intensive information sharing and consultations, and linking these communities to ongoing or potential 12 Due to existing legislation in Côte d Ivoire, the land in the RoW will have to be permanently acquired by the government so the compensation structure is based on the costs for land purchase. These affect less than 1 percent of the RoW since the land is largely state-owned. All land will be cleared and future encroachments will be monitored. In contrast, in Liberia, Sierra Leone and Guinea, except for those which will be physically relocated, the payments for land-related income losses in the RoW cover only losses from crops and trees 34

49 government rural electrification programs. For some selected towns shield-wire connections will be provided to provide electricity to the local population Grievance Mechanisms: Potential disputes are anticipated from the demarcation of the boundary of the RoW and the methods for valuation and compensation of land and structures. To resolve disputes, the RAPs contain clearly defined mechanisms for filing complaints and their resolution. Each grievance mechanism is based on in-country procedures and political and cultural practices, starting at the community level. Conflicts not resolved by community leaders are referred to district officials. The project s implementing agencies in-country are responsible for implementing the RAP and ensuring that the grievance and redress procedures are carried out. The RTC will also have a dedicated team of safeguards specialists who will also be trained handling grievances and conducting consultations. 14. Implementation Arrangements and Disclosure: Annex 9 describes the project s safeguards implementation structure. Each country s project implementation unit has a separate Environment and Social Relations Team and an Environment and Social Coordinator and Field Team. The budget for implementation of the ESIA and RAP will be covered by each participating country, including the hiring of relevant environment and social staff. The project allocated funding for capacity building and training of these units. The project s safeguards reports disclosure dates are listed in the table below. The in-country disclosure used popular media, such as publication in the local newspapers and radio announcements, which are the practical means for reaching communities in rural areas. In addition, the Consultant also organized village meetings which were coordinated by Chiefdom, district and community leaders. During these meetings, a translated summary presentation of the safeguards reports was presented and feedback from these meetings summarized in the RAPs annexes. Photographs and video recordings of the meetings were taken to document the participatory process. During implementation, similar diligence in organizing meetings, recording the feedback, and following up on actions to address community needs will be made as part of the livelihood restoration and community development programs. Table 7: Safeguards Disclosure Dates COUNTRY SAFEGUARDS INSTRUMENT DISCLOSURE IN-COUNTRY DISCLOSURE AT THE INFOSHOP Côte d Ivoire ESIA/ESMP Jan. 27, 212 Jan. 3, 212 Côte d Ivoire RAP April 5, 212* April 5, 212* Guinea ESIA/ESMP Jan. 27, 212 Jan. 3, 212 Guinea RAP March 3, 212* April 2, 212* Liberia ESIA/ESMP Jan. 27, 212 Jan. 3, 212 Liberia RAP Jan. 27, 212 Jan. 3, 212 Sierra Leone ESIA/ESMP Jan. 27, 212 Jan. 3, 212 Sierra Leone RAP Jan. 27, 212 Jan. 3, 212 *Delays in disclosure of the RAPs in Cote d Ivoire and Guinea stem from the fact that the planned field verification could not take place earlier due to security problems. F. Environmental and Social Issues 141. The environmental and social impacts of the project are expected to be positive. As earlier stated, there will be multiplied benefits, especially in the rural areas, through an expansion 35

50 of the electricity network. With the visible presence of the transmission line in the remote areas of the countries rural communities, there has been increased awareness of the environmental and social issues following the series of community and stakeholder consultations. The key environmental and social issues raised in these consultations include: potential impacts to the value of the properties along the transmission line route; changes in health and education access (with perceptions that these services would expand after the transmission line is set up); potential health impacts due to generation of electricity; construction related concerns (including land disturbances, noise and air pollution); impacts on natural resources, especially wildlife and sensitive species; geology and soil conditions from erosion and compaction; and other construction related issues like traffic, public services and utilities interruptions. There is country commitment to addressing these issues as they are covered in the mitigation measures proposed and to be implemented in the ESMPs Although the line route is 1,461 km long (with 5 km of distribution lines), the actual area affected by the project under construction is relatively small. Eleven (11) substations will be built, with each one covering a small area of 2m x 2m. These are located in flat well drained land, thus no major topographical changes will occur. The land will invariably have been used for cultivation and appropriate compensatory approaches have been applied to cover any income losses for these sites. In the transmission line, the land in the tower footprint will also be minimal, so the environmental impact will be small 143. Land take due to towers (25 sq m per tower) and substation (4, sq m per substation) would total less than one sq km. For the rest of the RoW, some new or improved access and spur roads will be cleared for use during construction and line monitoring. The main impacts from these, and where mitigation measures were already designed and covered in the ESMP, include some loss of land, crops and trees; anticipated waste management and water pollution; public health and safety concerns during construction, including possible spread of HIV-AIDs during the construction phase Community leaders expressed concern about receiving direct assistance for rural electrification and livelihood support. These issues were covered in the design of community development activities in the RAPs for each country. For example, there were specified allotments for social action plans, community programs and activities for vulnerable groups. These cover activities for livelihood restoration (e.g. agricultural inputs; formation of agribusiness cooperatives, etc); small-scale community infrastructure (e.g. prioritized from the needs assessment such as schools, health centers, or markets); and costs of community ceremonies (e.g. in Côte d Ivoire libation and purification ceremonies of sacred sites located near the RoW). The total allocation for community development is $861,128 and varied by country, as follows: Liberia ($183,1); Sierra Leone ($196,685); Guinea ($91,919); and Côte d Ivoire ($389,424). 36

51 Core Annex 1: Results Framework and Monitoring for the WAPP CLSG Power Interconnection Project Project Development Objective (PDO) of Project 1: To reduce the cost of and increase the electricity supply at utility level, and to increase the export capability of Côte d'ivoire. PDO Level Results Indicators Indicator One: Annual electricity supply from CLSG imports at utility level (disaggregated: Liberia - Liberia Electricity Corporation, Sierra Leone - National Power Authority, Guinea - Electricité de Guinée) Indicator Two: Annual weighted cost of electricity supply at power utility level in Liberia and Sierra Leone. Indicator Three: Cote d Ivoire export capability to CLSG countries Indicator Four: Direct project beneficiaries (number), of which female (%) Unit of Measure GWh USD/ kwh Baseline LEC: NPA: EDG: LEC:.42 NPA:.37 Cumulative Target Values** YR 1 YR 2 YR3 YR 4 YR Frequency Annual Annual Data Source/ Methodology Calculation based on financial report and accounts of LEC, NPA, EDG Calculation based on financial report and accounts of of LEC and NPA MW 2 Annual Annua report of RTC based on technical verifications Number (in million), (%) 5.2 (52%) Annual Annual report of RTC Responsibility for Data Collection M&E function of RTC M&E function of RTC M&E function of RTC M&E function of RTC Description (indicator definition etc.) GWh purchased by the power utilities per year. Calculated as the weighted sum of cost of electricity supplied by source of supply, divided by the sum of electricity supplied by country. This does not include the cost of electricity distribution. 13 Availability of transmission capacity for Cote d Ivoire exports to LSG countries 13 This indicator would be controlled for by using international fuel prices. 37

52 INTERMEDIATE RESULTS Intermediate Result (Component 1.A): Establishment of transmission capacity between and within Côte d Ivoire, Liberia, Guinea, and Sierra Leone Transmission line constructed (disaggregated by location) (1) Transmission line constructed from Man-Yekepa km 1, Annual Final technical report of contractors Direct observation M&E function of RTC (2) Transmission line constructed from Yekepa- Nzerekore 49 (3) Transmission line constructed from Yekepa- Buchanan 229 (4) Transmission line constructed from Buchanan- Monrovia 112 (5) Transmission line constructed from Monrovia- Mano 17 (6) Transmission line constructed from Mano- Kenema 115 (7) Transmission line constructed from Kenema- Bikongor 96 (8) Transmission line constructed from Bikongor to Bumbuna

53 (9) Transmission line constructed from Bumbuna- Yiben 73 (1) Transmission line constructed from Yiben- Kamakwie 6 (11) Transmission line from Kamakwie to Linsan 16 (11) Distribution line from Monrovia (near Mount Coffee) to the city of Monrovia 225 kv Substations constructed (disaggregated by location): (1) Yekepa (2) Nzerekore (3) Buchanan (4) Monrovia (5) Mano (6) Kenema (7) Bokongor (8) Bumbuna (9) Yiben (1) Kamakwie (11) Linsan Number Annual Final technical report of contractors Direct observation M&E function of RTC Intermediate Result (Component 1.B): Establishment of a sound institutional environment for the management of the WAPP CLSG interconnection Regional Transmission Company fulfillment of obligations on time and to the quality required. Yes/No None Yes Yes Yes Yes Yes Annual Review report of WB team of the RTC report on fulfillment of its obligations on time and to the quality required M&E function of RTC 39

54 Core Annex 2: Results Framework and Monitoring for the WAPP Integration and Technical Assistance Project Project Development Objective (PDO) of Project 2: To increase the technical integration of the WAPP network. PDO Level Results Indicators Indicator One: WAPP Master Plan Priority projects prepared to financial closure Indicator Two: Ratio of annual total hours of synchronization of WAPP Zone A against total hours in a year within TCN-CEB- GRIDCO interconnection INTERMEDIATE RESULTS Unit of Measu re Numbe r Baseline Cumulative Target Values** YR 1 YR 2 YR3 YR 4 YR5 Frequency Data Source/ Methodology Annual Signed financial agreement of priority projects % Annual Annual data of National Control Centers Intermediate Result (Component 2.A): Strengthen the power supply reliability along the WAPP CLSG transmission line. Supply Alternative Analysis completed. Yes/No None No No Yes Yes Yes Intermediate Result (Component 2.B): Strengthen integration of WAPP power systems Key experts recruited to support WAPP Secretariat Synchronization equipment installed Number Yes/No None No No No Yes Yes Annual Annual Annual Supply Alternative Analysis final report (document) Appointment Letters Final technical report of contractors Direct observation Responsibilit y for Data Collection M&E function of WAPP Secretariat M&E function of WAPP Secretariat M&E function of WAPP Secretariat M&E function of WAPP Secretariat M&E function of WAPP Secretariat Description (indicator definition etc.) Measure within CEB network as an approximation for the whole zone. 4

55 Annex 3: Detailed Project Description FIRST PHASE OF THE CLSG POWER SYSTEM RE-DEVELOPMENT SUB-PROGRAM OF THE WAPP APL PROGRAM WAPP CLSG Power Interconnection Project Background 1. Limited access to electricity services in Cote d Ivoire, Liberia, Sierra Leone and Guinea (CLSG) encompasses with high cost of electricity and low quality of energy services remain a key obstacles to turning the corner towards peace, stability and growth. This project will allow to physically integrating these countries electricity systems. That in turn will increase electricity supply, improve economies of scale, make better use of generation resources, and improve system reliability, both in terms of supply adequacy and security. Economies of scale are expected to accrue as the aggregation of demand across countries that is implicit in the construction of the line will allow for the development of larger-scale generation projects. 2. The potential economic development impact of this project is considered to be significant. Currently, electricity prices in both Liberia and Sierra Leone are among the highest world-wide as 54 UScents/kWh. These countries will be able to import significantly cheaper electricity from Côte d Ivoire in the initial years of operation of the transmission interconnection. Beyond 22, it is expected that large, low cost hydropower plants will be developed in Guinea, thus, providing cheaper and cleaner electricity to the interconnecting countries. 3. Under the umbrella of the West African Power Pool (WAPP) that seeks to integrate the operations of the national power systems into a sustainable regional electricity market, with the ultimate goal of providing the ECOWAS Member States with stable and reliable electricity supply at affordable cost, the CSLG transmission line interconnection has been prepared. Technical Project Design 4. In order to determine appropriate technology and characteristics of the transmission line, a feasibility study was prepared by the Sogreah/AETS consortium, which carried out detailed technical and economic studies to be able to evacuate and exchange the forecasted energy from the CLSG countries and neighboring ones. 5. In order to define the design of the transmission line, the feasibility study reviewed future generation, demand growth, mining loads, imports and exports among CLSG countries, exports in the long term to Mali, Burkina Faso and Senegal, and imports from Côte d Ivoire and Ghana. The technical parameters evaluated were: load flow, short circuit, stability, losses, N-1 steady state criteria, outage probability, and primary reserve in each country. Based on the technical and economic evaluation, a High Voltage Alternation Current (HVAC) of 225kV was recommended over the complete length of the line, with a drop off of a 66 kv distribution line to connecting Monrovia, Liberia s capital, with the remainder of the line. 6. Based on this, a configuration analysis of the 225 kv line was carried out in order to optimize the initial investments given the small initial size of the national systems in the first years of 41

56 operation of the transmission line, subject to meeting the forecasted demand in the CLSG countries and technical characteristics. The analysis considered also the load forecast from 215 to 23. The options considered were: Option A: Construction of a 225 kv double circuit line with both circuits strung; Option B: Construction of a 225kV double circuit line, with one circuit strung initially (phase 1), and a second circuit strung 3 years after completion of phase 1 (phase 2). Option C: Construction of a 225 kv single line in the phase 1, and construction of a 225 kv single line in phase 2 parallel to the first line. 7. The results show that Option B is the most cost effective solution with the construction of a 225 kv double circuit line with one circuit strung in 214 as a first phase, and the second circuit strung as a second phase to be completed by 22. While the transfer capacity between to two ends of the line will be 145MW to comply with reliability criteria in the first phase, some segment of the lines will be able to transfer up-to 2 MW. The demand-supply balance indicates that the power transfers in the first phase will range from 83 to 145 MW. 8. The second phase will allow for higher power transfers up-to 29 MW, which will be able to accommodate power transfer of hydropower generation from Guinea, Sierra Leone and Liberia. Similarly, individual sections of the line could transfer beyond 29 MW up to 4MW depending on the additional compensation equipment to be installed at phase two, which is not part of the project. The dynamic studies showed that this configuration (Option B) will meet the technical requirements of load peak flow, stability to meet the demand, and transmission capacity to be able to evacuate the energy from the supply centers. 9. Cost saving associated with Option B derive from the phasing of the implementation of the second circuit and the sizing of the power transformer as measured in MVA, and removal of bay lines. The upgrade and equipment will only be installed under phase 2 and are not financed under the present project. No upgrade will be required in the towers since they will be constructed and designed to operate on 225 kv. The 225 kv double circuit transmission line will have a total power transfer capacity of 29 MW (145 MW per circuit) after completion of both phases. The proposed project will finance only the development of the first phase. 1. Against the background of environmental and social safeguards considerations, different alternatives for line routing were assessed. This resulted in an overall extension of the line from originally estimated 1,264 km to 1,349 km in order to avoid environmental hot spot areas. The final line routing line is illustrated in the figure below. 42

57 Figure 3: Final Routing Line Detailed Description of the WAPP CLSG Power Interconnection Project Component 1.A. Power interconnection between Côte d Ivoire, Liberia, Sierra Leone, and Guinea (co-financed by World Bank, AfDB, EIB, and KfW, US$321.9 million) Sub Component 1.A-1. Construction of high voltage transmission line 11. This component will finance the construction of 1,349 km of 225kV double circuit overhead transmission line with one circuit equipped interconnecting Cote d Ivoire, Liberia, Sierra Leone and Guinea. The line will have a transmission capacity of 145MW in the first phase of this project and it is expected to reach a transmission capacity of 29MW once the second circuit is equipped when the demand is expected to reach the limit of the first phase. The second phase is envisaged to be completed 7 years after implementation of the project. This component also includes the financing for the construction of 5km of 66kV overhead transmission line in Liberia from Mount Coffee substation to Monrovia power system. The estimated cost is about US$193 million (excluding contingencies, excluding taxes and duties). 12. The 225kV high voltage transmission line will be equipped with Optical Fiber Ground Wire (OPGW). The OPGW will provide grounding and communication capabilities to the line that is normally installed between the tops of the high voltage electricity pylons. The OPGW s objective is to provide electric protection to the high voltage line from lightning strikes and to allow high-speed transmission of data in order to control the line and for communication purposes. 43

58 13. The technical feasibility study also analyzed the possible schemes to provide electricity in the future to village located along the line. The schemes subject to this analysis were: (i) Single Wire Earth Return System (SWER); (ii) Shield Wire System (SWS); and (iii) Single Phase Voltage Transformer, to a conventional 3-phase MV distribution system. The consultant recommended the implementation of the Shield Wire System (SWS) as the least-cost solution based on the preliminary cost estimates, indicating that the cost represents less than 2 percent of the unit cost of the 225kV transmission line. The SWS is an electrical interconnection scheme that facilitates the provision of electricity to small villages along the construction of commonly new HV transmission lines as a least-cost solution. The SWS is installed at the top of the HV transmission line and has two major functions. On one hand, the shield wire is normally grounded to provide lighting protection to the main HV transmission line. On the other hand, the shield wire can also transport power from the HV transmission line to lower voltage level with no additional substation requirement on the HV level. Sub-component 1.A-2. Substations 14. This sub-component will finance the construction of 11 substations of 225kV in the Yekepa, Buchanan, Mount Coffee and Mano in Liberia; Kenema, Bikongor, Bumbuna, Yiben Kamakwie in Sierra Leone; Linsan and Nzerekore in Guinea. Additionally, this component will provide financing to the required compensation system in the substations of Mount Coffee, Bumbuna and Linsan, and financing for the reinforcement and extension of the Man substation Côte d Ivoire. The total cost of this component is US$ million. 15. The 225 kv substations will be outdoor open-terminal type with a control building containing all the auxiliary equipment. The bus bars will be air-insulated tubular aluminum, in a single bus bar configuration and designed for the future extension to a double bus bar. The breakers will be insulated with sulfur hexafluoride (SF6) and mechanically tripped via a motorset spring. Each substation will be controlled by means of a built-in control-command and data acquisition system (SCADA), which will enable the substations to be selected and controlled either locally or remotely by a future control center. It will also be possible to select manual control of the substation if operation independent of the centralized system is required. Communication links for the centralized system will be set up either by means of a carrier line or by fiber optic. The table below presents the characteristics of each substation. Table 8: Substation Location and Transformer Characteristics Substation Transformer Man (existing, upgrade only) 225/9 kv 7 MVA Yekepa 225/33 kv 2 MVA Nzerekore 225/33 kv 2 MVA Buchanan 225/33 kv 2 MVA Mount Coffee / Monrovia 225/66 kv 7 MVA Mano 225/33 kv 2 MVA Kenema 225/33 kv 2 MVA Bikongor 225/33 kv 2 MVA Bumbuna 225/161 kv 7 MVA Yiben 225/33 kv 2 MVA Kamakwie 225/33 kv 2 MVA 44

59 Linsan Two 225/11 kv 1 MVA and two 225/33 kv 15 MVA 16. The financing plan for the construction of the 11 substations, compensation system and reinforcement of specific substations has been confirmed as follows: (i) the World Bank will finance Yekepa sub-station in Liberia; (ii) KfW will finance Mano, Monrovia, and Buchanan substation in Liberia; (iii) EIB will finance Bikongor, Kenema, and Bumbuna Substations in Sierra Leone; and (iv) AfDB will finance Linsan and Nzérékoré sub stations in Guinea, Kamakwie and Yiben substations in Sierra Leone, and Man substation in Côte d Ivoire. Sub-component 1.A-3: Supervisory Control and Data Acquisition (SCADA) 17. This sub-component will finance the procurement and installation of the supervisory control and data acquisition (SCADA) that will monitor and control the interconnected system in four countries for exchanging power and operating control of the system. The estimated cost of the SCADA is US$6.4 million and will be financed by AfDB. It is also required to upgrade the capabilities of the SCADA system in Côte d Ivoire so this center is also able to function as a control center of the CLSG transmission interconnection line while Guinea SCADA system is in place. The expansion of the SCADA system in Côte d Ivoire is provided also by the AfDB. 18. The proposed SCADA will be communicated two levels: (i) national communication to control the stations among CLSG s electric transmission network throughout the 12 substations, and (ii) international communication to exchange the information between an information and coordination centre based in Benin and CLSG s control centre. 19. Each substation will be equipped with a numerical control command system totally autonomous but which could communicate with the Regional Control Center (RCC SCADA) which should be built in Guinea, but which could be provisionally included in regional control center of Ivory Coast. This control command system should also be connected to any existing or future National Control Center. Sub-Component 1.A-4: Installation and Supply of Compensation and Frequency Regulation Equipment 2. This sub-component will finance measures to enhance compensation and frequency control along the CLSG transmission line, which are to be determined by the Owner s Engineer at a time closer to commissioning of the transmission line. This would include measures to minimize reactive power and enhance frequency control in transit situations. This subcomponent is financed by IDA. Sub-Component 1.A-5: Implementation of the Environmental and Social Management Plans (ESMPs) and Resettlement Action Plans (US$1.1 million) 21. The cost of the implementation of the Environmental and Social Management Plans (ESMPs), which includes the cost of the Resettlement Action Plans (RAPs) (US$ 1.1 million) will be covered by the respective Governments as part of their counterpart financing. The costs 45

60 of the implementation of the ESMPs will be almost entirely included into the contractor contract. The measures to be adopted in relation to the ESMP are discussed in the section pertaining to safeguards further below. Component 1.B: Support for the institutional framework and project oversight (US$45.4 million) 22. Under this component key institutional features of the project will be supported and developed that will ensure the sound implementation of the WAPP CLSG transmission interconnector. The component will be implemented or administered by the Regional Transmission Company (RTC) for the project, and it will be financed by IDA and EIB. Sub-Component 1.B-1. Establishment of the Regional Transmission Company 23. This component will provide the RTC with the technical assistance and training needed to implement and supervise the project. It will cover: (i) the structuring and set-up of the RTC; (ii) the capacity building, documentation and logistics needed by the RTC and national entities participating to the project in particular in fiduciary matter, (iii) establishment of the regulatory arrangements, (iv) the negotiation of the cooperation agreements between participating states and utilities; and v) the preparation or updating of national electrification plans for each of the participating countries as well as priority national projects required to maximize the benefits of interconnection. Sub-Component 1.B-2. Implementation support through the Owner s Engineer 24. The proposed Project will finance an Owners Implementation Firm (OIF) to assist RTC/PIU with: (i) overall Project management and supervision of the procurement, design, construction and preparation for operation and maintenance of the complete investment (the full transmission line and the upgrade of substations); (ii) supervision and monitoring of the implementation of the Environmental and Social Management Plan (ESMP) and the Resettlement Action Plan (RAP), based on an agreed monitoring plan; (iii) the carrying out of a compensation and frequency regulation studies and measures, to re-evaluate the compensation requirements for the line, including reactive power and frequency control in transit situations, and further dimension the scope and the scale of compensation and frequency regulation required; and (iv) the carrying out of the audits of the Regional Transmission Company. 25. The pre-award (pre-construction) activities for the Owner s Engineer are expected to be funded by the EU-Africa Infrastructure Trust Fund through the European Investment Bank. Funding for the functioning of the PIU is envisaged by the World Bank together with the post award (construction) activities of the Owner s Engineer. The total cost of this component is estimated at US$25.9 million. 46

61 The WAPP Integration and Technical Assistance Project Component 2.A: Supply Alternative Studies and Project Preparation Support (US$1 million) 26. Under this component a key studies will be conducted to ensure that in the medium to long-term the generation capacity along the line will be developed in a timely manner and in accordance with least cost principles. More specifically, technical assistance will be provided for preparatory institutional, legal, pre-feasibility/feasibility, and environmental and social impact assessment studies for the CLSG transmission line and potential hydropower plant candidates along the transmission line. The potential hydropower plant candidates may include (i) Bikongor hydropower plant (Sierra Leone); (i) Kassa B hydropower plant (Guinea); and (iii) Souapiti hydropower plant. These project sites have been identified as part of the least cost expansion plan along the WAPP CLSG interconnection through the updated WAPP Masterplan (211). In addition, this component will support project preparation, including the WAPP CLSG JIC, through studies and support of decision meetings, training, staffing and outfitting of a Project Implementation Unit (PIU). Component 2.B:Technical Assistance Integration of WAPP network (US$21.5 million) 27. This component proposes to support the integration of WAPP networks and provide technical assistances with a total financing of US$21.5 million. Out of this total amount, US$8.8 million is for equipment and the rest is for technical assistance for WAPP and consultant work to update and validate the existing transient stability model and protection harmonization scheme. This component has two sub-components as described below. Sub-Component 2.B-1. Technical Integration of WAPP Network 28. The establishment of a sub-regional market for electricity is conditioned by the interconnection and synchronous operation of transmission networks. Frequency and load/supply control is one of the challenges of a synchronous interconnection. The proposed synchronization component will address this issue to allow power generation resources pooling, thereby reducing supply costs and increasing supply volume in the WAPP. 29. Background: The WAPP interconnection system has been designed to be synchronously connected (connected and operating at the same frequency) in order to draw all the benefits from an integrated power system in terms of robustness, flexibility, power deficit reduction and regional power market management. In the WAPP Zone A, utilities from Cote d Ivoire (CIE), Ghana (GRIDCO) and Togo and Benin (CEB) have been interconnected for years. However, since 27 when the 33kV transmission line Ikeja West-Sakété was built to connect the Nigerian system to CIE, VRA, and CEB, it became impossible to synchronously connect the two systems due to frequency instability in Nigeria and lack of means to coordinate operations between the utilities. As a consequence, CEB has to operate two independent systems to accommodate imports from Nigeria and meet the load requirements of its clients in Benin and Togo. As it is not possible to exchange power from one system to another, sometimes one system can experience power deficit while the other has reserves. 47

62 3. The Project will finance the carrying out by WAPP of a synchronization program aimed to establish a sub-regional market for electricity on the basis of a suitably interconnected and synchronous operation of the regional transmission networks of four power utilities in the ECOWAS region, encompassing: (i) the updating of a feasibility study to determine the equipment needs and the installation of the equipment in the power utilities; (ii) the leasing of such equipment on a gratis basis to the power utilities; and (iii) the operation and maintenance of the equipment by the power utilities to control frequency and load/supply. The four power utilities that will receive assistance are Nigelec (Niger), Société Nationale d'electricité du Burkina SONABEL (Burkina Faso), Communauté Electrique du Bénin CEB (Benin and Togo), and Compagnie Ivoirienne d'electricité CIE (Côte d'ivoire). 31. Under the WAPP APL1 Phase 1 and 2 projects, the Bank has financed (through IDA Credits 492, 4213, and 4214) the construction of the Coastal Backbone transmission line to permit power transfers along the coast to, and from, Nigeria extending to Cote d Ivoire. The objective of the project is to increase cross-border power exchanges between the WAPP Zone A coastal states. The WAPP Synchronization and Technical Assistance Project will thus contribute to meeting these objectives due to ensuring that the power systems can be adequately integrated through measures installed in Benin and Togo, which geographically lie between Ghana and Nigeria. 32. WAPP Operations Manual: As part of measures aimed at addressing this issue, the WAPP Executive Board adopted the WAPP Operations Manual (Operation and Security Mitigation Plan or OSMP) in 27. Its eight policies contain the rules, principles, requirements, standards, criteria and procedures to enable a smooth operation of the power pool. 33. The WAPP Secretariat set up a Task Force (under the WAPP Engineering and Operating Committee) to assist in the deployment of the Operations Manual with the support of Nexant Inc., a USAID Resident Technical Assistance to the WAPP. The Task Force conducted network operational and stability studies as well as gap analyses to determine the needs of utilities to conform to these policies, and formulated an implementation plan and cost estimate of the investment required. The Task Force with the assistance of legal experts, also formulated a standard agreement defining and adopting modalities for the implementation of the WAPP Operations Manual that will be signed by the Managing Directors, Directors General, and Chief Executives of all WAPP Member Utilities. The major outcomes of a 29 gap analysis are: Different operating procedures existing between interconnected utilities 14 do not allow a coordinated and effective operation and do not take into account the introduction of control areas CIE-CEB-VRA operating instructions, CIE-SONABEL Operating instructions, General principles of operation of the OMVS-pgrio interconnected network, TCN-CEB-VRA Operating Procedures 15 Cote d Ivoire, Ghana and Nigeria are each handling a control area which include respectively Burkina Faso, CEB, and Niger 48

63 Need to upgrade and harmonize the communication/control systems between operators and measurement devices to allow exchange of information and real time system operation. Need to upgrade and harmonize protection to allow a coordinated management of the system security. Need to add compensation devices to sustain the voltage stability at the regional level. Need of sufficient operating reserve in each control area to face disturbances linked to loss of generation units. 34. Overall, the present system is not fit to handle a coordinated regional operation except if operational procedures and agreements are revised and additional equipments are supplied and installed. However, WAPP is finalizing a Euro 85 million grant from EU to establish its Information and Coordination Center in Cotonou, Benin. This will provide more flexibility for the operation of the entire regional network including effectiveness of the OSMP. 35. Equipment proposed: The table below shows equipment identified for Zone A by the Task Force and the consulting firm that did the analysis. The table details the type of equipment needed, the quantity, unit cost, number of unit per country and total cost per country. The initial study made in 26 was reviewed in Since the topology of the grid has changed, there might be some other requirements and an update of the situation is required. 36. The list includes equipment to ensure synchronization after the connection (to maintain the system running right after the connection and later), in particular control frequency systems. The frequency relay calibration equipment will help either to protect the generation equipment or to provide load shedding capabilities (the later will be the main purpose in this case). The list also includes equipment to measure the current and voltage changes and to improve the communication between systems (through improved data collection and communication systems). WAPP will retain ownership of this equipment and lease it on a gratis basis to the power utilities subject to them adequately undertaking the O&M of the equipment. 49

64 Table 9: Equipment Needed to Ensure High Reliability within WAPP Systems in Conformity with Operations Manual Equipment Description Quantity Unit cost (US$) Benin- Togo Nigeria Ghana Cote d'ivoire Burkina Faso Niger Total cost (US$ mil.) Communication facilities for Upgrade of telephone exchanges at 3 33, information exchange between systems (Policy 6 and 7 of WAPP Operations Manual) Control Areas Centers to implement hotline communication Devices to enable Data link server and ICCP software information exchange between the SCADAs of different control centers and communication between control centers and RTUs 245, Equipment to compensate Voltage compensator 161 kv on 1 2,, voltage drop (3.6 of Policy 3 of WAPP Operations Manual Volta-Lomé-Sakété Rehabilitation/commission of synchronous compensator at Shiroro 1 2,, Equipment to increase reliability within WAPP synchronous area at all time (Policy 1, 2, 3, 4, 5, and 6 of WAPP Operations Manual Line protection relays (distance, OC, etc.) with fault locator at interconnections Current transformer class.2 + Voltage transformer Frequency relay calibration equipment for each CAC and CIC Rate of decay frequency relay at interconnections RTUs at interconnectionprogrammable, dual port, multiprotocol Universal check meters at interconnections class , , , , , , PLC digital equipment 3 13, Total cost (US$ million) Total cost (US$ Million) for Cote d Ivoire, Togo, Benin, Burkina Faso, and Niger 8.8 Source: WAPP Secretariat. Estimated cost of infrastructure to implement WAPP Operations Manual. September 29. 5

65 37. Phases and total cost: This sub-component is structured in two phases: (i) the study phase and (ii) the implementation phase. During the study phase, a consultant will be hired to review and update the synchronization and frequency control studies already available at WAPP secretariat, update and validate existing transient stability model, study the protections harmonization scheme, and propose operating rules for reliable WAPP system operation. During the implementation phase a contractor will be selected to supply and install equipment under the supervision of an owner s engineer. Other financed activities include the cost of the Project Implementation Unit (office equipment, vehicles and operating costs) and assistance to the WAPP Advisory Panel on the OSMP (workshops and technical visits). 38. The WAPP will provide equipment to the five countries (Cote d Ivoire, Benin, Togo, Burkina Faso, and Niger) that have confirmed that the proposed activity to be conducted and implemented by the WAPP in the territory of the five countries conforms to the national legislation. It was decided that the WAPP will pursue options for implementing the required measures in Ghana and Nigeria through those countries own resources. Nevertheless, the study financed by the grant will confirm the equipment needs in all countries, including Ghana and Nigeria. Table 1: Total Cost for Sub-component 2.B-1 Items Total cost 1. STUDIES 3. Update/complementary operational studies 2.5 Three workshops on operational rules.5 2. IMPLEMENTATION 11.8 Equipment 8.8 Owner's engineer 1.5 Project Management & Coordination.8 Supervision missions by WAPP Task Force.1 Training & Workshops.6 Total baseline cost 14.8 Contingency 3.2 Total 18. Sub-Component 2.B-2: Technical Assistance and Logistical Support to WAPP Secretariat 39. This sub-component aims to speed up WAPP project implementation by strengthening the Planning, Investment Programming and Environmental Safeguards (PIPES) Department and for the Information and Coordination Center and build capacity. Four full time resident experts will be hired to assist the Secretariat for three years in project development, implementation/monitoring, power pool operation as well as environmental and social impact analysis sand resettlement procedures. It will also cover the implementation of a certification process for the network operators to enable better coordination between Controls Centers 51

66 involved in regional energy exchanges. Fifty (5) operators will be involved and will be the key persons to allow full deployment of the operation rules both in Zone A and B. 4. In parallel with the implementation of the regional power infrastructure, WAPP Secretariat needs to implement the regional electricity market by developing the market rules, standard contracts, transmission tariff methodology, settlement procedures etc. So far, studies have been conducted to establish a road map for the market and a tariff methodology with USAID technical assistance. WAPP Secretariat is finalizing the selection process of consultant on the market setting up. This sub-component will finance the process leading to the adoption of transmission tariffs. This includes the hiring of a consultant to complete the study and the consultation process through three workshops. Table 11: Total Cost for Sub-component 2.B-2 Items Unit cost (US$ M) Quantity Total cost (US$ M) Three Resident Experts for three years One power pool adviser for three years Travel expenses Office equipment and vehicles Travel expenses Office equipment and vehicles Five workshops for the environmental and social harmonization Certification program for Operators Consultant for transmission tariffs Three workshops for transmission tariffs Contingency.34 Total

67 Annex 4: Implementation Arrangements Project Institutional and Implementation Arrangements Project administration mechanisms 1. The Regional Transmission Company (RTC) will implement the WAPP CLSG Project. The WAPP Secretariat will implement the WAPP Integration and Technical Assistance Project. 2. The RTC will independently implement each of the CLSG Project components. The bulk of its activities will be to oversee the construction of the proposed transmission line. Among the legal documents that are under development for the setting up of the RTC, the International Project Agreement (IPA), sets out precisely what the roles and responsibilities of the RTC with respect to its shareholders, and vice-versa. 3. Up until effectiveness of the Credit, the WAPP Secretariat will continue implementing the Project Preparation Advance granted to Liberia for its project. Ongoing activities include (i) the finalization of the institutional framework, including the full setting up of the RTC; (ii) assistance with brokering a first Power Purchase Agreement; (iii) assistance for the setting up of the Project Implementation Unit (PIU), which is located initially at the WAPP, and which will be moved to the RTC by effectiveness; and (iv) assistance with the development of distribution networks along the substations of the transmission line. The WAPP also receives assistance from the EIB to start the process for the recruitment of the Owner s Engineer. The figure below illustrates the governance structure of the RTC. Figure 4: Governance Structure of the RTC 53

68 4. The WAPP Secretariat will independently implement the WAPP Integration and Technical Assistance Project, which focuses on technical assistance activities. The WAPP has experience in implementing donors grants, and some of the earlier gaps such as the availability of a dedicated procurement officer have been bridged. Financial Management, Disbursements and Procurement Financial Management and Disbursement 5. A financial management assessment has been completed for the WAPP Secretariat that will implement the WAPP Integration and Technical Assistance Project and the RTC to be created that will implement the WAPP CLSG Project. The assessments were done in accordance with the Financial Management Manual for World Bank-Financed Investment Operations that became effective on March 1, 21. The objective of the assessment is to determine whether the financial management arrangements: (a) are capable of correctly and completely recording all transactions and balances relating to the project; (b) facilitate the preparation of regular, accurate, reliable and timely financial statements; (c) safeguard the project s entity assets; and (d) are subject to auditing arrangements acceptable to the Bank. The conclusion of the assessment is that the WAPP secretariat complies with the Bank s minimum requirements under OP/BP 1.2 and is helping in the establishment of the FM arrangements of the RTC. The FM residual risk rating of WAPP secretariat is moderate as this organization has been implementing in a satisfactory manner the project preparation fund. As for the RTC under creation, its FM residual risk is assessed as substantial and the project should not be effective until the recruitment of its FM Manager and the adoption of the project implementation manual that includes acceptable financial management procedures to the Bank. Financial Management Arrangements 6. Budgeting arrangements: The budgeting procedures for the project will be described in the financial management procedures included in the project implementation manual that has to be prepared and agreed with the Bank before effectiveness. RTC will hire a Finance Manager who will be responsible for budgeting. At the WAPP Secretariat side, budget monitoring will be managed by the Head of Administration & Finance. 7. Accounting arrangements: The RTC and WAPP Secretariat accounting systems will be documented in the financial management procedures of the project implementing manual that should be finalized and agreed with the Bank before effectiveness. WAPP Secretariat will rely on the multi-projects accounting software that is functioning well under the project preparation advance PPA. The FM officer dedicated to the PPA activities is expected to continue preparing the accounts for this project. The FM Officer will report to the Head of Administration & Finance for the WAPP Secretariat. With regard to the RTC, a Finance Manager will be hired using a Project Preparation Facility. The Finance Manager will be assisted by the Accounts Officer, who should be hired by the RTC within 6 months after effectiveness. Both staff will be qualified professional accountants with adequate experience. RTC will also have to acquire an accounting information system to prepare accounts within six months after effectiveness. 54

69 8. Internal Control systems: The internal control systems for both projects will be documented in the financial management procedures included in the project implementation manual which has to be prepared and agreed with the Bank before effectiveness. 9. Internal Audit: WAPP Secretariat has an internal auditor but needs to engage in the audit of the project hence the project audit has to be part of the internal auditor s work plan. The internal audit will report to the WAPP Secretariat Finance Committee that will conduct the role of an audit committee. The RTC will have to hire a qualified and experienced internal auditor within six months after effectiveness who will review the internal control systems of the RTC and report to the audit committee of the Board of Directors for appropriate action to be taken with respect to the audit findings. The audit committee for the RTC has to be set up within six months after effectiveness. The audit committee is expected to meet at least quarterly. The WAPP Secretariat s existing finance committee will also serve as the audit committee. 1. Financial Reporting arrangements: Both RTC and the WAPP Secretariat will prepare quarterly un-audited Interim Financial Reports (IFRs) for the respective project in form and content satisfactory to the Bank, which will be submitted to the Bank within 45 days after the end of the quarter to which they relate. The format and content of the IFR has to be prepared by RTC and has been agreed-uponwith the Bank. The contents of the IFR will include: Statement of Sources and Uses of Funds; and Statement of Uses of Funds by Project Activity/Component. 11. Both RTC and WAPP Secretariat will also prepare the projects annual accounts/financial statements within three months after the end of the accounting year in accordance with International Financial Reporting Standards. Each audited financial statements should be submitted to the Bank within six months after the end of the accounting year. 12. Auditing Arrangements: The audit of the project s accounts will be prepared separately by each implementing agency with respect to the components being implemented. The audit will be done using a private external auditor acceptable to the Bank. International Standards on Auditing will be used to conduct the audit. Both RTC and the WAPP Secretariat should submit to the Bank within 6 months after the end of the financial year an audit report and management letter. The audit reports will be disclosed in accordance with the Bank s disclosure policy. The project shall be audited annually at the end of each financial year. The audit terms of reference for the project have to be agreed with the Bank before negotiations. 13. Governance and Anti-Corruption: The WAPP Secretariat has a Governance Committee whose role is to ensure that staff abides by a code of conduct that promotes good governance behavior. With regard to RTC, there is a need to have a policy that ensures fraud cases amongst staff are handled by a non executive members of the Board of Directors under an Anti-fraud and Anticorruption Committee with investigations done by the internal auditor. The fraud policy should also spell out arrangements for confidential reporting (whistle blowing) using for example hotlines and how the cases will be followed up and brought to logical conclusions. These should be done within six months after effectiveness. 55

70 Disbursements and Fund Flow Arrangements 14. Disbursements Arrangements: The transaction based disbursement method using statements of expenditure will be used when disbursing funds to the designated accounts managed by RTC and the WAPP Secretariat. Other methods of disbursement that will be used by the project include direct payments to suppliers, special commitments e.g. letters of credit, and reimbursements for expenditures incurred under the project. Further details about disbursements to the project will be included in the disbursement letter. If ineligible expenditures are found to have been made from the Designated Account held with the RTC, the borrowing country (Liberia) in association with RTC will be obligated to refund the same. If ineligible expenditures are found to have been made from the Designated Account held with the WAPP Secretariat, the WAPP Secretariat will be obligated to refund the same. If the Designated Account remains inactive for more than six months, the borrowing country (Liberia) in association with the RTC or the WAPP Secretariat may be requested to refund to IDA amounts advanced to the Designated Account. IDA will have the right, pursuant to the Financing Agreement, to suspend disbursement of the credit funds if reporting requirements are not complied with. 15. The implementing agencies (RTC and WAPP Secretariat) could during project implementation move to report based disbursement upon confirmation that there are satisfactory financial management systems in place, interim financial reports are being submitted in time and of good quality and the audit reports are being submitted in time with no significant internal control or accountability issues being raised by the external auditors. 16. Banking arrangements: Both the WAPP Secretariat and the RTC will open a Designated Account denominated in United States Dollars (USD) in a commercial bank acceptable to the IDA. Both the WAPP Secretariat and the RTC will also open a Project Account in a local currency in a commercial bank acceptable to the IDA to make eligible related payments in local currency. The local currency for the project account of the WAPP Secretariat will be FCFA. Details of the bank accounts that are opened and the account signatories should be communicated to the Bank. 17. Funds flow arrangements. Funds flow arrangements for the projects (through the designated and project bank accounts above) are as follows: IDA will make an initial advance disbursement into the designated accounts in US Dollars upon receiving a withdrawal application from RTC and WAPP Secretariat. Replenishment of funds from IDA to the Designated Account will be made upon evidence of satisfactory utilization of the advance, reflected in SOEs and/or on full documentation for payments above SOE thresholds. Replenishment applications will be required to be submitted regularly on a monthly basis. Funds will be transferred from the designated account to the project account and payments in relation to project eligible expenditure can be made from both accounts. 56

71 Figure 5: Flow of Funds Diagram for the RTC and the WAPP Secretariat World Bank (IDA) WAPP Secretariat or RTC Designated Account in USD WAPP Secretariat or RTC Project Account in local currency Project transactions paid in either USD or local currency Financial Management Action Plan 18. The table below shows the financial management action plan for the project. Table 12: Financial Management Action Plan Action Date due by Responsible Adopt the Project Implementation Manual that includes financial management Condition for effectiveness WAPP Secretariat/RTC procedures that have to be agreed with the Bank. Recruit a qualified and experienced Condition for RTC Finance Manager. Recruit a qualified and experienced internal auditor and accounts officer. Set up an audit committee that will follow up with management to ensure audit issues are addressed. Acquire and install an accounting information system for the RTC Develop an antifraud and anticorruption policy and adopt an antifraud and anticorruption committee. Conclusion of the Assessment effectiveness Dated covenant to be met within 6 months after effectiveness. Dated covenant to be met within 6 months after effectiveness. Dated covenant to be met within 6 months after effectiveness. Dated covenant to be met within 6 months after effectiveness. RTC RTC RTC RTC 57

72 19. The WAPP Secretariat will rely on the existing FM system that is functioning well with a finance unit that is staffed with experienced financial specialist and accountants who will be in charge of the implementation of this project using existing and adequate multi-projects accounting software. The RTC has to put in place financial management arrangements required before effectiveness as per the above action plan to meet the Bank s minimum requirements under OP/BP1.2. The other actions to be achieved within six months after effectiveness are also essential in strengthening the financial management systems of the project. The overall financial management residual risk rating for the RTC is substantial and moderate for the WAPP Secretariat. This will require the project to have on-site supervisions at least twice a year for the RTC and once for the WAPP Secretariat. Procurement Capacity Assessment, Risk and Mitigation Measures 2. The WAPP Integration and Technical Assistance Project will be implemented by WAPP Secretariat, the same secretariat which prepared the IDA-financed West African Power Pool (WAPP) CLSG Project. The procurement capacity assessment at WAPP secretariat for the West African Power Pool (WAPP) CLSG Project was carried out in June 28 and March 211. Following this assessment, the measures agreed upon to strengthen the WAPP secretariat are (i) finalize a recruitment of a procurement officer, (ii) revise WAPP s administrative, financial and accounting manual to strengthen the procurement section. 21. A procurement capacity assessment of WAPP Secretariat reviewed in March 212 by the Procurement Specialist based in the Benin Country Office shows that (a) procurement officer was recruited, but he is remains seconded by the Power Hold Company of Nigeria (PHCN) for three (3) years with effect from November 21, 211; (b) WAPP s administrative, financial and account was revised with satisfactory procurement section (Manual of Procurement Procedures and WAPP tender Code); and (c) prior to Nov 21, 214, a recruitment process for a replacement procurement specialist should begin to assure that the new procurement specialist is in place at the WAPP Secretariat (or the new CLSG Regional Transmission Company) prior to Nov 21, The procurement specialist who was recruited to work with the WAPP was selected on the basis of his knowledge of World Bank procurement procedures. However, the WAPP CLSG project, for which the WAPP will conduct the initial pieces of procurement, will have to deal with a broad set of procurement guidelines from the four co-financing agencies of the WAPP CLSG Project (AFDB, EIB, KfW, and WB). The procurement specialist will have to handle these procedures even though he is not as familiar with these procedures as he is familiar with World Bank procurement procedures. 23. Risks and mitigation measures: In view of (i) the high volume of work and delay with differing procurement procedures for each co-financier; (ii) the procurement capacity for all the co financing; and (iii) the satisfactory WAPP Secretariat manual of procurement procedures, the overall Project procurement risk has been rated as substantial. 58

73 24. WAPP Secretariat must submit to the Bank the first 18 month procurement plan before negotiations. Guidelines 25. Procurement for the proposed projects will be carried out in accordance with: (a) Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers dated January 211. dated January 211; (b) Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers dated January 211 and (c) the provisions of the Financing Agreements. Procurement Documents 26. Procurements will be carried out using the Bank s Standard Bidding Documents (including pre-qualification and bid evaluation report formats) for all International Competition Bidding (ICB), for works and goods. For the selection of consultants, the Standard Request for Proposal (RfP) will be used, along with the format for consultant technical and financial evaluation. For National Competitive Bidding (NCB), the Borrower would submit a sample format for bidding documents to the Bank for prior review, and once cleared by the Bank will continue to use this NCB document throughout the project, as agreed upon. Also for certain procurement packages, the World Bank procurement procedures will be used for contracts financed by certain co-financing partners (i.e. currently planned for co-financing with KfW and EIB under a joint procurement process with separate contracts co-financed under parallel arrangements). Currently AfDB co-financing would use separate procurement packages following their own procurement procedures. Due to the volume and complexity of procurement packages and the involvement of several co-financing partners in the procurement processes, the project procurement risk is rated substantial. Frequency of Procurement Reviews and Supervision 27. The Bank s prior and post reviews will be carried out on the basis of thresholds indicated in the table below. The Bank will conduct bi-annual supervision missions and annual Post Procurement Reviews (PPR); the ratio of post review is at least 1 to 5 contracts. The Bank could also conduct an Independent Procurement Review (IPR) at any time until two years after the closing date of the project. 59

74 Table 13: Procurement and Selection Review Thresholds Procurement/selection methods 1. Works and Goods ICB Works Goods Prior review threshold (US$) 5,, 5, Comments Method can be applied for any amount, but is mandatory for contracts above the prior review thresholds LCB (Goods) 3, Review of the contracts as indicated on the procurement plan (could also include first two contracts independently of amount). NCB Works Goods Shopping Works Goods <5,, < 5, <1, < 1, Direct Contracting All amounts Review of all contracts 2. Consulting Services QCBS 2, LCS 2, CQS (for contracts $US1,) 5, Individual Consultants (IC) 1, Single Source Selection (SSS) 3. Training and Workshops All amounts Training and workshops 1, Review of the contracts as indicated on the procurement plan (could also include the first two contracts independently of amount). Review of the contracts as indicated in the procurement plan (could include the first two contracts independently of amount). Review of the contracts as indicated on the procurement plan (could also include the first two contracts independently of amount). Review of the contracts as indicated on the procurement plan (could also include the first two contracts independently of amount). Review of the first two contracts independently of amount. Method applicable for contracts less than US$1, Review of the contracts chosen on a case-by-case basis, independently of amount, as indicated on the procurement plan Review of all contracts. On basis of detailed and approved annual plan (with indication of venue, number of participants, duration, detailed budget, etc.) 6

75 Ref. No. DESCRPTION Estimated Amount (US$) Procurement Method Pre qualification (yes/no) Domestic preference (y/n) Prior Review (y/n) Estimated Bids opening Date Expected Contract Signature Date Comments 28. All training and terms of reference of contracts estimated to more than US$1,, and all amendments of contracts raising the initial contract value by more than 15 percent of the original amount or above the prior review thresholds will be subject to IDA prior review. All contracts not submitted to the prior review will be submitted to IDA post review in accordance with the provisions of paragraph 4 of Annex 1 of the Bank s Consultant Selection Guidelines and Bank s procurement Guidelines. Procurement Plan 29. All procurement activities will be carried out in accordance with approved original or updated Procurement Plans. The Procurement Plans will be updated at least annually (or as otherwise required) to reflect the actual needs and capacity improvements of project implementation. All Procurement Plans should be published at the national level and on the Bank website according to the Guidelines. (a) Summary of Works and Goods Contract Packages for the First Eighteen Months of Implementation 3. The procurement plan for the first eighteen (18) months of project implementation has been prepared and will be available for the project negotiations. The tables below illustrate the main procurement packages of the procurement plan. Table 14: Works and Goods Contract Packages for CLSG Regional Transmission Company Construction of 225kV Transmission Lines Lot-1: 488km through Yekepa, Buchanan, Monrovia and Mano S/S in Liberia and 54km 66kV Overhead Trx Line in Monrovia. Lot-2: 362km through Border, at Kenema, Benkongor and Bumbuna S/S in Sierra Leone. Construction of 7No. 225/33kV Substations at Yekepa, Buchanan, Monrovia and Mano in Liberia and Kenema, Benkongor and Bumbuna in 146,548, 88,7, ICB Yes No Yes ICB Yes No Yes Sep 213 Oct 213 Nov 213 Nov 213 Ctract 1: IDA Ctract 2: EIB Ctract 1: IDA Ctract 2: /KfW Ctract 3: 61

76 Ref. No. DESCRPTION Estimated Amount (US$) Procurement Method Pre qualification (yes/no) Domestic preference (y/n) Prior Review (y/n) Estimated Bids opening Date Expected Contract Signature Date Comments Sierra Leone EIB Supply and Installation of compensation and frequency regulation measures of the WAPP interconnected network Supply of Computers and office equipments for the CLSG Project Implementation Unit (PIU) Supply of Computers and office equipments for the CLSG Regional Transmission Company (RTC) Supply of Vehicles for the CLSG Project Implementation Unit (PIU) for two (2) units Supply of Vehicles for the RTC for four (4) units 1,5, 15, NCB 151, ICB Yes No Yes Yes No Yes Août 213 Apr 213 NCB Yes No Yes Oct , NCB Yes No Yes Oct , NCB Yes No Yes February 212 Oct 213 May 213 Nov 213 Nov 213 March 213 Table 15: Works and Goods Contract Packages for WAPP Supply and installation of equipment to enhance the integration and synchronization of the WAPP interconnected network Supply of Office Equipment for the WAPP Secretariat 8,88, 5, ICB Yes No Yes Jun 213 Shop ping Yes No Yes Sep 212 Aug 213 Oct 212 Subjec t to receipt of letters from Minist ers of Financ e. 3 Supply of Vehicles for the WAPP Secretariat 6, NCB Yes No Yes Oct 212 Nov

77 (b) Summary of Consultant s Contract Packages for the First Eighteen Months of Implementation Table 16: Consultant s Contract Packages for CLSG Regional Transmission Company Ref No DESCRIPTION Amount ESTIMAT. (US$) Selection Method Prior Review (Yes/No) Estimated Bid Opening Date Estimated contract signing date Comments Owner's Engineer for the services of Project Management and Supervision of CLSG Transmission Lines, Substation, SCADA System Contracts and related Works and support for the implementation of Environmental and Social Management Plan (ESMP). Legal advise for transmission contracts Preparation of Operating procedures for the RTC. Preparation of administrative and accounting management procedure for the RTC Annual Financial and accounting Audit of the project for three (3) years of implementation Recruitment Consultant to assist the WAPP for the finalization of Job profiles description and recruitment of the management staff for the RTC. Recruitment of a Consultant for the 28,, QCBS Yes Sep 212 Dec ,4 QCBS Yes Jan 213 May , QCBS Yes Mar 213 Jul , IC Yes Jan 213 Fev 213 1, QCBS Yes Apr 213 Aug 213 8, CQS Yes May 213 Sep 213 5, IC Yes Oct 213 Nov 213 Phase 1 EIB; Phase 2 IDA 63

78 8 preparation of Terms of Reference (TORs) to recruit a Consultant for the RTC. Outsourcing of the computer system management for the RTC for three (3) years. 25, CQS Yes Aug 213 Oct 213 Table 17: Consultant s Contract Packages for WAPP Ref No DESCRIPTION Amount ESTIMAT. (US$) Selection Method Prior Review (Yes/No) Estimated Bid Opening Date Estimated contract signing date Comments Pre-feasibility / Feasibility Studies for Potential Hydropower Plants at Mano River (Liberia/Sierra Leone) and the preparation of the Bidding Document Pre-feasibility / Feasibility Studies for Potential Hydropower Plants at Kassa B (Guinea) and the preparation of the Bidding Document Pre-feasibility / Feasibility Studies for Potential Hydropower Plants at Souapiti (Guinea) and the preparation of the Bidding Document Hiring of Project Development Expert for three (3) 1,, QCBS Yes Apr 213 Aug 213 1,, QCBS Yes Jul 213 Nov 213 1,, QCBS Yes Mar 213 Jul , IC Yes Jan 213 Apr

79 years to assist WAPP Secretariat Hiring of Implementation and Monitoring Expert for three (3) years to assist WAPP Secretariat Hiring of Environmental, Social and Resettlement Expert for three (3) years to assist WAPP Secretariat Hiring of Power Pool Operation Adviser for three (3) years to assist WAPP Secretariat Update of the Reactive Power Compensation Studies for the implementation of the proposed synchronization of five (5) Power Utilities in the ECOWAS Region. Hiring of the Owner's Engineer to supervise the implementation of the synchronization system 18, IC Yes Jan 213 Apr , IC Yes Feb 213 Apr , IC Yes Feb 213 Apr 213 5, QCBS Yes Apr 213 Aug 213 1,5, QCBS Yes Apr 213 Aug 213 Procurement Filing 31. Procurement documents must be maintained in the project files and archived in a safe place until at least two years after the closing date of the project. Project Implementation Unit (PIU) will be responsible for the filing of procurement documents until the transfer of procurement responsibility to RTC. 65

80 Environmental and Social (including safeguards) 32. Environment and Social Impact Assessments (ESIAs) four all four countries were completed and disclosed by WAPP in January, 212, covering: (i) the existing environment and natural resources covered by the project; (ii) an assessment of the potential environment and social impacts; (iii) identification of the environment mitigation measures embodied in the Environment and Social Management Plan (ESMP); (iv) public consultations and involvement of local government and key stakeholders; and (v) preparation of Resettlement Action Plans (RAP) which contained the results of the social assessments, socio-economic surveys and livelihood programs. 33. The environment and social impacts are evaluated as a result of construction and operation of the project, including alternatives and mitigation measures as discussed with the participating governments of Côte d Ivoire, Liberia, Sierra Leone and Guinea (CLSG). 34. The total length of the 225 kv transmission line across the WAPP participating countries is 1,349 km, including two 66 kv distribution lines from Mount Coffee to Bushrod and Paynesville in Liberia. Except for these distribution lines, which cover part of the urban and periurban sections of Monrovia, the entire geography of the line s right of way (RoW) is mountainous and densely covered with forest, except for the Buchanan to Mano coastal areas in Liberia. The line segments in Guinea to Binkongor in Sierra Leone are hard to navigate due to the absence of roads and access ways. The Man (Côte D Ivoire) Yekepa (Liberia) Nzérékoré (Guinea) sections are mountainous with altitudes ranging from 5 m to 1,1 m. The Right-of- Way (RoW) in Buchanan to Mano in Liberia is flat with an altitude below 5 m. This area is generally marked by swamp and rubber farms. Apart from the Saint John River, which is over 6 m wide, several other rivers exist in this section. Kenema to Kamakwie in Sierra Leone are mostly hilly but hard to access. 35. Alternative transmission line routes. Nine alternate transmission line routes were considered to take into account the three environmentally sensitive areas from the standpoint of biodiversity importance. There are eight line routes for the three biodiversity hotspots in Liberia, but these were changed to take into consideration another routing, and which would avoid or substantially lessen any effects on the environment. These biodiversity hotspots include in Sierra Leone the Gola Forest National Park, Nimini Hills Forest Reserve, and Outamba-Kilimi National Park. The hotspots in Liberia are in Nimba Nature Reserve, one of the remaining high biodiversity areas in West Africa, Gbedhin Wetlands, a proposed Ramsar site, and the proposed Lake Piso Multiple Protected Area, which is also a proposed Ramsar site. 36. Project Impacts. Although the line route is 1,349 km long, including about 5 km of distribution lines, the actual affected area under construction and within the RoW is relatively small. Eleven sub-stations will be built in a small area of 2 m x 2 m. These are in flat, well drained land, thus with no major topographic changes anticipated. The land for tower locations will be small and the surrounding areas remain usable for controlled and sustainable agricultural cropping, except for Côte D Ivoire where legislation prohibits any land use inside the RoW. 66

81 37. The main potential impacts, which require mitigation measures, have been identified for the proposed project. These are loss of land, destruction of buildings, other structures and crops, noise pollution, waste management, water pollution, impacts on flora and fauna, public safety and health, occupational safety and health issues and socio-economic/socio-cultural issues. 38. The proposed project is expected to cause indirect impacts in the following environmental and social areas: (i) hydrology and water quality; (ii) socioeconomic conditions; (iii) land use and public recreation; and (iv) utilities. Environmental impacts, and mitigation measures, were reviewed with respect to direct effects to air quality; biological resources; cultural resources; geology, visual intrusion, soils; noise; public health and safety; public services; traffic and transportation and livelihoods. To the degree that the transmission project inhibits effective firefighting, greater impacts could result from wildfires, such as large fires potentially causing destruction of biological resources and cultural resources, and leading to greater soil erosion after fire events. 39. Indirect effects may be represented by a variety of potential impacts, projects, or actions, including growth-inducing effects such as residential and commercial development, and infrastructure and public works projects, among others. 4. Cumulative impacts, which refer to the impact on the environment which results from the incremental impact of the project when added to other past, present and reasonably foreseeable future actions are not substantial due to the nature of the terrain. In fact, the increase in regional growth in each of the four countries may indirectly contribute to potential cumulative impacts in the proposed project area. An increase in population growth directly affects the demand for jobs and housing, which may increase the number of planned development and improvement projects, such as public service facilities or transportation system expansions. Substantial population or employment increases near the area of the proposed project also substantially increases the population potentially exposed to an accident or other hazard. The project will monitor the cumulative impacts of the project. Since the cumulative impacts of the project have been assessed as minimal no mitigation measures for cumulative impacts have been developed 41. Affected Populations. The way in which communities are affected includes land to be acquired (sub-station, access road and towers) and clearance of the RoW. The RAPs include compensation to be paid to 1,634 households for the following categories of losses: (i) residential land and structures; (ii) land to be acquired for roads and towers; (iii) agricultural lands with perennial crops; (iv) agricultural lands with non-perennial crops; and (v) potential agricultural (or fallow agricultural lands). The distribution of affected population by country is summarized in the table below. Table 18: Breakdown of Number of Project Affected Persons (PAPs) Total PAPs For All Countries by Country PAPs by Households Dependents Côte d Ivoire 692 3,46 4,152 Liberia ,663 2,79 Sierra Leone 414 2,898 3, Total number of affected persons

82 Guinea Total 1,634 8,524 1, ESIAs and RAPs Costs. Except for Côte D Ivoire, the costs of the RAPs will mainly cover restrictions in land use inside the RoW. Upon completion of the transmission line, some farming will be permitted, so compensation will cover only the income losses from perennial crops or annual crops. Additionally, because the exact locations of the transmission line towers can only be determined during the construction phase, the actual costs for compensation in the RAPs may change, so the costs below are estimates in US dollars. The ESMPs costs include the mitigation measures and monitoring. The CLSG Governments will finance the ESMPs and RAPs. Table 19: Breakdown of Environmental Mitigation Costs by Country Country ESMP (US$) RAP (US$) Total (US$) Côte d Ivoire 547,671 1,645,33 2,192,74 Liberia 892,84 1,5,167 2,393,7 Sierra Leone 892,16 2,58,121 3,4,281 Guinea 29,59 1,866,368 2,156,958 All Countries 2,623,281 7,519,689 1,142, ESMPs/RAPs Implementation Arrangements: The ESMPs and RAPs will be implemented by a PIU that will be jointly supervised by the WAPP and the participating countries. A project social coordinator and an environment coordinator will be hired to supervise the activities as listed in the ESMPs and RAPs. The responsibilities include oversight of the compensation process and carrying out the livelihood restoration program as outlined in the RAP and implementation of the environment mitigation measures. 44. Grievance Mechanism. The project will have a separate grievance mechanism that will be managed in-country but progress in implementation of the mechanism will be reported to the WAPP initially and subsequently to the RTC, once set up. In the participating countries the PIU will rely on a community-based grievance filing system where disputes or concerns about the project will first be registered with the local leaders and elders, as appropriate. This will be followed by community and local dispute resolution before these are referred to the PIU in each country. 45. The mechanism includes a well planned Communications Plan that includes the use of popular media like village notices and community radio. These will be augmented by the use of information dissemination and community meetings to inform the people about progress on project implementation. Documentation of all consultations and major project progress will be recorded in the PIU of each participating country and in the WAPP Secretariat. 68

83 Monitoring & Evaluation See Annex 6 for a detailed description. Role of Partners (if applicable) See Annex 6 for a detailed description. 69

84 Annex 5 Operational Risk Assessment Framework (ORAF) WAPP APL 4, Phase 1 (CLSG Power Network) Stage: Board Presentation 1. Project Stakeholder Risks Rating: High Description: While strong Government support from the CLSG countries has provided for the preparation and for the endorsement international and energy treaties, CLSG countries are fragile states that face political economy constraints, such Risk Management: The CLSG Ministers of Energy have endorsed a treaty for the setting up of a Regional Transmission Company, thus confirming their commitment to the project. The WAPP Secretariat will continue to play an important role in promoting regional integration among the CLSG countries. as rent seeking behavior that might impact the proposed project. Resp: WAPP Stage: Implementation Due Date : Status: Not yet Description: The implementation of this project will involve 4 governments, 12 national institutions (at least 2 ministries and 1 utility company per country), and international entities (WAPP Secretariat; Committees of the CLSG Treaty). Risks of institutional interferences are therefore high at all levels of the chain of decision. Description: The national power utilities, which will be the offtakers of power from the transmission line and their shareholders, suffer from lack of capacity, financial viability, and political economy challenges especially in Liberia, Sierra Leone and Guinea. Ongoing due Risk Management: The establishment of the Regional Transmission Company (RTC) which will own, maintain and develop the transmission line, minimizes the direct involvement of governments and stakeholders and renders attempts for potential interference by third parties more transparent. Resp: RTC Stage: Implementation Due Date : Ongoing from establishment of RTC. Status: Not yet due Risk Management: The establishment of the CLSG Regional Transmission Company (RTC) which will own, maintain and develop the transmission line, minimizes the responsibility of the national public utilities. Resp: RTC 2. Implementing Agency Risks (including fiduciary) 3.1. Capacity Rating: High Description: There are two implementing agencies, the WAPP and the Regional Transmission Company (RTC) that will own, maintain and develop the transmission line. The WAPP has a proven track record of implementing World Bank grants, and with the recent recruitment of a new procurement officer sufficient capacity to handle the project. The RTC is still to be set up. While there is a clear plan of the staffing going forward with requisite terms of reference that are broadly acceptable to the Bank (with some fine-tuning needed), the RTC does not yet Stage: Implementation Due Date : Ongoing from establishment of RTC. Risk Management: Ongoing assistance to the WAPP and RTC to ensure that the capacity to implement the project is maintained throughout the lifetime of the project. Resp: Bank Stage: Implementation Due Date : Ongoing Status: Not yet due Status: Not yet due Risk Management: Staff for the PIU/RTC to be recruited with Bank financing. Follow closely due diligence to ensure that competent staff be recruited. 7

85 exist. Therefore the risk rating should be high for the RTC s Resp: Bank capacity Governance Rating: High Description: Political interference - RTC performance: the Regional Transmission Company (RTC) will be overseen by four ECOWAS Member States and serve at least four utilities. Any exhibition of lack of performance on the part of the RTC could lead to accusations of discrimination, lack of transparency etc by the four member countries or the power utilities. Furthermore, any discretionary deviation from rigid corporate/project stipulations for the benefit of one party would invite political interference in pursuit of other concessions for other parties which would be difficult to resist. The risk is that internal indiscipline would lead to an avalanche of concessions would undermine project performance. Stage: Implementation Due Date : Ongoing Status: Not yet due Risk Management: Comprehensive legal framework is being developed with the aim of minimizing such interference. The legal framework is taking lessons of experience from similar projects in the region and beyond and reflecting them in the design of the legal framework. Further, clear administrative manuals to regulate all functions of the RTC entity will be prepared, which should further mitigate the problems. Functional managers of the operating entity will be required to pledge full compliance with administrative provisions and be subject to summary dismissal for failure to comply. The RTC s legal framework also includes specific language pertaining to the prevention of fraud and corruption. Further, strict adherence to GAC principles will be required and monitored by the Bank. Resp: WAPP /PIU/ RTC/Borrower 4. Project Risks 4.1. Design Rating: Moderate Description : Budget overruns and delays in completion Sub-standard performance. The inability to implement the project within budget or on schedule is the main implementation risk. In addition, there is a low risk that some segments of the line may not perform as desired after completion (moderate). Reliability of service and maintenance. Long sections of the proposed transmission line traverse regions that experience monsoon type rainfall seasons for more than one third of the year. These conditions which make access to the line difficult can affect the timely execution of maintenance functions, resulting in unduly long outages and affect the overall reliability of service (moderate). Stage: Implementation Due Date : Ongoing Status: In progress Risk Management: A well-resourced and competent project implementation team will be assembled to be responsible for the management of the project. Detailed engineering investigations will be conducted prior to implementation. Resp: Bank Stage: Implementation Due Date : Ongoing Status: In progress Risk Management: A dedicated operation and maintenance company will be recruited towards the completion of construction to ensure that the transmission line is serviced in accordance with international best practice. Resp: Bank Stage: Implementation Due Date : Ongoing Status: In progress Tariff Setting, financial discipline. The resolve to maintain cost-recovery tariffs may weaken during the lifetime of the project. A potential waning over time of the willingness of users and the ability of the operating entity to collect all revenue or deal with non-payment may pose a problem, especially as some of the key potential off-takers the public power utilities have a very weak financial performance. Imprudent management of the finances of the operating entity either through inadequate cost control, misapplication of funds or other financial malpractices will jeopardize the good Risk Management: A smart and transparent tariff mechanism is being developed that should ensure that the costs of operating the RTC can be covered. ERERA, the Regional Regulatory Body, will verify that the tariff methodology adopted in the set of legal documents pertaining to the setting up of the RTC is well enforced. Further, the operating entity will be required to recruit and retain the appropriate financial expertise needed to build and maintain robust financial and accounting systems. The financial manager of the RTC shall be granted the needed authority to establish and enforce adequate controls and be held professionally accountable. 71

86 performance of the project (high). Resp: Borrower 4.2. Social & Environmental Rating: High Description: Delays in the implementation of the Environmental and Social Monitoring Plan. Issues could arise around the adequate and timely compensation of project affected persons before any construction commences due to inexperience of institutions involved. Stage: Implementation Due Date : Ongoing Status: In progress Risk Management: The Project has prepared ESIAs and RAPs in all four countries. A clear framework for the roles and responsibilities of the implementation of the ESMP has been put in place. Grievance mechanisms have also been established. These need to be kept in place. Resp: RTC/ Governments Stage: Implementation Due Date : Ongoing Status: Disclosed 4.3. Program & Donor Rating: High Description: Associated investments in generation sources and in domestic networks could be delayed, resulting in the risk that this project will be underutilised if these associated investments are inadequate. The realisation of benefits from this project, which is to transmit electrical energy from generating sources to load consumption center, is dependent upon the occurrence of other infrastructural investments needed to augment the capacity of generation sources as well as to Risk Management: The Project Preparation Advance is financing a study on the expansion of the distribution networks and bidding documents around the substations of the transmission line, and in the main economic centres in the respective countries that will be interconnected. Once complete, this study should provide the basis for a donor roundtable to put the financing for these measures together. Additionally, as part of the project financing, feasibility studies will be conducted to ensure that in the medium to long-term the generation capacity along the line will be developed in a timely manner and in accordance with least cost principles for the three hydropower generation options that have been identified as part of the Master Plan as key projects. enhance domestic distribution capacity within the interconnected networks. Resp: WAPP Stage: Implementation Due Date : Status: In Description: The meeting of project objectives could be delayed due to delays of effectiveness of co-financing from cofinanciers or the delay in procurement for which another cofinancier is responsible. Ongoing progress Risk management: The co-financiers will adopt a Memorandum of Understanding, which is a vehicle to ensure close coordination, including on effectiveness conditions and procurement strategy. Compliance with this MoU can be monitored on an ongoing basis. Resp: World Bank 4.4. Delivery Monitoring & Sustainability Rating: High Description: Financial viability. The poor financial health of the power sector in the four countries as a whole threatens the sustainability of any project or operation. Although the problem of tariffs being below cost is known to the authorities, there is no firm indication of how or when the problem will be addressed. The exception is Liberia, which has tariffs that are close to cost recovery, and which has a tariff adjustment mechanism. Overall Risk Following Review Stage: Implementation Due Date : Ongoing Status: In progress Risk Management: A number of measures are being considered to ring-fence the RTC from these risks. These include: (i) it is proposed that the RTC would hold a clearing account for all payments or through escrow accounts. A waterfall payment scheme would ensure that wheeling charges to the RTC be settled first; (ii) a letter of credit that the RTC holds with a commercial bank could ensure that payments are being made in a timely manner and that the RTC does not experience cash-flow problems; (iii) the EIB is proposing the setting up of a dedicated reserve account from which the RTC could draw in the event of a shortfall. Resp: Borrower Implementation Risk Rating: High Stage: Implementation Due Date : Ongoing Status: In progress 72

87 Annex 6: Implementation Support Plan 1. The objective of this implementation support plan is to ensure that the Governments involved and the WAPP properly implement the project. It also ensures that World Bank s resources and staff are sufficient to supervise and support this implementation. This implementation support plan responds to complexities of the project given a regional project that covers four countries, a challenging environment, and the high level of coordination required among four co-financiers. 2. Adequate World Bank resources and staffing to assure this level of supervision will need to be made available throughout the Project implementation cycle. Project supervision will be undertaken by an inter-disciplinary team, with strong support from senior management in the Africa Sustainable Development department as well as from country and regional managements. 3. Similarly, the WAPP and the co-financiers, AfDB, EIB, KfW, and the World Bank agreed during a series of meetings, and as reflected in Aide Mémoires, to a set of principles for future collaboration on the preparation and implementation of the WAPP CLSG Interconnector Transmission Project Meeting effectiveness conditions 4. First, the World Bank team and implementing agencies will focus on meeting the effectiveness conditions. The table below presents an indicative timeline. Table 2: Indicative Timeline for Meeting the Effectiveness Conditions Milestone/Effectiveness condition Indicate timeline Approval of the International Project Agreement and the Shareholder Agreement by the CLSG countries June 212 Signature of Treaty for the Construction, Operation, and Development of the CLSG Interconnection Line June 212 Ratification of the Treaty by the Parliaments of the CLSG countries September 212 Signature of IPA by the four Governments and the SPC October 212 Effective creation and mobilization of the SPC December 212 Commitment of States equity contributions November 212 Signature and effectiveness of anchor transmission service and power purchase agreement November 212 Signature and effectiveness of the financing agreements with AfDB pertaining to Liberia November 212 Signature and effectiveness of the financing agreements with AfDB pertaining to Côte d Ivoire March 213 Signature and effectiveness of the financing agreement with KfW November 212 SPC fully staffed and the General Manager recruited and appointed December

88 The shareholders agreement signed and effective October 212 The SPC s shareholders met to appoint their representatives to the Board of Directors October 212 The SPC s Board of Director approve the General Manager s contract October 212 Bank implementation support 5. First phase. Technical implementation support will focus on ensuring timely procurement processes, functioning implementation and coordination arrangements between the PIU and the Owner s Engineer in order to ensure appropriate technical design of project components. Activities will also include mainstreaming the integration of CLGS countries into the West Africa Power Pool through promoting constant policy and technical dialogue facilitated by the WAPP Secretariat. The Bank team will include HQ and country office-based staff and consultants. Specialized expertise in transmission design and developing power pool operations will be mobilized as required. Resource requirements will be higher than the Bank s average project supervision coefficients because implementation support activities must be carried out in four countries, in a challenging power sector context, and large number of contracts given the scope of the Project. 6. Second phase. After tendering process is finalized in the first phase, Bank team support will focus on monitoring construction process, contracts management, disbursements, and effectiveness of capacity building and technical assistance activities. During this phase, the Bank will also monitor the progress of the RTC with the support of the Owner s Engineers. The Bank team will include HQ and country office-based staff and consultants, complemented with specialized expertise as required. Resource requirements will be higher than the Bank s average project supervision coefficients during the Project s construction phase because activities must be carried out in four countries and field visits to the transmission construction sites in remote and conflict prone areas will require additional resources for secured transportation and ensuring the security of staff. The cost of field visits may be shared between the co-financiers. Main areas of supervision Procurement and technical aspects 7. During early phase of the project implementation, more frequent supervision is envisaged in order to ensure that procurement guidelines are followed by the PIU being supported by the Owner s Engineer and to ensure co-financiers procurement harmonization. Procurement packages will be reviewed by each internal co-financier and it is expected to submit a joint decision. This will require additional coordination and time from the Bank team. The Bank team will include bank staff engineers, complemented with specialized expertise, in particular to power system synchronization, in order to review technical specifications and proposals. During the second phase, it is expected field supervisions to the construction sites. In terms of estimating the staff weeks, during the first year, it may need eight staff weeks of the procurement specialist 74

89 and four weeks of the senior procurement specialist. Same requirements will apply for engineering support. Financial management aspects 8. Financial management supervision will start by assessing the progress of the RTC staffing and to review the plan in place in order to execute disbursements following FM guidance according to different co-financiers. This supervision will take place before contracts are awarded in case improvement measures need to take place before disbursement. The financial management supervision will also review quarterly progress and financial audits. In terms of resources, a country office-based staff eight weeks is expected to be required. Environmental and social aspects 9. Environmental safeguards support will include visits to critical project areas along the line, monitor mitigation measures and hold consultations with local communities with the project affected people and their respective committees. During construction, monitoring is necessary to ensure the ESMPs and occupational health and safety measures are adhered to, and appropriate site rehabilitation is undertaken post-construction. Social safeguards support includes working with RTC with support of the Owner s engineer for the RAPs implementation. It is expected to have a field supervision mission in the second phase three weeks per year. In terms of resources, environmental and social specialists for eight weeks, respectively, are expected to be supporting the project. 1. A significant staff effort is envisaged to meet the implementation challenges characterizing by a regional project and multiple co-financiers. The Bank team should be composed of mix skills and experience for the successful project implementation. The table below outlines the expected staff weeks and travel required to make sure the actions and schedule are appropriately resourced. Based on this, the overall estimated supervision cost is US$ 325, per year on average, with slightly higher supervision costs in the first years, and slightly lower costs in the subsequent years. Table 21: Supervision Needs Time Focus Skills Needed Partner Role First phase (approx. nine months) Effectiveness, procurement, safeguards, FM, power pool integration. Legal, engineering, procurement, financial management, power pool development, environmental and social/resettlement, country economist, specs verification and review The WAPP Secretariat will facilitate implementation in the early phase. AfDB, EIB, KfW will supervise their components of the Project and contribute to 75

90 support. joint supervision. Second phase. (aprox months) Mid-term review Completion report Review of progress in construction and capacity building; review of sector technical and financial performance; procurement; M&E; safeguards; FM; EAPP development. Engineering, sector specialist, sector regulatory specialist, M&E specialist, financial analyst, economist, environmental and social/resettlement, legal. Engineering, sector specialist, sector regulatory specialist, M&E specialist, financial analyst, economist, environmental and social/resettlement, legal. Engineering, sector specialist, sector regulatory specialist, M&E specialist, financial analyst, economist, environmental and social/resettlement, legal. AfDB, EIB, KfW and will supervise their components of the Project and contribute to joint supervision. Participate in joint mid-term review Participate in joint completion review and reporting Table 22: Estimated Staff Required during Supervision Skills Needed Number of Staff Weeks Team leader 1 2 Sector leader 2 Power engineer 8 2 Procurement Specialist 8 2 Power trading/regulatory specialist Specialized technical experts 76 Number of Trips per year 1 As required 1 As required

91 Regional integration 1 As required specialist Financial analyst 2 1 Country economist 1 FM specialist 8 2 Legal 8 2 (initially) Administrative support 3 Disbursement specialist 3 Environmental specialist 8 2 Social specialist 8 2 M&E expert 3 1 Joint co-financiers implementation support 11. In order to reduce the administrative burden to the Recipient, the co-financiers plan to conduct joint supervision missions at least two times every year, or as otherwise agreed. Technical supervision may be conducted with the Owners Engineer at their premises or the financiers premises. The supervision missions will generally focus on the review of technical, institutional, environmental and social, procurement, financial management, and monitoring and evaluation aspects of the project. The co-financiers agree to share the activities to be undertaken during the supervision meetings to take advantage of synergies and in order to reduce the costs of supervision of each donor. The different agencies agree to take the lead on the aspects of supervision as follows: Procurement: WB and AfDB per each respective tendering documents Institutional Setting-up and Assessment: WB Environmental and Social Safeguards: WB Financial Management: AfDB/WB Monitoring and Evaluation: KfW Technical aspects/engineering: EIB 12. For activities explained above, the lead co-financier will serve as the single window for the communication with the Recipient, and will consolidate the review, comments and decisions by each co-financier. 77

92 Annex 7: Economic and Financial Analysis LIBERIA: West African Power Pool (WAPP) Côte d Ivoire, Liberia, Sierra Leone, and Guinea Power Interconnection Project Economic Analysis 1. In support of West Africa Power Pool (WAPP) goals of establishing a well-functioning, cooperative power pooling mechanism in the region, the proposed WAPP CLSG project will provide for transmission interconnections between Côte d Ivoire, Liberia, Sierra-Leone and Guinea (CLSG). This annex provides details of the economic and technical analysis used in determining the economic performance of the transmission interconnection. The main benefit of the proposed interconnection would be to enable electricity trade between the participating countries, and within the wider regional network. The CLSG transmission line will allow for the transfer of surplus generation from the country/region with the least/lower future generation costs to the system with the higher/highest generation costs. As per the feasibility study from AETS/Sogreah, the electricity could up until 22 come from Côte d Ivoire and Ghana. Even marginal plant in both countries is lower cost that the average cost of electricity in Liberia, and the average cost of supply in both Sierra Leone and Guinea. Post-22, it is expected that the low-cost hydropower resources in Guinea can be developed, which would further lower the cost of electricity supplied along the line. 2. This economic analysis attempts to estimate the net economic benefits of the CLSG interconnection by focusing on estimating the fuel and investment savings that would be achieved when the transmission line is built relative to a reference scenario without the interconnection. 16 An economic analysis of the project commissioned by the WAPP Secretariat, financed by the EIB, and undertaken by AETS in partnership with Sogreah in 29 was updated and recalibrated for this purpose The analysis evaluates the benefits of the interconnections for each country by comparing the following two scenarios over the time horizon: Reference/baseline scenario: this is the optimal expansion plan of the electrical system of the four countries (Côte d Ivoire, Liberia, Sierra-Leone and Guinea) without the interconnection line. This is the without project scenario; and Integrated Planning Scenario: this is the optimal expansion plan, which includes the interconnection line and adjusts the power generation investments in the participating countries to derive the maximum benefit from the interconnection. This is the with project scenario. 16 Since generation costs dominate the overall cost structure of the power system, it is often sufficient to save relatively little generation costs in order to justify a relatively important interconnection project. 17 This analysis updates and extends the 2 year coverage (21-23) in the study carried out by Sogreah to 3 years ( ). 78

93 4. Based on the difference in net present value (NPV) between the two scenarios, the project has a positive NPV of US$57 million (with a 1 percent discount rate) and an economic rate of return (EIRR) of 36% for the four countries under the base case assumptions 18. In addition, the project results in 5.6 million tons of avoided carbon emissions, which at $2 per ton can be valued at $62.5million in NPV terms. The table below presents a breakdown of the results. Table 23: Summary of costs and benefits (in USD million. 1 EUR = 1.31 USD, NPV at 1%) Item Total Cote d'ivoire Liberia Sierra Leone Guinea Benefit a) Total saving from fuel and generation costs compared to baseline scenario $481 $754 $129 $11 ($52) b) Smoothening of the load $84 $61 $4 $5 $14 curve c) Reduction of spinning $211 $17 $21 $15 $69 reserve Total Benefit $775 $922 $153 $12 ($42) Costs Investment over costs ($25) ($3) ($75) ($64) ($36) Net Revenue Transfers 19 () ($642) ($41) ($35) $718 Net benefits $57 $249 $38 $21 $262 EIRR 36% 73% 42% 15% 18% Base Case Assumptions 5. Time horizon. The AETS/Sogreah study covered a period of 2 years from 21. This analysis updates and extends the analysis to 3 years (from ) to include the full lifetime of the project starting with the construction of the project. Accordingly, the construction period is updated to for the first line and for the second line. As expected, these changes have further improved the economics of the project. 6. Fuel Costs. The original analysis uses a reference value of US$6/bbl. However, based on the World Bank s projection for oil price developments, this was modified to a value of US$ 8/bbl, with a low scenario and a high scenario of $6/bbl and $1/bbl, respectively. The prices of other fuels such as Natural Gas and Heavy Fuel oil are linked to oil prices through the use of multiplying factors. For each case, it is assumed that the fuel costs increase with a relatively low annual growth rate (1.5% per annum), reflecting the long term growth rate of oil prices. 7. Trade on the WAPP CLSG transmission line. A distributed exchange arrangement where Guinea would exports power to Côte d Ivoire, Sierra Leone and Liberia post 22 using 18 The economic rate of return for each of the countries is likely to depend on how the overall gains distributed among different countries. 19 The net revenue transfers among the countries were calculated separately from the model. 79

94 the proposed 225kv lines is considered in the economic analysis. Before 22, it is assumed that power is exported from Côte d Ivoire to Guinea. Under the base case, it is assumed that during the first years a capacity of 2 MW is traded. Subsequently 2*2 MW is traded. 2 This is in line with the plan that the 1 st circuit is ready for 216 and the 2 nd in Country load forecast and generation plans. The load forecast and generation development plans of the four countries are based on official forecasts obtained from electric utilities and other documents. These forecasts are independent of the CLSG line and serve as a basis for comparisons with variant generation plans likely to be undertaken with the CLSG line The tables below respectively present the demand forecast assumptions and demand forecast for the four countries, including demand from mines. 2 While the transfer capacity between to two ends of the line will be 145MW to comply with reliability criteria in the first phase, some segment of the lines will be able to transfer up to 2 MW (and similarly for the second phase). To take this into account, the economic analysis includes a sensitivity analysis on the volume traded. 8

95 Table 24: Details on demand forecast assumptions Table 25: Demand Forecasts Demand (MW) Cote d'ivoire Liberia Sierra Leone Guinea Demand (GWh) Cote d'ivoire Liberia Sierra Leone Guinea

96 Table 26: Consumption under with Project Scenario Thermal (GWH) Cote d'ivoire Liberia Sierra Leone Guinea Hydro (GWH) Cote d'ivoire Liberia Sierra Leone Guinea The project would help unlock Guinea s large hydropower potential. With the project, the World Bank estimates that Guinea would add about 2,8 MW of hydropower capacity and generate an additional 133,4 GWh over the period Without the project, Guinea would add only 1,6 MW and generate only 67,5 GWh over the same period. Project Benefits 1. The incremental benefits resulting from the construction of the transmission interconnection as derived in the model stem from the following: Fuel and other energy cost differentials among countries/locations in the CLSG region and beyond. Surplus power generated in region/country with future least generation costs (Guinea) can be exported to another region/country with higher long term generation costs (Côte d Ivoire, considering its relatively costly hydroelectric potential per generated kwh, compared to the three other countries) (see table below). This results in net gains for the systems as a whole. Table 27: Long term generation costs under without project scenario (in USD million - 1 EUR = 1.31 USD, NPV at 1%) Country NPV Fuel Costs ($ Million) NPV Investment Generation Costs ($ Million) Total Fuel and Generation Costs Average Cost Hydro Future ($/KWh) Minimum Cost Hydro Future ($/KWh) Côte d Ivoire Liberia Sierra Leone Guinea

97 Gains from the reduction of the spinning reserve. Interconnected systems are able to maximize the exchange of energy, therefore reducing the need for each country to have large spinning reserves. This translates generation cost savings for the participating countries in relation to the reference scenario (see table below). Gains from smoothening of the load curve. Interconnecting power systems leads to a resulting global curve with a peak level below the level sum of the individual peak load related to each separate country. This again translates generation costs savings. Table 28: Gains by Country (in USD million - 1 EUR = 1.31 USD, NPV at 1%) Gains from the reduction of the spinning reserve Gains from smoothening of the load curve Country Cote d'ivoire $17 $61 Liberia $21 $4 Sierra Leone $15 $5 Guinea $69 $14 Total $211 $ CO 2 Emission Reductions. The interconnection results in reduced use of hydrocarbon fuels in the four countries and helps avoid more than 5.6 million tons of carbon emissions over the life of the project in comparison to the without project scenario. Assuming a damage cost value of $2 per ton, overall gains from avoided carbon emissions can be valued at $62.5 million in NPV terms. Cote d Ivoire, Liberia, and Sierra Leone see a reduction in CO 2 emissions while there is an increase in Co2 emissions in Guinea (see table below). This reflects the higher level of export of hydropower from Guinea to other countries with the interconnection. Table 29: Avoided Emissions by Country (Tons) CO 2 Emissions Avoided NPV US$ Country Tons (Million) Cote d'ivoire 7,211, Liberia 1,397, Sierra Leone 357,3.7 Guinea (3,354,528) Total 5,611, Economic Costs 12. The economic costs incorporated in the economic analysis are the additional costs that the CLSG countries will incur if the interconnection project is not built, i.e. when compared to 21 Net Present Value (NPV) for Guinea is positive although there is an increase in CO 2 emissions over the life of the project. Indeed, Guinea sees important reductions in CO 2 emissions in the early years while increase in CO 2 emissions only occur later. 83

98 the baseline scenario (see table below). The additional costs reflect the difference between the total costs of undertaking the CLSG project (including total investment costs, O& M costs and various other costs) 22 and the costs of transmission system investments under the baseline scenario. Table 3: Fuel and generation costs for the different scenarios for each country (in USD million - 1 EUR = 1.31 USD, NPV at 1%) Cote d Ivoire Liberia Sierra Leone Guinea Total Column1 FC GC FC GC FC GC FC GC FC GC FC+GC Without Project Scenario With Project Scenario FC: Fuel Costs GC: Generation Costs Sensitivity Analysis $5,34 $4,582 $122 $653 $74 $596 $1,118 $1,487 $6,618 $7,318 $13,936 $4,664 $4,469 $57 $589 $67 $52 $1,62 $2,45 $5,85 $7,65 $13, Sensitivity analyses carried out for variations of discount rates, fuel prices, and project cost demonstrate that the economics of the interconnection project is robust to different amount of electricity trade through the interconnection. Under the CLSG distributed exchange scenario where 2MW of power is transferred from 216 and 2*2MW from 22, the net present value (NPV) is positive for discount rates of less than 36 percent. Tables A6-8 and A6-9 present the results of the sensitivity analyses. Table 31: CLSG distributed exchange scenario with transfers of 2 MW from 216, and 2*2 MW from 22 Sensitivity Analysis - Discount rate Discount rate Net Benefits 8% 1% 12% EIRR 36% Sensitivity Analysis - Fuel costs Fuel costs 6USD/bbl 8 USD/bbl 1 USD/bbl 14 USD/bbl 22 This includes costs associated with several reinforcements of the Cote d Ivoire networks that would necessary for proper operation of the whole networks. The total costs of these additional investments were estimated at 26 USD million, of which half has been assumed to be charged to the project costs. 84

99 Net Benefits EIRR % 36% 41% 47% Sensitivity Analysis Project Costs Discount rate Net Benefits 2% below base case Base Case 2% above base case EIRR 114% 36% 25% 14. Assuming that a 1% discount rate value is a minimum acceptable value, the previous table leads to recommend a decision for the project implementation even if the cost of crude oil is equal to 6 US$ / bbl before project commissioning. 15. Assuming that only half the power assumed above - 1MW from 216 and 2*1MW from 22 is transferred, the net present value (NPV) is positive for discount rates of less than 3 percent. The NPV remains positive for a discount rate lower than 3%, which indicates a robust result for any variation of the discount rate. Table 32: CLSG distributed exchange scenario, with transfers of 1 MW from 216 then 2*1 MW from 22 Sensitivity Analysis - Discount rate Discount rate 8% 1% 12% Net Benefits EIRR 3% Sensitivity Analysis - Fuel costs Fuel costs 6USD/bbl 8 USD/bbl 1 USD/bbl 14 USD/bbl Net Benefits EIRR 22% 3% 35% 41% Sensitivity Analysis Project Costs 85

100 Discount rate Net Benefits 2% below base case Base Case 2% above base case EIRR 93% 3% 22% 86

101 Financial Analysis 1. This section presents a financial analysis of the Project and of the CLSG Regional Transmission Company (RTC), an evaluation of the potential fiscal impact, and a description of the financial situation of the participating utilities. The conclusion is that the project and RTC are financially viable and that the potential fiscal impact is limited. In addition, the project will improve the currently difficult financial situation of the participating utilities. Key Assumptions 2. The total investment cost for Phase 1 is expected to be US$476 million. The project will be funded through concessional loans from the World Bank (US$176 million), AfDB (US$29 million) and EIB (US$15 million), and grant. The tables below provide details of breakdown of total investment cost and the terms of the loans provided by the lenders to the Project. The Total Investment Cost during the Phase 2 for doubling the transmission line is assumed to be about US$81 million with a gearing ratio of 8%. Table 33: Total Investment Cost and Financing Plant for Phase 1 in Thousand U$ Use of Funds Source of Funds EPC Equity 2,837 - Transmission Line 192,741 - Substation 111,144 Grant - SCADA 6,42 - KfW 4,774 - Frequency Control Measure, etc 1,5 - AfDB 14,263 - Integration of WAPP Network 18, ESMP 11,298 Owner's Engineer 25,9 Debt : 31,11 Audit 47 - EIB 15,18 RTC cost during the construction 17,1 - AfDB 28,831 Other Costs 87,95 - IDA 176, Financial Charge 4,217 Total Project Cost 47,466 Interest During Construction 5,541 Total Investment Cost 475, ,885 Table 34: Financing Available by Lender and Terms of Financing Lender Amount (US$ ) Tenor (Years) Grace Period (Years) Interest Rate Service Charge On-lending Term EIB 15, % US$2.7 Mil Same as Gov. AfDB(Loan) 28, % % Same as Gov. AfDB (Grant ) 14, IDA 176, 4 1 %.75% Same as Gov. KfW (Grant) 4,

102 3. The assessment period used is 3 years as the underlying timeframe for the project is 213 to 242. The respective construction period for Phase I is assumed to be 213 to 215, and for Phase II 22 to 221. Other key assumptions adopted in this analysis are summarized below: Table 35: Key Assumptions for the Financial Analysis Parameter Unit Value Concession Period Year 3 years Construction 213~215(1 ST Phase) / 22~221(2 nd Phase) Contracted Amount MW 145 MW (216~211) / 29 MW (222~242) O&M Cost* - Transmission Line Percentage of Investment 1% - Substation Percentage of Investment 3% - SCADA Percentage of Investment 1% RTC Cost during the operation period - Director 5 US$142,/person - Supervisors and Managers 14 US$27,/person - Assistants 9 US$12,/person - Other RTC cost 15% of RTC Labor s cost External Services - Technical Support for RTC US$1,33, /Year * O&M cost includes the O&M staff s labour costs. 4. For the purpose of the financial analysis, the revenue requirements for the RTC assume that all operating costs are covered and that the RTC maintains a minimum cumulative DSCR of 1.5, which is a requirement under the Implementation Agreement. In the event the minimum revenue requirements cannot be covered through the transmission user tariffs, the participating utilities will pay the difference to the RTC as per the terms of the International Project Agreement (IPA). 88

103 Key Results 145. The financial analysis confirms that the RTC will be financially viable and able to cover its cash operating costs, to make provisions for the renewal of the assets and to meet its debt service obligations under the revenue and tariff assumptions detailed in annex 7. However, based on these assumptions, the project has a financial internal rate of return (FIRR) of minus 2. percent and a financial net present value (FNPV) of minus US$194 million. The reason the project has a negative FIRR and FNPV is that the tariff is designed to ensure that the RTC can meet its debt service obligations but also that it is as low as possible in order to encourage trade The Project is financed by relatively large grants from the AfDB and KfW (more than US$15 million) that do not need to be reimbursed. The balance of the financing will come from concessional loans with relatively long maturities and at rather low interest rates as well as equity provided by the participating States. No return on equity is expected, at least during the initial years of operation If tariffs would be set higher in order to produce a positive FIRR and NPV, it could: (i) discourage trade on the line and undermine the key objective of this project (reducing electricity cost in the CLSG countries) and (ii) create a relatively large cash surplus over the life of the project. Such a surplus is not needed. With the current tariff, as designed, the RTC will have all the revenues it needs to operate, maintain and renew its assets (through normal as well as major maintenance), and service the debt (the cumulative debt service ratio will always remain above at least 1.5). These tariff policies are fully in line with the development objective of the Project. 5. The table below provides an overview of the RTC projected key financial performance indicators. Table 36: Highlights of Projected Financial Performance in Thousand US$ Income Items Revenue 18,125 18,125 18,125 18,125 19,14 Operating Expenses 21,317 21,498 21,682 21,87 22,62 - O&M Costs 7,83 7,987 8,147 8,31 8,476 - RTC Costs 1,2 1,224 1,249 1,274 1,299 - Depreciation 12,286 12,286 12,286 12,286 12,286 Operating Income (3,192) (3,373) (3,557) (3,745) (2,922) Non-Operating Expense 1,689 1,689 1,663 1,558 2,745 Net Loss/Income (4,881) (5,28) (5,15) (5,235) (5,61) Balance Sheet Items Total Assets 327, ,582 31,16 297, ,629 - Current Assets 8,148 15,421 15,141 14,673 15,25 - Fixed Assets 319,448 37, , ,588 39,63 Total Liabilities 31,753 31,768 33, , ,642 89

104 Trade Payable Debts 31,11 31,11 32,58 295,44 311,839 Total Equity 16,842 11,814 6,664 1,429 11,987 Cash Flow Items Cash Flow from Operations 6,658 7,273 7,151 7,67 7,91 Cash Flow from Investing (4,594) Cash Flow from Financing (7,431) (7,535) 32,953 Cash/Cash Equiv. at the end of Year 6,658 13,931 13,652 13,183 13,452 Debt Service Coverage Ratio Cumulative DSCR RTC s operating expense & Debt Service Burden (Cash Basis) Operating Expense 8,288 9,196 9,38 9,568 9,76 Principal - - 7,431 7,535 7,641 Interest 1,689 1,689 1,663 1,558 1,453 Total 9,977 1,885 18,474 18,662 18,854 Fiscal Impact Analysis 6. It is expected that a substantial amount of the available transmission line capacity will be contracted by effectiveness, but the worst case simulations have been carried out to estimate the potential impact on the financial position of each of the participating utilities under a number of scenarios. 7. All-in cost of RTC is estimated to be around US$1 million in 216 to US$26 million in 242. As the major risk stems from the transmission contracts, the alternative case forecasts contracted capacity of 83 MW in 216~221 (signature of this PPA is an effectiveness condition), thereafter 29 MW. Base : Off-take amount in PPA increases from 145 MW in 216~221, thereafter 29 MW Scenario: Off-take amount in PPA increases from 83 MW in 216~221, thereafter 29 MW 9

105 Figure 6: Financial Burden of Each Utility based on Scenario (in Thousand U$) 2, 18, 16, 14, 12, 1, 8, 6, 4, 2, 2,5 2, 1,5 1, 5 Operating Expense Principal Interest Scenario 8. The maximum financial burden to each utility is about US$2.1 million per annum and can be reduced through an increased volume of contracted capacity in the PPAs. The cash flow shortfall might happen during 218~221, when the RTC starts repaying the debt but the contracted amount may not be sufficient. The table below shows the maximum potential fiscal impact on each of the participating governments. The potential burden on the participating governments in a worst case scenario is small relative to their GDP. Also, if the Governments decided to reflect this payment on the electricity tariff, it will rise by a maximum of.27 US$/kWh in Sierra Leone and less in the other countries. Table 37: Potential Maximum Exposure of Participating Governments(Million U$) Ivory Coast Liberia Sierra Guinea Leone Government payment if RTC revenues from PPAs not sufficient GDP * 22, ,9 4,54 % of GDP.9%.22%.11%.46% Avg. Demand in 215~22 (GWh) 8,24 1, 783 1,73 Incremental tariff to cover the revenue gap by utilities (US$/kWh) * Source : US State Department 9. The tariff per KWh assumes that the transmission line capacity will be utilized as contracted. Assuming an average load factor of about.7, the average cost per kwh is.17 U$/kWh. 91

106 Table 38: Average Cost of Line 216~ ~242 Peak Demand(MW) Energy Flow* (GWh) 889 1,778 Average Cost of Line (U$/kWh).2.16 *Energy Flow is assumed by calculating Peak demand * 365 days * 24 hrs *.7(Load Factors) 1. If the amount of transmission capacity contracted is below the level of the current assumption (145 MW in 216~221, 29 MW in 222), a tariff increase is necessary in order to cover the operating expense and perform the debt service. The cost per kwh is shown in the table below: Table 39: Average Cost of Line (U$/kWh) 83 MW in 216~221, thereafter 29 MW Average Cost of Line in 216~221 Average Cost of Line over the whole period.37.2 Sensitivity Analysis 11. The project has been tested for sensitivities to three key assumptions considered in the base case. The table below shows the results of the sensitivity tests on the Project FIRR. The project has been tested for sensitivities to four key assumptions considered in the base case. Even in the worse case scenario, the RTC is able to perform the debt service as the minimum cumulative DSCR is above 1. Table 4: Summary of Project Financial Analysis Results Scenarios FNPV (@1%) (US$ Million) FIRR Base Case % Downside Scenarios 1 Higher EPC + 5% % 2 Project Delay + 1 year % 3 Fixed Tariff Decrease - 5% % WAPP CLSG Financial Analysis of the Utilities Involved 16. The power utilities will benefit financially from trading on the line, because they will have (i) increased revenues from exporting electricity (Côte d Ivoire and later Guinea); (ii) reduced costs from importing power that is at lower cost than what can be generated domestically (Liberia, Sierra Leone, and Guinea), and (iii) additional revenues by being able to dispatch more power than they would otherwise have available (Liberia, Sierra Leone, and Guinea). Secondly, as shown before, the potential costs to power utilities will be relatively small. The table below summarizes the financial analysis of the four utilities. 92

107 Table 41: Utilities Financial Analysis Summary Question Why is it important? How do we answer it? 1. What is the current financial situation of the utilities in the four countries? Utilities will pay wheeling charges to the RTC their current situation will help understand risk of non payment Analyze recent financial statements and other information available for each utility Answer Utility in Cote d Ivoire is financially profitable and creditworthy 23 but overall sector is making losses. Utilities in Liberia, Sierra Leone, and Guinea are not creditworthy. 2. What impact will the WAPP CLSG project have on the utilities financial situation? Understand if the project will improve or worsen utilities finances and thus their capacity to pay the RTC Compare estimated cost of import through WAPP CLSG with average tariff and marginal cost of generation Estimated cost of import is less than the marginal cost of generation in Liberia, Guinea, and Sierra Leone. The project will therefore improve their financial situation. Cote d Ivoire will also benefit; first from increased export opportunities and later through lower cost imports 3. Will the utilities be able to pay and how can the governments help make the payments more reliable? Understand impact on the RTC s financial viability and determine payment enhancement mechanisms Determine based on previous analysis and other experiences with payment enhancement mechanisms Most of the utilities will remain dependent on subsidies. Mechanisms have been included in the IPA to cover the risks associated with the nonpayment of dues to the RTC Financial situation of the utilities 17. The utility in Cote d Ivoire is financially profitable and creditworthy but the overall sector is making losses. Utilities in Liberia, Sierra Leone, and Guinea are not creditworthy. We describe the situation of each utility below. 18. All four utilities have relatively high operating ratios and their revenues hardly or do not cover the operating expenses. Available cash flows appear to be below the level required to ensure a continued quality of service. Utilities generally have a negative net result and their activities are not sustainable without government subsidies. In Cote d Ivoire the utility has a positive net result but the government is providing substantial subsidies to the sector. Current ratio shows that some of the utilities are not able to pay their current liabilities with their current assets reflecting potential difficult cash situation. Utilities in Sierra Leone and Liberia also have high level of debts and a negative equity. Overall, none of the utilities appears creditworthy without clear government guarantees. 23 Overall assessment of whether the utility is financially sound enough to take a loan and reimburse it (without credible guarantees by another entity such as the government) 93

108 19. The table below summarizes the overall difficult financial situation of the utilities. A white background indicates a healthy financial situation, a light grey background an average situation, and a darker grey background a difficult situation. Table 42: Summary of the Financial Situation of the Utilities Côte d Ivoire Liberia Sierra Leone Guinea Operating ratio 97% 15% 161% 129% (%) 24 Net result (US$ Mil.) Current ratio in in in in Debt ratio 27 (%) 95% 125% 171% 75% Equity (US$ Mil.) Positive: 45.9 Negative: Creditworthiness 28 Utility is profitable but sector relies on subsidies Source: Latest available data (see following tables for each utility) Negative: No No No Positive: Côte d Ivoire s power sector is structured as follows: since 199, a private company has a lease contract for the operation and maintenance of the national power utility: Compagnie Ivoirienne d Electricite (CIE). CIE operates some of the generation assets and is responsible for transmission and distribution. The original lease contract ran from 199 to 25 and, despite the country s internal difficulties, the contract was renegotiated for another 15 years until 22. In addition, several Independent Power Producers (IPPs) are also responsible for generation. In 1994, the country awarded the first IPP in Africa to CIPREL, and in 1998 it awarded the then largest IPP in the continent to Azito Energie. 21. Since 1998, the sector cash flows are managed through a cash waterfall mechanism (Manuel de Procedures) that gives priority of payment to private investors: The utility operator (CIE) gets its contractual remuneration first, followed by the IPPs and gas field operators on a 24 Operating expenses divided by sales. A ratio of 1% means that the operating expenses are more than the sales. 25 Datum for 211 is for period from July 21 to June 211. Similarly 21 datum is for July 29 to June Current assets divided by current liabilities. Indicate ability of utility to pay its short term debts. The ratio should be above 1 and ideally above Total debt (long term and current) divided by total assets. A ratio above 8% is worrisome as it indicates an already highly leveraged company. A ratio above 1% indicates that the equity is negative. 28 Overall assessment of whether the utility is financially sound enough to take a loan and reimburse it (without credible guarantees by another entity such as the government provided) 94

109 pari passu basis. If there are not enough revenues, the GOCI must use revenues received from the gas production sharing agreements to subsidize the cash shortfall. The Ivorian Government share of the gas field revenues was approximately FCFA 91 billion in 21. Given that the sector s deficit was higher than this amount, the Government had to make a direct budget contribution of FCFA15 billion. 22. The overall financial situation of the power sector in Cote d Ivoire is not healthy. The sector approximately lost 18 billion FCFA in 211 due mostly to the high cost of gas 29 and lack of tariff increase. 3 This overall situation affects the repayment capacity to the RTC. However the Government has renegotiated the price of the main gas field and is willing to increase tariff in 212 which should improve the overall financial situation. 23. CIE itself has a healthy financial situation. CIE has generated a positive net result of about US$1 million in each of the past four years and provided dividends to its shareholders. Its operating ratio is below 1% and its current ratio is consistently above 1. CIE appears to be creditworthy but the overall sector still relies on subsidies. CIE could also improve its receivable turnover (256 days in 21). As the current ratio stays the same, longer delays in getting paid also implies longer payment periods for CIE s suppliers. Table 43: Main Financial Results for Compagnie Ivoirienne d Electricité (CIE) Cote d Ivoire Item Unit Total operating revenues US$ Mil Total operating US$ Mil expenses Operating ratio % 97% 97% 97% 97% Net result US$ Mil Net cashflow US$ Mil Subsidies US$ Mil Dividends US$ Mil. n/a Current ratio Ratio Equity US$ Mil Debt ratio % 9% 93% 93% 95% Receivables US$ Mil Receivable turnover Days Source: CIE annual reports 29 Since 27, when a price cap was removed from the existing gas supply contracts, gas prices have increased significantly. According to Foster and Pushak, since 27, average operating costs have nearly doubled from $.8 to around $.15 per KWh, and although power tariffs were increased, adjustments have been modest relative to the cost escalation. 3 The Government was unable to proceed with a 1% tariff increase proposed in January 211 as the post electoral crisis was going on 95

110 24. Liberia: The Liberian Electricity Corporation (LEC) is responsible for power supply in Liberia. Before the civil war in Liberia ( ), LEC had serious financial difficulties due to high losses and poor collection. To complicate matters further, almost all the energy infrastructure (including power plants, substations, and transmission lines) was collaterally damaged during the civil war. 25. In 26, the Government started a program to revive the electricity sector of Liberia. Improving collection was a key focus. The combination of an accurate metering, billing and collection system and a strict disconnection policy pushed collection rates upward to 94% at the end of 29. This ensured a substantial increase in revenues. In addition, the electricity tariff was set to cover operating costs. However, even under the highest level of electricity tariff in Africa (see figure below), it is not always sufficient for LEC to meet its current operating costs. A management contract with Manitoba Hydro International (MHI) started on July 1, 21 and is starting to improve the situation. Figure 7: Regional Electricity Tariffs in 29 (US cents per kwh) Source: World Bank Liberia Electricity System Enhancement Project 26. Thanks to these reforms, LEC s financial situation has greatly improved. From July 21 to June 211, LEC even made a positive net result (thanks to a high amortization of deferred income) and had a positive net cashflow (thanks to a grant from Norway). 27. However LEC s financial situation remains weak and LEC regularly needs subsidies. LEC also has a large amount of long term debt its debt ratio is 125% and equity is negative. Consequently, LEC is not creditworthy, that is not financially sound enough to justify the extension of loan without a credible guarantee by the government. In addition, the financial information available is limited and financial statements have not been audited. 96

111 Table 44: Main Financial Results for Liberia Electricity Corporation (LEC) Liberia Item Unit Total operating revenues US$ Mil Total operating expenses US$ Mil Operating ratio % 93% 116% 14% 15% Net result US$ Mil. n/a n/a Net cashflow US$ Mil. n/a n/a Subsidies US$ Mil Current ratio Ratio n/a n/a Equity US$ Mil. n/a n/a Debt ratio % n/a n/a 99% 125% Debt US$ Mil. n/a n/a Receivables US$ Mil. n/a n/a Receivable turnover Days n/a n/a Source: Unaudited financial statements for LEC for period July 29 - June 21 and July 21 - June 211 and World Bank Liberia Electricity System Enhancement Project Appraisal Document 28. Sierra Leone: The power utility in Sierra Leone (National Power Authority or NPA) is currently not profitable and creditworthy. Revenues are increasing and financial losses are decreasing but NPA is still dependent on the Government to continue its activities. As the board of directors approved the 29 financial statements (in March 211), it noted that the Authority remains reliant upon the continued financial support of the Government of Sierra Leone to continue as a going concern. The Government of Sierra Leone have indicated their intention to continue to provide financial support to the Authority and have signed a written agreement to provide such continued financial support. As in Liberia, NPA has to carry out its activities with an infrastructure that was partially destroyed during the civil war (that ended in 22) and suffers from very high losses (around 5%). 29. NPA s operating ratio is largely above 1%, indicating that the tariff does not even cover the operating costs. NPA s net cash flow was positive in 28 and 29 only thanks to large subsidies and delays in paying providers (payables increased from US$3.5 to US$15 million from 28 to 29 and working ratio deteriorated to.7). 3. NPA s equity is largely negative (minus US$15.9 million in 29) as the government s continued grants are not sufficient to cover the accumulated losses. Table 45: Main Financial Results for National Power Authority (NPA) Sierra Leone Item Unit Total revenues US$ Mil. 31 Most data shown as 211 are from the management contractor for the period from July 21 to June 211. Similarly 21 refers to the period from July 29 to June Projections based on preliminary results for period January to September

112 Total expenses US$ n/a n/a Operating ratio Mil. % 279% 161% n/a n/a Net result US$ Net cashflow Mil. US$ n/a n/a Subsidies Mil. US$ n/a n/a Current ratio Mil. Ratio n/a n/a Equity US$ n/a n/a Debt ratio Mil. % 181% 171% n/a n/a Receivables US$ n/a n/a Receivable turnover Mil. Days n/a n/a Payables US$ Mil n/a n/a Source: National Power Authority including audited 29 Financial Statements (approved March 211) 31. Guinea: The power utility in Guinea (Electricité de Guinée or EDG) is in a weak financial situation and is not creditworthy. Expenses and revenues both increased significantly in recent years (mostly due to high fuel cost and provisions for bad debts for expenses and tariff increases in 26 and 28 for revenues). However the operating ratio (share of operating expenses compared with sales) keeps increasing indicating that the operating revenues cover an increasingly smaller share of the operating expenses. The net income remains negative and EDG has not had a positive net income in the past five years. 32. EDG suffers from poor commercial performance. It is partly due to the invoicing mechanism a fixed fee disconnected from actual consumption and partly to long delays in payment and high level of bad debts. Receivable turnover is very high, meaning that it takes EDG a long time (more than a year in 21) to get paid. Often EDG does not get paid at all and high expenses in recent years reflect high provision for bad debts. This creates a very tight cashflow situation. 33. Given that the company is not profitable and that its cash situation is extremely difficult, EDG is not carrying out most of the necessary operations and maintenance (O&M) expenses, nor the necessary investments, and relies on subsidies from the Government. Its equity is eroding (but it is still positive). Although its debt ratio is a reasonable 75% in 21, the utility is not creditworthy. 34. Overall, EDG s financial situation is very weak and its financial information is not fully reliable (EDG s financial accounts are not certified). The table below shows the main financial results. Table 46: Main Financial Results for Electricité de Guinée (EDG) - Guinea Item Unit Total revenues US$ Total expenses Mil. US$ Operating ratio Mil. % 84% 94% 93% 11% 129% 98

113 Net result US$ Subsidies Mil. US$ Current ratio Mil. Ratio Equity US$ Debt ratio Mil. % 72% 64% 67% 69% 75% Receivables US$ Receivable turnover Mil. Days Source: Nodalis. Diagnostic et Plan de Redressement du Secteur de l Electricité en Guinée. Version Finale. October Impact of the WAPP CLSG project on the financial situation of the utilities: Knowing that the current financial situation of the four utilities is generally weak, this section looks at the impact that the WAPP CLSG project will have on the utilities finances. We find that estimated cost of import is less than the marginal cost of generation (assumed to be HFO or diesel) in Liberia, Guinea, and Sierra Leone. The project will improve the financial situation of the utilities in Liberia, Guinea, and Sierra Leone. 33 Cote d Ivoire will also benefit; first from increased export opportunities and in the medium term through importing lower cost power (from hydropower developments in Guinea for instance). 36. To reach this conclusion, we compared an estimated cost of import with WAPP with (i) the current average tariff and (ii) marginal cost of production in these countries. To calculate the estimated cost of import with WAPP, we used the highest current export price from Cote d Ivoire 34 and added costs for the RTC s wheeling charges, the additional national transmission and distribution costs (once the power is transferred to the national grid), and losses. This gives a rough estimate of 19.2 cents/kwh (see assumptions in following table. We estimated the same cost for all countries). In the medium term, less expensive generation sources should be developed (for instance hydropower projects in Guinea) that would reduce the cost of import with WAPP. 37. Estimated cost of import with WAPP is lower than current average tariff in Liberia and Sierra Leone. While this comparison is informative, the correct comparison is with the current marginal cost of generation in each country. In other words, is it less costly for a utility to import through WAPP CLSG than to generate locally? Generation at the margin in these countries is currently based on costly thermal solutions. If we consider an estimated cost of diesel or HFO as the marginal cost of generation in these countries, we observe that the estimated cost of import through WAPP is much lower. Consequently, the financial situation of the utilities could only improve with imports from WAPP rather than costly local generation. 33 Assuming utilities import only when it makes sense for them (if the cost of import is less than their marginal cost of production) and unless (i) the tariff does not cover the cost of importing power and (ii) imports are for additional power (i.e. they do not displace more expensive local generation) 34 Export price of US cents/kwh to VRA in Ghana. We assume that in the short term, exports would come from Cote d Ivoire although the country may not have enough capacity during peak periods. We will check this during appraisal. 99

114 Figure 8: Comparison between Estimated Cost of Import with WAPP, Estimated Total Cost with HFO and Diesel and Current Average Tariff (US cents/kwh) Estimated total cost with HFO, 37.5 Estimated total cost with diesel, 56.3 Liberia, 54. Sierra Leone, Estimated total cost of CLSG import, 19.2 Cote d'ivoire, 12. Guinea, Source: See table below Cost of KWh delivered (US cents/kwh) 38. The Table below presents the assumptions and calculations used. Table 47: Assumptions and Calculations Used Average tariff (US cents/kwh) Calculation US cents / kwh Source Estimate cost of import Export price A 11.7 Highest current export price from Cote d Ivoire Estimated wheeling charge B 1.7 World Bank assumption based on project financial model National transmission and C 2.3 2% of export price - World Bank assumption distribution cost Losses D 3.5 3% of export price - World Bank assumption Estimated total cost of E = A + B Calculation import with WAPP C + D Estimated delivered cost Average cost of generation from HFO F 31.6 World Bank estimate for Liberia (based on inputs from LEC) Average cost of generation from diesel G 5.5 World Bank estimate for Liberia (based on inputs from LEC) Estimated total cost with H = F + C Calculation HFO D Estimated total cost with I = G + C Calculation 1

115 diesel D Current average tariff Cote d'ivoire (21) 12. Utility (CIE) and government entity (SOGEPE) Liberia (June 211) 54. June 211 LEC Monthly Status Report Sierra Leone (Jan-Sep 211) 35.4 Utility (National Power Authority) Guinea (21) 12.6 Diagnostic et Plan de Redressement du Secteur de l Electricité en Guinée. Version Finale. Nodalis. October 211. p Utilities capacity to pay and mechanisms for the governments to ensure payments: Based on the analysis above, the WAPP CLSG project will not worsen the financial situation of the utilities. In fact, at least some of these utilities would benefit significantly from this interconnection as the energy imported would displace more expensive generation sources. However most of these utilities will remain dependent on Government s subsidies and will not be creditworthy unless efficiency improves and tariffs are restructured. Given their difficult financial situation, utilities may have difficulties paying for the wheeling charge. Mechanisms have been included in the IPA to cover the risks associated with the non-payment of dues to the RTC. 11

116 Annex 8: Trading Potential and Arrangements LIBERIA: West African Power Pool (WAPP) Côte d Ivoire, Liberia, Sierra Leone, and Guinea Power Interconnection Project 1. One of the key elements for success of the project will be that power flows on the line. As the experience of other regional greenfield transmission lines shows, achieving sufficient levels of trade is not straightforward. This section reviews the potential for trade, especially in the initial years of line operation, and then sets out proposals and measures that have been discussed to reduce the risk of limited trading on the line. The Potential for Trade (215 22) Côte d Ivoire 2. The feasibility study prepared by AETS/Sogreah assumed that Côte d Ivoire would be able to export 83 MW to Liberia, Sierra Leone, and Guinea from the time that the transmission line will become operational, from about 215 onwards. On 5 March 212, the Minister of Côte d Ivoire confirmed the commitment of the Government of Côte d Ivoire to supply the CLSG transmission line with 83 MW of power once is becomes operational as part of a Communiqué signed by three of the four Ministers of Energy of the CLSG project. As is shown below, Côte d Ivoire s demand and supply balance indicates that from 216 sufficient capacity is available for export onto the CLSG transmission interconnector in all except for the slow supply growth scenario. 3. Current total installed electrical generation capacity in Côte d'ivoire is 1,391 MW. The actual available electrical generation capacity varies between 8-1, MW, due to plant scheduled maintenance, plant outages and variations in hydrology. Peak power demand (excluding exports) was over 9 MW in 21. The country therefore does not have reserve generation capacity, which makes it vulnerable to load-shedding at peak times. As the Ivorian economy recovers and growth accelerates, demand for power is expected to increase. Going forward, demand is forecast to grow by about 7.7 percent per annum on average between 212 and 22, further increasing the power deficit, which could affect the countries that already import power from Côte d Ivoire. Additional generation capacity is required as well as investments in transmission and distribution. 4. The Government is taking action and is planning to increase generation capacity by about 1, MW by 22. The Government has signed contracts with developers to increase the capacity of the existing Azito independent power producer (IPP) gas fired power plant by 144 MW to come online in December 214, and also to extend the Ciprel IPP gas fired power plant by 11 MW by 214 and 11 MW by 215. Both planned extensions are likely to close financing before June 212. In addition, the financing of the Abatta project developed by Petroci and Contour Global is also on track. The gas fired Abatta plant is to provide an additional 15 MW in 214 (and more through other phases). Finally, the Government is still looking for adequate financing for the Soubré hydropower plant estimated at about 27 MW. Following financial close, including for the ancillary investments in transmission and distribution, the plant would be expected to be available after five years. Given the current developments it is likely to 12

117 come online by 218. The capacity of the sector to finance these investments largely depends on ongoing negotiations regarding the price of gas and discussions in relation to the tariff structure and potential for tariff increase. Also, Cote d Ivoire s reliance on gas should be sustainable. The Government has launched a study to assess long term gas supply. In addition to national resources, Cote d Ivoire could consider connecting to the West African gas pipeline or liquefied natural gas (LNG). 5. Based on planned investments, Côte d Ivoire could export on average 168MW (about 1,54GWh) to other CLSG countries every year over the period The tables and graph below present the quantities available from Côte d'ivoire after responding to internal demand and exports from existing long-term contracts. 35 They also include a sensitivity analysis on the increase in generation. The fast scenario is based on the Government of Côte d Ivoire s planned development. To be conservative and take into account possible delays in project development and financial closing, the base scenario delays all projects by one year, except for Abatta phase 1 (1.5 year delay as the project timeline is somewhat more ambitious) and for hydropower projects (2 year delay as delays are more likely on those projects). The slow scenario delays all projects by two years, except for Abatta phase 1 (2.5 years) and for hydropower projects (3 year delay). The table below lists these assumptions in detail. Table 48: Assumptions on additional generation in Côte d Ivoire Additional generation Capacity Fast Base Slow source (MW) Ciprel Ciprel Azito Abatta Abatta Soubré (hydropower) Louga (hydropower) Note: COD is Commercial Operations Date COD depending on scenarios 6. The table and graph further below indicate under both the fast and the base scenario that Côte d Ivoire has sufficient export capacity available to supply the CLSG transmission interconnector between 186 MW in 216 to MW. Even in the slow generation expansion growth scenario export is possible in 3 out of 5 years between 216 and 22. The graph illustrates this export potential further. 35 GoCI projects total exports of 1,785GWh by 215, including 765GWh to SONABEL (Burkina Faso), 2GWh to VRA (Ghana), 25GWh to CEB (Togo and Benin), and 32GWh to EDM (Mali). We assume the same quantities through

118 GWh Table 49: Quantities available for export to WAPP CLSG (GWh and MW) 36 GWh Increase in generation Average Slow (79) (567) (2,16) (1,772) ,182 (139) Base (79) (567) (1,263) 1, ,31 2,873 2,182 1,54 Fast ,534 1,24 4,17 3,513 2,873 3,512 2,761 MW Increase in generation Average Slow (15) (17) (397) (322) (38) Base (15) (17) (238) Fast Figure 9: Quantities available for export to WAPP CLSG (GWh) 4, 3, 2, 1, - (1,) (2,) (3,) Increase in generation: Slow Base Fast Ghana 7. Ghana may also be a source of exports. As described in the previous section, Cote d Ivoire should be able to export significant quantities of power to Liberia, Sierra Leone, and Guinea. If Cote d Ivoire was not able to deliver some of these exports, Ghana may be able to fill in. 8. Ghana s incremental generation for exports would come from a thermal source. If this source is natural gas, it would be less expensive than current thermal generation in Liberia, Sierra Leone, and Guinea. We estimate the cost from gas combined cycle generation in Ghana to be around 8 US cents/kwh. 36 The quantity in MW is calculated approximately based on the quantities available in GWh and the average load factor for the plants in Cote d Ivoire (about 6%). 14

119 9. Ghana s capacity to produce and export economical power depends on adequate gas supply. Nigeria is currently delivering gas through the West African Gas Pipeline although not the full quantity needed by Ghana. However it is likely that by the time WAPP CLSG is operational, Nigeria will be able to supply higher quantities or that Ghana would produce gas from its domestic resources (associated gas from the Jubilee field) 37 or both. Guinea 1. In the medium term, Guinea has the potential to export large quantities of power. In particular, there are two key hydro projects under development that the World Bank is actively supporting 11. The Kaleta hydropower project has a capacity of 24 MW and an estimated cost of U$527 million. The Guinean government (GoG) and the China Eximbank are co-financing the project (respectively 25% and 75%). The China Eximbank has yet to provide its final approval. However the EPC contract for the plant was already awarded to China Water and Electricity Company (CWE). Works on the project site started in late 211 with GoG funds and the construction phase is expected to take four years, with commissioning expected in late 215. This project is therefore at late stages of confirmed financing, with procurement completed and construction started, using the government portion of the funding. 12. The GoG is currently contemplating a study to decide on the allocation of Kaleta s energy generation, likely to comprise both exports and domestic consumption. It is not clear what proportion of the plant s output the government intends to sell to mining companies in Guinea. Electricity is expected to be transmitted by The Souapiti hydropower project, with a capacity of 515 MW and an estimated cost of US$1 billion, is the largest hydropower project currently under preparation in Guinea. The GoG aims to have it online in 218 and aims to develop it as a PPP in partnership with a mining company. There are ongoing discussions between GoG, Sinohydro and China Eximbank about the project, but the latest status is unclear. A pre-feasibility study was completed in 29 and an ESIA is underway under AfDB funding. The World Bank is processing some financing for project preparation under component 2.A of the proposed project for detailed feasibility and technical design studies. Other potential users 14. During preparation, the team considered a Partial Risk Guarantee (PRG) for a large thermal power plant to be bid out and constructed along the transmission line against guaranteed off-take contracts. This was discussed in the WAPP JIC forum. However, the WAPP and the countries felt that such a set-up would be too complex, given the already complex nature of the project. However the possibility remains of building a 2MW to 4MW thermal plant that could serve all CLSG countries when less expensive source of generation are not available. This plant could be done under a PPP format with possible IFC and MIGA involvement. 37 Ghana National Petroleum Corporation foresaw a production of 12 million cubic feet of gas per day during Phase 1 of the Jubilee project, of which 3 to 5 would feed power plants while the rest would be re-injected to maintain reservoir pressure. Production of gas would reach 25 million cubic feet in Phase II. 15

120 15. Mining companies are also potential large anchor customers and users of the CLSG line. As mentioned above, mining companies plans in Guinea are still unclear. In Liberia, there may be potential interest for trading on the line from mining companies. Development of an Anchor Power Purchase Agreement 16. During the preparation of the WAPP CLSG project, potential buyers and sellers for an initial cornerstone PPA have been identified. A potential power utility in immediate need to purchase electricity is Liberia s Electricity Corporation (LEC). Similarly, a few well-known mining companies may be interested in purchasing power. On the other hand, today s most promising candidate for the sale of power is from Ghana. 17. In early 212 framework Purchasing Power Agreements and Transmission Service Agreements are being drafted and discussed in the WAPP JIC forum. These are to be attached to the International Project Agreement (IPA) of the RTC, and will be mandatory for use along the line. This also creates a clear level of certainty for trades along the line. Once these documents are finalized, the WAPP Secretariat will spearhead the initiative to close at least one PPA. The closure of such a cornerstone agreement would be a condition for effectiveness for both the Bank and EIB. The development of the PPA is being financed by the Bank s Project Preparation Advance. 18. Côte d Ivoire has committed to selling 83 MW to Liberia, Sierra Leone, ad Guinea, once the CLSG transmission line comes on-stream. Anchor Purchasing Power Agreement(s) are expected to be signed by November

121 Annex 9: Institutional Structure for the CLSG Interconnector LIBERIA: West African Power Pool (WAPP) Côte d Ivoire, Liberia, Sierra Leone, and Guinea Power Interconnection Project 1. In order to address the chronic shortage of generation supplies in many of its member states, the Economic Community of the West African States (ECOWAS) formed the West African Power Pool (WAPP) and prepared a Master Plan for the integration of its members individual grids into a regional network. This plan represented the backbone of the WAPP s development and included development of the hydro resources and interconnection of Côte d Ivoire, Liberia, Sierra Leone, and Guinea (CLSG) into the WAPP system. 2. These four countries entrusted the preparation of the project to construct, own, operate, and maintain the 1,349 km transmission line linking their electric grid (CLSG Transmission Line) to the WAPP Secretariat. The countries also established the WAPP Joint Implementation Committee (JIC), consisting of representatives from all four countries ministries in charge of energy, the electric utilities involved, and other concerned ministries, to ensure that the appropriate public stakeholders were involved in developing the project and its legal framework. Once the line is constructed, it would constitute the first interconnection of power systems ever among these four countries. 3. In 28, the WAPP endorsed the establishment of Special Purpose Companies (SPC) as major vehicles for implementation of WAPP s regional priority projects. A few examples of such SPCs exist in the ECOWAS region, including SOGEM, which runs the Manantali (and, soon, the Felou) hydropower plants in Mali, that are jointly owned by Mauritania, Senegal and Mali; and the CEB, which owns and operates key generation plant and transmission lines for Benin and Togo. The experience of these SPCs in the ECOWAS region has been mixed, and the WAPP JIC tried to take the lessons learned from these experiences into consideration in setting up a better-structured SPC for the CLSG Transmission Line. 4. In , the WAPP and JIC began developing the legal framework for implementation of the CLSG Transmission Line. As discussed in more details below, this structure is primarily based on creating a Regional Transmission Company (RTC) by treaty among the States to design, construct, own, operate, maintain, and develop the line. The RTC, a supranational entity with commercial character, would be set up based on articles of association annexed to the treaty that provide for the entity s governance structure. An international project agreement (IPA) implements the provisions of the treaty by agreement among the CLSG states and this RTC. 5. The IPA provides for the countries obligations towards the RTC and gives the RTC the mandate to implement the CLSG Transmission Line. The RTC s shareholding would be divided in equal shares among the national utilities designated for the role by the States and subject to a shareholders agreement that governs the utilities respective rights and responsibilities. Users of the CLSG Transmission Line are expected to enter into power purchase agreements for the sale and purchase of power, and use the line to move the power pursuant to a transmission service agreement with the RTC. 17

122 The CLSG Treaty Treaty Governance Structure 6. The treaty provides for agreement among the States to finance, construct, own, operate, maintain, and develop the CLSG Transmission Line (see Figure A8-1). The treaty further provides for the creation of a Steering Committee to take all necessary decisions and actions needed for implementation of the treaty s purpose. This committee will be composed of the Ministers of Energy from each State and assisted by a treaty secretariat that will provide the requisite administrative support needed for the committee s activities. The WAPP, which has been coordinating the Project s activities on behalf of the States so far, will undertake the role of the treaty secretariat during the construction phase of the Project. Decisions of the Steering Committee will be by a three-quarter majority vote and require the presence of three-quarters of the committee s members in person or by proxy. An 8-member Implementation Committee, consisting of one member from each of the ministries in charge of energy and finance in the four States, will monitor the actual construction and operation of the line and advise the Steering Committee on pertinent implementation issues. Funding for operation of the Steering Committee, the Implementation Committee, and the treaty secretariat will be covered in equal proportion by the four States. Figure 1: Treaty Structure Republic of Cote d Ivoire Republic of Liberia Republic of Sierra Leone Republic of Guinea CLSG TREATY Steering Committee Consisting of Ministers of Energy of all 4 countries TREATY SECRETARIAT (WAPP during Construction) Implementation Committee Consisting of 8 members from Ministries of Energy and Finance 18

123 Regional Transmission Company 7. The treaty establishes the Special Purpose Company as a supranational entity with a commercial character to implement the CLSG Transmission Line (see Figure 2). It will be called the CLSG Regional Transmission Company or RTC. The RTC will be domiciled in one of the States and enter into establishment agreements with the States in which it has offices to enable it to carry out its obligations. However, the location of the RTC s offices is not expected to subject it, its staff, officers, agents, or activities to the prevailing national legislation to the extent inconsistent with the provisions of the treaty. The duration of the RTC will be 99 years or such shorter or longer periods as may be permitted under the Articles of Association of the RTC. 8. The RTC s initial issued shares will be divided equally among the national utilities designated by the States to hold such shares. The corresponding equity must be paid in full within three (3) months from the date of the treaty s ratification by all of the States. The utilities will be responsible, on a joint and several basis, for all of the RTC s liabilities. The share capital of the RTC can be increased, either by issuing new shares or by increasing the nominal value of existing shares, provided that any such increase adheres to the principal of equal distribution of the RTC s shares among the four utilities involved. The Steering Committee s prior agreement is required for any transfer of these shares, whether for or without consideration, even where such transfer is part of a company, spin-off, or merger. Figure 11: Ownership Structure of the CLSG Regional Transmission Company CLSG TREATY ARTICLES OF ASSOCIATION S H A R E H O L D E R S Énergies de Côte d'ivoire (CI-Energies) Liberia Electricity Corporation National Power Authority Electricité de Guinée SHAREHOLDERS AGREEMENT CLSG Regional Transmission Company a supranational entity with a commercial character 9. The RTC will be managed by the shareholders through a Board of Directors. The Board will consist of seven (7) members, one member from each of the relevant national utility, one member representing WAPP, and two members from the ECOWAS region, selected pursuant to 19

124 an open and transparent process on the basis of their expertise and experience, to represent the interests of both the founding States and the region as a whole. Members of the Board must not be interested, whether directly or indirectly, in any contract or arrangement proposed to be entered into or in fact entered into by or on behalf of the RTC, except such contracts or arrangements with the shareholder appointing such member to the Board. The members are also not permitted to (a) exercise their mandate in conjunction with the holding of any elected or other governmental office, or the holding of a position of authority within an electricity regulatory body, or (b) a shareholder or officer of any of the RTC s suppliers. 1. The quorum for meetings of the Board without which decisions by the Board cannot be made, requires the participation of 5 members of the Board either in person or by proxy. Decisions by the Board require the approval of four-fifth of the participating members of the Board, with the positive vote of at least two members appointed by the founding States. 11. The Board will select a General Manager to manage the day-to-day operation of the company pursuant to a contract complying with best international standards. The General Manager must not be a member of the Board and must be selected on the basis of a selection process organized by an independent recruitment agency. Like members of the Board, the General Manager cannot hold an elected or other government office, be a shareholder or officer of one of the RTC s suppliers, a member of any regulatory authority in the electricity sector, or interested, whether directly or indirectly, in any contract or arrangements proposed to be entered into or in fact entered into by or on behalf of the RTC. 12. The RTC is granted certain rights, including the right to construct and operate the CLSG Transmission Line, to collect tariffs and charges for connection to and use of the line on a basis that permits the company s financial viability. The RTC is also expected to be exempt from taxes and other duties, except those expressly listed in Annex 2 of the treaty. Property Rights 13. Each State is required to expropriate, to the extent necessary, and, in all cases, own the land comprising, at a minimum, the area required for implementation of the CLSG Transmission Line. Each State is further required to allocate and grant to the RTC, at no cost to the RTC, all of the real property rights, which may or may not include title to the land, and rights-of-way necessary to construct, operate, and maintain the project. The States must implement the agreed Environmental and Social Management Plan (ESMP) and, to the extent applicable, the related resettlement action plans before any grants to the RTC of real property rights or rights-of-way can take place. 38 The grants will include, at a minimum, the beneficial use and occupancy of the land without any liens or encumbrances by a State or a third party as to the use of or access to the land, or as to any tangible, intangible, or personal property existing on the land. The grants will 38 The SPC will be responsible for implementing the Environmental and Social Management Plan during the construction and operation periods. It should also be noted that the ESMP, and related resettlement action plans, may be revised before effectiveness of the World Bank loan to ensure adherence to the guidelines and policies of other Development Financing Institutions (i.e., the African Development Bank, European Investment Bank, and kfw) participating in the financing of the CLSG Transmission Line. Any such revisions will be subject to the approval of the World Bank to ensure they remain consistent with World Bank policies and guidelines. 11

125 also be evidenced by sufficient documentation to ensure their enforcement under the relevant national law. Withdrawals from the Treaty 14. Unless unanimously agreed by all States, no State can withdraw from the treaty for 25 years from the date of the treaty s entry into force. After this period, any State can withdraw, subject to either agreement on how to ensure continuity of access to and operation of the CLSG Interconnection Line through the territory of the withdrawing State or a binding commitment from the withdrawing State to comply with the terms of the agreements reached among the States for construction and operation of the line. International Project Agreement 15. The treaty envisages that the States and the RTC would enter into the IPA to implement the treaty s provisions and to provide for the RTC s rights and obligations for CLSG Transmission Line s construction, ownership, operation, maintenance, and future development (see Figure A8-3). 16. The IPA provides for the allocation and grant of the necessary real property rights and/or rights-of-way to the RTC. The RTC is responsible for preventing physical encroachment onto the land on which the CLSG Transmission Line is located by taking measures consistent with best utility practices. However, in the event that, despite the RTC s diligence, the health and safety of people and communities on or near the project s land corridor is materially affected by physical encroachment or other activities, the RTC may request assistance from the States in surveillance and enforcement activities. In such circumstances, the States will defend and hold the RTC harmless against costs or charges in respect to damage to the CLSG Transmission Line, or any part thereof, and against claims or actions by third parties in conflict with the RTC s granted real property rights. Figure 12: Overview of the International Project Agreement Republic of Cote d Ivoire Republic of Liberia Construct, operate, maintain, and develop the interconnection line consistent with prescribed standards Implement the ESIA/ESMP during construction and operation periods Ensure non-discriminatory access to the line to all users, subject to the needs of the establishing utilities Assist in planning energy production in member states CLSG Regional Transmission Co. Republic of Sierra Leone Republic of Guinea Real Property Rights for construction and operation of the Line Implement RAPs prior to transfer of real property rights to company Guarantee the company s financial viability through the tariff methodology included in the IPA Grant permits and other authorizations Indemnify company against changes in law and taxes that are inconsistent with the terms of the CLSG Treaty 111

126 Power Purchase Agreement Control Area Agreement 17. The RTC is obligated to design, construct, operate, and maintain the CLSG Transmission Line in accordance with minimum functional specifications included in the IPA and the ESMP. The RTC is also required to construct the line using contractors, equipment suppliers, consultants, or other non-consulting service providers selected through a process complying with applicable national laws, international best practices, and the procurement rules and policies of the respective co-financier whose funding will be used to pay for such procurements. The contracts themselves are required to comply with applicable national laws and international best practices, and include appropriate liquidated damages for delays in achieving contractuallyguaranteed milestones and/or performance parameters. The RTC must submit the project plans and periodic updates on the construction of the line to the Implementation Committee for the committee to carry out its monitoring functions and appropriately advise the treaty s Steering Committee on implementation progress. 18. The RTC is required to treat all users of the line on the same basis, subject to the needs of the RTC s shareholders needs to meet their customers energy demand. The RTC is also responsible for ensuring continuity of transmission service pursuant to administrative, technical, and availability conditions prescribed in the IPA. The RTC is required to provide service pursuant to a transmission service agreement based on terms provided in the IPA (see Figure A8-4). Nonetheless, the RTC is expected to cede operational control of the line to the WAPP, as the regional network operator, under a control area agreement whereby WAPP will coordinate dispatching of generation facilities and energy flows on the integrated grids across the interconnected ECOWAS countries. 19. The RTC will be responsible for maintaining the line and responding to operational instructions from the WAPP from time to time. The purchaser of power that will flow on the CLSG Transmission Line will likely be responsible for securing transmission service on the line by entering into a transmission service agreement with the RTC. It is expected that, as a condition of effectiveness of the World Bank s financing, an anchor transmission service and power purchase agreement will be signed. Figure 13: Illustrative Contractual Structure for Service on the CLSG Transmission Line Purchaser Transmission Service Agreement CLSG Regional Transmission Co. Seller Dispatch Instructions West African Power Pool 112

127 2. The States undertake to ensure that all relevant governmental agencies in each State grant to the RTC, without delay and in accordance with all applicable laws and regulations, all relevant and necessary approvals and permits that the company or its contractors need to implement the project. The RTC is required to submit the requisite applications for such approvals and permits, prepared in accordance with applicable national and local laws and regulations, within the prescribed timeframes. The RTC is entitled to expedited treatment in circumstances where it has not received the necessary information to make the application in time or the need for the approvals or permits could not reasonably have been anticipated, and the absence of these approvals or permits would cause delay to the RTC in carrying out its obligations. 21. The States also undertake to provide all of the financing needed for construction of the CLSG Transmission Line on the same terms and conditions as made available by the cofinanciers to the States. The States will provide these funds under subsidiary financing agreements between the States and the RTC that will cover such terms as disbursements, repayments, and other conditions governing the use of the proceeds. The funds will be used for the sole purpose of designing, constructing, operating, and maintaining the line. Furthermore, the States will take all necessary measures to restore the RTC s financial viability in the event that the company s operation is affected by a force majeure event, an event of an economic nature external to the RTC but not amounting to force majeure, or an unforeseen impediment of a physical nature or deriving from a sovereign decision of a State or its agencies. 22. The RTC s operating costs (which is expect to include debt service repayments, operation and maintenance costs, staffing and administrative costs, and insurance) will be recovered through a tariff that will be updated on an annual basis starting from the date of completion of the Transmission Line s construction. The IPA, once finalized, will include an annex that provides the RTC s projected operating costs and the tariff methodology that will govern the anticipated annual adjustments. The principles of the tariff methodology are described in more details in Annex The RTC is required to (i) observe the highest standards of ethical conduct in discharging its obligations as well as in exercising its rights in this IPA; (ii) develop, implement, and maintain effective and comprehensive ethics and anti-corruption policies and guidelines that are consistent with international best practices and designed to promote the principles of law, proper management of the RTC s affairs, integrity, transparency, and accountability; and (iii) ensure that its directors, officers, employees, agents, and representatives adhere to these policies and guidelines in the conduct of their business for the RTC. Nonetheless, with respect to activities financed by a Co-Financier, the RTC is required to follow that Co-Financier s rules, guidelines, and/or policies on preventing and combating fraud and corruption. 24. The States can terminate the IPA if the RTC does not remedy any material default on its part under the agreement, any transmission service agreement with user of the line, or the control area agreement with WAPP. This right is subject to providing the RTC notice of the breach and allowing the RTC thirty (3) days, or such longer period as may reasonably be necessary, to cure such breach. The States have the right to terminate the IPA if the RTC is unable or unwilling to remedy a material and continuing breach. The IPA could also be terminated by mutual agreement between the States and the RTC, or by any of the parties to the extent an event of 113

128 force majeure prevents the RTC from performing a material obligation in the agreement for over one (1) year. However, termination of the agreement for any reason is subject to the Co- Financiers no objection and to putting in place all necessary arrangements to enable repayment and servicing of co-financed debt. Upon termination of the IPA, ownership of the Transmission Line and related equipment must transfer to a new special purpose vehicle established by the States to continue management, maintenance, operation, development, and, as the case may be, construction of the line. This entity is suppose to undertake this responsibility pursuant to the terms and conditions of a new IPA that are in compliance with the provisions of the terminated IPA and any amendments thereto. The RTC would receive a full and final settlement from the States of any residual liabilities existing prior to the termination. 114

129 Annex 1: Implementation Status of Projects of the West Africa Power Pool (WAPP) Adaptable Lending Program LIBERIA: West African Power Pool (WAPP) Côte d Ivoire, Liberia, Sierra Leone, and Guinea Power Interconnection Project 1. In order to address regional energy challenges ECOWAS has formed and put in place the West African Power Pool (WAPP) a cooperative power pooling mechanism for integrating national power system operations into a unified regional electricity market with the expectation that it will, over the medium to long term, assure citizens of a stable and reliable electricity supply at affordable costs. ECOWAS Vision: The West African Power Pool 2. The collective vision of ECOWAS Member States is to develop and put in place the West African Power Pool (WAPP) to achieve the objective enumerated above. To this end, they adopted an ECOWAS Energy Policy in 1982 and decided to establish a West African Power Pool (WAPP) in The long term scenario is for WAPP to become the principal vehicle to help meet the region s projected electricity requirement by harnessing electricity from: (a) several large capacity hydropower facilities (Kainji & Jebba, Akosombo, Manantali,etc.) sited on the region s major rivers (Niger, Volta, Senegal) which could produce relatively low-cost electricity compared to other alternatives; (b) the substantial but as yet untapped hydro resources of Guinea, some 6,MW of which is potentially economic to develop and can generate around 2-25 TWh per year of electricity at relatively low cost; and (c) an expansion of gas-fired power generation, leveraging the community s parallel track strategy to expand access to Nigeria s enormous natural gas reserves (35 billion cubic meters of proven natural gas reserves) via the West Africa Gas Pipeline (WAGP) project. Free flow gas started in 21 and full commercial delivery started in 211 with the commissioning of compressors in Nigeria. As a flagship infrastructure project of the New Partnership for African Development (NEPAD) 39, the WAPP directly contributes to the broader ECOWAS agenda to establish an open, unified, regional economic space in West Africa. 3. According to the 29 Africa Infrastructure Country Diagnostic (AICD), power trade expansion in West Africa would allow substantial savings (about half a billion dollars annually) and boost volume of power traded from 5 TWh to 15 TWh (see maps below). The African Union/NEPAD s Programme for Infrastructure for Africa (PIDA) includes the West African Transmission corridor as a priority project NEPAD was established to implement an integrated socio-economic development framework for Africa, and was formally adopted at the 37 th Summit of the Organisation for African Unity in July Operations/PIDA%2note%2English%2for%2web%228.pdf 115

130 Figure 14: West Africa Trade Expansion and Trade Stagnation Scenarios 4. The vision for WAPP is also embodied in the ECOWAS Energy Protocol (EEP) which develops a legal framework aimed at promoting long term cooperation between the ECOWAS Member States in the Energy field. According to its Article 2, this cooperation is based on the mutual advantages to increase investment in the energy sector and to develop energy commerce in the West African region. Article 3 states the general objective of developing an open and competitive energy market. 5. The basic objectives of the EEP are to: (i) ensure free trade of energy, equipments and products related to energy between Member States; (ii) define non-discriminatory rules for trade and dispute resolution; (iii) attract and protect private investments and; and (iv) ensure the protection of environment and development of energy efficiency. Specific provisions related to competition (article 6), to wheeling (article 7) and to resource access (article 18) constitute a basis for building the regional electricity market framework. 6. Important decisions, taken by the ECOWAS highest decision making body demonstrate ownership of the WAPP initiative by its Member States. Key milestones reached to date include: 21: Adoption of a Mechanism for Financing the WAPP ; 41 23: Adoption of the ECOWAS Energy Protocol or EEP to set up a unified, regional (legal and regulatory) umbrella for energy sector developments in the region; 25: Adoption of a regional investment plan based on the ECOWAS Revised Master Plan for the Generation and Transmission of Electrical Power 42 ; 41 ECOWAS/ CEDEAO (21). 25th Session of the Authority of Heads of State and Government. Decisions A/Dec.8/12/1 Relating to the Establishment of a Mechanism of the West African Power Pool (WAPP). Dakar, 2 21 December

131 26: Adoption of the Articles of Agreement Relating to the establishment and ffunctioning of the West African Power Pool with the status of a specialized Institution of ECOWAS 43 ; and 28: Establishment of the ECOWAS Regional Electricity Regulatory Authority (ERERA) 44 with jurisdiction over the territory of all Member states in their relation in the area of cross border exchanges of electricity through the power transmission network. 7. Strong ownership by involved utilities is shown by their signing of the WAPP Articles of Agreement which institute a management structure for the West African Power Pool (WAPP), its organization and functions. The WAPP Secretariat was formally inaugurated in 26 and is operational. It includes 2 (public and private) electric power utilities to date. The entity is based in Cotonou, Benin and includes a WAPP Information and Coordination Center. 8. WAPP members recognize that the WAPP Organization exists and operates for the benefit of the bulk electric transmission system and to ensure the reliability of the entire region s power supply and commit to participate in projects, and comply with regulatory requirements. 9. However, in addition to the development of a specific regional institutional framework and policy harmonization between member states, the implementation of the vision requires the development of a clear roadmap for the design and implementation of the power market mechanisms and the power generation and transmission facilities. It appears that infrastructure and market design/implementation were relatively slow to materialize during the last 1 years because of lack of capacity at the institutional level on one hand and urgent needs to first address national power deficit on the other. 1. Progress has been made on the establishment of a transparent and harmonized policy, regulatory and commercial framework for cross border electricity trade between ECOWAS member States. In addition to the coming into force of the Energy Protocol in 26 and the establishment of the Regional Electricity Regulatory Authority, some progress has been made on key issues related to the establishment of the market as follows: A methodology to calculate the tariffs for electric transmission service in an ECOWAS regional electricity market has been proposed but yet to be adopted and implemented because of an important pre-requisite with the definition of the market structure and rules. Utilities through WAPP Executive Board adopted an Operations Manual called the Operational Security and Mitigation Plan (OSMP) in 27. This Manual sets the rules, principles, requirements, standards, criteria and procedures to be observed for the smooth operation of the pool. However, a gap analysis shows additional equipment and capacity building are needed for its implementation. IDA financing is being considered for that. 42 ECOWAS/ CEDEAO (25). 28th Session of the Authority of Heads of State and Government. Decision A/Dec.7/1/5 Relating to the ECOWAS Revised Master Plan for the Generation and Transmission of Electrical Energy. Accra, 19 January ECOWAS/ CEDEAO (26). 29th Session of the Authority of Heads of State and Government. Decision A/Dec. 18/1/6 Adopting the Articles of Agreement Relating to the Establishment and functioning of the West African Power Pool, Niamey, 12 January 26; and Decision A/Dec.2/1/6 Granting the Status of a Specialized Institution of ECOWAS to the WAPP Organization. Niamey, 12 January ECOWAS/ CEDEAO (28). 33rd Session of the Authority of Heads of State and Government. Supplementary Act A/SA.2/1/8 establishing the ECOWAS Regional Electricity Regulatory Authority. Ouagadougou, 18 January

132 11. Remaining gaps include the definition and adoption of market rules and regulations. This will require commitment to a road map to harmonize policies and practices as well as transition arrangements. WAPP Secretariat will need assistance to conduct and coordinate the process with the utilities and the Member States. 12. WAPP is working on a road map to enable a transition from the present technical and commercial arrangements to a regional electricity market and competitive wholesale market including time frame and resources. Recruitment of a consultant is ongoing to support key stakeholders (authorities, operators and other participants) to: Analyze and recommend an appropriate market model for the establishment of the WAPP Regional Electricity Market; Develop electricity market rules to address issues that include among others, bidding process, physical spot market, financial market, clearing and settlement, and power balance mechanisms, including roles, responsibilities and interfaces; Assist in the establishment of comprehensive trading rules and a mechanism for market operations; Develop a systematic and detailed integrated action plan for establishing regional power trade and physical and institutional infrastructure projects for implementation; Review and advice on consolidation of existing agreements and recommendations on mitigation strategies for existing PPAs and interface with the WAPP Operation Manual; Develop guidelines for establishing the Wholesale Electricity Market (WEM), relevant Transmission Tariff and transition to a competitive energy market. 13. To sum up, WAPP members need to agree on the phases of market development and on how to adopt and implement the associated technical and commercial rules. Progress in implementing the West African Power Pool Infrastructure program 14. Progress has also been made on the Regional Infrastructure Development as both power supply capacities and interconnection transmission lines are needed. The regional Master Plan was adopted in It was revised in 24 with an implementation strategy. However, low implementation on the generation aspects combined with an exorbitant energy crises led to the adoption of the WAPP Emergency Power Supply Security Plan (EPSSP) in 28 by ECOWAS Heads of State and Government through Supplementary Act Implementation of new transmission line projects was also constrained due to among others, limited human and institutional capacities both at the regional and national level. A regional IDA TA Grant is to be financed under the present Project to support the WAPP Secretariat to accelerate the project preparation and implementation processes, as utilities are facing short term challenges which limit dedication of their staff to day to day regional project issues. 45 ECOWAS/ CEDEAO (28). 33rd Session of the Authority of Heads of State and Government. Supplementary Act A/SA.4/1/8 adopting the Emergency Power Supply Security Plan. Ouagadougou, 18 January

133 16. In December 211 an updated Master Plan has been adopted by the ECOWAS Governments. This builds on the present implementation strategy of pursuing in parallel the following five distinct but mutually-reinforcing sub-programs (see map below): Coastal Transmission Backbone Subprogram (Côte d Ivoire, Ghana, Benin/Togo, Nigeria); Inter-zonal Transmission Hub Sub-program (Burkina Faso, OMVS via Mali, Mali via Côte d Ivoire, LSG via Côte d Ivoire); North-core Transmission Sub-program (Nigeria, Niger, Burkina Faso, Benin); OMVG/OMVS Power System Development Subprogram (The Gambia, Guinea, Guinea Bissau, Mali, Senegal); CLSG Power System Redevelopment Subprogram (Côte d Ivoire, Liberia, Sierra Leone, Guinea). Figure 15: ECOWAS Interconnection Map 17. With regards to power generation, the 6 MW Felou Hydropower Facility is currently under construction within the framework of OMVS and expected to be commissioned end 213. In Ghana, the construction of the 4 MW Bui Hydropower by the Government of Ghana is well-advanced with commissioning envisaged by end 212. In complement, the WAPP EPSSP seeks to address the capacity generation shortage by developing regional gas fired power stations. An International call for a prequalification of private partners for the implementation of the EPSSP was launched in early WAPP is also finalizing the terms of a Euro 85 million grant from E.U. to establish its Information and coordination Center which will be located in Cotonou, Benin. This will provide more flexibility for the operation of the regional network including effectiveness of the OSMP and coordination between Control Centers. 119

134 Financing of the West African Power Pool Program 19. As part of its regional integration strategy, the Bank s Executive Board endorsed in 25 the application of the Adaptable Program Lending instrument (APL) to provide US$35 million equivalent IDA resources to support a multi-year programmatic framework put in place by WAPP. The table below details IDA s contribution to the different projects. Main co-financiers were the European Investment Bank and African Development Bank. The table also shows that US$31.9 million has already been approved by the Board and US$15 million are in the pipeline for FY12 (CLSG project). Table 5: WAPP Program Overview WAPP APL APL1 Phase 1 (CTB) APL1 Phase 2 (CTB) APL1 Phase 3 (Adjarala HEP) APL2 Phase 1 (OMVS Felou HEP) APL2 Phase 2 (OMVG) APL3 Phase 1 (BF GH Transmission Hub) APL3 Phase 2 (CI ML Transmission Hub) APL4 Phase 1 (CLSG) Countries Project Costs US$ m IDA US$ m Board Approval (actual/planned) Ghana June-5 Ghana, Benin 75 6 June-6 Benin, Togo 4 12 TBD Mali, Mauritania, Senegal Guinea, Guinea- Bissau, The Gambia Burkina Faso, Ghana June 26 and August FY Côte d Ivoire, Mali Côte d Ivoire, Sierra Leone, Liberia, Guinea June 211 tbd Financing from India under discussion FY12 46 Initial credit wasus$85 million in 26 and additional financing was approved in

135 Annex 11: Environmental and Social Safeguards 1. The project is classified as Category A due to its extensive coverage 1,349 km of a right of way (RoW) in 4 countries and 11 substations. This classification is despite the fact that the RoW and the lands demarcated for the substations are generally low-impact land uses, generally farm-bush land, secondary succession forests and small-scale agriculture and fallow lands. Because its large coverage may potentially affect surrounding lands, as well as communities in and around the designated RoW, the following safeguards policies are triggered: OP/BP4.1 (Environment Assessment); OP/BP4.4 (Natural Habitats); OP/BP4.11 (Physical Cultural Resources); and OP/BP4.12 (Involuntary Resettlement). The Table below summarizes the reports that were prepared and disclosed in-country and in the Bank s InfoShop. Table 51: Disclosure Table Bank Safeguards Policies OP/BP4.1 Environmental Assessment OP/BP4.4 Natural Habitats OP/BP4.11 Physical Cultural Resources OP/BP4.12 Involuntary Resettlement Safeguards Instruments/Reports Disclosed in-country Disclosed in Bank InfoShop Environment and Social Impact Jan. 27, 212 Jan. 3, 212 Assessment (ESIA) Environment and Social Jan Jan. 3, 212 Management Plan (ESMP) Report containing Analysis of Jan. 27, 212 Jan. 3, 212 Alternatives line route (as part of ESIA) A chance find procedure is included in the construction contracts for the transmission line and substations Resettlement Action Plans (RAPs): Cote d Ivoire April 5, 212* April 5, 212 Liberia Jan. 27, 212 Jan. 3, 212 Sierra Leone Jan. 27, 212 Jan. 3, 212 Guinea March 3, 212* April 2, 212 *Delays in completion and disclosure of the RAPs for Cote d Ivoire and Guinea were due to problems with security. Environmental Impacts 2. The total length of the 225 kv transmission line (T-line) across the WAPP Interconnection, which covers Côte d Ivoire, Liberia, Sierra Leone, and Guinea, is 1,349 km, including two 66 kv distribution lines (in total 5 km) from Mount Coffee to Bushrod Island and Paynesville in Liberia. World Bank environmental and social safeguard missions visited almost the entire length of the three transmission lines. The transmission line goes through mostly farm lands or bush areas (farm-bush); in some cases, it also passes through degraded forest areas, urban, and peri-urban areas. 3. Côte d Ivoire: The WAPP Interconnection line segment from Man in Côte d Ivoire via Danane to the Liberian border is flat to hilly and passes through farm-bush, which is fallow land and is part of the agricultural system in the area. In this section there are no sensitive forest areas. One protected forest area, one sacred forest and one sacred water body have been avoided. 121

136 4. Liberia: The line section from the Côte d Ivoire/Liberian border to Yekepa passes mostly through flat to hilly country consisting of farm-bush. The only sensitive forest area on this line stretch is the East Nimba Reserve, one of the last remaining biodiversity hotspots in West Africa and supported by a World Bank funded GEF project, has been completely avoided. The line route will not increase access in this sensitive area, which could result in an increase in illegal logging and poaching, since the line follows the existing main road. 5. The line segment from Yekepa to the Guinea border passes through the valleys of a mountainous area consisting mainly of farm-bush. On the mountain slopes most of the economically valuable trees have already been logged. The area can be accessed through bush roads, which are used by trucks and leading to the border control in Bololewee village, a recently constructed border crossing in Liberia and the Yalenzou border town in Guinea. The construction and presence of the transmission line will provide some improved access. Impacts such as increased illegal logging and poaching have been assessed as very limited since most of the area of the RoW is already accessible and almost all economically valuable trees have already been removed. 6. The line segment in Liberia from Yekepa to Buchanan, mostly along the existing railway and on to Mt. Coffee and Mano passes entirely through farm-bush. This area is accessible from existing roads. There are no sensitive forest areas on this stretch. The Right-of-Way on this line segment avoids two proposed Ramsar sites. The line route segment from Mano in Liberia to Kenema in Sierra Leone passes through farm-bush. The two 66 kv distribution lines pass from the Mt. Coffee Power Hydropower Plant site through flat farm-bush into the direction of Monrovia. The last few kilometers of these lines pass through the urban and peri-urban sections of Monrovia. 7. Sierra Leone: After the Liberia/Sierra Leone border, the line passes the Gola Forest National Park on its western side. The area can be accessed through existing bush roads. Impacts such as increased logging and poaching have been evaluated as limited. The line segment in Sierra Leone from Kenema to Binkongor and on to Bumbuna and Kamakwie passes through farm-bush. The protected area of Nimini Hills Forest Reserve has been avoided. The impacts of this line segment on illegal logging and poaching have been evaluated as minimal. The last stretch of the line in Sierra Leone to the Guinea border avoids the Outamba-Kilimi National Park within Sierra Leone. The RoW passes through flat farm-bush. Cattle herders heavily use the entire area. 8. Guinea: The line segment in Guinea from Yalenzou, at the north eastern border with Liberia, to Nzérékoré is hilly. The line on this stretch passes entirely through farm-bush. There are no sensitive forest areas on this stretch in Guinea. The site for the new sub-station in Nzérékoré, a town of around 8, inhabitants, is suitably located outside the town and does not pose a problem from an environmental or social point of view. The line segment from the Guinea/Sierra Leone border to Linsan is flat and consists of farm-bush. The site for the new substation near Linsan does not pose any environmental or social risk. The same can be said for all the other new sub-station sites. 122

137 9. OP4.4 (Natural Habitats) was triggered to address significant potential changes in critical natural habitats covered by the project. To avoid significance changes to critical natural habitats these areas have been avoided. The project will not cause any significant conversion of natural habitats. OP4.11 (Physical Cultural Resources) was also triggered due to the length of the T-Line where chance finds procedures were included in the construction contracts as guidelines in case there are areas with culturally and historically significant properties (e.g. artifacts, sacred sites). It is expected that the project will cause very limited cumulative impacts. However, any potential cumulative impacts on natural habitats, including surrounding forests resulting from the construction of roads, other energy transmission and distribution under the Project, small-scale mining, agriculture, and/or landfills will be monitored during construction and operation. Because the RoW does not overlap or affect any significant or primary forests and induced impacts, such as increased illegal logging and poaching, have been assessed as limited, OP4.36 (Forests) was not triggered. 1. An extensive Analysis of Alternatives survey, including relevant mitigation measures, was carried out by the Consultant to ensure that there would be no significant environmental and social impacts. The Consultant who did the Line Routing Study and identified the alternative routing took into consideration the potential impacts from a technical, environmental, social, economic, and financial point of view. Although this was deemed appropriate by WAPP as an acceptable way of demarcating the RoW line routing, and even though the feasibility study was carried out independently by AETS/SOGREAH, another consultant company, the line route study was viewed nonetheless as part of the project s technical feasibility. As explained in the paragraph 117 of the main text, in this connection, a waiver is being requested following the Bank s policy in OP4.1 (Environmental Assessment, footnote 7). 11. Natural Habitats Safeguard Policy OP4.4: The ESIA for the CLSG project analyzed all relevant environmental and social impacts of the proposed CLSG transmission line route and substations and found minimal impacts on forest areas in and around the demarcated RoW. It was also assessed that induced impacts, such as increased illegal logging and poaching would be limited. The shortest route of the transmission line (T-line) would cross some critical natural habitat areas with sensitive biodiversity hotspots, which would cause unacceptable environmental impacts. To ensure that these areas are fully taken into account, as noted earlier, an Analysis of Alternatives was undertaken as part of the ESIA, and which elaborated on the various alternative line routes in order to avoid these high biodiversity areas. The additional costs for these diversions were estimated at approximately US$ 9 million. Similarly, the ESIA found that the line routing did not cross or affect any primary forests, and in fact, the RoW was characterized as having low impact vegetation such as farm-bush land, secondary succession forest, and agricultural land uses. The following biodiversity hotspots were identified and described in the ESIA and were subsequently avoided in the line routing. These include: (i) the East Nimba Reserve (one of the last biodiversity hotspots in West Africa), the Gbedin Wetlands a proposed Ramsar site, and the Lake Piso proposed Ramsar site all of which are in Liberia; (ii) the Gola Forest National Park, the Nimini Hills Forest and the Outamba Kilimi National Park all of which are in Sierra Leone (see figure below). 123

138 Figure 16: Location of the Biodiversity Hotspots 12. World Bank environmental and social specialists visited the entire line route in Liberia, Guinea, and Côte d Ivoire, and a major part of the T-Line route in Sierra Leone in September 21. In December 211, site visits to the T-Line segment from Linsan in Guinea to the Sierra Leone border, and the area in Sierra Leone around the Outamba Kilimi National Park in Sierra Leone were completed. Lastly, in March 212, the areas in Liberia around Yekepa, in Guinea around Nzérékoré and around Man in Côte d Ivoire were also verified as generally having the same low impact land use characteristics as the rest of the line. 13. World Bank safeguard staff and other stakeholders advised the ESIA Consultant that the above mentioned biodiversity hotspots in Sierra Leone and Liberia should be avoided. After visiting the East Nimba Reserve, the two proposed Ramsar sites and the Gola Forest National Park in September 21, the ESIA Consultant began to explore viable alternatives, including technical feasibility, costs, and environmental and social impacts, in order to avoid these ecologically sensitive areas. 14. In Kenema, Sierra Leone, discussions were held with the EU financed Gola Forest Program, with conservation advocates and environmental non-governmental organizations (NGOs) in Freetown. These discussions were facilitated by the Chairwoman of the Sierra Leone Environmental Protection Agency (EPA) and the Deputy Director of Forestry, who are responsible for the planning and management of protected areas in Sierra Leone. All these parties advised to avoid the identified biodiversity hotspots. This proved important since the Gola Forest was recently upgraded to a National Park -- the second national park declared in Sierra Leone with a very high density population of globally significant chimpanzees. 15. Various alternative routing options were proposed to bypass the Gola Forest National Park, the Tiwai Island (one of the main protected areas for Chimpanzees in Sierra Leone) and the Kambui Hills. One of the alternatives proposed was to bypass the Gola Forest National Park 124

139 avoiding as well the Tiway Island and the Kambui Hills and which is only marginally more expensive is acceptable to the World Bank and has been endorsed. Option 1 (blue line in the figure below) has been selected as the final line route. Figure 17: Alternatives considered to avoid the Gola Forest National Park in Sierra Leone 16. The September 211 ESIA presented the elaborated alternatives and was able to identify T-Line routes in all four countries. In addition to the high biodiversity sites in Sierra Leone and Liberia, the ESIA also did a similar site survey, scoping and identification of areas in Guinea and Côte d Ivoire, with the same purpose of avoiding any sites of environmental and biological diversity significance, such as the above mentioned biodiversity hotspots. Upon completion of the site surveys, the WAPP and country representatives selected the optimal T-Line route that avoided the environmental hotspots and any sites with significant or primary forests. The proposed Line Route avoiding all of the critical natural habitats is presented in Figure

140 Figure 18: Geographic features of the project area Proposed line route 17. Indeed, a good Analysis of Alternatives is one of the main ESIA tools that was used to identify the optimal, environmentally and socially acceptable T-Line route. Subsequently, the ESMP contained measures and actions for addressing possible impacts during implementation. Thus, by avoiding the high biodiversity areas, and by including relevant mitigation measures during implementation and operation, the ESIA addresses all natural habitat issues and satisfies the World Bank s Natural Habitats Safeguard Policy. 18. Environmental and Social Management Plan under the Construction Phase: The remaining environmental and social impacts are related to the construction phase. The ESMPs, which is an integral part of the ESIAs identified these construction related impacts. The contractor(s) will be required to prepare and implement their own Construction ESMP (CESMP). For more complex environmental management issues the contractor(s) will be required to prepare Method Statements. 19. In order to prepare and implement the CESMP the contractor(s) will be required by contractual arrangement to recruit qualified environmental/social staff. The Owner s Engineer will be required by contractual arrangement to supervise the adequate implementation of these CESMPs on a day to day basis and will need to employ qualified environmental/social staff for this purpose. A Project Implementation Unit (PIU) will be established in the four countries. An environmental and a social specialist will be part of each PIU who will be responsible for the supervision of the implementation of the ESMPs and RAPs. The Regional Transmission Company (RTC) after it has been established will take over these responsibilities. The RTC will 126