The World Bank Kenya Infrastructure Finance/PPP project (P121019)

Transcription

1 Public Disclosure Authorized AFRICA Kenya Financial Systems Practice Global Practice IBRD/IDA Adaptable Program Loan FY 2013 Seq No: 4 ARCHIVED on 22-Dec-2014 ISR17114 Implementing Agencies: Public Private Participation Unit, Ministry of Finance Public Disclosure Authorized Key Dates Key Project Dates Board Approval date:15-nov-2012 Planned Mid Term Review Date:-- Original Closing Date:31-Dec-2016 Project Development Objectives Effectiveness Date:11-Feb-2013 Actual Mid-Term Review Date:-- Revised Closing Date:31-Dec-2016 Public Disclosure Authorized Project Development Objective (from Project Appraisal Document) The overall objective of this two-phased Adaptable Lending Program (APL) Program is to increase private investment in the Kenya infrastructure market across sectors and to sustain this participation over an extended period of time. This involves three key areas of development: (i) enabling environment; (ii) pipeline; (iii) financing. The specific objective of the APL 1 project is to improve the enabling environment to generate a pipeline of bankable Public-Private Partnership (PPP) projects. Has the Project Development Objective been changed since Board Approval of the Project Objective? No PHRPDODEL Components Public Disclosure Authorized Name Technical Support to PPP Institutions for PPP Legal, Regulatory and PPP Financing Environment:(Cost $11.50 M) Support for Preparation of Individual PPPs:(Cost $20.00 M) Improvements to Fiscal Risk Management Framework:(Cost $5.00 M) Support for Program Management:(Cost $3.50 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Moderately Unsatisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Unsatisfactory 12/22/2014 Page 1 of 8

2 Overall Risk Rating -- Substantial Implementation Status and Key Decisions The fifth Implementation Support Mission for the Infrastructure Finance and Public-Private Partnerships Project (IFPPP) Project was carried out from October 27th to November 7th, As the last implementation support mission prior to the mid-term review, and with a change in task leadership, the mission provided important information on implementation status at a critical juncture in the project cycle. The US$40 million Credit became effective on February 13, 2013, and comprises four components: Component 1: Institutional Development and Regulatory Reform; Component 2: Preparation of a pipeline of PPP transactions; Component 3: Improvement of Fiscal Commitment and Contingent Liability (FCCL) framework for PPP projects; and Component 4: Program Implementation Support. The Project Development Objective (PDO) of this two-phase Adaptable Lending Program (APL) is to increase private investment in the Kenya infrastructure market across sectors and to sustain this participation over an extended period of time. The specific development objective of the first phase of the Project is to improve the enabling environment to generate a pipeline of bankable PPP projects. Total disbursement 21 months into implementation is US$4.2 million (11%). Component 1: Institutions Support and Regulatory Reform, comprises three subcomponents Support to PPP Institutions, Legal and Regulatory Reform, and Legal Institutional Development for Financial Products for PPPs. The objectives of the sub-component Support to PPP Institutions are to support the relevant line ministries and other contracting authorities (CAs) as well as to support the establishment and functioning of a PPP Unit at the National Treasury. The PPP Unit has laid the groundwork for achieving these objectives through their initial concerted efforts in recruiting staff, developing relationships and building credibility with the CAs and key stakeholders through their support around the legal and regulatory framework. However, procurement delays and staffing limitations continue to slow down the implementation of this sub-component. The objective of the subcomponent Legal and Regulatory Reform is to support a robust legal and regulatory framework for implementing PPP transactions and projects at national and sub-national levels. The adoption of the PPP Act, including preparation and adoption of PPP regulations and procedures and their effective implementation, forms the basis of achievement of this component. However, some areas around the legal framework could be amended going forward, based on lessons learned over the past two year. The objective of the subcomponent on Legal Institutional Development for Financial Products for PPPs is, on one hand, to develop the framework for a Project Facilitation Fund (PFF) for specific financing instruments, such as Viability Gap Financing (VGF), guarantees, infrastructure funds, financial intermediary lending facilities, and on the other hand to support the development of local capital markets which create the enabling environment for long term finance in local currency. An outline of the PFF with provisions in the PPP Act and PPP Regulations was discussed with the PPPU with consideration of agreed upon actions implemented by the PPP Unit. The initial steps to set up the PFF have been delayed, due to lack of capacity at the Debt Management Office (DMO). There has also been mixed progress on the capital markets agenda supported under the IFPPP which are critical to achieving the objective of developing a long term government bond yield curve. The external technical assistance that has been provided outside of the project has not been complimented with dedicated resources embedded within the counterpart institutions to ensure capacity, ownership, and sustainability. Moving forward, the Project will now begin to provide dedicated resources for the implementation of this critical agenda, including the hiring of a capital markets advisor at the PPPU. The PPP Pipeline Preparation component is designed to lay the groundwork for bringing infrastructure PPPs to market by carrying out technical and financial feasibility studies to prepare these transactions up the stage of bidding. The Project has identified the initial six first mover transactions, and it has been critical to ensure that the processes follow international best practice in PPP development. However, developing the requisite capacity within the PPPU and the CAs has been slower than envisaged, which has led to substantial contracting delays. Implementing agreed actions on accelerating procurement processes will be the key to reinvigorating the first mover projects and pipeline, with the initial steps being transactions advisors contracted for all six projects by January The Development of Institutional and Regulatory Framework for Assessment, Monitoring, Managing, Reporting, and Disclosure of Fiscal Commitment and Contingent Liability (FCCL) associated with PPPs is intended to strengthen the risk management framework for fiscal commitments and contingent liabilities assumed by the Government in the context of procuring infrastructure finance under PPPs. Management of fiscal liabilities is important because it is a requirement under the PPP Act that the debt management office reviews all PPP proposal and contracts in order to assess their value for money and affordability to the Government. Progress for developing the framework is behind schedule, in part because of limited capacity at the Debt Management Office to absorb any new framework or carry out assessments. Agreements to put in place an FCCL management framework, drafting of Guidelines for the assessment and management of the FCCL, and steps to enhance capacity at the DMO for the purpose of FCCL management were endorsed by the Project stakeholders (PPPU, DMO, CBK). Overall, the total disbursement as of October 2014 stands at US $4.2 million, mainly due to delays in the recruitment of Transaction Advisors (TAs), and sectoral consultants, which constitutes a significant portion of the project funding at 45.9%. A revised procurement plan was finalized and submitted in May, Monthly monitoring of the plan is ongoing. The PPPU and Bank teams have reviewed key issues with procurement delays and laid out a change in process, response time, and capacity building intended to significantly accelerate procurements 12/22/2014 Page 2 of 8

3 and disbursements. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance High Macroeconomic Moderate Sector Strategies and Policies Substantial Technical Design of Project or Program Moderate Institutional Capacity for Implementation and Sustainability High Fiduciary Moderate Environment and Social Moderate Stakeholders Moderate Other /22/2014 Page 3 of 8

4 Overall Substantial Results Project Development Objective Indicators PHINDPDOTBL Expression of Interests (EOIs) issued to prospective sponsors for three targeted PPP transactions (Number, Custom) Value All six Transaction Advisors will be on board by January Once they are on board, it will take on average 18 to 24 months for them to complete the feasibility study and move to the stage of identifying the potential sponsors. The earliest time the EOIs will be issued is June 2017, and therefore the initial target of 3 EOIs to be issued to prospective sponsors by Dec 2016 will not be achieved. It is likely this target need to be revised through restructuring. PHINDPDOTBL PPP Regulations associated with the new Law agreed to with MoF (Yes/No, Custom) Value N Y Y Y Date 31-Dec Apr Nov Dec-2016 National PPP Regulations have been approved by Parliament and were gazetted on October 30, The PPP Unit will convene a stakeholder workshop in November 2014 to raise awareness on PPP regulations. County PPP Regulations are currently going under public consultation and will be submitted for Attorney General and parliament endorsement by February PHINDPDOTBL PPP Fiscal Commitment and Contingent Liability Framework operationalized as measured by: upstream DMO due diligence on prospective (feasibility stage) transactions completed in line with Law (Yes/No, Custom) Value N N N Y 12/22/2014 Page 4 of 8

5 PHINDIRITBL The FCCL framework is unlikely to be in place by the end of year 2 (February 2015) which would be needed in order for the PDO indicator to be achieved. The DMO has yet to recruit FCCL specialist to help them carrying out the idenficiation and management of FCCL risks, nor are there staff in place to implement or design the overall framework. PHINDPDOTBL Regular issuance of Government benchmark bonds in medium and long term maturities up to 7/10 year tenures (Number, Custom) Value Date 31-Dec Oct Nov Dec-2016 Since the last mission in April, progress towards building benchmarks has been minimal, because issuances have been below agreed targets, meaning that this PDO indicator is not on track to be achieved by December of Longer term and strategic planning by the CBK and Treasury could translate into more systematic issuances with appropriate benchmark sizes. Overall Intermediate Results Indicators Capital Markets Authority Bill 2011 approved by Cabinet for submission to Parliament (Yes/No, Custom) Value N Y Y Y 12/22/2014 Page 5 of 8

6 PHINDIRITBL PHINDIRITBL PHINDIRITBL PHINDIRITBL Securities and Investments Bill 2011 approved by Cabinet for submission to Parliament (Yes/No, Custom) Value N Y Y Y Five feasibility studies completed and submission by contracting authorities to the PPP Committee acceptable to the Association, including Safeguards; ready for market entry (Number, Custom) Value The results framework specifies that two feasibility studies should have been completed by year 1 (Feb 2014), four by year 2 (Feb 2015), and a total of five by year 4. It is likely that this indicator will be met by year 4, with a cumulative target of five studies, but no intermediate targets are likely to be met, given that the transactions advisors for the first six projects are not yet contracted. Line Ministries and Agencies Nodes for First Mover Transactions established and operational (Number, Custom) Value PPP FCCL approved by National Treasury Cabinet Secretary (Text, Custom) Value No In progress In progress Yes The FCCL framework should have been approved by the National Treasury by the end of year 1, but is still pending. 12/22/2014 Page 6 of 8

7 Overall Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P IDA Effective XDR % Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P IDA Effective 15-Nov Dec Feb Dec Dec-2016 Cumulative Disbursements 12/22/2014 Page 7 of 8

8 Restructuring History There has been no restructuring to date. Related Project(s) There are no related projects. 12/22/2014 Page 8 of 8