Program Implementation Document. Project Number: November PAK: Access to Clean Energy Investment Program

Transcription

1 Program Implementation Document Project Number: November 2016 PAK: Access to Clean Energy Investment Program

2 CONTENTS Page I. Program Description 1 II. Results and Disbursement 2 A. The RBL Program s Overall Results including Disbursement Linked Indicators is in Table 2 and 3 below. 2 B. Disbursement Allocation and Status 12 III. Expenditure Framework and Financing 14 A. Expenditure Framework 14 IV. Program Systems and Implementation Arrangements 14 A. MHP Implementation Business Model 14 B. Monitoring and Evaluation System 17 C. Fiduciary Systems 20 D. Satisfying Procurement Member Country Eligibility Restrictions 22 E. Safeguard Systems 22 F. Suggested Guiding Principles for Voluntary Land Donations 23 G. Gender and Social Dimensions 23 H. Communication and Information Disclosure Arrangements 23 I. Development Coordination 24 V. Integrated Risks and Mitigating Measures 24 VI. Program Action Plan 24 VII. Technical Assistance 24 A. Summary 24 B. Consulting Service Requirement 25 VIII. Monitoring of Key Program Covenants 25 IX. Summary of Key Outstanding Issues 25 X. Accountability Mechanism 25 XI. Program Organizational Structure and Focal Staff 25 A. Organizational Structure 25 B. Program Officers and Focal Persons 26

3 PURPOSE OF THE PROGRAM IMPLEMENTATION DOCUMENT The Islamic Republic of Pakistan is wholly responsible for implementing the program supported by results-based lending. The Asian Development Bank staff support the results based lending program design and implementation. The program implementation document (PID) consolidates the essential program implementation information. The PID is a management tool which supports effective program implementation, monitoring, and reporting. It is developed throughout the program processing, and should be discussed with the developing member country at loan negotiations. It is a living document that should be refined and kept up to date during program implementation.

4 Abbreviations ACE - Anti-Corruption Establishment ADB - Asian Development Bank AFD - Agence Française de Développement BPEEL - best-practice energy efficiency legislation AGP - Auditor General of Pakistan APFS - audited program financial statement DC - development contractor DDO - Drawing and Disbursement Office DMF - design and monitoring framework DLI - disbursement-linked indicator EA - executing agency EAD - Economic Affairs Division EDP - Energy Department of Punjab EIA environmental impact assessment ERC - Energy Resource Center FD - Finance Department FABS - Financial Accounting and Budgeting System FS feasibility study IA - implementing agency ICT - Information Communication Technology IEE initial environmental examination KPEPA Khyber Pakhtunkhwa Environmental Protection Agency KPP - Khyber Pakhtunkhwa Province M&E - monitoring and evaluation MHP - micro-hydropower plant MW - megawatt NAB - National Accountability Bureau NAM - New Accounting Model NBP - National Bank of Pakistan OCR - ordinary capital resources O&M - operations and maintenance PAP - program action plan P&D - Planning and Development PEC - Pakistan Engineering Council PEDO - Pakhtunkhwa Energy Development Organization PEECA - Punjab Energy Efficiency and Conservation Agency PHC - primary healthcare facility PID - program implementation document PMU - program management unit PbPR - Punjab procurement rules PMC - program management consultant PPMS - program performance monitoring system PPR - program progress report

5 PPRA - Public Procurement Regulatory Authority PPTA project preparatory technical assistance PSSA - program safeguards system assessment RBL - results-based lending RRP - report and recommendation of the president SBD - standard bidding document SBP - State Bank of Pakistan TA - technical assistance WA - withdrawal application

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7 Access to Clean Energy Investment Program (RRP PAK 49056) I. Program Description 1. The results-based lending (RBL) program will support the Government of Pakistan s national and provincial goals of providing uninterrupted access to affordable and clean energy by financing a slice of the provincial power sector plans in Khyber Pakhtunkhwa Province (KPP) and Punjab. The program scope, defined by community-based renewable energy initiatives and public sector energy efficiency programs, is summarized in Table 1. The RBL program will exclude activities that would be classified as category A in the Safeguard Policy Statement (2009), 1 and activities that would involve procurement of works, goods, and services under contracts whose estimated value exceeds specified monetary amounts. 2 Table 1: Program Scope (As of November 2016) Item Broader Government Programs Results-Based Lending Program Outcome Uninterrupted access to affordable and Increased access to sustainable and more clean energy for all sections of the reliable electricity services, particularly for population. vulnerable communities in KPP and Punjab. Key outputs (i) Expanded generation capacity, (ii) increased electrification rates, (iii) increased renewable energy generation, and (iv) Activity types Program expenditure increased private sector investment in energy sector development. (i) Development of renewable and thermal energy resources, (ii) development and enforcement of policies and regulations, (iii) (iv) provision of reliable electricity to all population, and (v) demand-side management and energy efficiency initiatives. $26 billion: $10 billion for KPP $16 billion for Punjab Provincial government $25.3 billion Community $30 million ADB $ 325 million AFD $ 78.6 million KPP and Punjab (i) Renewable energy-based power plants are installed, (ii) increased opportunity for women and girls to obtain energy services and benefits, (iii) enhanced institutional capacity to foster sustainability, and (iii) public sector energy efficiency is promoted. (i) Installation of micro-hydropower plants in rural KPP, (ii) introduction of sustainable business models for off-grid power, (iii) implementation of off-grid decentralized solar solutions for education and primary health care facilities in KPP and Punjab, and (iv) support to energy efficient initiatives in Punjab. $ million $ million for KPP $ million for Punjab Main financiers Provincial government $ 40.8 million (9%) and respective Community $9.9 million (2.2%) financing amounts ADB $ 325 million (71.5%), OCR Funding AFD $ 78.6 million (17.3%) Geographic KPP and Punjab coverage Implementation period ADB = Asian Development Bank, AFD = Agence Française de Développement, KPP = Khyber Pakhtunkhwa province, OCR = ordinary capital resources. Source: Asian Development Bank, Energy Department, KPP and Punjab 1 Asian Development Bank, Safeguard Policy Statement. Manila. 2 The amounts are currently $50 million for works, turnkey and supply, and installation contracts; $30 million for goods; $20 million for information technology systems and non-consulting services; and $15 million for consulting services. ADB, Piloting Results-Based Lending for Programs. Paragraph 66. Manila.

8 2 II. Results and Disbursement A. The RBL Program s Overall Results including Disbursement Linked Indicators is in Table 2 and 3 below. Table 2: RBL Program Results Framework (As of November 2016) DLI Results Indicators Yes/ no Baseline value Year Outcome: Access to sustainable and more reliable electricity services increased, particularly for vulnerable communities in KPP and Punjab 1. By 2021, access to electricity is provided to an additional 240,000 households and 2.6 Yes ,000 households 80,000 households 120,000 households 180,000 households 240,000 households million students in unelectrified and poorly electrified areas: DLI ,000 students 1,100,000 students 1,600,000 students 2,100,000 students 2,600,000 students KPP: households (cumulative) 0 40,000 80, , , ,000 KPP: total students (cumulative) 0 160, , , , ,000 Punjab: total students (cumulative) 0 340, ,000 1,120,000 1,460,000 1,800, In previously electrified areas, the number of targeted schools and PHFs affected by load shedding is reduced to zero by 2021: KPP (cumulative) No 13,000 schools, 1900 PHFs 3,000 schools 120 PHFs Punjab (cumulative) 10,000 schools 1,780 PHF ,400 schools 1,520 PHFs 2,400 schools 96 PHFs 8,000 schools 1,424 PHFs 7,800 schools 1,140 PHFs 1,800 schools 72 PHFs 6,000 schools 1,068 PHFs 5,200 schools 760 PHFs 1,200 schools 48 PHFs 4,000 schools 712 PHFs 2,600 schools 380 PHFs 600 schools 24 PHFs 2,000 schools 356 PHFs 0 schools 0 PHFs 0 schools 0 PHF 0 schools 0 PHF Output 1 Renewable energy-based power plants installed 3. By 2021, power generation capacity from clean energy sources is increased by an additional amount of 182 MW: Yes DLI 2 0 MW MW 73 MW 109 MW 146 MW 182 MW 153 MW in KPP (MHP and solar) 0 MW 31 MW 61 MW 92 MW 123 MW 153 MW (cumulative) 29 MW in Punjab (solar) (cumulative) 0 MW 5 MW 12 MW 17 MW 23 MW 29 MW 4. By 2021, at least 26,587 sites have renewable energy-based power plants installed, of which: Yes DLI 3 0 installed ,317 10,635 15,952 21,270 26,587 KPP: 1,000 MHPs installed (cumulative) ,000 KPP: 8,187 solar plants installed (cumulative) 1,637 3,275 4,912 6,550 8,187

9 3 DLI Results Indicators Yes/ no Baseline value Year Punjab: 17,400 solar plants installed (cumulative) 3,480 6,960 10,440 13,920 17,400 Output 2. Opportunity for women and girls to obtain energy services and benefits increased 5. By 2021, at least 30% of schools with solar Yes 0%; no school 2016 plant installed are girls schools: DLI connected to 6% 12% 18% 24% 30% KPP (cumulative) 4 solar plant 6% 12% 18% 24% 30% Punjab(cumulative) 6% 12% 18% 24% 30% 6. By 2021, at least 7% of target households newly connected to electricity are womenheaded Yes DLI 0 %; no newly connected % 4% 5% 6% 7% households 1 (cumulative, KPP) 5 households 7. By 2021, 500 PHFs used by women for No 0 PHFs PHFs 150 PHFs 275 PHFs 400 PHFs 500 PHFs delivery or antenatal care (ANC) are equipped with solar plants. equipped with solar plants KPP (cumulative) 10 PHFs 30 PHFs 50 PHFs 60 PHFs 70 PHFs Punjab (cumulative) 40 PHFs 120 PHFs 225 PHFs 340 PHFs 430 PHFs 8. By women are trained to equip No 2016: trained 1500 trained 2000 trained 2500 trained 3000 trained them in using energy benefits. women trained KPP (cumulative) 500 trained 1500 trained 2000 trained 2500 trained 3000 trained Output 3. Institutional capacity to foster sustainability enhanced. 9. By 2021, governance, financial Yes management and procurement functions are DLI improved. 6 KPP energy department (PEDO) No procurement unit, no internal audit 2016 Corporate governance structure implemented, including dedicated procurement unit Internal audit department established and operationalized Procurement manual adopted Business model adopted for microhydroelectricity plants Program management unit strengthened. First internal audit report approved by PEDO board PEDO internal performance audit report on the program produced 1 Women-headed households mean any household headed by: (i) a single woman living on her own, (ii) a widow, or woman separated from her husband for any reason, including migration, with or without children.

10 4 Results Indicators Energy department of Punjab (EDP) 10. By 2021, 100% of identified energy and finance department staff of both provinces trained on technical issues, gender, project management, financial management, contract management, and environmental and social management. DLI Yes/ no Baseline value Year No procurement EDP internal unit, no audit report internal audit produced Dedicated procurement unit established. Internal audit department established and operationalized Procurement manual adopted Program management unit strengthened. No 0% trained % staff trained 40 % staff trained KPP (cumulative) 20 % staff trained 40 % staff trained Punjab (cumulative) 20 % staff trained 40 % staff trained 11. From 2017, ICT-driven program Yes No PPMS 2016 performance monitoring system (PPMS) is DLI operationalized to produce annual 7 performance monitoring reports on all indicators and PAP actions. KPP PPMS set up, 2017 report issued Punjab PPMS set up, 2017 report issued Output 4. Public sector energy efficiency promoted in Punjab 2018 report issued on all indicators and PAP actions 2018 report issued on all indicators and PAP actions 60 % staff trained 60 % staff trained 60 % staff trained 2019 report issued on all indicators and PAP actions 2019 report issued on all indicators and PAP actions 80 % staff trained 80 % staff trained 80 % staff trained 2020 report issued on all indicators and PAP actions 2020 report issued on all indicators and PAP actions EDP internal performance audit report on the program produced 100 % staff trained 100 % staff trained 100 % staff trained 2021 report issued on all indicators and PAP actions 2021 report issued on all indicators and PAP actions

11 5 Results Indicators 12. By 2019, energy audits are conducted on 100% of identified public sector buildings and a model net zero building is constructed. DLI Yes/ no Yes DLI 8 Baseline value Year No energy 100% have audits, no conducted model net zero energy audits building % of identified public sector buildings have conducted energy audits Construction of model net zero building initiated Methodology developed and approved for follow-up on energy audit recommendation s Construction of model net zero building completed and government standards and design for net zero buildings notified. ADB = Asian Development Bank, DLI = disbursement-linked indicator, EDP = Energy Department of Punjab, ICT = Information and Communication Technology, IVA = independent verification agent, KPP = Khyber Pakhtunkhwa province, MHP = micro-hydropower plant, MW = megawatt, PEDO = Pakhtunkhwa Energy Development Organization, PPMS = program performance monitoring system, RBL = results-based lending. Sources: Asian Development Bank, Energy Department of Punjab, and Pakhtunkhwa Energy Development Organization. Table 3: Disbursement-Linked Indicator Verification Protocols (As of November 2016) Disbursement-Linked Indicator Definition and Description of Achievement and Verification Information Source and Time Frame DLI 1. By 2021, access to electricity is provided to an additional 240,000 households and 2,600,000 students in un-electrified and poorly electrified areas baseline: 0 All targets are cumulative and provide the minimum threshold for disbursement without prejudice to the arrangements for partial disbursement. Disbursement targets for KPP: Households: 2017: 40, : 80, :120, : 180, : 240,000 Students: Definition: For MHP, the DLI refers to the total households connected to the MHP grids provided by the RBL program. For solar sources, the DLI refers to the total number of students in schools provided with solar electricity by the RBL program, to be obtained from education authorities. Conditions for disbursement are met when (i) the total number of households provided with electricity by the program from MHPs equals or exceeds the annual cumulative target specified, and (ii) when the total number of students in beneficiary schools is equal to or exceeds the annual cumulative target specified. In KPP, MHP component counts for 80% of full disbursement and solar sources component counts for 20% of full disbursement. For example, if all the household targets are achieved but student targets are not, then 80% of the target amount allocated for KPP for that year will be disbursed. KPP: PEDO reports drawn from its PPMS. Punjab: EDP reports drawn from its PPMS. Frequency for reporting will be annual. Verification Agency and Procedure PEDO or EDP prepares an attestation that the DLI is met and attaches the relevant report. The IVA will verify the results each year first, from the administrative records. These will be the number of consumers per site and schoolchildren in connected schools in KPP and the number of schoolchildren in connected schools in Punjab. Second, the IVA will back this up with random spot checks of communities, and schools in field visits. Field trips may be combined

12 6 Disbursement-Linked Indicator 2017: 160, : 320, : 480, : 640, : 800,000 Disbursement targets for Punjab Students: 2017: 340, : 780, : 1,120, : 1,460, : 1,800,000 Definition and Description of Achievement and Verification Partial disbursement: The DLI is scalable and partial disbursement is allowed for each of the above components. If the target is not fully achieved, then disbursement is proportional to the increase made from the previous period s targeted achievement for that component. The following formula will be applied: Partial DLI disbursement = planned DLI disbursement for the period (actual achievement of the current period targeted achievement of the previous period) / (targeted achievement of the current period targeted achievement of the previous period). 2 Disbursements are allowed for early or late achievement of the DLI. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is a year or more late, as long as this is within the loan period. If the target achievement is early, early disbursement can be made. DLI 2. By 2021, power generation capacity from clean energy sources is increased by an additional amount of 182 MW baseline: 0 Definition: All targets are cumulative and provide Clean energy sources mean MHPs and solar plants installed by the RBL the minimum threshold for program in KPP, and solar plants installed by the RBL program in schools in disbursement without prejudice to the Punjab, and the University of Bahawalpur. For each province, installed power arrangements for partial disbursement. generation capacity will be added up. There is no need to disaggregate by type Disbursement targets for KPP: of renewable sources. 2017: 31 MW 2018: 61 MW Conditions for disbursement are met for each province when the total 2019: 92 MW installed capacity from the above sources reach or exceed the megawatts 2020: 122 MW specified in the annual target for that province. 2021: 153 MW Disbursement targets for Punjab: 2017: 6 MW 2018: 12 MW 2019: 17 MW 2020: 23 MW 2021: 29 MW Partial disbursement: The DLI is scalable and partial disbursement is allowed. If the target is not fully achieved, then disbursement is proportional to the increase made from the previous period s targeted achievement. The following formula will be applied: Partial DLI disbursement = planned DLI disbursement for the period (actual achievement of the current period targeted achievement of the previous period) / (targeted achievement of the current period targeted achievement of the previous period). 3 Disbursements are allowed for early or late achievement of the DLI. This means that the planned disbursement amount for a given year can be released when Information Source and Time Frame KPP: PEDO reports drawn from its PPMS. Punjab: EDP reports drawn from its PPMS. Frequency for reporting will be annual. Verification Agency and Procedure as appropriate for DLIs 1 to 5, with checking of different elements for each DLI on the same field trip. Within three weeks of receiving the independent verification report, ADB confirms that the target is met and initiates the process of disbursement. PEDO or EDP prepares an attestation that the DLI is met and attaches the relevant report. The IVA will verify the results each year through (i) a review of program records on delivery, installation and capacity of power source and (ii) backed up by field spot checks. The verification process will take into account the different capacities of each source. Field trips may be combined as appropriate for DLIs 1 to 5, with checking of different elements for each DLI on the same field trip. Within three weeks of receiving the independent verification report, ADB confirms that the target is met and initiates the process of disbursement. 2 For each year, the baseline (representing 0% disbursement) is taken from the previous period s planned target, while the current year s target (representing 100% disbursement) is taken from the current year s planned target. 3 For each year, the baseline (representing 0% disbursement) is taken from the previous period s planned target, while the current year s target (representing 100% disbursement) is taken from the current year s planned target.

13 7 Disbursement-Linked Indicator Definition and Description of Achievement and Verification the set target is fully achieved, even if the achievement is a year or more late, as long as this is within the loan period. If the target achievement is early, early disbursement can be made. DLI 3: By 2021, at least 26,587 sites have renewable energy-based power plants installed baseline: 0 Definition: All targets are cumulative and provide Renewable energy sources mean MHPs in KPP, and solar plants in schools the minimum threshold for and PHFs in both KPP and Punjab. These are considered installed when the disbursement without prejudice to the plant is operational and producing electricity. Whatever the installed capacity of arrangements for partial disbursement. the MHP or solar plants, each plant is counted as an entity. Disbursement targets for KPP: Total MHPs installed: Conditions for full disbursement are met for each province when the total 2017 : 200 number of installations (MHPs and solar plants in KPP and solar plants in 2018 : 400 Punjab) is equal to or exceed the annual target for that province. For KPP, the 2019 : 600 MHPs account for 80% and solar plants for 20% of full disbursement. For 2020 : 800 example, if all the MHP installation targets are achieved but not the solar plant 2021 : 1,000 targets are achieved, then from the target amount allocated for DLI 3 for KPP Solar plants installed: for that year, 80% disbursement will be made for the full achievement of MHP 2017: 1,637 installation. 2018: 3,275 Partial disbursement: The DLI is scalable and partial disbursement is allowed 2019: 4,912 for each component. If the target is not fully achieved, then disbursement is 2020: 6,550 proportional to the increase made from the previous period s targeted 2021: 8,187 achievement for that component. The following formula will be applied: Disbursement targets for Punjab: Partial DLI disbursement = planned DLI disbursement for the period (actual Solar plants installed: achievement of the current period targeted achievement of the previous 2017: 3,480 period) / (targeted achievement of the current period targeted achievement of 2018: 6,960 the previous period) : 10,440 Disbursements are allowed for early or late achievement of the DLI. This means 2020: 13,920 that the planned disbursement amount for a given year can be released when 2021: 17,400 the set target is fully achieved, even if the achievement is a year or more late, as long as this is within the loan period. If the target achievement is early, early disbursement can be made. DLI 4: By 2021, at least 30% of schools with solar plant installed are girls schools baseline: No school connected to solar plant. All targets are cumulative and provide the minimum threshold for disbursement without prejudice to the Definition: The numerator for this indicator is the number of girls-only schools ( girls schools ) connected to a solar plant. The denominator is the total number of schools connected to a solar plant. Each year, the numerator and denominator are measured on a cumulative basis. Information Source and Time Frame KPP: PEDO reports drawn from its PPMS. Punjab: EDP reports drawn from its PPMS. Frequency for reporting will be annual. KPP: PEDO reports drawn from its PPMS. Verification Agency and Procedure PEDO or EDP prepares an attestation that the DLI is met and attaches the relevant report. The IVA will verify the results each year, in the same process as for DLIs 1 to 5 (review of records backed up by field spot checks). For DLI 3, field checks will focus on the installation and operationalization of plants. Field trips may be combined as appropriate for DLIs 1 to 5, with checking of different elements for each DLI on the same field trip. Within three weeks of receiving the independent verification report, ADB confirms that the target is met and initiates the process of disbursement. PEDO or EDP prepares an attestation that the DLI is met and attaches the relevant report. The IVA will verify the results each year, in the same two stage process as 4 For each year, the baseline (representing 0% disbursement) is taken from the previous period s planned target, while the current year s target (representing 100% disbursement) is taken from the current year s planned target.

14 8 Disbursement-Linked Indicator arrangements for partial disbursement. Disbursement targets (Share of girls schools within the total number of schools having received solar plants): for KPP: 2017: 6% 2018: 12% 2019: 18% 2020: 24% 2021: 30% for Punjab: 2017: 6% 2018: 12% 2019: 18% 2020: 24% 2021: 30% Definition and Description of Achievement and Verification Conditions for disbursement are met for each province when the percentage share of girls schools equals or exceeds the annual percentage target for that province. Partial disbursement: The DLI is scalable and partial disbursement is allowed. If the target is not fully achieved, then disbursement is proportional to the increase made from the previous period s targeted achievement. The following formula will be applied: Partial DLI disbursement = planned DLI disbursement for the period (actual achievement of the current period targeted achievement of the previous period) / (targeted achievement of the current period targeted achievement of the previous period). 5 Disbursements are allowed for early or late achievement of the DLI. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is a year or more late, as long as this is within the loan period. If the target achievement is early, early disbursement can be made. DLI 5: By 2021, at least 7% of target households newly connected to electricity are women-headed households baseline: 0 Definition: All targets are cumulative The denominator for this indicator, the target households, means the Disbursement targets for KPP: households in the communities selected by the RBL program that have received All targets are cumulative and provide electricity generated from MHPs. The numerator is the number of womenheaded households provided with electricity from MHPs under the RBL the minimum threshold for disbursement without prejudice to the program. Women-headed households mean any household headed by: (i) a arrangements for partial disbursement. single woman living on her own, with or without children, or (ii) a widow, or Share of women-headed households woman separated from her husband for any reason, including migration, with or within the total number of households in without children. KPP having received electricity generated from MHPs: Conditions for disbursement are met when the percentage share of womenheaded households equals or exceeds the annual cumulative target for KPP. 2017: 2% 2018: 4% 2019: 5% 2020: 6% 2021: 7% Partial disbursement: The DLI is scalable and partial disbursement is allowed. If the target is not fully achieved, then disbursement is proportional to the increase made from the previous period s targeted achievement. The following formula will be applied: Partial DLI disbursement = planned DLI disbursement for the period (actual achievement of the current period targeted achievement of the previous Information Source and Time Frame Punjab: EDP reports drawn from its PPMS. Frequency for reporting will be annual. KPP: PEDO reports drawn from its PPMS. Punjab: EDP reports drawn from its PPMS. Frequency for reporting will be annual. Verification Agency and Procedure for DLIs 1 to 5 (first, review of program and school records; second, random spot checks conducted in the field). Field trips may be combined as appropriate for DLIs 1 to 5, with checking of different elements for each DLI on the same field trip. Within three week of receiving the independent verification report, ADB confirms that the target is met and initiates the process of disbursement. PEDO or EDP prepares an attestation that the DLI is met and attaches the relevant report. The IVA will verify the results each year, in the same two stage process as for DLIs 1 to 5 (first, review of program records, and second, random spot checks conducted in the field). Checks for this DLI will focus on the number of womenheaded households in MHP beneficiary communities. Field trips may be combined as appropriate for DLIs 1 to 5, with checking of different elements for each DLI on the same field trip. Within three week of receiving the independent verification report, ADB confirms that the target is met and initiates the process of 5 For each year, the baseline (representing 0% disbursement) is taken from the previous period s planned target, while the current year s target (representing 100% disbursement) is taken from the current year s planned target.

15 9 Disbursement-Linked Indicator Definition and Description of Achievement and Verification period) / (targeted achievement of the current period targeted achievement of the previous period). 6 Disbursements are allowed for early or late achievement of the DLI. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is a year or more late, as long as this is within the loan period. If the target achievement is early, early disbursement can be made. DLI 6: By 2021, governance, financial management and procurement functions are improved baseline: No procurement unit, no internal audit department. Disbursement targets for KPP: 2017: (i) Corporate governance structure implemented, including dedicated procurement unit, (ii) Internal audit department established and operationalized, (iii) procurement manual adopted (iv) business model adopted for micro-hydroelectricity plants, (v) program management unit strengthened. 2018: First internal audit report approved by PEDO board. 2021: PEDO internal performance audit report on the program produced. Disbursement targets for Punjab: 2017: (i) Dedicated procurement unit established, (ii) Internal audit department established and operationalized, (iii) Procurement manual adopted, (iv) Program management unit strengthened. 2018: EDP internal audit report produced. 2021: EDP internal performance audit report on the program produced. Definition: The actions under DLI 6 in terms of institutional strengthening are measured by the results produced, as follows: a) An internal audit department must meets the following criteria. The department (i) independently assesses the organization's risk management, governance and internal control system, (ii) reports regularly on these to the highest level in the organization (e.g., head of the organization, management and the audit committee), and (iii) is made up of qualified and skilled people able to work in accordance with the requirements contained within the International Professional Practices Framework. Most importantly, the internal audit report (2018) and performance audit report (2021) produced by the internal audit department must meet the standards set by the Auditor-General of Pakistan. b) A dedicated procurement unit must meets the following criteria: (i) it is established as a permanent unit of the organization with supplementary procurement staff in the Program Management Unit, (ii) its functions are procurement planning, procurement process, contract management and procurement monitoring and reporting, and (iii) the roles and accountabilities are clearly defined within the unit as well as with the rest of the organization. c) The procurement manual must be able to guide all PEDO/EDP activities in procurement and contracting practices and must meet provincial regulatory requirements in the procurement of all goods, services and works, as well as in the internal controls and standards of conduct for all personnel involved in the procurement process. d) The business model adopted for MHPs means the KPP government has to review, select and adopt one of a number of business models developed as part of the due diligence report under ADB s TA 9047 PAK. e) A strengthened program management unit means a unit that has been established and staffed in line with the organogram in the PPTA report, which means having the operational strength to implement PAP. Information Source and Time Frame KPP: PEDO reports Punjab: EDP reports Frequency for reporting will be annual. Verification Agency and Procedure disbursement. PEDO or EDP prepares an attestation that the DLI is met and attaches the relevant reportand the following as applicable:. (a) for the implementation of the corporate governance structure: a copy of the new corporate governance structure in place, with an indication of the names of the staff occupying the various positions reflected in the structure, and a copy of the document which describes the functions and responsibilities of each unit and position in the structure; (b) for the establishment of the dedicated procurement unit or internal audit department: a certification from the appropriate officer of PEDO or EDP confirming that the procurement unit or internal audit department has been established and operationalized with a copy of the document which describes the functions and responsibilities of the unit or department and a list of the names of the staff occupying each position in the unit or department; (c) for the adoption of the 6 For each year, the baseline (representing 0% disbursement) is taken from the previous period s planned target, while the current year s target (representing 100% disbursement) is taken from the current year s planned target.

16 10 Disbursement-Linked Indicator Definition and Description of Achievement and Verification Conditions for disbursement are met for each province when the institutional action(s) specified for that year has been completed and the entities or products set up or produced meet the criteria set out in (a) to (d) above. For 2017, each of the 5 actions required of the KPP government accounts for 20% of the full disbursement allocation for that year, while for Punjab, each of the 4 actions required accounts for 25% of the full disbursement allocation for that year. That is, if Punjab completes only the action on internal audit and no other in 2017, then it will receive only 25% of the full allocation for that year. Partial disbursement is not allowed: The DLI is not scalable. The action has to be completed before any disbursement. Disbursements are not allowed for late achievement of the DLI. This means that all actions and reports must be completed on time. Early payment against an earlier than scheduled completion date is allowed. Information Source and Time Frame Verification Agency and Procedure procurement manual or business model: a copy of the notification or other order of the appropriate body or officer in PEDO or EDP adopting the procurement manual or business model, and a copy of the manual or model; (d) for the strengthening of the program management unit: a certification of the appropriate officer in PEDO or EDP listing the actions that were completed in order to strengthen the program management unit, with an indication of the dates of completion and other supporting details. The IVA will verify the results in 2017, 2018 and 2021 on the basis of the required reports. Within three week of receiving the independent verification report, ADB confirms that the target is met and initiates the process of disbursement. DLI 7: From 2017, ICT-driven program performance monitoring system (PPMS) is operationalized, to produce annual performance monitoring reports on all indicators and PAP actions baseline: No PPMS Disbursement targets for KPP: 2017: PPMS set up in PEDO, 2017 report issued : annual performance monitoring report issued on all indicators and PAP actions. Disbursement targets for Punjab: 2017: PPMS set up in EDP, 2017 report issued : annual performance monitoring report issued on all indicators and PAP actions. Definition: Operationalization of PPMS means the establishment of the PPMS in EDP and PEDO, with the required software and capacity in place to (i) conduct performance monitoring of all DMF indicators as well as additional indicators, as required, for the procurement, installation and functioning of MHP and solar plants, and (ii) to implement all the PAP actions as agreed. The PPMS should be a web-based monitoring system, to allow for data transmission and collection from remote locations. All indicators mean all the indicators agreed on by all stakeholders in the early part of Conditions for disbursement are met for each province when the actions specified for that year are met. For 2017, full disbursement requires (a) PPMS to be set up (50% of full disbursement allocation for that year) and (b) a 2017 report to be produced on all indicators (50% of full disbursement allocation for KPP: PEDO reports drawn from its PPMS. Punjab: EDP reports drawn from its PPMS. Frequency for reporting will be annual. PEDO or EDP prepares an attestation that the DLI is met and attaches the relevant report. The IVA will verify the results each year on the basis of the performance monitoring reports. Within three week of receiving the independent verification report, ADB confirms that the target is met and initiates the process of disbursement.

17 11 Disbursement-Linked Indicator Definition and Description of Achievement and Verification that year). Information Source and Time Frame Verification Agency and Procedure Partial disbursement is not allowed: The DLI is not scalable. Disbursements are also not allowed for late achievement of the DLI. DLI 8: By 2019, energy audits are conducted on 100% of identified public sector buildings and a model net zero building is constructed baseline: No energy audits Disbursement targets for Punjab: 2017: 30% of identified public sector buildings have conducted energy audits Construction of model net zero building initiated 2017: 100% of identified buildings have conducted energy audits 2018: Methodology developed and approved for follow-up on energy audit recommendations Construction of model net zero building completed and government standards and design for zero-net buildings notified. Definition: Identified public sector buildings are all those in the list developed by EDP in the first quarter of 2017 and acceptable to ADB. The number of buildings on this list constitutes the denominator for this indicator for 2017 and The numerator is the number of buildings from the list that have had energy audits conducted. Net zero building means a 62% reduction from current average level for net emission. Conditions for disbursement for the energy audits are met when the percentage targets for 2017 and 2018 are achieved, and when the institutional actions specified for each year have been completed. For the net-zero building, condition for disbursement for the 2017 target is met when civil works are started and target for 2019 is met when the building has been completed, furnished, equipped and Energy Department staff shifted to the building. For each year, the institutional actions relating to energy audits are allocated 15% of the full disbursement amount and institutional actions relating to net-zero building are allocated 85% of the full disbursement amount for that year. Partial disbursement: For 2017 and 2018 energy audits percentage targets, the DLI is scalable and partial disbursement is allowed. However, partial disbursement is not allowed for the institutional actions. Disbursements are allowed for early or late achievement of the DLI. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is a year or more late, as long as this is within the loan period. If the target achievement is early, early disbursement can be made. EDP reports drawn from its PPMS. Frequency for reporting will be annual. EDP prepares an attestation that the DLI is met and attaches the relevant report. The IVA will verify the results for energy audits in 2017, 2018 and 2019 on the basis of the energy audit reports produced in 2017 and 2018, and the approval of follow up on energy audit recommendations in For the construction and government standards on net zero building, the IVA will conduct checks of the site and the notification of standards. Within three week of receiving the independent verification report, ADB confirms that the target is met and initiates the process of disbursement. ADB = Asian Development Bank, DLI = disbursement-linked indicator, EDP = Energy Department of Punjab, ICT = Information and Communication Technology, KPP = Khyber Pakhtunkhwa province, MHP = micro-hydropower plant, MW = megawatt, PEDO = Pakhtunkhwa Energy Development Organization, PAP = program action plan, PHF = primary health care facility, PPMS = program performance monitoring system, RBL = results-based lending. Sources: Asian Development Bank, Energy Department of Punjab, and Pakhtunkhwa Energy Development Organization.

18 12 B. Disbursement Allocation and Status Table 4: Disbursement Schedule for Khyber Pakhtunkhwa ($ million) DLI 1 DLI 2 DLI 3 DLI 4 DLI 5 DLI 6 DLI 7 DLI 8 Disbursement Linked Indicator By 2021, access to electricity is provided to an additional 240,000 households and 800,000 students in un-electrified and poorly electrified areas. By 2021, power generation capacity from clean energy sources is increased by an additional amount of 153 MW. By 2021, at least 9,187 sites have renewable energy-based power plants installed. By 2021, at least 30% of schools with solar plant installed are girls schools. By 2021, at least 7% of target households newly connected to electricity are women-headed households. By 2021, governance, financial management and procurement functions are improved. From 2017, ICT-driven program performance monitoring system (PPMS) is operationalized to produce annual performance monitoring reports on all indicators and PAP actions By 2019, 100% of identified public sector buildings have conducted energy audits and the methodology for follow-up on energy audit recommendations has been approved. Total ADB Financing Allocation Share of total ADB financing (%) % % % % % % % % Subtotal % Interest and Commitment Charges Total ADB = Asian Development Bank, DLI = disbursement-linked indicator, ICT = Information and Communication Technology, MW = megawatt. Sources: Asian Development Bank and Energy Department of Punjab.

19 13 DLI 1 DLI 2 DLI 3 DLI 4 DLI 5 DLI 6 DLI 7 DLI 8 Disbursement Linked Indicator By 2021, access to electricity is provided to an additional 1,800,000 students in un-electrified and poorly electrified areas. By 2021, power generation capacity from clean energy sources is increased by an additional amount of 29 MW. By 2021, at least 17,400 sites have renewable energybased power plants installed. By 2021, at least 30% of schools with solar plant installed are girls schools. By 2021, at least 7% of target households newly connected to electricity are women-headed households. By 2021, governance, financial management and procurement functions are improved. From 2017, ICT-driven program performance monitoring system (PPMS) is operationalized to produce annual performance monitoring reports on all indicators and PAP actions By 2019, 100% of identified public sector buildings have conducted energy audits and the methodology for follow-up on energy audit recommendations has been approved. Table 5: Disbursement Schedule for Punjab ($ million) Total ADB financing allocation Share of total ADB financing (%) % % % % % % % % Subtotal % Interest and Commitment Charges 4.00 Total ADB = Asian Development Bank, DLI = disbursement-linked indicator, ICT = Information and Communication Technology, MW = megawatt. Sources: Asian Development Bank, Energy Department of Punjab, and Pakhtunkhwa Energy Development Organization.

20 14 III. Expenditure Framework and Financing A. Expenditure Framework 2. Program expenditures. The broader government programs expenditures are estimated to be $26,280 million from 2017 to 2021, of which the RBL program expenditures are estimated to be $454.3 million. 3. Program financing plan is summarized in Table 6. The co-financing from AFD will be loan. The cofinancing will be joint and collaborative, and will not be administered by ADB. Source Table 6: Program Financing Plan Punjab KPP ($ million) Program Share of Total (%) Government Provincial government Community contribution Development partners Asian Development Bank Ordinary capital resources (loan) Agence Française de Développement Total KPP = Khyber Pakhtunkhwa. Sources: Asian Development Bank estimates, Energy Department of Punjab, and Khyber Pakhtunkhwa. IV. Program Systems and Implementation Arrangements A. MHP Implementation Business Model 4. Under the RBL program, the MHPs will provide electricity to around 1.5 million people in rural areas of KPP, and solar plants installed at schools will provide electricity to more than 2.6 million students, including 1.2 million girls. The MHP program will be implemented with the assistance of NGOs, hired through a competitive procurement process serving as the lead partner of the contractor, and responsible for site selection, conducting feasibility study and community mobilization. The contractor team will together be responsible for construction of the plant and training of the community team on operation and maintenance. The community organizations will be responsible for operation and maintenance of the plant and collection of cost recovery tariff to ensure sustainability. Four possible business models have been developed by the project preparatory technical assistance consultant. In all possible business models, the following essentials to ensure successful project implementation and a sustained long term operation are to be address: (i) Tariff: Application of proper tariff scheme covering all costs of direct expenses for operation and maintenance, financial contingency for unexpected events and the accumulation of funds for future renewal of the asset. (ii) Licencing: All projects independent from the ownership has to ensure that they dispose all the necessary licences and approvals according to federal and provincial regulation. 1 The interest and other charges during construction to be capitalized in the loan.

21 15 (iii) Fulfil provision for operation and maintenance: To ensure a safe and stable operation and to enable a maximal lifetime of the micro-hydropower plant the provisions for operation and maintenance are to fulfil. (iv) Funds: The owners and the operators have to ensure observed by PEDO that they allocate the dedicated shares of tariffs for contingency and renewal in the foreseen accounts. (v) Social and Environmental Safeguard: All provisions concerning social and environmental safeguard are to fulfil. 5. Based on the above essentials for sustainability, Table 7 shows different models. Table 7: Options to Structure the Business Model Business Model Development and Construction Asset Management and Operation No. Project Owner Project Developer Asset Owner Asset Operator A.I PEDO Development Contractor Community Community A.II PEDO Development Contractor PEDO Community A.III PEDO Development Contractor Community O&M Provider A.IV PEDO Development Contractor PEDO O&M Provider B PEDO Development Contractor Private Private Investor/Operator Investor/Operator C Private Investor Private Investor Private Investor Private Investor/Operator 6. Four different business models have been proposed by the PPTA consultants. Details are as below: Figure 1: Business Model for Plants with Generation Capacity Up to 200 KWs Development Operation A B HDF PEDO Development Contractor/ Mobilizer C D E COMITY A. Funds out of Hydro Power Fund of Government of KP are allocated to PEDO B. PEDO selects the developer/mobilizer to perform the works. C. Development Contractor/Mobilizer shall direct interact with Community for social mobilisation and project development D. PEDO shall approve technical proposals, ensure the process follows the rules and receive the final works when commissioned. E. PEDO is transferring the asset to the COMITY -in the form of COMITY- and ultimate responsible of the Operation and Maintenance as owner of the plant as all liabilities* are transferred to COMITY Community *in case of full ownership transfer COMITY=group of people nominated by a community, HDF= Hydel Development Fund, PEDO= Pakhtunkhwa Energy Development Organization. Source: Asian Development Bank project preparatory technical assistance (TA-9047) for the Access to Clean Energy Investment Project consultants report.

22 16 Figure 2: Business Model for Plants with Generation Capacity from 200 to 500 KWs (Option 1) Development Operation A B HDF PEDO Development Contractor/ Mobilizer C D Community E COMITY F O&M Prov. A. Funds out of Hydro Power Fund of Government of KP are allocated to PEDO B. PEDO selects the developer/mobilizer to perform the works. C. Development Contractor/Mobilizer shall direct interact with Community for social mobilisation and project development D. PEDO shall approve technical proposals, ensure the process follows the rules and receive the final works when commissioned. E. PEDO is transferring the asset to the COMITY -in the form of COMITY- and ultimate responsible of the Operation and Maintenance as owner of the plant as all liabilities* are transferred to COMITY F. COMITY is undertaking an operation & maintenance agreement with an private service provider COMITY= group of people nominated by a community, HDF= Hydel Development Fund, KP= Khyber Pakhtunkhwa, O&M=operations and maintenance, PEDO= Pakhtunkhwa Energy Development Organization. Source: Asian Development Bank project preparatory technical assistance (TA-9047) for the Access to Clean Energy Investment Project consultants report. Figure 3: Business Model for Plants with generation capacity from 200 to 500 KWs (Option 2) Development A B HDF PEDO Development Contractor/ Mobilizer C D Community E Operation O&M Prov. Community A. Funds out of Hydro Power Fund of Government of KP are allocated to PEDO B. PEDO selects the developer/mobilizer to perform the works. C. Development Contractor/Mobilizer shall direct interact with Community for social mobilisation and project development D. PEDO shall approve technical proposals, ensure the process follows the rules and receive the final works when commissioned. E. PEDO shall undertake a Lease Agreement for operation and maintenance with a private sector O&M provider. PEDO shall be ultimate responsible of the Operation and Maintenance as owner of the Plant. Community is beneficiary of the operation. All liabilities are by PEDO. HDF= Hydel Development Fund, O&M=operations and maintenance, PEDO= Pakhtunkhwa Energy Development Organization. Source: Asian Development Bank project preparatory technical assistance (TA-9047) for the Access to Clean Energy Investment Project consultants report.

23 17 Figure 4: Business Model for Plants with Generation Capacity from KWs Development A B HDF PEDO Development Contractor/ Mobilizer C D Community E Operation Private Investor F O&M Prov. A. Funds out of Hydro Power Fund of Government of KP are allocated to PEDO B. PEDO selects the developer/mobilizer to perform the works. C. Development Contractor/Mobilizer shall direct interact with Community for social mobilisation and project development D. PEDO shall approve technical proposals, ensure the process follows the rules and receive the final works when commissioned. E. PEDO is privatizing and transferring the asset to an private investor F. Private investor is undertaking the operation & maintenance by himself or he is awarding an private service provider with an operation & maintenance agreement HDF= Hydel Development Fund, KP= Khyber Pakhtunkhwa, O&M=operations and maintenance, PEDO= Pakhtunkhwa Energy Development Organization. Source: Asian Development Bank project preparatory technical assistance (TA-9047) for the Access to Clean Energy Investment Project consultants report. B. Monitoring and Evaluation System 7. This section describes the monitoring and evaluation (M&E) system that will apply to the rest of the program period with RBL financing, and incorporates the recommendations of the program M&E system assessment on ongoing M&E activities. 1. Summary of Monitoring and Evaluation System 8. Institutional arrangements. Similar M&E systems to track program progress for KPP and Punjab are managed in parallel and will report on program progress to ADB; and coordinate with the relevant provincial departments. The M&E responsibilities are summarized in Table 8. Table 8: M&E Responsibilities by Agency Responsibilities Agency PEDO, EDP, and Populate the web-based M&E system with field information. PEECA Verify and confirm the field information. Maintain the M&E system. Issue and approve the quarterly reports. Submit disbursement requests to ADB. Coordinate with provincial finance, education, and health departments. ADB Process disbursements based on fulfillment of DLIs. Monitor the program status. Periodically deploy TA consultants to validate PEDO and EDP s reports on DLIs (see para ). Provincial health, Facilitate data collection of field information during the operations and maintenance finance and stage for the solar program. education Provide inputs on status of indicators in the solar-powered schools and primary departments healthcare facilities. ADB = Asian Development Bank, DLI = disbursement-linked indicator, DMF = design and monitoring framework, EDP = Energy Department of Punjab, M&E = monitoring and evaluation, PEDO = Pakhtunkhwa Energy Development Organization, PEECA = Punjab Energy Efficiency and Conservation Agency, TA = technical assistance. 9. M&E indicators. The expanded M&E indicators for the rest of the program period, which

24 18 will be monitored by PEDO, EDP and PEECA. The agencies will update the status of the program DMF, DLIs, and PAP; and compliance with the loan agreement. The key indicators are in Table 9. The M&E systems will be web-based, where the data on indicators will be aggregated in quarterly progress reports for the entire program, and for specific indicators. 10. Organizational setup and information flow for M&E. Figure 5 illustrates this process. 11. Data collection, analysis, and reporting with web-based M&E system. A web-based M&E system is being designed, 2 which will enable PEDO, EDP and PEECA to effectively monitor the expanded M&E indicators. The system will allow large volumes of data to be collated, analyzed and captured in the program progress reports to be submitted to (i) the provincial energy, health and education department secretaries; and (ii) ADB bi-annually. 12. Program evaluation. Within two years after RBL effectiveness, ADB will field a midterm review to report on the progress against the program indicators, and agree on catch-up measures for any delays. Within one year from RBL closing, the program EAs will submit program completion reports to ADB and the Government on the results of the programs in KP and Punjab. Within two years from RBL closing, ADB, in consultation with the EAs, will prepare its own program completion report, and share the same with the Government. Table 9: Key M&E Indicators Program Responsible Minimum Deliverable to Indicator Monitoring Agency Monitoring External Parties Key Indicator DMF DLI PEDO EDP PEECA DC Frequency PPR WA Number of approved feasibility studies * * Quarterly * Energy produced * * * Monthly * Commissioned capacity * * * * Monthly * * Beneficiary population * * * * Monthly * * Female population benefited * * * * Monthly * * Percentage of women-headed households * * * Monthly * * Number of women trained on using energy benefits * * * Quarterly * * Percentage of private operators * * Quarterly * Number of jobs created * * * Yearly * GHG mitigation * * * Monthly * Final capacity expected * * * Quarterly * Number of created utilities * * * * Monthly * * Aggregated cost * * * Monthly * Percentage of annuity recovered * * Quarterly * Global availability * * * Quarterly * Number of complaints * * * Quarterly * Percentage of girl schools * * * Monthly * * Number of PHFs with delivery and antenatal care * * * Monthly * * Percentage of compliance with BPEELs * Yearly * * Compliance with energy efficiency audits in public building plan * Yearly * * Compliance with construction work plan for the ERC * Quarterly * * BPEEL = best-practice energy efficiency legislation, DC = contractor, DLI = disbursement-linked indicator, DMF = design and monitoring framework, EDP = Energy Department of Punjab, ERC = Energy Resource Center, M&E = monitoring and evaluation, PEDO = Pakhtunkhwa Energy Development Organization, PEECA = Punjab Energy Efficiency and Conservation Agency, PHF = primary healthcare facility, PPR = program progress report, WA = withdrawal application. 2 The system is being developed by the project preparatory TA consultants under TA 9047-PAK: Access to Clean Energy Investment Project, and finalized with PEDO and EDP.

25 19 Figure 5: M&E Organizational Setup and Information Flow ADB = Asian Development Bank, DLI = disbursement-linked indicator, EDP = Energy Department of Punjab, M&E = monitoring and evaluation, PEECA = Punjab Energy Efficiency and Conservation Agency, PEDO = Pakhtunkhwa Energy Development Organization, TA = technical assistance. Table 10: M&E Responsibilities of Energy Department/Agency Staff and External Parties Staff/External Party Energy department/ agency head Project director Number of Staff PEDO EDP PEECA Responsibility Effectively operate M&E system, and approve quarterly progress reports. 1 (solar) 1 (MHP) 1 1 Coordinate the activities of the field supervisors, and smart meter operators (as needed); manage contractors; and draft program progress reports on M&E indicators. M&E head Coordinate M&E activities, including overseeing the web-based M&E system to guarantee its reliability; circulate M&E data; and flag issues that require mitigation measures. M&E analysts 3 3 Review (i) consistency of information on completed sites, and raise alarms as needed; (ii) reports from smart meters to ascertain the operational status of the power plant; and (iii) system alarms, and provide relevant staff with the information for solutions. Prepare comprehensive reports for approval by M&E head, and subsequently by the project director, and then energy agency head. Field supervisors Verify field information from the contractors on site progress, ensure that information from finished power plants are complete and accurate, and uploaded to the web-based M&E system. Finance department Input data related to contractors payments in the web-based M&E system. Smart meter operator Program beneficiary 1 1 Collect data on power generation and availability from the on-site smart meter and camera in each power plant, and submit reports. Report any major incident. Ensure that smart meters are operational. Contractor Upload comprehensive data from each power plant during feasibility, construction and commissioning EDP = Energy Department of Punjab, M&E = monitoring and evaluation, MHP = micro-hydropower plant, PEDO = Pakhtunkhwa Energy Development Organization, PEECA = Punjab Energy Efficiency and Conservation Agency.