INDEPENDENT VERIFICATION AGENT (IVA)

TERMS OF REFERENCE Reference No. 83213343 A RESULT BASED FINANCING (RBF) MEASURE in ETHIOPIA Cooking Stoves Within Energizing Development- Phase Two 1. Description of the Project 1.1. Project Background INDEPENDENT VERIFICATION AGENT (IVA) The energy sector in Ethiopia is characterized by the predominance of the household sector, accounting for 89% gross energy consumption in 2006. 1 Domestic energy requirements are mostly met from wood, animal dung and agricultural residues. About 81% of the estimated 16 million households in Ethiopia use firewood, 11.5% cook with leaves and dung cakes and only 2.4% use kerosene for cooking. This dependence is expected to continue in the foreseeable future. The consequences of the prevailing energy supply and consumption pattern include: Growing demand and biomass resource over-exploitation has increased households costs of energy acquisition and eroded household welfare; Deforestation and general environmental degradation; Loss of human availability for productive work due to time spent on collecting firewood. Over 70% of households collect firewood and about 25% travel at least 5 kilometres. 2 Many children, especially girls, are withdrawn from school to attend to domestic chores related to biomass use, reducing their literacy and restricting their economic opportunities; Exposure to indoor air pollution from solid fuels leads to premature deaths. In Ethiopia 56,460 deaths per year are directly attributable to indoor air pollution from the use of solid fuels, more than 90% of them children under five years of age 3 ; and Reduction in agricultural production and productivity due to the use of valuable soil conditioners and organic fertilizers and animal fodder (dung and crop residue) for fuel. Burning of dung as fuel instead of using it as a soil conditioner has led to a reduction of 550,000 tonnes of grain production per year. 4 1.2. Objectives of the RBF Measure 1. The overall objective of the Result-Based Financing (RBF) Measure in Ethiopia Cooking Stoves Project is to scale-up the commercialization of improved cook stove technologies through piloting a results-based financing approach. The Project will overcome the current gap between urban-based production of improved cook stoves and demand in the rural areas. The wide-scale commercialization of improved cook stove technologies under this Project is expected to deliver the following benefits: 1 Ethiopian National Energy Balance, Preliminary Results for 2006. 2 Central Statistics Agency, Welfare Monitoring Survey, 2004. 3 WHO, Indoor Air Pollution: National Burden of Disease Estimates, 2007. 4 Environmental Protection Authority and Ministry of Economic Development and Cooperation Addis Ababa, 1997. 1

Reduced deforestation and forest degradation, Reduced time spent in gathering firewood; Improved energy efficiency in domestic cooking, Reduced cooking times, Reduced number of women and children who contract respiratory and eye problems due to prolonged exposure to poor indoor air quality, Employment generation and income diversification for rural population from improved cook stove production and marketing; and Reduced GHG emission. 2. The specific objective of the pilot RBF Measure is to promote improved cook stove technologies and stimulate market development in the rural areas in Oromiya and Tigray regions. The Project will provide support to commercial ICS producer SMEs address this market. The project will reach an estimated 275,000 people (about 55,000 households) in four years. This will results: Savings of 505,000 tons of firewood equivalent; Create 5,000 additional jobs in stove production and marketing; Avoid 1,500 deaths associated with indoor air pollution; Carbon skin of 2.1 tons per year per household (total of 115,500 tons per year); and Carbon abatement potential of 14 metric tons of carbon-dioxide over the project life. 1.3. Intervention Woredas 3. The project will be implemented in eight selected Woredas in the Oromiya and Tigray regions. The following Woredas have been selected by GIZ in consultation with the respective regional Energy Bureaus: Table 1. List of Pilot Intervention Woredas Oromiya Region Tigray Region Woreda (District) Zone Woreda (District) Zone 1. Sebata Hwas Finfine Special 1. Degua Tembien Central 2. Lome East Shoa 2. Raya Azebo Southern 3. Adama Zuriya East Shoa 3. Emba Alaje Southern 4. Shala West Arsi 4. Werie Lekhe Central 5. Dandi West Shoa 5. Tahtay Maichew Central 6. Ambo Zuriya West Shoa 6. Tselemti North Western 7. Jaldu West Shoa 7. Tahtay Koraro North Western 8. Amaya South West Shoa 8. Hawzien Eastern 1.4. Target Households and Number of Stoves 4. The target households are rural households in the intervention Woredas. The target households will be identified by the Service Provider. The GIZ has prepared estimates of eligible improved cook stove targets. The total number of stoves to be disseminated by the Project is 103,000 biomass injera baking stove, and 103,000 biomass cooking stoves. 2

1.5. Eligible Improved Cook stove Technologies 5. The improved cook stove technologies eligible for commercialization under the Project are: a) Mirt baking stove, and b) Tikikil Cook stove. 6. The minimum technical specification of the stoves is provided in Table 2. Table 2. Minimum Technical Requirements of Eligible Improved Cook Stove Technologies Parameter Injera baking stove Cooking Stove 1. Fuel used Biomass (firewood, BLT, dung, crop residue) Biomass (firewood, BLT, dung, crop residue) 2. Thermal Efficiency 18% 28% 3. Fuel saving against open-fire 50% 50% 4. Life span 5 years 3 years 1.6. Project Duration The Project duration is from 01.12.2015 31.12.2017. A contract with the successful bidder shall be signed for the initial one year. The duration of the contract can be extended for additional period depending upon successful performance. 3

2. Description of the RBF structure/process 2.1. RBF process The RBF process and the roles and responsibilities of the parties involved are illustrated in Figure 3 and outlined below. a) The funding agent, GIZ-ECO, will enter into contract agreements with Service Providers b) Financing Institution(s) for managing the RBF incentive scheme; and Independent Verification agent(s); c) The target households will purchase the approved stove models and will pay the Service Provider in cash or through loan by the contracted Financial Institution(s) or other providers; d) The Service Provider shall deliver and install the stove in the targeted households and provide a free of cost after-sale service for one year from the date of installation of the stove. Upon installation of the stove, the Service Provider shall fill-in the Standard Stove Sales Agreement in three copies 5. The copies will be distributed as follows: a) 1 (one) copy to the beneficiary households b) 1 (one) copy to the GIZ-ECO Regional Office c) 1 (one) copy to will be retained by the Stove Marketing, Sales and Distribution partner e) The Stove Marketing, Sales and Distribution partner shall periodically submit Performance Report and a Payment Request every Three months to the contracted Independent Verification Agent with a copy to the GIZ- EnDev. f) The Independent Verification Agent shall verify that the results claimed by the contracted Service Providers have been effectively achieved and whether the terms and conditions have been fulfilled or not. g) The Independent verification Agent will submit its Performance Verification Report to GIZ- EnDev within one month from the date of receipt of the Performance Report and a Payment Request by the Improved Cook Stove Marketing, Sales and Distribution partners. h) The GIZ- EnDev shall examine and evaluate the Performance Verification Report submitted to it by the Independent Verification Agent and authorize the contracted Financial Institution for release of payment of 85% of the approved RBF incentive amount to the Improved Cook Stove Marketing, Sales and Distribution partner within fifteen days of date of receipt of the payment authorization letter. The Financial Institution shall keep remaining 15% amount as deposit towards the guarantee of after sale service. i) The Independent Verification Agent shall verify whether or not after-sales services have been provided satisfactorily. If the service has been found satisfactory, it shall recommend to GIZ-ECO for authorizing the payment of the remaining 15% amount. If the after sales service has not been found satisfactory, the amount to be paid towards the after service sale shall be used by GIZ-ECO for the repair and maintenance of the stove(s). 5 The copies maintained by the households, GIZ-ECO Regional Office and the Stove Supplier will be the basis for field verification by the contracted Independent Verification Agent. Also, the copy will be used for updating the database maintained by the respective GIZ-ECO Regional Office. 4

Improved Cook Stove Technology Producer (Mirt, Tikikil, other approved stoves) Cash ksupply of stove Technology Supplier/Service Provider (Agricultural cooperatives, stove producers, etc.) u Service/Performance agreement GIZ-ECO (Funding Entity) Cash/Coupon Report on Performance Performance Verification Report vperformance: installation of stoves, after sales services Target Beneficiaries (Poor rural households) Performance Verification (stoves installed/after sales services provided) Independent Verification Agent (Checks that performance requirements have been met) Figure 1. RBF Process 5

2.2. Roles of the Project Partners Main and roles of the several Project partners are described below. Proposers are free to suggest other/additional roles as appropriate. A. GIZ-EnDev 7. The GIZ will be responsible for the following main tasks; a) Avail financing of the RBF Measure; b) Overall coordination of partners and parties involved in the implementation of the RBF Measure; c) Contracting of Service Providers; d) Contracting Independent Verification Agent; e) Examine performance verification reports submitted to it by the contracted IVA and effect incentive amount to the Service Providers; f) Maintain a database of improved cook stove technologies sold under this Project g) Establish National and Regional Advisory committees; h) Establish baseline data to enable sound monitoring and evaluation; i) Conduct supervision missions; j) Reporting to EnDev program; and k) Monitoring and evaluation of the RBF Measure. B. Regional Advisory Committees 8. The National and Regional Advisory committees will be established by the GIZ. The responsibilities of the NSC will be to: a) Provide technical advice to the implementing partners regarding the activities in the Annual Work Plan and budget; b) Review the project performance reports and propose measures to addresses emerging management and implementation problems; c) Periodically discuss the appropriateness of project implementation arrangements including consistent and common approaches to project implementation modalities and results-based reporting and impact assessment; and d) Identifies emerging lessons learned. 9. The RAC s membership will consist of relevant implementing parties such as participating financial institution, Independent verification agent(s), service providers, regional energy bureaus, and civil society representatives as appropriate. 1

C. Improved Cook Stove Technologies Marketing, Sales and Distribution Partners (Service Providers) 10. The Service Providers shall: a) Have the sole responsibility for the marketing, sales and distribution of eligible cook stove technologies at market-based pricing to the target households in the intervention Woredas; b) Provide training on stove use to user households; c) Submit periodic stove marketing, sales, distribution reports each 3 (three) months to GIZ-EnDev with a copy to the contracted Independent Verification Agent; d) Submit Payment Request to GIZ-EnDev at the end of each 3 (three) months; e) Maintain a database of stove sales to the target households; f) Permit the GIZ-EnDev and the contracted Independent Verification Agent appointed to inspect all accounts and records relating to its performance; and g) Provide all information that the GIZ-EnDev may reasonably request. D. Independent Verification Agents 11. The Independent Verification Agent shall: a) Verify that agreed outputs as defined in Contract agreements entered into between the GIZ-EnDev and the Service Providers in each pilot Woredas are achieved; b) Validate incentive payment claims by contracted Service Providers and make recommendations on disbursement the incentive amount thereof. c) Submit Quarterly Verification Reports. 2

3. Format and content for proposals in response to this RFP Key steps and schedule for the RFP process are as follows: 1. RFP issued by the GIZ-EnDev [Date] 2. Proposals due [Date] 3. IVA selected by the GIZ- EnDev for negotiations [Date] 4. Target date to complete Contract Agreement with IVA [Date] These dates are subject to change by the GIZ- EnDev. The GIZ- EnDev will notify all IVAs that have submitted letters of Expression of Interest to propose of any changes. Question and Answer Procedures and Addenda - Questions and answers will generally be handled in writing and distributed the responders. Any written questions shall be submitted to the GIZ-EnDev at the address specified for the receipt of proposals or to the following email: pcc@giz.de Faxed questions or inquiries will be accepted. The GIZ- EnDev may modify this RFP prior to the date fixed for submission of proposal by issuance of an addendum to all proposers. Proposals will be due no later than [Date]. Proposals shall be addressed and delivered to: German Development Cooperation Office GIZ Office Addis Ababa Kirkos Kifle Ketema Kebele 18 (behind Intercontinental Hotel) P.O.Box: 100009 Addis Ababa The GIZ- EnDev is not responsible for lost or misdirected proposals. Verbal communications with the GIZ- EnDev are encouraged but shall not be binding on the GIZ- EnDev and shall in no way modify this RFP or excuse proposers from the requirements set forth in the RFP. Such modifications shall only be made in writing through RFP addenda as indicated above. An optional pre-bid conference will be held at [Date] in [Address]. This conference is an opportunity for proposers to learn more about the Pilot RBF Project and ask questions. The GIZ- EnDev and other relevant Program Partners will be in attendance. The GIZ- EnDev s selection of a IVA pursuant to this RFP process does not mean that the GIZ- EnDev accepts all aspects of the IVA s proposal, modifications to which may be requested and agreed to during contract negotiations. Costs for preparing proposals are entirely the responsibility of each proposer and shall not be chargeable to the GIZ- EnDev. If the GIZ- EnDev is unable to reach an agreement with the IVA originally selected, it will select the next highest-ranking respondent from the original list, without the need to go out for another RFP. 3

4. Description of Tasks/Proposed Methodology for the IVA Result Verification through review of records - Verify relevant pre-agreed indicators as evidence of achievement of result claimed. In order to validate subsidy claim submitted by Improved Stove Marketing, Sales and Distribution partners, the IVA will verify preagreed indicators as evidence of the achievement of the results claimed, through an exhaustive desk review of Stove Marketing, Sales and Distribution partners records (financial records, stove purchases/production, stove sales, etc.). Physical verification of results claimed. The IVA will carry out on-site random physical verification of at statistically significant number of households. The IVA will design appropriate household questionnaire and estimate the appropriate sample size. The IVA will physically certify that the stoves are installed in the target households and will verify the associated records kept by the Improved Stove Marketing, Sales and Distribution partners. Specifically, the IVA will undertake the following main tasks: - Physical verification of installation of eligible stoves in the target households by the contracted Service Providers - Conduct survey of prices of the stoves - Stove use monitoring: rate of acceptance, performance of the Improved cook stove technologies - User households satisfaction on the stove technologies - What change the improved cook stove technologies have brought to user households - Sustainability - verify that service provided by the improved stoves is continuing and users are satisfied, through documentation review, physical checks, and interviews. For field verification, the sampling methodology proposed by the IVA will have to be acceptable to ensure that the sample households representative and make the verification valid. The sample size of households should be estimated based on the level precision, the level of confidence interval and the degree of variability in the attributes to be measured. 4