Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY Report No: RES14735 Public Disclosure Authorized RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE ENERGY SECTOR STRENGTHENING PROJECT LOAN Public Disclosure Authorized OCTOBER 25, 2010 TO THE ADMINISTRACION NACIONAL DE ELECTRICIDAD (ANDE) WITH THE GUARANTEE OF THE REPUBLIC OF PARAGUAY FOR THE ENERGY SECTOR STRENGTHENING PROJECT Public Disclosure Authorized DECEMBER 10, 2015 ENERGY AND EXTRACTIVES GLOBAL PRACTICE LATIN AMERICA AND THE CARIBBEAN REGION 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.
ABBREVIATIONS AND ACRONYMS ANDE DMS EMP EMS ESMF OMS PDO PIU SCADA SGIDE Administración Nacional de Electricidad. Demand Management System. A SCADA application that optimizes and manages the distribution systems (including events, alarm, time tagging, historical data records, control sequences) to monitor and operate the Medium Voltage (MV) grid. Increases overall grid reliability. Environmental Management Plan. Energy Management System. A SCADA application that optimizes and manages the transmission systems (including events, alarm, time tagging, historical data records, control sequences) to monitor and operate the High Voltage (HV) grid. Increase overall transmission grid reliability proactively minimizing blackouts. Environmental and Social Management Framework. Operations Management System. A SCADA application that optimizes and manages the restoration of power outages in distribution systems by reducing the duration and frequency of power outages. Project Development Objective. Project Implementation Unit. Supervisory Control And Data Acquisition. A software that provides real-time Supervisory Control and Data Acquisition of the power system components. Sistema de Gestión Integral de Distribución Eléctrica (Integrated Electrical Distribution Management System). An integral management system to optimize the technical, operational, administrative and commercial aspects of the Distribution System operation, maintenance and commercial cycle (regular metering, billing, and collection). Regional Vice President: Country Director: Senior Global Practice Director: Practice Manager/Manager: Task Team Leader: Jorge Familiar Jesko Hentschel Anita Marangoly George Antonio Alexandre Rodrigues Barbalho Sergio Gonzalez Coltrinari 2
PARAGUAY Energy Sector Strengthening Project CONTENTS A. SUMMARY 5 B. PROJECT STATUS 6 C. PROPOSED CHANGES 6 3
DATA SHEET Paraguay PY Energy Sector Strengthening Project (P114971) LATIN AMERICA AND CARIBBEAN Energy & Extractives Report No: RES14735 Basic Information Project ID: P114971 Lending Instrument: Specific Investment Loan Regional Vice President: Jorge Familiar Calderon Original EA Category: Partial Assessment (B) Country Director: Jesko S. Hentschel Current EA Category: Partial Assessment (B) Senior Global Practice Director: Practice Manager/Manager: Team Leader(s): Anita Marangoly George Original Approval Date: Antonio Alexandre Rodrigues Barbalho Sergio Augusto Gonzalez Coltrinari Current Closing Date: 30-Nov-2010 31-Dec-2015 Borrower: Responsible Agency: ANDE ANDE Restructuring Type Form Type: Full Restructuring Paper Decision Authority: Country Director Approval Restructuring Level: Level 2 Financing ( as of 06-Nov-2015 ) Key Dates Project Ln/Cr/TF Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P114971 IBRD-79940 Effective 30-Nov-2010 23-Feb-2011 09-Feb-2012 31-Dec-2015 31-Dec-2015 Disbursements (in Millions) Project Ln/Cr/TF Status Currency Original Revised Cancelle d Disburse d Undisbur sed % Disburse d P114971 IBRD-79940 Effective USD 100.00 100.00 0.00 44.65 55.35 45 4
Policy Waivers Does the project depart from the CAS/CPF in content or in other significant respects? Yes [ ] No [ X ] Does the project require any policy waiver(s)? Yes [ ] No [ X ] A. Summary of Proposed Changes The main proposed changes are: (a) a 22-month extension (first extension) of the Closing Date of the project from December 31, 2015, to October 31, 2017 to enable timely completion of all ongoing activities and achievement of the PDO; (b) changes in investments in all three components and approval and completion of new proposed investments; (c) reallocation of loan proceeds; and (d) changes of some indicators in the results framework. Change in Implementing Agency Yes [ ] No [ X ] Change in Project's Development Objectives Yes [ ] No [ X ] Change in Results Framework Yes [ X ] No [ ] Change in Safeguard Policies Triggered Yes [ ] No [ X ] Change of EA category Yes [ ] No [ X ] Other Changes to Safeguards Yes [ X ] No [ ] Change in Legal Covenants Yes [ ] No [ X ] Change in Loan Closing Date(s) Yes [ X ] No [ ] Cancellations Proposed Yes [ ] No [ X ] Change to Financing Plan Yes [ ] No [ X ] Change in Disbursement Arrangements Yes [ ] No [ X ] Reallocation between Disbursement Categories Yes [ X ] No [ ] Change in Disbursement Estimates Yes [ X ] No [ ] Change to Components and Cost Yes [ X ] No [ ] Change in Institutional Arrangements Yes [ ] No [ X ] Change in Financial Management Yes [ ] No [ X ] Change in Procurement Yes [ ] No [ X ] Change in Implementation Schedule Yes [ X ] No [ ] Other Change(s) Yes [ ] No [ X ] Appraisal Summary Change in Economic and Financial Analysis Yes [ ] No [ X ] Appraisal Summary Change in Technical Analysis Yes [ ] No [ X ] Appraisal Summary Change in Social Analysis Yes [ ] No [ X ] Appraisal Summary Change in Environmental Analysis Yes [ ] No [ X ] Appraisal Summary Change in Risk Assessment Yes [ ] No [ X ] 5
B. Project Status The Loan was approved by the Bank on November 30, 2010 and became effective on February 9, 2012, with an original Closing Date of December 31, 2015. Implementation delays, including an effectiveness delay of about 15 months, have slowed down project implementation. The Project comprises 3 Components: Components 1 and 2 finance 11 investment packages and Component 3 supports Technical Assistance (TA) to strengthen sectoral capacity. Progress to date on the 11 investments originally included in the Loan is as follows: a) Investments 1 to 9 are currently under implementation, one of which (Reactive Power Compensator at the Guarambaré Substation) will be completed in December 2015.Factory testing has been completed for most of the equipment and delivery of tested equipment is already scheduled. All of the 24 transformers to be installed in 10 substations are scheduled for delivery by March 2016, while eight of them will be delivered ahead of schedule by the end of this year. b) Investment 10 (sub-component 2.1 - Construction of two new transmission substations at Barrio San Pedro and Minga Pora) is at bid evaluation stage with a bid opening ceremony on November 20, 2015. This investment is key to meeting the PDO. At the Bank request, this investment had been put on hold earlier since completion would end up being beyond the current Closing Date. c) Investment 11 (Sub-component 1.1 Purchase and installation of SCADA) will be scaled down from a SCADA-EMS-DMS-OMS-SGIDE system to a just the SCADA-EMS portion to optimize and manage the High Voltage (HV) transmission grid. The supervision mission of July 2015 noted significant progress in implementation, which allowed the upgrade of the Project Development Objective (PDO) and Implementation Progress (IP) ratings to Moderately Satisfactory. This is mainly due to the fact that while progress has been achieved and several contracts have been signed, ratings can improve only once the closing date has been extended, to allow for adequate time for completion of all activities, especially for sub-component 2.1 (construction of two new transmission substations), crucial to meeting the PDO. C. Proposed Changes Project Development Objectives Original PDO Development Objectives/Results To increase the quantity and quality of the provision of electricity services by the Borrower, while improving the Borrower s performance. Change in Project's Development Objectives Change in Results Framework The current indicators are difficult to track and measure because they measure overall system parameters (i.e. losses, service interruptions, energy transferred, etc.) in the country instead of the project related 6
investments. Therefore, a revision of the indicators is proposed to better reflect the expected outcomes of the project, including the new proposed investments, as well as actual progress towards the PDO. Out of the five PDO indicators, three are being replaced and two are being dropped. The ones being dropped are: (a) increased quality of service (improved voltage profile), and (b) Direct Project Beneficiaries. Out of five Intermediate Indicators, four are being replaced and one is being dropped. The updated indicators will be included in the Project Operations Manual. Other Changes to Safeguards Compliance The new proposed activities for the restructuring package represent a significant additional effort from ANDE for the original activities in terms of environmental management. The Borrower prepared a new Environmental Management Plan (EMP), to prevent and mitigate the potential impacts that these new activities might cause. The proposed new activities, if managed appropriately, are not expected to generate major adverse impacts. Some of the potential impacts are: (a) generation of residues from the packing of electrical equipment (wood, carton, plastic, etc.) and draining of oil tanks used in the transformers; (b) risks of accidents during transportation of the major electrical equipment (transformers, mobile substations, large truck, etc.) in urban areas; (c) risks of explosions and fires during installation, transportation, operation and storage of major equipment; (d) management of hazardous residues from maintenance activities (i.e. change of electrical/electronic spares, transformers, etc.). The EMP contains actions and measures to prevent and mitigate potential impacts and to improve ANDE's environmental management, including mitigation measures and protocols for the storing and handling of old transformers and other electrical residues. The EMP was published on Nov 20, 2015 on the Borrower s and the Bank s external websites. The changes in activities and new investments imply no land acquisition and no indigenous people issues. Change in Loan Closing Date(s) Financing The extension of the Closing Date from December 31, 2015, to October 31, 2017 will allow for the Project to complete all of the ongoing and planned activities, recovering the time lost with the initial effectiveness delay and the slow progress in implementation until recently. Ln/Cr/T F IBRD- 79940 Status Reallocations Original Closing Date Current Closing Date Proposed Closing Date Previous Closing Date(s) Effective 31-Dec-2015 31-Dec-2015 31-Oct-2017 31-Dec-2015 The following table shows the reallocation of the Loan proceeds, needed to adjust the changes to components and costs that is presented in detail in the next section. Ln/Cr/TF Currency Current Category of Allocation Disbursement % 7
IBRD-79940 USD Disbursement Estimates Expenditure GO, CW, CS, Non-CS, TR for PART 1 GO, CW, CS, Non-CS, TR for PART 2 GO, CS, Non-CS, TR for PART 3 Premia for CAPS/COLLARS Change in Disbursement Estimates 8 (Type Total) Current Proposed Current Proposed 20,000,000 25,631,000 100 100 77,000,000 71,769,000 100 100 2,750,000 2,350,000 100 100 0.00 0.00 0 0 Designated Account 0.00 0.00 0 0 FRONT END FEE 250,000 250,000 0 0 Total: 100,000,000 100,000,000 A realignment of actual and estimates disbursements till the current Closing Date is needed and estimates for the proposed extension are presented in the following table. Fiscal Year Current (USD) Proposed (USD) 2011 0.00 0.00 2012 0.00 0.00 2013 0.00 0.00 2014 17.80 17.80 2015 82.20 26.80 2016 0.00 35.00 2017 0.00 20.40 Change to Components and Cost Total 100.00 100.00 Components 1) Component 1 Modernizing the Borrower s Distribution Management System and Installing an advanced Metering System for Large Consumers. (IBRD US$20m). a) Sub-Component 1.1: Installation of a state-of-the art integrated distribution management system. It will not be possible to complete the full SCADA/EMS/DMS/OMS/SGIDE system even with an extension of 22 months. Instead, it is proposed to only undertake the SCADA/EMS portion with an
estimated budget of US$4.94 million to optimize and manage the High Voltage (HV) transmission grid. The balance from the original budget will be used to finance the following new investments: i) Supply and installation of SCADA/EMS for transmission US$ 4,942,153 ii) Supply and installation of fiber optic network US$ 7,690,000 iii) Supply and installation of active communication equipment US$ 6,235,000 iv) Supply and installation of wireless meshed network US$ 3,700,000 v) Supply and installation of digital carrier equipment US$ 928,000 b) Sub-Component 1.2: Installation of a 66kV advanced metering system. This is underway. No scope changes envisaged. 2) Component 2- Improving the Performance of the Transmission Network (IBRD US$77m). a) Sub-Component 2.1: Construction of two new substations. Bidding is underway. No scope changes anticipated to this component. b) Sub-Component 2.2: Extension of about 10 existing substations (transformers purchased and savings incurred as bid was lower than estimated budget). c) Sub-Component 2.3: Installation of Reactive Compensator at Guarambaré Substation. This is underway and completion expected by end of 2015. No changes to the scope. Savings incurred from the purchase of transformers under 2.2 will be used to finance new investments, as follows: i) Supply of 11 three-phase power transformers for additional 7 substations US$13,230,000 ii) Supply of mobile substation 66/23kV-30MVA US$ 2,500,000 iii) Purchase of 8x6 truck with modular trailer to transport power transformers US$ 1,900,000 iv) Purchase of mobile 23kv distribution center compact 23kv cells and SSAA US$ 1,600,740 3) Component 3-Strengthening Paraguay s Electricity Sector and the Borrower s Institutional Capacity (IBRD US$2.75m). a) Sub-component 3.1: Improvement of the performance of the electricity sector and in particular, the Borrower, through: (i) the carrying out of an independent institutional assessment of the legal framework, the organizational structure and operational procedures of the electric sector in Paraguay; (ii) the development of an action plan (acceptable to the Bank and to the MH); and (iii) the implementation of the key priorities established in the action plan, all in a manner acceptable to the Bank and to the MH. During the mission of July 2015, it was agreed that the three studies originally contemplated under subcomponent 3.1 were not relevant anymore. Those studies are replaced by a Technical Assistance for the analysis of ANDE's organizational structure and human resources, with an estimated cost of US$ 800,000. b) Sub-component 3.2: Institutional strengthening of the Borrower's capacity in investment and project planning and implementation, through, inter alia: (i) strategic advice to the Borrower's Presidency on managerial decisions that will enhance its performance; (ii) strategic support from international consultants with successful experience in the implementation of a distribution management system during the first three years of implementation of Part I of the Project; (iii) strengthening of the Borrower's environmental and social unit through provision of best practices 9
and methodologies, and capacity building to ensure oversight of transmission investments under Parts 1 and 2 of the Project; and (iv) strengthening of the Borrower's financial and asset management practices, its internal auditing unit, and provision of external auditors for the Project (underway). The item (i) strategic advice to the Borrower's Presidency on managerial decisions that will enhance its performance will be dropped as it is no longer relevant. This is the only change envisaged. Technical missions took place in May and July 2015, to carry out a technical assessment and feasibility of the new investments proposed by the Borrower, after which, critical investments needed which could be implemented under this Loan were identified. During the mission of July 2015, the technical team worked closely with the Borrower and carried out an assessment of the identified proposed new investments and a feasible implementation schedule within the anticipated 22-month extension. The proposed new investments will be financed from reallocation of funds between the components in the project and there will be no change in the current total Loan amount. The list of new proposed investments was agreed upon during the mission of July 2015 and is included in the revised Procurement Plan. An additional EMP has been prepared for improving safety, environmental and social management at the seven existing substation where the proposed new 11 transformers are to be installed. A budget was also agreed upon with the Borrower for the new proposed activities and funding will be provided by the Borrower. The original Components Cost breakdown under this Loan was the following: 1. Component 1. Modernizing the Borrower s Distribution Management System and Installing an Advanced Metering System for Large Consumers (US$ 25 million; IBRD US$ 20 million) 2. Component 2. Improving the Performance of the Transmission Network (US$ 96.25 million; IBRD US$ 77 million) 3. Component 3. Strengthening Paraguay s Electricity Sector and the Borrower s Institutional Capacity(US$ 3.5 million; IBRD US$ 2.75 million) 4. The loan also finances the Front-End fee of $250,000. That is, the original "Project Total Cost" was US$125 million of which the IBRD Loan amount was US$100 million (inclusive of US$250,000 Front-End fee) and ANDE's counterpart funds totaled US$25 million. The total "Project Cost" has been reduced from US$125 million to US$108.78 million, of which US$100 million correspond to the IBRD Loan amount (inclusive of US$250,000 Front-End Fees) and ANDE's counterpart funds decreased from US$25 million to US$8.78 million. The revised Components cost breakdown is the following: 1. Component 1. Modernizing the Borrower s Distribution Management System and Installing an Advanced Metering System for Large Consumers (US$28.40 million; IBRD US$25.63 million) 2. Component 2. Improving the Performance of the Transmission Network (US$77.89 million; IBRD US$71.77 million) 10
3. Component 3. Strengthening Paraguay s Electricity Sector and the Borrower s Institutional Capacity(US$ 2.49 million; IBRD US$ 2.35 million) 4. The loan finances the Front-End fee of $250,000. The following table presents the change of IBRD financing for each component, up to the total of US$99.75 million (exclusive of US$250,000 Front-End Fees). Current Component Name Component 1 - Modernizing ANDE's Distribution Management System and Installing an Advanced Metering System for Large Customers Component 2 - Improving the Performance of the Transmission Network Component 3 - Strengthening Paraguay's electricity Sector and the Borrower's Institutional Capacity Proposed Component Name Change in Implementation Schedule Component 1 - Modernizing ANDE's Distribution Management System and Installing an Advanced Metering System for Large Customers. Component 2 - Improving the Performance of the Transmission Network. Component 3 - Strengthening Paraguay's electricity Sector and the Borrower's Institutional Capacity. Current Cost (US$M) Proposed Cost (US$M) Action 20.00 25.63 Revised 77.00 71.77 Revised 2.75 2.35 Revised Total: 99.75 99.75 Other Change(s) As additional time is needed to complete ongoing and new activities, a proposed new implementation schedule acceptable to the Bank has been agreed upon during the mission of July 2015. 11