document of the world bank filedocument of the world bank report no: icr00001832 implementation...

Document of The World Bank

Report No: ICR00001832

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-40600)

ON A

CREDIT

IN THE AMOUNT OF SDR 10.5 MILLION (US$ 15.7 MILLION EQUIVALENT)

TO THE

REPUBLIC OF SENEGAL

FOR AN

ELECTRICITY SECTOR EFFICIENCY ENHANCEMENT PROJECT

PHASE 1, APL-1

October 3, 2011

Energy Group Sustainable Development Department Country Department AFCF1 Africa Region

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

Currency Unit = FCFA

FCFA505 = US$1 US$ 1.29265 = EURO 1.00

US$1.50803 = SDR 1

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS

AfDB African Development Bank AFD Agence Française de Développement (French Development Agency) APL Adaptable Program Loan ASER Agence Sénégalaise d 'Electrification Rurale (Rural Electrification

Agency of Senegal) BOAD Banque Ouest Africaine de Développement (West African Development

Bank) BOO Build, Own, Operate CAS Country Assistance Strategy BOT Build, Operate, Transfer CFAA Country Financial Assessment CNH Comité National des Hydrocarbures (National Hydrocarbon Committee) CO2 Carbon Dioxyde COD Commercial Operations Date CPRSE Cellule de Préparation des Réformes du Secteur de l'Energie (Unit for the

Preparation of Energy Sector Reforms) CQ Selection Based on Consultants' Qualifications CRSE Commission de Régulation du Secteur de 1'Electricité (Electricity

Regulatory Commission) DDI Direction de la Dette et de 1'Investissement (Debt and Investment

Directorate of the Ministry of Finance) DE Direction de l 'Energie (Energy Directorate) EIA Environmental Impact Assessment EMP Environmental Management Plan EPC Engineer, Procure and Construct EURIBOR Euro Interbank Offered Rate FMA Financial Management Assessment FSA Fuel Supply Agreement GEF Global Environment Fund GoS Government of Senegal HFO Heavy Fuel Oil ICB International Competitive Bidding IDA International Development Association

IsDB Islamic Development Bank IFC International Finance Corporation IPP Independent Power Producer IS Interconnected System ISDS Integrated Safeguards Data Sheet KfW German Cooperation Agency LCS Least-Cost Selection MEM Ministère de 1'Energie et des Mines (Ministry of Energy and Mines) MW Megawatt NCB National Competitive Bidding OBA Output-Based Aid OMVS Organisation pour la Mise en Valeur du Fleuve Sénégal (Senegal River

Basin Organization) PCU Project Coordination Unit PETROSEN Société des Pétroles du Sénégal (Senegal National Petroleum Company) PIC Public Information Center PPA Power Purchase Agreement PPP Public-Private Partnership PRG Partial Risk Guarantee PRGF Poverty Reduction Growth Facility PRSC Poverty Reduction Strategy Credit PRSP Poverty Reduction Strategy Paper QCBS Quality and Cost Based Selection RE Rural Electrification RPF Resettlement Policy Framework SA Special Account SAR Société Africaine de Rqffinage (Refining Company) SENELEC Société Nationale d 'Electricité (National Power Utility of Senegal) SBD Standard Bidding Document SOE Statement of Expenditures SPC Special Purpose Company SPV Special Purpose Vehicle TA Technical Assistance WAPP West Africa Power Pool

Vice President: Obiageli K. Ezekwesili

Acting Country Director: McDonald Benjamin

Sector Manager: Lucio Monari

Project Team Leader: Stephan Garnier

ICR Team Leader: Stephan Garnier

SENEGAL ELECTRICITY SECTOR EFFICIENCY ENHANCEMENT PROJECT

PHASE 1, APL-1

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design ........................................................... 12. Key Factors Affecting Implementation and Outcomes ........................................................... 63. Assessment of Outcomes ...................................................................................................... 134. Assessment of Risk to Development Outcome ..................................................................... 175. Assessment of Bank and Borrower Performance .................................................................. 176. Lessons Learned .................................................................................................................... 217. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ....................... 22Annex 1. Project Costs and Financing ...................................................................................... 23Annex 2. Outputs by Component .............................................................................................. 24Annex 3. Economic and Financial Analysis ............................................................................. 25Annex 4. Bank Lending and Implementation Support/Supervision Processes ......................... 26Annex 5. Beneficiary Survey Results ....................................................................................... 28Annex 6. Stakeholder Workshop Report and Results ............................................................... 29Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ................................. 30Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ................................... 42Annex 9. List of Supporting Documents .................................................................................. 43

i

A. Basic Information

Country: Senegal Project Name:

SN - Electricity Sector Efficiency Enhancement - Phase 1, APL-1

Project ID: P073477 L/C/TF Number(s): IDA-40600

ICR Date: 01/25/2011 ICR Type: Core ICR

Lending Instrument: APL Borrower: GOVERNMENT OF SENEGAL

Original Total Commitment:

XDR 10.5M Disbursed Amount: XDR 3.3M

Revised Amount: XDR 10.5M

Environmental Category: B

Implementing Agencies: SENELEC Ministry of Energy and Mines

Cofinanciers and Other External Partners: N/A B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 10/21/2003 Effectiveness: 12/09/2005 12/09/2005

Appraisal: 03/21/2005 Restructuring(s): 12/28/2010

Approval: 05/17/2005 Mid-term Review: 07/31/2008 10/15/2008

Closing: 01/31/2009 12/31/2010 C. Ratings Summary C.1 Performance Rating by ICR

Outcomes: Unsatisfactory

Risk to Development Outcome: High

Bank Performance: Unsatisfactory

Borrower Performance: Unsatisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Unsatisfactory Government: Unsatisfactory

Quality of Supervision: Unsatisfactory Implementing Agency/Agencies:

Unsatisfactory

Overall Bank Performance:

Unsatisfactory Overall Borrower Performance:

Unsatisfactory

ii

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance

Indicators QAG Assessments

(if any) Rating

Potential Problem Project at any time (Yes/No):

No Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

Yes Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Moderately Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Central government administration 8 8

Power 92 92

Theme Code (as % of total Bank financing)

Infrastructure services for private sector development 50 50

Rural services and infrastructure 50 50 E. Bank Staff

Positions At ICR At Approval

Vice President: Obiageli Kathryn Ezekwesili Gobind T. Nankani

Country Director: Mcdonald Benjamin Madani M. Tall

Sector Manager: Lucio Monari Yusupha B. Crookes

Project Team Leader: Stephan Claude Frederic Garnier Michel Layec

ICR Team Leader: Stephan Claude Frederic Garnier

ICR Primary Author: Nourredine Bouzaher F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document)

The Project development objectives are to: (a) increase the electricity supply and the reliability and cost-effectiveness of electricity services; and (b) enhance the performance of key energy sector institutions.

iii

Revised Project Development Objectives (as approved by original approving authority):

The project development objectives were not revised during the life of the project. (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at Completion or Target

Years

Indicator 1: New generation facility of 67.5 MW commissioned (Kounoune I project) Value quantitative or qualitative

No plant New generating facility of 67.5 MW commissioned in 2006

Achieved (with delay)

Date achieved 12/31/2004 12/31/2006 01/31/2008 Comments (incl. % achievement)

The 67.5 MW Kounoune I IPP plant was commissioned in January 2008.

Indicator 2: Electricity sales increased Value quantitative or qualitative

1538 GWh in 2004

1875 GWh in 2007 Achieved (with delay)


1868 GWh in 2008, 1956 GWh in 2009 and 2100 GWh in 2010

Indicator 3: Reduction of interruption of power deliveries Value quantitative or qualitative

14 GWh in 2004

8 GWh in 2007 Not achieved


Undelivered energy increased and reached a peak in 2008 (105 GWh), 2009 (88 GWh) and up to 174GWh in 2010. It is expected to be higher (250GWh at the end of September) in 2011.

Indicator 4:

Reduction in SENELEC’s variable cost of generation and purchases (Sector indicator)

Value quantitative or qualitative

Index =100 for 2004 (*) (*) Imprecise baseline as it does not indicate the level of variable cost the base year index corresponds to.

Reduction of 7% by 2007 (based on the 2004 petroleum products price levels)

Not achieved


After a reduction in generation costs with the commissioning of new power generation facilities (Bel Air (60MW), Kahone (60MW) and Kounoune (67.5MW), the variable costs significantly increased in 2009-2010, due to the sharp increase in fuel prices and lack of maintenance of aged facilities. Senelec reported an increase in variable generation cost of about 50% compared to its level in 2004.

Indicator 5:

Decrease in technical and non-technical transmission and distribution losses (T&D) as a % of net generation (Sector Indicator)

iv


17.5% in 2004

15.5% in 2007

Not achieved


Increase in technical and non technical losses since 2004. As of December 2010, the level of losses was estimated at 21.4%.

Indicator 6: Monitoring and Evaluation (M&E) system for the energy sector set up. Value quantitative or qualitative

No M&E system in place

M&E system for the energy sector in place

Partially achieved


With the creation of an Audit Department within SENELEC, there has been progress in setting-up an M&E system for SENELEC’s Board. An M&E system for the entire energy sector (including SENELEC) is also under development at the Ministry level.

Indicator 7: New electricity tariff mechanism set up Value quantitative or qualitative

Existing tariff setting mechanism needs to be reviewed every 5 years

Existing tariff mechanism reviewed

Achieved


The tariff setting mechanism was reviewed twice during the life of the project. The last review took place in 2011 to establish an annual review and to account for variation of inflation in fuel prices on a monthly basis. However in 2011, the average tariff was still much below the cost of service.

Indicator 8: Adoption of a training program for public sector staff (SENELEC, Ministry of Energy and CRSE)


No training program in place

Adoption of a yearly training program for the public sector staff

Partially achieved


Each public entity prepared its own training program. However, due to the lack of financing the training program was not implemented every year.

Indicator 9: Implementation by GoS of PPP arrangements for SENELEC Value quantitative or qualitative

No decision as yet taken by GoS

PPP arrangements implemented by GoS

Partially achieved


Although two IPPs were contracted (with Kounoune Power financed under the project; and 125 MW coal based plant under construction), the Government did not define its detailed strategy for private participation in SENELEC (despite indicating its commitment to SENELEC’s reform with private participation in its Letter of Sector Policy in February 2008. However, preparatory work has been conducted during the project. A consultant has been recruited to accompany SENELEC and the authorities in the implementation of SENELEC’s unbundling. The studies to create an holding and three subsidiaries have been completed under the project. The accounting systems have been separated.

v

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1:

Beginning of construction by selected sponsors and commercial commissioning of the Kounoune I IPP


No Kounoune I IPP

Satisfactory operation of Kounoune I IPP (67.5 MW)

Achieved


The intermediate indicator does not indicate a target completion date. Plant construction was completed by end 2006 and fully commissioned by January 2008.

Indicator 2:

Award the contracts and completion of works relating to the transmission and distribution networks and rehabilitation of generation facilities


No contract awarded

Contracts awarded and work completed

Dropped


Activities related to this indicator have been cancelled and indicator dropped following the restructuring (cancellation of funds) of the project in December 2010.

Indicator 3:

Award of contracts and completion of Master plan studies for generation, transmission and distribution


No Master plans

Master plans completed

Achieved


The two Master Plans have been completed

Indicator 4: Completion of a communication plan. Completing/setting up of a Monitoring& Evaluation Database.


No communication plan in place and no M&E database

Communication plan completed and M&E database set up.

Partially achieved .


SENELEC’s communication strategy is still under preparation under own resources. With the creation of an Audit Department within SENELEC, there has been progress in setting-up an M&E system for SENELEC’s Board. An M&E system for the entire energy sector (including SENELEC) is also under development at the Ministry level.

Indicator 5: Implementation by GoS of PPP arrangements for SENELEC Value quantitative or qualitative

No new PPP arrangement in place

New PPP arrangement implemented

Partially achieved


Although two IPPs were contracted (with Kounoune Power financed under the project; and 125 MW coal based plant under construction), the Government did not define its detailed strategy for private participation in SENELEC (despite indicating its commitment to SENELEC’s reform with private participation in its Letter of Sector Policy in February 2008. However, preparatory work has been conducted during the project. A consultant has been recruited to accompany SENELEC and the authorities in the implementation of SENELEC’s unbundling. The studies to create an holding and three subsidiaries have been completed under the project. The accounting systems have been separated.

vi

G. Ratings of Project Performance in ISRs

No. Date ISR Archived

DO IP Actual

Disbursements (USD millions)

1 12/21/2005 Satisfactory Satisfactory 0.00 2 06/30/2006 Satisfactory Satisfactory 3.32 3 12/29/2006 Satisfactory Satisfactory 3.32 4 06/18/2007 Moderately Satisfactory Moderately Satisfactory 3.32 5 12/17/2007 Moderately Satisfactory Moderately Satisfactory 3.32 6 06/06/2008 Moderately Satisfactory Moderately Satisfactory 3.32 7 12/19/2008 Moderately Satisfactory Moderately Satisfactory 3.32 8 06/09/2009 Satisfactory Moderately Satisfactory 3.62 9 12/17/2009 Moderately Satisfactory Moderately Unsatisfactory 3.71

10 06/27/2010 Moderately Satisfactory Moderately Unsatisfactory 4.51 H. Restructuring (if any)

Restructuring Date(s)

Board Approved

PDO Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made

DO IP

12/28/2010 MS MU 6.2 See Section 1.7 below for more details

I. Disbursement Profile

1

1. Project Context, Development Objectives and Design

1.1 Context at Appraisal 1. The Senegalese authorities managed the economy well in 2003 and 2004, achieving robust economic growth and low inflation. The fiscal deficit and government indebtedness were maintained at sustainable levels. Progress in structural reforms continued, although at a slow pace. The macroeconomic outlook for 2005 appeared favorable, with continued vigorous economic growth, low consumer price inflation, and a sustainable fiscal position. The fiscal program for 2005 allowed for modest increases in current expenditure, kept the investment outlays in line with the absorptive capacity of the economy and foreign financing, and aimed at an ambitious but feasible revenue target. 2. The prudent fiscal policy preceding project approval was foreseen to continue over the medium term. The authorities strove to maintain low budget deficits, collect revenue efficiently, and tighten control on current expenditure to allow for measured increases in capital and pro-poor spending. They also kept an eye on the growth of contingent liabilities, including those arising from public enterprise borrowing and prospective public private partnerships in the implementation of investment projects. 3. Vigorous implementation of structural reforms, especially in the electricity and groundnut sectors, improvements in the business climate, and upgrades to the infrastructure sectors were seen as key to lowering the cost of production, raising the efficiency of the export sector, and preserving the external competitiveness of the economy. 4. The strong economic growth experienced over the years preceding project approval was however showing strains and structural weaknesses in various sectors were to blame. The electricity sector was beset by difficulties. The electricity generation, transmission and distribution facilities were old and in poor condition due to lack of investment and maintenance (about 30% of SENELEC’s production facilities were more than 25 years old). Its facilities could not therefore effectively meet the rapidly growing demand for electricity of about 25 to 35 MW per year (7 to 10% per year). Furthermore, the financial performance of the sector was poor and unable to provide the funds necessary to fill the investment gap generated by the demand growth. As a result, the utility’s operating costs were high and its finances were in a precarious situation. If major investments were not carried out in an effective and timely fashion, the utility’s financial and operational performance would have continued to deteriorate and the economy would have likely been damaged. 5. The GoS, in its Energy Sector Development Letter (dated April 9, 2003), stated that the main objective for the electricity sector is to secure a reliable supply of electricity services required by the economy and the population at the lowest possible cost. To meet this objective, GoS proposed three areas for action: (a) restructuring the generation,

2

transmission and distribution activities currently carried out by SENELEC; (b) promoting private sector participation for financing and improving the sector’s performance; and (c) increasing access to electricity services in rural areas. 6. On this basis, GoS prepared a ten-year investment program to be implemented in two phases to: (a) maintain and quickly increase the electricity supply and service reliability as needed by the economy and the population; (b) reduce costs of the electricity service; and (c) enhance the performance of key energy sector institutions. In the first phase (mid 2005-mid 2008), urgent investments were to be made to ward off the technical and financial deterioration of the electricity sector and to provide electricity services to the economy and the population. These investments should have been made earlier, but were neglected, as GoS’s efforts and attention were mostly focused on the privatization of SENELEC (in the late 90’s). In the second phase (mid 2008-mid 2012), investments were to be made to expand coverage and continue reducing costs through improving the efficiency of investment and strengthening of sector’s institutions. The government requested the donor community, including the Bank Group, to cofinance a substantial part of SENELEC’s investment program. The Bank decided to support part of the program through an Adaptable Program Loan (APL), Partial Risk Guarantees (PRGs) and IFC loans as well as potential MIGA support. 7. The main rationale for Bank involvement in the development of the energy sector was to support the implementation of the PRSP and GoS’s development and reform strategy for the energy sector. This was to be achieved through: (i) key investments in the energy sector, which would increase the level and the quality of energy services and reduce the costs of providing such services to the economy; and (ii) private investment and commercial financing in the electricity and petroleum subsectors. 8. The overall goal of the PRSP, considered by the World Bank Board on December 22, 2002, was to reduce poverty by more than half between 2001 and 2015. A CAS was presented and approved by the Board on April 17, 2003. It supported the GoS’s PRSP around the pillars of (i) wealth creation, and (ii) capacity building and development of social services. Per capita supply of infrastructure services in Senegal is low and a major objective of the CAS was to expand their supply, to lower service costs and to promote private sector development. The project was included in the base case scenario of the CAS.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 9. The main development objective of the program was to help Senegal provide reliable and cost effective energy services to support economic growth and poverty alleviation. Such program was to be implemented in two phases. Phase I (APL-1) main objective was to increase the installed capacity of the power system, and therefore, the availability of reliable electricity at lower costs, foster private sector participation in the energy sector, promote the development of Senegal’s hydrocarbon resources and strengthen the petroleum sector and the institutions of the energy sector.

3

10. The Electricity Sector Efficiency Enhancement Project (the Project) was designed to implement key activities of the first phase of the APL due to limitations in availability of IDA 13 resources. The objectives of the Project were to: (a) increase the electricity supply and the reliability and cost-effectiveness of electricity services; and (b) enhance the performance of key institutions of the energy sector. 11. The complete list of key indicators is given in section F: Results Framework Analysis above.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 12. The original project objectives and the key indicators1 were not revised over the life of the project.

1.4 Main Beneficiaries 13. The primary target groups were the Ministry of Energy and government owned enterprises under its control, more specifically SENELEC, the national power utility, the regulator, as well as the private sector, and the economy at large (industry, commerce and households).

1.5 Original Components (as approved) 14. To support the GoS ten-year investment program in the electricity sector, it was proposed that the Bank Group support for the Program includes an Adaptable Program Loan (APL), Partial Risk Guarantees (PRGs) and IFC loans as well as potential MIGA support. 15. The program was to be implemented in two phases. The Electricity Sector Efficiency Enhancement Project was designed to implement key activities of the first phase of the APL and use the allocated IDA 13 resources.

16. The Project (under IDA 13 available resources) consisted of the following parts:

Part A. Support to SENELEC (IDA Credit US$11.46 M; PRG of up to US$ 7.2 M and IFC A loan of up to Euro 17 M)

1 However, with the cancellation of the rehabilitations/reinforcement investments, the intermediate result indicator: Award of the contracts and completion of works relating to the transmission and distribution networks and rehabilitation of generation facilities) was dropped.

4

1. Strengthening SENELEC’s power generation, distribution, and transmission capacities, through: (a) the support to efforts to attract private investments in new electricity generation facilities; and (b) the rehabilitation and strengthening of its distribution and transmission networks;

2. Providing technical assistance to SENELEC to develop its master plan(s) for electricity generation, transmission and distribution; and

3. Supporting the preparation and implementation of a training program for

staff of SENELEC.

Part B. Institutional Strengthening and Project Monitoring and Evaluation (US$1.0 M) 1. Strengthening the Borrower’s implementation, monitoring and evaluation

capacities, including: (a) support for the design of a monitoring and evaluation system for the MEM; (b) support in the areas of Project implementation, management, coordination, administration, financial and technical audits, and environmental and social impact assessment and mitigation; and (c) carrying out studies on the strengthening of capacity of the energy sector in the long term; and

2. Providing advisory services to assist the Borrower in reviewing options for public/private partnerships for SENELEC.

Contingencies (US$1.25 M) and refinancing of the project preparation facilities (US$2.0 M)

17. To complete the APL Phase I activities, a second project (of about US$33.4 M) was to be submitted to the consideration of the Bank’s Executive Directors in early fiscal year 2006 as soon as IDA 14 resources would be available. The proposed allocation was US$17.9M to complete the activities of Part A, US$12.45M to complete activities of part B and US$ 3.0M unallocated. However this allocation never materialized for the APL.

1.6 Revised Components 18. Late December 2010, at the request of the Government of Senegal, the project was restructured to cancel the remaining project funds and closed, as scheduled, on December 31, 2010. The (delayed) rehabilitation/reinforcement of SENELEC’s existing transmission and distribution network under Component A1 could therefore no longer be financed under the project (see section 1.7 below for more details). It would be financed with SENELEC’s own funds.

5

1.7 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) 19. In 2006 and in the first months of 2007, Senegal suffered from a severe energy crisis evidenced by power shortages, low quality and high cost of energy services; increased dependence on expensive imported petroleum products, and deep financial problems in key government owned energy companies. The government requested the Bank to work with other donors on critical issues of the energy sector such as financial restructuring, institutional reform, diversification of energy sources, etc, through policy advice and financing. The Bank decided then to prepare a Development Policy Credit (DPC)2 of SDR 49.1 million (US$80 Million equivalent) instead of investment financing for the APL. 20. Then in the second half of 2010, instead of pushing ahead with the project, the Government of Senegal did not seek a further extension of the Credit closing date of December 31, 2010, and requested the cancellation of the rehabilitation component’s funds, because the length of extension needed to contract and execute pending rehabilitation works under the above subcomponent would be excessive (more than 2 years). There was also little likelihood, given the performance of the project that such an extension would have been granted had it been requested by the government. Therefore the project was restructured in December 2010 just before the closing date. 21. The restructuring of the project consisted in a partial cancellation of the Credit and a reallocation between Credit categories. At the Government’s request the Bank team first considered the recommitment of the undisbursed funds to the Senegal – Fifth Poverty Reduction Support Credit (PRSC V), subject to the following three key conditions: (1) adoption by the Recipient of an emergency plan acceptable to the Association designed to remove bottlenecks in the electricity sector and improve SENELEC’s financial situation, (2) Signed letter from the independent regulatory agency (a) stating that SENELEC’s request to establish a new tariff formula is receivable, and (b) indicating the schedule for the establishment of such formula, and (3) changes to SENELEC’s tariff structure or adjustment of SENELEC’s electricity tariffs to (a) produce additional revenues and (b) increase energy efficiency / improve demand-side management of energy resources. 22. Despite significant progress in reaching the three conditions, it was politically impossible for the Government to comply with the third condition (tariff increase) without significant restoration in the quality of service. The Bank decided then not to recommit the undisbursed funds under the PRSC V, but rather recommitted them under the Senegal – Tertiary Education Project approved in May 2011, as allowed under the

2 The DPC was designed to support the policy changes needed to restore the financial equilibrium of Senegal’s energy sector with particular emphasis on the electricity sub-sector as well as activities related to the importing, refining, storing and distributing petroleum products in Senegal

6

Investment Lending Reform approved by the Board of Executive Directors of the World Bank on October 22, 2009. The cancelled amount relates primarily to proceeds under the credit allocated to the rehabilitation of existing generation facilities and reinforcement of transmission lines, (SDR 6.4 million - approx USD9.7 million or 60 percent of the total credit amount) which, to date, has not been implemented. 2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry (including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy of participatory processes, as applicable) Soundness of preparatory work: 23. The ESEEP was a follow-up project to a major adjustment operation financed by IDA in the energy sector and also to the Electricity Services for Rural Areas Project approved by the Board of Directors in September 2004. As a result of the experience accumulated during the preparation and implementation of these two operations, the following were identified as important criteria for the ESEEP design: (a) fundamental sector reforms are essential to ensure continued and sustainable development of the energy sector and the pivotal role private sector participation has to play if the sector is to increase electricity coverage and support the growth of the economy; (b) sector reform, with emphasis on private sector participation, entails strong political commitment and public endorsement; (c) prioritization of investments based on technical, financial and economic merit, starting by rehabilitating and increasing the efficiency of existing investments, and increasing plant and equipment whenever justified; (d) strong donors’ support was seen as key to provide comfort to private investors and mitigate perceived risks, especially after two failed attempts at privatizing SENELEC, the national power utility, which undermined international investors’ confidence in the power sector of Senegal; and (e) need for realistic and simplified design and ownership by stakeholders. These lessons were, for the most part, formally addressed in the design of ESEEP but several misjudgments were made regarding government commitment, ownership of the project by SENELEC, coordination between the Ministry of Energy and SENELEC and the capacity of the sector to implement an however relatively modest program of rehabilitation of generation, transmission and distribution. 24. The preparation of the ESEEP took about one year and a half between the review of the concept of the project and the appraisal of the operation. This allowed for a project preparation facility advance to be deployed for preparatory work. However, despite detailed analytical work, the component 1 of the project was not fully prepared as the bidding documents for the rehabilitation component were not ready. Adequacy of government commitment: 25. Commitment to, and ownership of, the project were strong during project preparation on the Government side. During the project design, the GoS repeatedly expressed its interest in the Bank’s continuing support to the energy sector. However, the

7

very difficult dialogue between the Bank and the General Manager of SENELEC during project preparation led to the decision to locate the Project Implementation Unit (PIU) within the Ministry of Energy and not within SENELEC which resulted in a lack of ownership on SENELEC’s side and thus the very slow implementation pace. Assessment of risks: 26. The weakening of the financial position of SENELEC that was due to unwise investment and financing decisions, higher fuel costs not compensated by tariff adjustments, decrease in the collection rate and inability or unwillingness of the oversight institutions to carry out their responsibilities, was rightly identified and rated as “High” at appraisal and one of the major potential risks associated with the project. The following actions were proposed to manage this risk: (i) in the short run: (a) upfront agreement and close monitoring of SENELEC’s investment program financing and business plan, and a stricter process for capital budgeting and financing decisions 3 ; (b) revision of the electricity tariff adjustment formula, especially to allow for speedy adjustments to fuel prices changes; (c) strengthened role of SENELEC’s Board of Executive Directors; and (d) strengthened sector institutions. For the medium term, the involvement of private partners was seen as providing additional risk mitigation. 27. Financial covenants were also imposed on SENELEC but the conditions under which these covenants could be achieved were not investigated in depth nor were measures to that effect put in place. 28. There was an over optimism with respect to the Government’s readiness to proceed with forceful reforms in the power sector and on petroleum product sector pricing and reform. In addition, a lack of realism on the part of SENELEC and the Ministry of Energy concerning the coming into stream of new generation capacity, which would have changed the prospects of the sector in terms of greater capacity and lower cost through sizeable natural gas and coal-fired power plants, significantly affected SENELEC’s financial position and projections for financial self-sustainability.

29. The risk associated with lack of ownership by SENELEC, for the implementation of Part A of the project, at the early stages of project implementation was overlooked. This has delayed the project and stifled dialogue4. Finally, a modest risk was connected with the inability of central government and SENELEC to provide required counterpart contributions for investments; this assessment was correct since during project implementation, the GoS was fully committed to provide timely and sufficient counterpart funding, while SENELEC contributed its own share.

3 Several financial covenants were included in the Project Agreement of June 28, 2005, including a Debt Service Coverage Ratio, a Return on Assets requirement and a Financial Leverage Ratio.

4 Project implementation and dialogue improved up after the general manager was replaced by GoS in 2006.

8

Assessment of adequacy of project Design: 30. The Project’s strategy to focus on priority investments on the basis of technical, financial and economic merit criteria, made sense. The project therefore concentrated on cost effective investments such as the rehabilitation of existing power infrastructure. 31. Under budgetary constraints, the project design provided the right path for sustaining the sector while pushing forward the planning process for future investments to meet demand. Combining capacity building, institutional strengthening and investments under the ESEEP was also the right strategic choice. Outputs of the institutional component were directed towards establishing a suitable framework and an enabling environment for effective implementation of the physical investment component, such as the establishment of public-private partnerships for SENELEC. Two master plans for generation and transmission and, distribution, were prepared. However, underlying this planning exercise was the expectation of a turnaround in SENELEC’s financial situation so that it would be able to finance at least part of its investment program. This did not materialize.

32. However, the project was clearly underfunded compared to the Project Development Objectives which were overly ambitious in terms of efficiency improvement and did not directly relate to investments under the project. 33. Project design did not include the development of a strategy and action plan on power sector governance and petroleum product pricing and sector reform, to be dealt with during implementation. These issues were not seriously addressed during project implementation with severe consequences for SENELEC operational and financial performance.

2.2 Implementation (including any project changes/restructuring, mid-term review, Project at Risk status, and actions taken, as applicable) 34. The following factors had a major impact on the implementation of the project, as they prevented reaching the targets set for the key performance indicators of the project. 35. Difficult dialogue between the Bank and management of SENELEC: The delays at the start of the project were due to the very difficult dialogue between the Bank and the management of SENELEC until the end of 2006 when the General Manager of SENELEC was changed. The location of the project implementation unit within the Ministry of Energy was also the result of this difficult dialogue and this did not help project implementation. 36. Slow pace of implementation due to insufficient project readiness: In December 2008, just before the initial closing date and after three years of implementation, the commitment of IDA resources was slow and only a minor portion of the credit was disbursed ($2.51 million; or about 16% of the available IDA credit). Project's implementation lagged behind original estimates. The pace at which the project activities proceeded was not in keeping with initial forecasts. Not only were procurement

9

activities delayed but also, for some important components such as the rehabilitation of transmission and distribution lines were differed at the request of SENELEC and replaced by the rehabilitation of the Cap des Biches steam power station5. The lack of preparation of the bidding documents for Cap des Biches power station rehabilitation resulted in rebidding because the initial call for bids proved to be non responsive, further delaying project implementation.

37. However, this pace improved significantly in 2009 but came too late in view of the closeness of the closing date. As late as January 2010, several components were still being bid such as the rehabilitation of the Cap des Biches power station. 38. Persistent deterioration of SENELEC’s financial situation: The underlying theme of project implementation has been the persistent deterioration of SENELEC’s financial situation6 resulting in a severe cash flow crisis despite substantial financial support provided by the GoS. The Bank team intensified its supervision and support to both SENELEC and the Ministry of Energy but SENELEC’s focus of attention clearly shifted away from the project. 39. Significant increase in oil prices: The energy crisis of 2008, with a barrel at U$147 in July 2008, was exceptional in its severity. Fuel price increases had a detrimental effect on SENELEC’s recovery efforts and made difficult financial transfers by the government to the electricity sub-sector. SENELEC estimated that its variable costs increased by about 27% as a result of the fuel price increase. 40. Inadequate levels of tariffs: The formula for SENELEC’s revenue control that prevailed, between 2005 and 2009, was inadequate to ensure SENELEC’s financial viability on a yearly basis insofar as the formula took into account future, lower production costs in setting current prices. However, with the second revision of the tariff methodology, concluded in May 2010, the authorities decided to maintain the same approach (i.e. a price cap averaged over five years)7. 41. Insufficient action from both the Government and SENELEC: The supervision missions recommended a number of measures to expedite project implementation with a view to meeting the project objectives and disburse the available credit in a timely manner, including short term measures such as: (i) strengthening corporate governance of SENELEC; (ii) revising of the electricity tariff formula to

5 Agreed while extending the project closing date

6 The rapid deterioration in SENELEC’s financial position was caused by: (i) delays in generation investment which resulted in the rental of expensive generators, (ii) increase in the price of fuel, and (iii) insufficient tariff adjustments.

7 In February 2011, the Government made changes to the tariff setting formula. The frequency of the tariff review was reduced from 5 to 3 years with a yearly assessment of revenues needs and payment of tariff compensation on a quarterly basis.

10

improve SENELEC’s cost recovery; (iii) competitive fuel procurement to reduce costs; (iv) budgetary support to SENELEC; and (v) financial restructuring of SENELEC. Other measures were to be implemented within a longer timeframe: (i) diversification away from petroleum based power generation through the development of coal-fired and renewable energy such as hydro; and (ii) reform of the power sector’s structure. Some of these measures were also part of a package of measures agreed with the government during the preparation of the Senegal – Energy Sector Recovery Development Policy Credit which was approved by the Board in June 2008. However, despite the continuous dialogue with the Bank, the Government did not take sufficient actions to address these issues, in particular the problems of governance of the power and petroleum product sub-sectors.

42. SENELEC was focused on very short term issues to address load shedding, its financial situation and customer discontent: Another factor that had an impact on project implementation was the fact that SENELEC was mostly focused in managing a crisis situation, financial but also, given the extent of load shedding, technical and relational. Undelivered energy increased and reached peaks in 2008 (105 GWh), 2009 (88 GWh) and 2010 (174 GWh). It is expected to be even higher in 2011 (already 250 GWh at the end of September). Political pressure on SENELEC to find an immediate solution to load shedding was intense.

43. As a result of the above factors, implementation pace was extremely slow and about US$9.5 million or about 60% of IDA credit of US$15.7 million had to be canceled because a number of activities could not be carried out before the closing date of the project or were financed out of SENELEC’s own resources. Only studies and institutional support activities (but no physical investments) were carried out during the implementation period of the project

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 44. The baseline data for the indicators were prepared8 and the monitoring system was simple and based on measurable outputs. MEM, through the Project Coordination Unit (PCU) carried out the overall monitoring of the project and the achievement of output indicators and reported these quarterly to the Bank. The monitoring included a separate detailed reporting by SENELEC covering progress on physical implementation, procurement, financial commitments and other elements of project progress. There was close supervision of the operation by the Bank’s team based in Dakar with support as needed from Washington. There were regular meetings between MEM, SENELEC and IDA to review the progress in project implementation as well as the technical, commercial and financial performance of SENELEC.

8 Except for the reduction in the variable costs of SENELEC’s generation and energy purchases where the baseline was set at an index of 100 without indicating what level of variable costs this corresponds to.

11

45. As for results on the ground, the set of indicators proved to be relevant for sector related indicators but less for measuring specific outcomes of the project. As shown in Section F above, three indicators were achieved including one with delay, three were partially achieved and three were not achieved. Sustainability of M&E arrangements beyond the project implementation period could not be ascertained.

2.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution, as applicable) 46. Environment and social safeguards: Project design took into account the Bank’s safeguards policies and included procedures and implementation arrangements to ensure full consideration of environmental safeguards in accordance with OP 4.01. Specifically, guidance on procedures and arrangements for environmental screening, assessment, consultations, disclosure, as well as EMP monitoring during implementation, were clearly stated in the Project’s Operational Manual. On the social safeguards side, OP 4.12 was triggered since land acquisition was anticipated to result from some project components such as the Kounoune IPP. An EIA was completed in February 2004 for the Kounoune I IPP power plant and since the detailed engineering was not available for the rehabilitation of existing power facilities, a detailed Environmental Policy Framework and Resettlement Policy Framework were prepared, as well as a Public Consultation Plan. No new transmission lines were needed. The Consultation Plan and the conclusions were included in the EIA for the plant and were disclosed at the Bank’s Infoshop, the Ministry of Environment and SENELEC. Apart for Kounoune IPP, the project documentation did not reveal any social impact grievance as a result of implemented project components. 47. Kounoune IPP. The ESIA required a 500 meters buffer zone around the plant perimeter which resulted in land acquisition and resettlement. It was agreed following the Bank’s (and IFC) last meeting, in January 2010, with various stakeholders (including representatives from de “Département de l’Environnement et des Etablissements Classés (DEEC), the Ministry of Energy, the Mayor of Sangalkham, Kounoune Power” (KP), WB and IFC) that the 500m buffer zone requirement will be revised following a detailed risk assessment. Kounoune Power recently completed a Hazard Analysis report and submitted it to the DEEC for comments; the final draft has not yet been sent to IFC. The report will determine the outstanding problem of encroachment of the buffer zone around the plant. There is a community health and safety concern as commercial and residential construction continues within the 500 meter buffer designated around the plant and in some cases over the two gas and fuel pipelines that run parallel to the KP plant. There is no apparent solution in the immediate term; however the Hazard Analysis may result in a reduced buffer zone from 500m to 40 or 20m. It is likely that further resettlement may occur after the designation of the new buffer zone limitation. 48. With respect to the air quality impacts, the Supplemental EIA, predicted that the Senegalese air quality standards may be exceed for a limited number of hours (94 hours per year) for NO2 1-hour maximum standard and days (8 days per year) for SO2 24-hour maximum standard. In order to mitigate these, the Kounoune Project Sponsors have implemented mitigation measures and undertaken continuous air quality monitoring at

12

the location of the maximum impact and results shows that air quality standards have been respected over the last three years 49. Financial management. Over the last two years of the project implementation, financial management rating was unsatisfactory because of an inadequate management system at the Project Coordination Unit (PCU) of the Ministry of Energy, lack of coordination between this unit and SENELEC and the non reimbursement of an ineligible expenditure of about US$24,000. On the advice from the Bank, the PCU recruited an external assistance to help with carrying out the accounting and financial operations of the project as well as the preparation of financial statements and the financial follow up of the project and the Ministry of Finance reimbursed the ineligible expenditure. Although this has allowed an updating of the project’s accounts and the preparation of quarterly financial statements, it has not been deemed sufficient for a satisfactory financial implementation of the project. The 2009 accounts of the project were however certified without qualifications, although the auditors made recommendations for the improvement of internal project controls. While the audits were carried out in accordance with International Standards on Auditing each year, some reports were submitted with some delay. 50. Procurement: Major procurement issues were identified during project implementation that led to significant delays. Even taking into account the fact that SENELEC was in the midst of a grave financial crisis, the overall procurement capacity of SENELEC has probably been overestimated and as bidding documents were not ready ahead, procurement actions were taken with delay and to make things worse, important packages had to be rebid because they failed to attract responsive bids. Submission of prior review contracts to the Bank was sometimes late due to failures in coordination between SENELEC and the MEM. The delays and failures were noticeably fewer in the last year of the Project as all parties involved better understood and responded to the requirements.

2.5 Post-completion Operation/Next Phase (including transition arrangement to post-completion operation of investments financed by present operation, Operation & Maintenance arrangements, sustaining reforms and institutional capacity, and next phase/follow-up operation, if applicable) 51. In view of the continuing strong growth of electricity demand, SENELEC’s investment plans include power generation, transmission and distribution with a large role foreseen for the private sector especially in generation. However, unresolved tariff, collection and billing, and operational issues hamper SENELEC’s efforts to meet demand. These issues and lack of capital/equity make it difficult for SENELEC to access capital markets and private investors to finance supply expansion. 52. The Electricity Sector Efficiency Enhancement Project (the subject of this ICR) and a development policy operation (the Energy Sector Recovery Project) have, for various reasons, failed to turn the situation around particularly regarding SENELEC’s financial viability. The dramatic surge in oil prices in 2008 and the 2008-09 financial crises resulted in government budget slippages and various disruptions in fuel supply to

13

SENELEC in 2009 and 2010. In addition, despite several tariff adjustments between 2007 and 20099, the authorities did not set a tariff benchmarked to SENELEC’s revenues and performance because of customer affordability constraints and political economy considerations. The government found it politically impossible to pass through to consumers the whole of the cost increase through tariffs over a short period. Weakened by the food and economic crises, many consumers would have found difficult to cope with the price shock. The government was itself equally affected by the extra fuel cost and the reduction in fiscal revenues because of the economic crisis. It was therefore not in a position to effect budgetary transfers of the magnitude required to compensate SENELEC for fuel and other costs it incurred. 53. The appointment in October 2010 of a new Minister for the energy sector has brought a new impetus, vision and direction for energy sector recovery and reform. With support from international and national firms, the new Minister mandated the preparation of a major restructuring and recovery plan for the whole energy sector, based on a 360 degree diagnostic and audit. The diagnostic of the electricity sector carried out in October 2010 pointed to two main issues: one is the growing gap between fast growing demand and a limited, costly and unreliable supply of electricity and the other one is SENELEC’s persistent financial difficulties with a significant operating deficit and high indebtedness. 54. The Bank team supported the government and its team of consultants in the preparation of the 2010-2014 electricity emergency plan (Plan Takkal) aimed at (a) removing the electricity supply bottlenecks by ensuring additional power capacity prior to the commissioning of a coal-fired power plant scheduled for 2014/2015 and enhancing demand side management and energy efficiency; and (b) addressing SENELEC’s cash-flow and financing constraints.

55. The Bank has found this program relevant to address the issues of the electricity sector in Senegal and decided to support it through a new investment operation, which is being prepared for Board presentation in FY12. The Bank may provide assistance in the financing of transmission and distribution investments and in the deployment of prepaid and electronic meters both to improve SENELEC’s cash flow and reduce distribution losses.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation (to current country and global priorities, and Bank assistance strategy) 56. The general objectives and the activities supported by the ESEEP were fully relevant to the situation of the electricity sector in Senegal. The relevance of the project objectives is therefore rated high. The project objective, as stated in the PAD, focused on:

9 With the current energy mix, Senegal has one of the highest electricity tariffs in West Africa.

14

(a) increasing of the electricity supply and the reliability and cost-effectiveness of the electricity services; and (b) enhancing the performance of key institutions in the energy sector. However, as stated above, these objectives appear overly ambitious in relation with the limited scope of the project. 57. Although a number of the government’s policies, strategies, and priorities were reconsidered after the project was approved, the ESEEP objectives have been relevant and consistent, both at approval and during implementation. Developing access to electricity services, ensuring that SENELEC becomes an efficient utility and does not become an undue burden on the government’s budget and priorities, fostering private sector participation in all segments of the power industry in Senegal, and improving infrastructure and electricity service provision to the population constitute an important objective of Bank intervention in the sector (e.g. Energy Sector Recovery Development Policy Credit).

58. Such objective remains relevant to the current stage of Senegal’s development. Improving infrastructure service delivery has been a central theme in each of the past CASs throughout the life of the project, including the current CAS of May 2, 2007 covering the period 2007-2010. It supports the GoS’s PRSP around the pillar of wealth creation, including the building and maintaining basic infrastructure for growth. Per capita supply of infrastructure services in Senegal is low and a major objective of the CAS was to expand the supply of infrastructure services, to lower service costs and to promote private sector development.

3.2 Achievement of Project Development Objectives (including brief discussion of causal linkages between outputs and outcomes, with details on outputs in Annex 2) 59. The objectives of the project were only partially met: The increasing supply objective was met with delay through the commissioning of the Kounoune IPP project in 2008 and the electricity sales exceeded the target in 2010. The commissioning of the Kounoune HFO fired IPP of 67.5 MW that is now delivering energy to the grid on the basis of a 15-year Power Purchase Agreement with SENELEC is remarkable given the history of failed privatizations of SENELEC and the little appetite foreign investors had for investments in African power sectors. The targets related to the enhancement of the performance of energy sector institutions were also either not achieved or only partially achieved. The targets related to the adoption of a training program for public sector institutions and the adoption of a new electricity mechanism and those related to: (i) the setting up of a monitoring and evaluation system for the energy sector; and (ii) the implementation of public-private arrangements for SENELEC were achieved or partially achieved. 60. However, the targets related to the efficiency of SENELEC’s operations were not achieved. These concern in particular the reduction in undelivered energy, the reduction

15

in technical and non technical losses as well as the reduction of SENELEC’s variable costs10. 61. Other components were not implemented such as the rehabilitation of generation, transmission and distribution networks which will be financed by SENELEC’s and Government’s own funds because the contract award was made near the closing date and could not therefore be financed by the project, or, have seen their scope reduced11 such as the Capacity Building for SENELEC, the Communication and Project Monitoring and Evaluation, and the Capacity Building for the Energy Sector Institutions sub-components.

62. Furthermore, 60% of the credit had to be canceled and recommitted to the Senegal - Tertiary Education Project approved in May 2011, because a major component of the project (rehabilitation of generation units, transmission and distribution lines) could not be implemented. 63. Based on this assessment, the achievement of the PDO is rated unsatisfactory.

3.3 Efficiency (Net Present Value/Economic Rate of Return, cost effectiveness, e.g., unit rate norms, least cost, and comparisons; and Financial Rate of Return) 64. The economic analysis contained in the PAD may have overstated the benefits of SENELEC’s investment program. The following benefits were claimed: (i) provision of additional electricity supply to meet demand; (ii) fuel savings gained through the use of more efficient generating units; (iii) decrease in transmission and distribution losses and; (iv) system reliability improvements. 65. Least-cost optimization seeks to minimize the costs of generation. This includes operation and maintenance as well as fuel costs. Therefore, if a program is least cost, it already incorporates any fuel savings due to the use of more efficient mix and timing of generation technologies. It would therefore be double counting to claim fuel savings as a benefit of the program. Similarly, higher system reliability and lower system losses would translate as increased sales than otherwise would be the case. Therefore, claiming increased reliability and lower losses as additional benefits overestimates the benefits of the program to that extent. Furthermore, any investment included in the least-cost program is deemed itself least-cost and if the program is economically justified using either the consumers’ willingness to pay or current average tariff as a proxy to value the

10 The baseline for the latter was not clearly defined.

11 Originally, the Project was designed as a two-phase APL. Due to constraints on the IDA13 allocation, the financing of the APL1 was divided into two stages; the first stage was financed under IDA13, while the second stage was supposed to be financed under IDA 14. However the energy sector allocation under IDA 14 was not directed to ESEEP but instead to budget support through the Energy Sector Development Policy Credit referred to above. Some of the activities in Part B of the project were reduced in scope and had to be financed in part by SENELEC’s or Government’s own funds.

16

economic benefits of the program, then the specific investment itself is economically justified. 66. Nevertheless, without going into details, due to the low achievements of the project in contribution to SENELEC’s investment program, the project’s rate of return is negative (without taking into account the Kounoune IPP).

67. The Kounoune IPP was the most important investment under the project. If it were to be looked at independently of the whole of SENELEC’s investment program in generation/transmission, its rate of return has been conservatively estimated at 14% (initially forecasted at 26%) and the net present value at about US$23 million.

3.4 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs, and efficiency) Rating: Unsatisfactory 68. The overall outcome of the project has a high relevance in terms of increasing the supply of electricity in a system that was and continues to be subject to severe load shedding. However, the poor level of achievement of the project development objectives in terms of increasing the efficiency of the operations of SENELEC and enhancing the efficiency of sector institutions is detrimental to the rating. On this basis, the project’s overall outcome is rated unsatisfactory. Finally, one should recall that only about 40% of the funds made available by IDA under the project were used.

3.5 Overarching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above)

(a) Poverty Impacts, Gender Aspects, and Social Development

69. The direct impact of the Project on lower-income urban population and other vulnerable groups was not explicitly taken into consideration at appraisal, and no poverty analysis was conducted at preparation stage. Gender issues were not reflected at the preparation stage, neither was gender impact monitored during implementation. There are still shortages in the power system in Senegal and the population continues to be affected by the poor quality of service as shown by the increase in the indicator for undelivered energy.

(b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development)

70. The project’s institutional development impact, which is defined in ICR guidelines as the extent to which the project “has improved the agency’s or country’s ability to make effective use of its human and financial resources” is rated unsatisfactory. The development objective of the project “to enhance the performance of key institutions of the energy sector” is directly linked to institutional change and strengthening. The institutional strengthening component targeted provision of TA and training to the

17

Ministry of Energy and Mines (MEM) in support of the development of the capacity required for effectively discharging its responsibilities in the sector, and to parastatals, such as SENELEC and SAR, for improving their capacity to provide services more effectively. The scope of the sub-components related to institutional strengthening12 was reduced because of resource constraints under IDA 14. These activities were to be financed by SENELEC and MEM through own resources. Nevertheless, at project closing, the proposed training center for SENELEC was not created.

(c) Other Unintended Outcomes and Impacts (positive or negative) None

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes)

4. Assessment of Risk to Development Outcome Rating: High 71. The likelihood that some changes may occur that are detrimental to the ultimate achievement of the project’s development outcome is substantial. This development depends crucially on SENELEC’s ability to shoulder the regular payments mandated by the power purchase agreements with the Kounoune and other IPP projects. Therefore, if SENELEC’s financial deterioration is not stopped, the sustainability of power sector development through private sector participation will be in doubt. This is a serious risk given the history of frustrated private sector participation in the power sector of Senegal. Technical (such as those deriving from lack of maintenance), social, or environmental threats to the development outcomes may develop in the future if SENELEC’s operational and financial performance deteriorates further.

5. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues)

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase) Rating: Unsatisfactory 72. This ICR assesses the Bank’s performance during identification, preparation, and appraisal of the project as unsatisfactory. 73. The composition and balance of the Bank team was adequate. It consisted of four core sector specialists, six fiduciary and safeguards members. The project preparation period was relatively long (17 months between concept review and appraisal), which did

12 The Capacity Building for SENELEC, Communication and Project Monitoring and Evaluation, and Capacity Building for the Energy Sector Institutions sub-components.

18

allow to put in place the necessary arrangements for the Kounoune IPP power plant. The Borrowers’ compliance with Bank’s safeguard policies was adequately assessed. Strategic choices were appropriately made at the design and preparation stage such as (i) focus on rehabilitation and increasing efficiency, (ii) combining TA and investment capital, and (iii) focusing on sector’s institutional capacity.

74. However, despite a solid sector background work, the project failed to come to grip with the critical financial situation of SENELEC, it misjudged government commitment, and it underestimated the reluctance by the former manager of SENELEC at project inception to engage with the Bank team. Potential risks were rightly identified, but the assessment of the Government readiness to undertake necessary reforms on sector governance was overly optimistic.

75. In addition and as already stated, the project was clearly underfunded on the critical reform agenda with over ambitious PDOs and KPIs. The main investment component was not fully prepared by SENELEC which was clearly not pushing for the project and the location of the PIU was not adequate. Therefore, quality at entry, as a whole, is therefore rated as unsatisfactory. (b) Quality of Supervision (including fiduciary and safeguards policies) Rating: Unsatisfactory 76. The quality of project supervision carried out by the Bank is rated as unsatisfactory. 77. The quality of supervision was intensive in the second part of the project as the team was based in Dakar (from July 2007) and therefore in constant touch with all stakeholders. The team was proactive in responding to emerging issues and a changed political environment. Except during the first year of implementation, the supervision worked extensively with MEM to build up the operational capabilities of the PCU, prepare feasibility studies and bidding documents, and thus build the framework for accelerated rates of disbursement to happen in the following years of implementation. The 23 month extension of the project was mainly attributed to a) slow start of the project for the reasons discussed above, b) the need to fine-tune the investment component (i.e. to focus first on generation rather than on the transmission and distribution rehabilitations and finance instead the rehabilitation of the Cap des Biches power station13) and the institutional strengthening component, and c) rebidding after initial bids proved unresponsive.

13 The financing of the approved project was not sufficient for both generation and transmission and distribution subcomponents.

19

78. Bank supervision missions were engaged in continued and extensive policy dialogue with MEM, the Ministry of Finance, SENELEC, and the international donor community based in Dakar on sector issues. Advice provided during implementation was timely and of high quality which insured expedited process of subprojects preparation such as the master plans for generation and transmission and distribution. The supervision team comprised, on average, two to three sector specialists, fiduciary and safeguards specialists from the Bank’s regional office in Dakar and sometimes from headquarters in Washington, D.C. The supervision team provided substantial emphasis on monitoring indicators. Relations with the borrower were generally good, but sometimes tense especially when the team pressed the issue of SENELEC’s financial situation and how to address it.

79. Restructuring of the project came late: Unfortunately, despite all these efforts, the objectives of the project were not met. The restructuring of the project came rather late in the process; the Bank team should probably have proposed a project restructuring, including a complete review of the results indicators, earlier, probably during the Mid Term Review when the implementation ratings of the project started to deteriorate midway in the implementation of the project.

80. Focus shifted to the DPO: Despite the field-based supervision, the focus of the dialogue with the authorities and SENELEC shifted to the DPO which appeared to be more critical for sector recovery.

81. Sincerity of ratings: the DO ratings appear clearly overestimated and were based on expectation of project extension. The team should have rated the project unsatisfactory much earlier.

82. Based on above, the ICR rates project’s supervision as unsatisfactory. (c) Justification of Rating for Overall Bank Performance Rating: Unsatisfactory 83. The rating of overall Bank performance is Unsatisfactory, being Unsatisfactory at entry and Unsatisfactory during supervision.

5.2 Borrower Performance (a) Government Performance Rating: Unsatisfactory 84. The Government performance is assessed as Unsatisfactory (U) for the following reasons:

• The political will to implement energy sector reform did exist at the time of project startup, as evidenced in particular by the arrangements put in place for the Kounoune IPP and the decision to unbundle SENELEC. However, this political will weakened with SENELEC’s deteriorating financial situation as a result of oil

20

prices increases, delays in making investments and when it came to adjusting tariff, taking timely action to resolve implementation and policy issues, and enhancing the governance of sector entities. The focus clearly shifted toward the DPO.

• The government found itself in a bind between continuing budgetary transfers to the energy sector it could not sustain and increasing already high tariffs that would hurt consumers while not being able to bring on-stream the cost-reducing changes in energy generation mix quickly enough. The Government did not provide strategic support to address the persistent deterioration of SENELEC’s financial situation. The Government only provided palliative measures to address short term difficulties. As a result, SENELEC’s situation worsened, threatening sector’s objectives as well as the sustainability of private sector participation in the power sector in Senegal.

• Decision-making processes have, in general, been protracted and significant

ambiguities and uncertainties related to key aspects of sector reform have not been addressed, such as the pricing of electricity services and the true scope of the autonomy of the regulatory authority, as well as the reform of the petroleum sector downstream which has a bearing on the cost of fuel for power generation.

(b) Implementing Agency or Agencies Performance Rating: Unsatisfactory 85. This has been rated Unsatisfactory (MU) because of the following reasons:

• The Project Coordination Unit (PCU) played an important role in handling project-related administrative matters (procurement, contract management, progress reports, etc.). However, the coordination between the PCU located in the Ministry of Energy and SENELEC was not always effective. The PCU acted as a go-in-between the Bank and the agencies in the energy sector involved in the reform process. It did not have the capacity or the authority to address substantive issues. This situation has hampered the dialogue with each agency.

• Project implementation was also delayed because of SENELEC’s management

resistance to engaging with the Bank at the start of the project. This was resolved after about one year of project implementation when SENELEC management was changed by the Government. Project implementation, however, continued to suffer because SENELEC’s attention was focused on short term issues of ensuring adequate electric service under severe liquidity constraints.

(c) Justification of Rating for Overall Borrower Performance Rating: Unsatisfactory. see 5.2 (a) and 5.2 (b) above

21

6. Lessons Learned (both project-specific and of wide general application) 86. Small but too ambitious project with regard to significant sector needs. As explain above the project scope was not aligned with intended PDOs which were sector oriented. 87. Shifted of focus: The electricity sector in Senegal has gone through significant transformation (energy crisis, new leadership, and new approach to dealing with the issues in the sector). In that context, the Government’s most immediate effort has been to prepare a 2010-2014 electricity emergency plan aimed at ensuring additional power capacity prior to the commissioning of the coal-fired power plant scheduled for 2015; and lifting SENELEC’s cash-flow and financing constraints. In such context, it was difficult to get the focus of all parties involved in the implementation of a project limited in size and outcome. Both the Bank and its counterparts shifted towards trying to meet the second tranche release conditions of the Energy Sector Recovery Development Policy Credit. 88. Institutional arrangements. The institutional arrangement should have been designed in accordance with the beneficiaries of the main activities and the roles and responsibilities of each entity. The Ministry of Energy should have played a role of coordination entity (or a steering committee) and not an implementing unit. The dilution of responsibility resulted from the fact that the project was implemented at the Ministry of Energy whereas at least 80% of activities required the involvement of SENELEC for their execution. This situation has impacted negatively on the overall performance in addition to the lack of dedicated team for this project within the Minister’s office. 89. Importance of appropriate field-based team. An important lesson learned in many projects implemented by field based staff is that the rapidly changing circumstances of the sector required an intensive and continuous dialogue which becomes easier with the presence of sector teams in the field office. Another lesson learned through this project is that appropriate field based dialogue and supervision is only possible if human resources are adequate. When the team is overloaded, the quality of implementation of smaller projects could suffer. 90. Ownership of key design aspects and preparation issues. The resistance of some key actors during project design and preparation may have resulted in sub-standard solutions such as the location of the PIU. Similarly, the preparation of certain components (e.g., rehabilitation component) was not fully completed. Subsequently, the situation created serious implementation delays 91. Sequencing sector policy issues and an investment operation. Sector policy and strategy as well as the financial restructuring of SENELEC should have been the foundation of Bank intervention in the energy sector prior to any investment commitment. As it turns out, their absence had a detrimental effect on the achievement of project objectives.

22

92. Financial covenants. It serves no useful purpose to impose financial covenants that have little chance of being achieved. It is best to work on the conditions under which these covenants will be fulfilled. Financial covenants imposed on utilities in Bank supported projects often were not met. 93. Realism of IP/DO ratings and project extension. The operational policy that unsatisfactory projects should not be extended without management waiver can bring task teams to less realism in rating IP and DO unsatisfactory in the ISR prior to project extension.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies See annex 7 (b) Cofinanciers (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society)

23

Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Project Costs (US$ million)

Components/Activities Initial Actual/latest % of Appraisal

A1: Generation, Transmission and distribution rehabilitation and reinforcement

9.5 0.0 0

A2: Capacity Building for SENELEC

0.7 0.7 100

A3: Technical Assistance to SENELEC

1.7 1.7 100

B1: Communication and project monitoring and evaluation

0.5 0.3

60

B2: Energy Sector Long Term Development

1.1 1.7 155

B3: Capacity Building for the Energy Sector Institutions

0.7 0.2 29

Refinancing of Project Preparation facility (PPF)

2.3 2.3 100

Unallocated (Contingencies) 0.1 0 0

TOTAL 16.6 6.9 42

(b) Financing

Source of Funds

Appraisal Estimate

(USD millions)

Actual/Latest Estimate

(USD millions)

Percentage of Appraisal

Borrower 0.90 0.7 78 International Development Association (IDA)

15.70 6.2 39

24

Annex 2. Outputs by Component

Part A: Support to SENELEC Component Al: SENELEC- Generation, Transmission, Distribution Facilities

Commissioning of Kounoune Power

Procurement documentation for the Cap des Biches power station Component A2: Technical Assistance to SENELEC

Generation and Transmission Master Plan

Distribution Master Plan Part B: Institutional Strengthening and Long Term Development of the Energy Sector

Options for private sector participation in the power sector of Senegal

SENELEC unbundling documentation

Minutes of Stakeholders’ Workshop

25

Annex 3. Economic and Financial Analysis (including assumptions for the analysis)

KOUNOUNE I IPP

Plant nominal capacity 67.5 MW

Plant capacity factor 70%

Generation 414 GWh

Use 1st year 70%

2nd year 80%

3rd year‐20th 100%

Station use &

T&D losses 18%

Average tariff 18 Uscents/kWh

Estimated cost 80 US$ Million

O&M 3% of invest costs

HFO price 70 US$/bbl

bbl 159 liters

Fuel use 250 gr/kWh

Station use Net Sales Net Sales Net Benefits

Invest. Cost O&M Costs Fuel CostTotal Costs Generation T&D Losses (GWh) (US$ M) (US$ M)

(US$ M) (US$M) (US$) (US$ M) (GWh) (GWh)

2006 16 0 0 16 0 0 0 0 ‐16

2007 40 0 0 40 0 0 0 0 ‐40

2008 24 2.4 32 58 290 52 238 43 ‐16

2009 2.4 36 39 331 60 272 49 10

2010 2.4 46 48 414 75 339 61 13

2011 2.4 46 48 414 75 339 61 13

2012 2.4 46 48 414 75 339 61 13

2013 2.4 46 48 414 75 339 61 13

2014 2.4 46 48 414 75 339 61 13

2015 2.4 46 48 414 75 339 61 13

2016 2.4 46 48 414 75 339 61 13

2017 2.4 46 48 414 75 339 61 13

2018 2.4 46 48 414 75 339 61 13

2019 2.4 46 48 414 75 339 61 13

2020 2.4 46 48 414 75 339 61 13

2021 2.4 46 48 414 75 339 61 13

2022 2.4 46 48 414 75 339 61 13

2023 2.4 46 48 414 75 339 61 13

2024 2.4 46 48 414 75 339 61 13

2025 2.4 46 48 414 75 339 61 13

2026 2.4 46 48 414 75 339 61 13

2027 2.4 46 48 414 75 339 61 13

2028 2.4 46 48 414 75 339 61 13

PV, NPV (US$ Million) $391.92 $2,303.10 $414.56 $22.64

IRR 14%

26

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(b) Task Team members

Names Title Unit Responsibility/

Specialty Lending Thanh Lu Ha Senior Program Assistant AFTEG Ignatius A. Menezes Consultant AFRVP

Supervision/ICR Fabrice Karl Bertholet Sr Financial Analyst AFTEG Moez Cherif Sr Energy Econ. AFTEG Bourama Diaite Senior Procurement Specialist AFTPC Anta Tall Diallo Program Assistant AFCF1 Saidou Diop Sr Financial Management Specia AFTFM Philippe J-P. Durand Program Coordinator AFTEG Alain Ebobisse Chief Investment Officer CNGIV Maimouna Mbow Fam Sr Financial Management Specia AFTFM Kwawu Mensan Gaba Lead Energy Specialist SASDE Stephan Claude Frederic Garnier

Senior Energy Specialist AFTEG

Thanh Lu Ha Senior Program Assistant AFTEG Fatouma Toure Ibrahima Wane

Senior Financial Specialist AFTEG

Amadou Konare Sr Environmental Spec. AFTEN Michel E. Layec Lead Energy Economist LCSEG Sunil W. Mathrani Senior Energy Specialist AFTEG Cheikh A. T. Sagna E T Consultant AFTCS Ibrah Rahamane Sanoussi Procurement Specialist AFTPC Awa Seck Senior Economist AFTEG Seynabou Thiaw Seye Program Assistant AFCF1 Fily Sissoko Lead Financial Management Spec AFTFM Pierre C. Vieillescazes Consultant MNSED Eric Jean Yoboue Senior Procurement Specialist AFTPC Noureddine Bouzaher ICR Primary Author/Consultant AFTEG

(c) Staff Time and Cost

Stage of Project Cycle Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending FY01 0.34 FY02 1 2.94 FY03 16 110.71 FY04 20 155.07

27

FY05 58 345.06 FY06 0.00 FY07 0.00 FY08 0.00

Total: 95 614.12 Supervision/ICR

FY01 0.00 FY02 0.00 FY03 0.00 FY04 0.00 FY05 0.00 FY06 38 131.74 FY07 38 181.29 FY08 28 90.07 FY09 6 0.00 FY10 FY11

Total: 110 403.10

28

Annex 5. Beneficiary Survey Results (if any)

Not applicable.

29

Annex 6. Stakeholder Workshop Report and Results (if any)

Not applicable.

30

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR I – Conclusions of the Borrower’s ICR. (The full contribution in the original French language is given below) “Difficulties experienced and flaws of the project

Quality of the project indicators Project performance indicators do not measure the true performance of the project. They describe the results of SENELEC well but do not address the use of human and financial resources of the project nor with its timely implementation.

Difficulties to adapt to World Bank procedures Often World Bank procedures for the preparation of bidding documents appeared too complex for the people in charge of the project, particularly within SENELEC, used as they were to their own bidding documents format. Several bidding documents were rejected because they did not contain the correct information or the format used was not the proper one.

Problems encountered by the Project Management Unit (PMU) During the first years of implementation, the PMU lacked sufficient accounting and support staff to monitor the components of the project. The lack of knowledge of Bank procedures made things worse. The change of management that took place in 2009 improved the situation significantly. In addition, the lack of definition of fiduciary responsibilities between SENELEC and the coordination unit had a negative impact on the project. The 80% allocation of the Credit resources to SENELEC was not accompanied with a proportionate transfer of responsibilities in terms of monitoring and reporting.

Lack of communication with the donor During the first phase of the project from December 2005 to July 2007, no mean of communication with the donor was available, except for letters that often went unanswered. The appointment of an energy expert in Dakar has been helpful because it is with this expert’s presence in the field that project implementation really started.

31

II – Full Borrower Contribution (see below) République du Sénégal Un Peuple – Un But – Une Foi ______ Ministère de la Coopération Internationale, des Transports Aériens des Infrastructures et de l’Energie ______ Projet de Renforcement du Secteur de l’Electricité (PRESELEC) Rapport d’achèvement du Projet de Renforcement de l’Efficacité du Secteur de l’Electricité (Preselec) : Crédit IDA 4060/SE

I. Introduction : Afin d’accompagner le Sénégal dans sa stratégie de garantir aux populations un service électrique de qualité aux moindres coûts dans le but de soutenir la croissance économique et la politique de réduction de la pauvreté, l’Association Internationale pour le Développement (IDA) a mis à la disposition du Gouvernement un crédit (IDA 4060/SE) de 10,5 millions de DTS (droits de tirage spéciaux) soit 15,71 millions de dollars US aux taux de change initiaux, et une garantie de 6,5 millions de dollars US au profit de la centrale privée de Kounoune 1, en 2005, à travers le Projet de Renforcement du Secteur de l’Electricité (PRESELEC). Ce projet approuvé par le Conseil d’Administration de la Banque Mondiale, le 17 Mai 2005, est l’objet de la convention de financement signée le 28 Juin 2005. L’entrée en vigueur du PRESELEC est intervenue le 08 Décembre 2005 et la date de clôture du projet était fixée au 31 Janvier 2009. Un second accord spécifique précisant le programme à financer, les objectifs spécifiques que Senelec devait atteindre et les indicateurs de performance a été validé entre la Banque Mondiale et Senelec en 2008. Le 27 Janvier 2009, le Gouvernement du Sénégal a demandé et a obtenu une prolongation du projet jusqu’au 31 Décembre 2010 et une réallocation des ressources du projet à d’autres investissements. Le crédit IDA 4060/SE mis en place se décompose en quatre parties :

La partie A : Appui à la SENELEC, d'un montant de 11,46 millions $ US. Elle concerne les actions prioritaires devant permettre à la SENELEC de renforcer sa

32

capacité de production, et de remettre en état les parties critiques de son système de transport et de distribution.

La partie B : Développement institutionnel, d'un montant de 1 million $ US. Elle prend en charge les actions urgentes pour la réforme du secteur de l'électricité et le renforcement de capacités des institutions chargées de la gestion et de l'administration du secteur de l'énergie.

Les crédits non alloués, d'un montant de 1,25 millions $ US, qui devaient permettre, également, de prendre en charge certaines actions prioritaires non prévues aux parties A et B.

La ligne Refinancement du PPF, d'un montant de 2 millions $ US. Elle prend en charge le remboursement de dépenses déjà supportées par SENELEC dans la mise en oeuvre du projet Kounoune 1.

…/… II. Objectifs du projet

L'objectif principal du programme est d'aider le Sénégal à fournir des services énergétiques fiables et rentables dans le but de soutenir la stratégie de croissance économique et la réduction de la pauvreté. Pour atteindre cet objectif, le Sénégal, à travers le Programme, devait assurer, dans la première phase :

une meilleure disponibilité et fiabilité de la distribution de l'électricité à des coûts plus compétitifs ;

la réforme du sous-secteur de l’électricité et le renforcement des institutions chargées de sa gouvernance.

Pour atteindre cette cible, l’allocation suivante a été initialement approuvée. Catégories Montants alloués (DTS)

1. Travaux partie A (A1) 5 700 000 2. Biens et équipements 400 000

Partie A (A2) 100 000 Partie A (A3) 100 000 Partie B (B2) 200 000

3. Services de consultants 2 030 000 Partie A (A3) 1 550 000 Partie B (B1) 140 000 Partie B2 (B2) 340 000

4. Renforcement de capacités partie A (A2) 160 000 5. Dépenses de fonctionnement 40 000 6. Refinancement du PPF 1 340 000 7. Ressources non allouées 830 000

TOTAL 10 500 000

33

En décembre 2010, une partie des ressources initialement allouées au Projet a été annulée soient 6.400.000 DTS. Les ressources restantes ont fait l’objet d’une réallocation qui se présente comme suit :

Category

Amount of the Credit by Category Pre Re-Allocation and Cancellation (SDR)

Amount of the Credit by Category Post Cancellation (SDR)

Amount of the Credit by Category Post Re Allocation (SDR)

1 Works under: (a) Part A.1

5, 400,000

0

0

2 Goods under: (a) Part A.1 (b) Part B.1 (c) Part B.3

1, 000,000 85,000 170,000

0 85,000 170,000

0 0 100,000

3 Consultants’ services under: (a) Part A.3 (b) Part B.1 (c) Part B.2 (d) Part B.3

1, 090,000 100,000 600,000 210,000

1, 090,000 100,000 600,000 210,000

1, 090,000 100,000 965,000 0

4 Training and Travels under: (a) Part B.1 (b) Part B.2 (c) Part B.3

50,000 100,000 50,000

50,000 100,000 50,000

50,000 100,000 50,000

5 Operating Costs (Part B) 80,000 80,000 80,000 6 Refunding of Project

Preparation Advance 1, 490,343

1, 490,343

1, 490,343

7 Unallocated 74,657 74,657 74,657 TOTAL 10, 500,000 4, 100,000 4, 100,000 L’annulation d’une partie des ressources (6,4miilions de DTS), sur la demande du Gouvernement du Sénégal, s’est traduite par une baisse substantielle de la dotation initiale qui passe de 10,5 millions de DTS à 4,1 millions de DTS. La mise en œuvre du projet a été assurée par deux structures à savoir : la Senelec qui assurait la mise en ouvre des activités de la composante A en relation avec la Banque et l’Unité de Coordination, mise en place au niveau du Ministère en charge de l’Energie, qui assurait la mise en œuvre des activités de la composante B. II.1. Les objectifs de la partie A se déclinent selon 3 sous composantes :

A1 : Equipement de production, transport et distribution

34

Cette sous composante avait pour objet l’accompagnement de la construction de centrales thermiques par des opérateurs privés, la réalisation d’équipements de distribution ainsi que la réhabilitation d’équipements de transport.

A2 : Renforcement de capacités Cette sous composante visait le renforcement des capacités de la Senelec en matière de préparation de ses plans directeurs (production/transport/distribution).

A3 : Assistance Technique Cette sous composante visait l’appui à la préparation et l’exécution d’un programme de formation du personnel de Senelec. Parallèlement, Senelec s’était engagée à atteindre les objectifs suivants à la fin du programme :

Augmenter les ventes d’électricité qui devaient passer de 1538 GWh en 2004 à 1875 GWh en 2008, soit une croissance de 20 % sur la période ;

Signer le contrat d’achat d’électricité de Kounoune II au plus tard, le

31 décembre 2006 ;

Réduire les délestages à 8 GWh en 2007 contre de 14 GWh constatés en 2004, soit une baisse de 40 % ;

Réduire de 7 % à horizon 2007, les coûts variables de la production et d’achat d’électricité ;

Réduire les pertes techniques et non techniques à 15,5% en 2007 (en pourcentage de la production nette) contre 17,5 % en 2003, soit une amélioration du rendement de 2 points ;

Mettre en œuvre le partenariat public/privé pour la SENELEC avant le 31 décembre 2007.

II.2. Les objectifs de la partie B se déclinent selon 2 sous composantes

B1 : Renforcement des capacités de l’emprunteur Cette sous composante était destinée au renforcement des capacités de l’emprunteur en matière d’exécution, de suivi et d’évaluation de projet par : a) la mise au point d’un système de suivi et évaluation destiné au Ministère en charge de l’énergie ; b) un appui en matière d’exécution, gestion, coordination, administration, suivi et évaluation du projet, y compris les audits financiers et techniques, et en matière d’évaluation des effets sociaux et environnementaux et de réduction desdits effets ; c) réalisation d’études pour le renforcement des capacités long terme du secteur de l’énergie.

35

B2 : Etudes des options de partenariat privé/public pour la Senelec Cette sous composante devait aider à soutenir la réflexion sur les réformes structurelles de Senelec.

III. Résultats et impacts du projet III.1. Résultats composante « A » du Projet III.1.1 Les indicateurs de performance Indicateurs Objectifs

Réalisations Observations

Les ventes d’électricité en 2008

1875 GWh 1806 en 2007 2069 en 2008

Accroissement de 34% contre un objectif de 20% sur la période 2004-2008.

Accord sur le power purchase agreement de Kounoune II

31 Décembre 2006 2007 Le projet de kounoune II n’a pas été mis en œuvre du fait la crise pétrolière de 2008

Délestages 8 GWh en 2005 29,74 GWh 92, 8 GWh en 2006 75,8 GWh en 2007

Le niveau de délestage constaté est largement supérieur au niveau visé

Coût variable de production et d’achat d’énergie

Réduction de 7% -Production : 47,9 à 61,1 F/kWh F/kWh

Sur la période une augmentation de 27% du coût variable est constatée contre un objectif de baisse de 7% par rapport à 2004.

Pertes techniques et non techniques

15,5% en 2007 18,8% en 2007 Le pertes techniques et non techniques ont augmenté sur la période 3,3 points contre face à l’objectif de baisse de 2 points par rapport a son niveau de 2003

Ouverture du Capital de Senelec au privé

31 Décembre 2007 2010

Les Ventes d’électricité

L’accroissement des Ventes est dû à l’augmentation de la clientèle de l’ordre de 10% par an. Cet accroissement de la clientèle est à conjuguer avec un taux d’équipement des ménages en croissance.

Les délestages Le niveau de délestages n’a pas baissé comme souhaité en raison :

des retards dans la mise service du projet de Kounoune 1 (67,5 MW) ;

36

de la non signature du projet Kounoune II due en partie à la délocalisation de la centrale sur le site de Kaolack et du surcoût relatif au génie civil et à la partie électrique ;

de la baisse de l’hydrologie de Manantali.

Les pertes techniques et non techniques Les pertes techniques et non techniques ont augmenté du fait de la recrudescence de la fraude. En revanche, la mise en œuvre des grands projets de Senelec dans les réseaux de Transport et de Distribution a contribué à réduire les pertes techniques.

Les Coûts Variables Le coût variable a augmenté en raison :

du retard dans la mise en service de Kounoune I et Kounoune II ; de la baisse de l’hydrologie de Manantali ; de la location de groupes de 50 MW très coûteux en 2005 et 2006 ; de l’utilisation de centrales de pointe coûteuse en quasi-base alors que

ces centrales doivent être utilisées que deux heures par jour ; de l’augmentation de près de 400% des coûts de combustible ; des arrêts de la centrale privée GTI.

Concomitamment, le prix moyen de cession de l’électricité a accru de 20% passant de 78,5 F/kWh en 2007 à 99,9 F/kWh en 2008.

Privatisation de Senelec La Senelec n’a pas trouvé de partenaire privé malgré les efforts déployés dans ce sens. III.1.2 Exécution Dans cette partie, nous passons en revue les projets d’investissements pour préciser leurs états d’avancement et les obstacles rencontrés dans leur exécution.

Appui aux efforts pour attirer les investisseurs privés S’agissant du projet de centrale Kounoune 1 d’une capacité de 67,5 MW, la Banque a mis en place une garantie partielle de risque et un financement rétroactif sur des actions de préparation du projet que Senelec avait préfinancé. Les dépenses ont été remboursées à hauteur de 478 000 dollars, le 25 Avril 2007.

Réhabilitation du réseau de Distribution et des Lignes de Transport En ce qui concerne les projets d’infrastructures (lignes de Transport, de Distribution), le taux de réalisation est resté très faible depuis la mise en vigueur du projet.

37

Le 25 Janvier 2007, lors d’une réunion Etat-Banque Mondiale, en raison des difficultés que Senelec rencontrait pour satisfaire la demande et des nombreux délestages qui s’en sont suivis, la Senelec a souhaité la réaffectation du financement réservé à ce volet au programme de réhabilitation de ses principales centrales de production. Une réunion de recadrage s’est tenue le 27 Juillet 2007 dans les locaux de Senelec et un plan d’actions a été défini avec les principaux acteurs pour atteindre des objectifs à court terme. Le programme d’investissement se résumait depuis cette date à la réhabilitation des centrales 301,302, 303 et la réhabilitation des lignes de transport de Senelec. Les DAO sur ces projets ont été transmis respectivement le 26 Octobre et le 22 Novembre 2007 à la Banque Mondiale pour ANO. Une première réunion d’échanges s’est tenue au siège de la Banque Mondiale, en Janvier 2008, pour recueillir les observations sur ces TDRs. Tenant compte de ces observations, Senelec a soumis à la Banque Mondiale de nouvelles versions de ces TDRs, les 07 et 13 février 2008. Une version des TDRS sur la réhabilitation du réseau de Transport a été transmise le 27 Octobre 2008. Cependant, vu que le coût du projet de réhabilitation de la centrale Cap des Bîches n’était pas connu, la Banque Mondiale et Senelec ont pris, d’un commun accord, la décision de suspendre tous les autres projets d’infrastructures jusqu’au dépouillement des offres sur la réhabilitation du groupe 302. Une fois que le coût de l’offre connu, les autres consultations pourraient se poursuivre. Une version des TDRS sur la réhabilitation des groupes a été transmise le 22 Mai 2008. Un premier avis de non objection sur la réhabilitation des centrales a été donné le 01 Juillet 2008 et l’appel d’offres pour ce projet a été lancé le 11 août 2008 en trois lots. La remise des offres a eu lieu le 12 novembre 2008. Malheureusement, aucune soumission n’a été enregistrée pour le lot 1. S’agissant des lots 2 et 3 deux soumissions ont été reçues avec des écarts de prix très importants. La Banque Mondiale n’a pas donné son ANO sur ce projet et a souhaité la reprise du dossier. Le dossier d’appel d’offres a été relancé et Senelec a reçu plusieurs offres. Le rapport de la commission technique étant transmis, la Senelec a obtenu l’avis de non objection de la Banque. Cependant, la durée des travaux étant de 12 mois, il n’était pas possible d’adjuger le contrat, car la date de clôture du projet était prévue le 31 Décembre 2010. Il en a résulté un arrêt du projet qui, en définitive, n’a pas été exécuté et les ressources qui lui étaient dédiées ont été annulées sur demande du Gouvernement du Sénégal.

38

Plans Directeurs de la Senelec Cette composante du Preselec concerne le financement de deux études de schémas Directeurs à l’horizon 2030. Le schéma directeur production transport et distribution a été réalisé par SNC LAVALIN aux coûts suivants :

Schéma Directeur Distribution et Système d’information géographique : 344 398 Euros.

Schéma Directeur Production-Transport : 563 400 $CAN.

Monitoring environnemental Ce volet n’a pas été exécuté par la Senelec. III.2. Résultats de la composante « B » du Projet Indicateurs Résultats Commentaires

1) Développement à long terme et perspectives

Réalisé Les travaux de séparation comptable et de dégroupage des activités de la Senelec en trois filiales Production-Transport-Distribution/vente ont été réalisés.

2) Suivi évaluation de projet Partiellement réalisé Le logiciel de gestion de projet n’a pas été acquis. Toutefois, l’unité de gestion a eu recours à un cabinet d’assistance comptable.

3) Renforcement des capacités de l’emprunteur

Partiellement Réalisé Un plan de renforcement de capacité a été exécuté en 2010 au profit des différentes directions du Ministère en charge de l’Energie. Toutefois les renforcements de capacité de la commission de régulation et de la structure qui avait en charge la conduite de la réforme institutionnelle de Senelec n’ont pas été exécutés.

Les dépenses réalisées sur les fonds du projet au titre de la partie B s’élèvent à 860.261.085 F CFA contre une dotation de 1.075.154.707 F CFA, soit un taux de décaissement de 80%. Sous-composante 1 « Biens équipements » Les dépenses réalisées au titre de la composante « biens et équipements » se chiffrent à 72.586.613 FCFA. Elles correspondent à des acquisitions de matériel roulant et de matériel informatique au profit du Ministère en charge de l’Energie et des structures

39

administratives sous tutelles. Ces acquisitions ont été effectuées au cours des années 2006 et 2007. Sous-composante 2 « Services Consultant » Les dépenses au titre de cette composante se chiffrent à 638.077.369 FCFA. Elles concernent les dépenses de suivi évaluation à hauteur de 75.856.605 FCFA et les dépenses relatives à l’évolution institutionnelle de la Senelec à hauteur de 562.220.764 FCFA. En effet, afin de piloter la réforme de la Senelec, le Gouvernement avait mis en place un Groupe Technique Ad hoc (GTAH). Les dépenses relatives à ses travaux ont été prises en charge par le PRESELEC. Il s’agit notamment du recrutement d’un consultant individuel qui a accompagné le GTAH et le consultant RTE France, qui a réalisé les études et travaux relatifs au dégroupage des activités de la Senelec. Egalement, un consultant individuel a été recruté dans le cadre de la rédaction de la lettre de politique sectorielle adoptée par le Gouvernement en 2008. Compte tenu de la situation particulièrement difficile que traverse le secteur de l’électricité, le Gouvernement a décidé d’arrêter le processus devant conduire au dégroupage des activités de la Senelec en trois filiales avec la participation du privé dans le capital de l’entreprise. Toutefois, les travaux de séparation comptable et de délimitation des frontières de la production, du transport et de la distribution déjà réalisés et validés seront mis en œuvre. Ils permettront d’améliorer la transparence des coûts et faciliteront l’identification des niches d’inefficacité dans la chaine de valeur de la Senelec. Sous-composante 3 « Renforcement de capacités » Les dépenses au titre de cette composante se chiffrent à 109.116.002 FCFA. Elles correspondent à des formations ponctuelles réalisées en 2008 à hauteur de 13.229.844 FCFA et à la mise en œuvre, en 2010, d’un plan de renforcement de capacité plus global pour le Ministère et ses structures. Les dépenses au titre de ce chapitre se chiffrent à 82.564.693 FCFA. Le plan de renforcement de capacités a été au bénéfice du personnel d’encadrement et du personnel d’appui du Ministère en charge de l’Energie, de la Direction de l’Electricité, de la Direction des Hydrocarbures et Combustible Domestiques, de la Direction de l’Economie et de la Maitrise de l’Energie et du Comité National des Hydrocarbures. Le renforcement de capacité a porté, entre autres, sur :

la planification opérationnelle et la gestion des programmes publics ; le suivi évaluation des programmes publics et systèmes d’information ; le management budgétaire public ;

40

le système d’archivage électronique ; l’économie et management de l’aval pétrolier ; la gestion financière de projets ; la communication ; la gestion des ressources humaines.

Le renforcement de capacité prévu au profit de la Commission de Régulation du Secteur de l’Electricité n’a été mise en œuvre par la structure concernée. Sous-composante 4 « Dépenses de fonctionnement » Les dépenses de cette composante se chiffrent 40.481.101 FCFA.

IV. Difficultés et insuffisance du projet

Qualité des Indicateurs du projet Les indicateurs définis pour l’évaluation du projet ne traduisent pas les performances réelles du projet. Ils décrivent bien les résultats de la Senelec mais ne s’intéressent pas à l’utilisation des ressources humaines et financières du projet ni à la réalisation du projet, dans les délais impartis.

Difficultés de s’adapter aux procédures de la Banque Mondiale Souvent les procédures de la Banque Mondiale en matière de préparation de DAO semblaient trop compliquées pour les responsables du projet, notamment au niveau de la Senelec, habitués à leurs propres formats d’appels d’offres. Plusieurs dossiers ont été rejetés car les rubriques étaient mal renseignées ou le dossier utilisé n’était pas conforme au type d’appel d’offres.

Difficultés de l’unité de gestion du projet Pendant les premières années de l’exécution du projet, l’unité de gestion a été confrontée à un manque de ressources humaines comptable, personnel d’appui pour assurer le suivi et l’évaluation des composantes du projet allié à un défaut de maîtrise des procédures de la Banque. Ce point a connu une nette amélioration avec le changement intervenu dans le management du projet en 2009. Par ailleurs, le défaut de définition des responsabilités fudiciaires entre la Senelec et l’unité de coordination a négativement impacté sur le fonctionnement du projet. En effet, la mise à la disposition de la Senelec de 80% des ressources du crédit n’a pas été accompagnée de transfert de responsabilités en terme de suivi et de reporting.

Manque de Communication avec le Bailleur de fonds

41

Dans la première phase du projet de Décembre 2005 à Juillet 2007 aucun moyen de communication avec le bailleur n’était disponible en dehors des lettres qui restaient le plus souvent sans réponse. La nomination d’un expert Energie à Dakar a été une action salutaire car c’est grâce à la présence de cet expert que l’exécution du projet a effectivement démarré.

42

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Not applicable.

43

Annex 9. List of Supporting Documents

Project Appraisal Document Implementation Status Reports Development Credit Agreements Project Agreement Minutes of the Stakeholders’ workshop