Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: PAD2375

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT PAPER

ON A

PROPOSED CREDIT

IN THE AMOUNT OF US$59.57 MILLION

TO THE REPUBLIC OF SIERRA LEONE

AND ON A PROPOSED ADDITIONAL CREDIT

IN THE AMOUNT OF US$22.66 MILLION

AND A PROPOSED GRANT

IN THE AMOUNT OF SDR 16.10 MILLION (US$22.66 MILLION EQUIVALENT)

TO THE REPUBLIC OF LIBERIA

FOR THE

WEST AFRICAN POWER POOL (WAPP) - CÔTE D'IVOIRE, LIBERIA, SIERRA LEONE, AND GUINEA (CLSG) POWER INTERCONNECTION PROJECT

AND A PROPOSED ADDITIONAL GRANT

IN THE AMOUNT OF SDR 12.4 MILLION (US$17.50 MILLION EQUIVALENT)

TO THE WEST AFRICAN POWER POOL (WAPP)

FOR THE

WAPP INTEGRATION AND TECHNICAL ASSISTANCE PROJECT

IN SUPPORT OF THE FIRST PHASE OF THE CLSG POWER SYSTEM RE-DEVELOPMENT SUB-PROGRAM OF THE WAPP APL PROGRAM

October 25, 2017

Energy and Extractives Global Practice Africa Region

This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective September 30, 2017)

Currency Unit = US$, SDR

SDR 1 = US$1.41

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS

AF Additional Financing AfDB African Development Bank

APL Adaptable Program Loan

CLSG Côte d’Ivoire, Liberia, Sierra Leone, and Guinea

CPO Chief Procurement Officer

DSCR Debt Service Coverage Ratio

ECOWAS Economic Community of West African States

EDSA Electricity Distribution and Supply Authority

EEP ECOWAS Energy Protocol

EIB European Investment Bank

EIRR Economic Internal Rate of Return

EPC ESIA

Engineering, Procurement and Construction contracts Environmental and Social Impact Assessment

ESMP Environmental and Social Management Plan

EVD Ebola Virus Disease

FIRR Financial Internal Rate of Return

FMM Financial Management Manual

FNPV Financial Net Present Value

FS Feasibility Study

FY Fiscal Year

GBR Geological Baseline Report

GDP Gross Domestic Product

GNI Gross National Income

GoG Government of Guinea

GoL Government of Liberia

GoSL Government of Sierra Leone

GW Gigawatts

HFO Heavy Fuel Oil

HLSC High-Level Steering Committee

iii

HPP Hydropower Plant

HQ Headquarters

IBRD International bank for Reconstruction and Development

IDA International Development Association

IDC Interest During Construction

IFS International Finance Corporation

IPRE Investment Plan for Renewable Energy

IPP Independent Power Producer

ISR Implementation Status Report

KfW Kreditanstalt für Wiederaufbau (German Development Bank)

Km Kilometer

kV kWh LACEEP

Kilo Volt Kilowatt hour Liberia Accelerated Electricity Expansion Project

LEC Liberia Electricity Corporation

LIDAR Light Detection and Ranging Survey

LIRENAP Liberia Renewable Energy Access Project

M&E Monitoring and Evaluation

MIGA Multilateral Investment Guarantee Agency

NPA National Power Authority (of Sierra Leone)

NEPAD New Partnership for African Development

MLME Ministry of Lands, Mining and Energy

NGO Nongovernmental Organization

NPV Net Present Value

O&M Operation and Maintenance

OMVG Organisation de Mise en Valeur du Fleuve Gambie (Organisation for the Development of the River Gambia)

OMVS Organisation de Mise en Valeur du Fleuve Sénégal (Organisation for the Development of the River Senegal)

PAD Project Appraisal Document

PAP Project Affected Person

PDO Project Development Objective

PDU Project Delivery Unit

PoE Panel of Experts

PPA Power Purchase Agreement

PPF Project Preparation Facility

PPP Purchasing Power Parity

RAP Resettlement Action Plan

SCADA Supervisory Control and Data Acquisition

SDR Special Drawing Rights

SREP Scaling Up Renewable Energy in Low Income Countries Program

SVC SWS

System Voltage Control Shield Wire System

iv

TA Technical Assistance

ToR Terms of Reference

TRANSCO CLSG Transmission Company Côte d’Ivoire, Liberia, Sierra Leone, and Guinea

TSA TW

Transmission Service Agreement Terawatt

UA Unit of Account

US$ United States Dollar

USc Unites States cents

WAPP West African Power Pool

Regional Vice President: Makhtar Diop

Regional Director:

Country Director:

Rachid Benmessaoud

Henry Kerali

Sector Global Practice Director: Riccardo Puliti

Practice Manager: Charles Joseph Cormier

Task Team Leaders: Clemencia Torres de Mästle

Xavier Remi Daudey

Pierre Jacques Lorillou

v

REPUBLIC OF LIBERIA AND REPUBLIC OF SIERRA LEONE

West African Power Pool (WAPP) - Côte d’Ivoire, Liberia, Sierra Leone, and Guinea (CLSG) Power Interconnection Project- Additional Financing

CONTENTS

I. Introduction ............................................................................................................................................... 1

II. Background and Rationale for Additional Financing ................................................................................. 2

A. Regional and Country Context................................................................................................................ 2

B. Sector Context ...................................................................................................................................... 10

C. Higher Level Objectives to which the Project Contributes ................................................................... 13

D. Original Project Description and Performance..................................................................................... 14

E. Rationale for Additional Financing ....................................................................................................... 17

F. Consideration of Other Options ........................................................................................................... 20

III. Proposed Changes .................................................................................................................................. 21

IV. Appraisal Summary ................................................................................................................................ 32

V. World Bank Grievance Redress............................................................................................................... 40

nnex 1: Revised Results Framework ........................................................................................................... 41

Annex 2: Detailed Description of Modified or New Project Activities ........................................................ 48

Annex 3: Revised Implementation Arrangements and Support ................................................................. 69

Annex 4: Updated Economic and Financial Analysis................................................................................... 82

Figures Figure 1. Map of WAPP Infrastructure .......................................................................................................... 6 Figure 2. Sources of the WAPP CLSG Financing Gap (Gap Calculated in Early 2017) ................................. 18 Tables

Table 1. Supply/Demand Situation: WAPP ............................................................................ 4 Table 2. The WAPP Infrastructure Program .................................................................................................. 8 Table 3: Addressing WAPP CLSG Power Interconnection Financing Gap, by Country and Donor (US$, millions) ....................................................................................................................................................... 19 Table 4: Proposed Changes in Project Result Framework .......................................................................... 23

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ADDITIONAL FINANCING DATA SHEET Liberia and Sierra Leone

Additional Financing for the West African Power Pool (WAPP) - Côte d’Ivoire, Liberia, Sierra Leone, and

Guinea (CLSG) Power Interconnection Project

WAPP

Additional Financing for the WAPP Integration and Technical Assistance Project

AFRICA

Energy and Extractives Global Practice

Basic Information – Parent

Parent Project ID: P113266 Original EA Category: A - Full Assessment

Current Closing Date: 31-Oct-2019 - Credit 31-Dec-2017 - Grant

Basic Information – Additional Financing (AF)

Project ID: P163033 Additional Financing Type (from AUS):

Cost Overrun, Restructuring, Scale Up

Regional Vice President: Makhtar Diop Proposed EA Category: A - Full Assessment

Country Director: Rachid Benmessaoud Expected Effectiveness Date: 30-March-2018

Senior Global Practice Director:

Riccardo Puliti Expected Closing Date: 15-Dec-2020

Practice Manager/Manager:

Charles Joseph Cormier Report No: PAD2375

Team Leader(s):

Clemencia Torres de Mästle, Xavier Remi Daudey, Pierre Jacques Lorillou

Borrower

Organization Name Contact Title Telephone Email

Ministry of Lands, Mines and Energy, Liberia

Patrick Sendolo Minister 2316243490

psendolo@emansion.gov.lr

Ministry of Energy, Sierra Leone

Henry Macauley Minister 2348034368025 homacauley@energy.gov.sl

The West African Power Pool (WAPP) Secretariat

Siengui Ki Secretary General

22921347195 kisiengui@ecowapp.org

vii

Project Financing Data – Parent Project (WAPP APL4 (Phase 1) - CLSG Power Interconnection Project and WAPP Integration and Technical Assistance Project - P113266

Key Dates

Project Ln/Cr/TF Status Approval Date

Signing Date Effectiveness Date

Original Closing Date

Revised Closing Date

P113266 IDA-51100 Effective 31-May-2012 16-Aug-2012 13-Feb-2015 31-Dec-2017 31-Oct-2019

P113266 IDA-H7700 Effective 31-May-2012 20-Aug-2012 27-Dec-2012 31-Dec-2017 31-Dec-2017

Disbursements (in millions)

Project Ln/Cr/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed

P113266 IDA-51100 Effective SDR 93.30 93.30 0.00 30.43 62.87 32.61

P113266 IDA-H7700 Effective SDR 20.40 20.40 0.00 5.88 14.52 28.84

Project Financing Data – Additional Financing for the WAPP APL4 (Phase 1) -- CLSG Power Interconnection Project and WAPP Integration and Technical Assistance Project. (P163033)

[ ] Loan [ ] Grant [X] IDA Grant

[X] Credit [ ] Guarantee [ ] Other

Total Project Cost: 126.98 Total Bank Financing: 122.38

Financing Gap: 0.00

Financing Source - Additional Financing (AF) Amount

International Development Association (IDA) 41.11

IDA Grant 40.16

IDA Credit provided from the IDA Regional Projects Window 41.11

GERMANY KREDITANSTALT FUR WIEDERAUFBAU (KFW) 4.60

Total 126.98

Policy Waivers

Does the project depart from the CAS in content or in other significant respects?

No

Explanation

Does the project require any policy waiver(s)?

No

viii

Team Composition

Bank Staff

Name Role Title Specialization Unit

Clemencia Torres de Mästle

Team Leader (ADM Responsible)

Senior Energy Economist Senior Energy Economist GEE08

Xavier Remi Daudey Team Leader Energy Specialist Energy Specialist GEE07

Pierre Jacques Lorillou Team Leader Senior Hydropower Specialist

Senior Hydroelectricity GEE07

Xiaoping Li Procurement Specialist (ADM Responsible)

Senior Procurement Specialist

Senior Procurement Specialist

GGO07

Rahmoune Essalhi Procurement Specialist

Procurement Analyst Procurement Analyst

GG001

Jean Charles Kra Financial Management Specialist

Senior Financial Management Specialist

Senior Financial Management Specialist

GGO26

Aissatou Diallo Senior Finance Officer

Senior Financial Management Specialist

Senior Financial Management Specialist

WFALN

Alicia Hernandez Munoz Team Member Consultant Energy GEE08

Claudia M. Pardinas Ocana Team Member Senior Counsel Senior Counsel LEGAM

Franklin Koffi S.W. Gbedey Team Member Senior Energy Specialist Senior Energy Specialist GEE07

Issa Thiam Team Member Finance Officer Disbursement WFALA

Jianping Zhao Team Member Senior Energy Specialist Energy GEE08

Joseph Tawiah Quayson Team Member Energy Specialist Energy Specialist GEE08

Juliet Pumpuni Team Member Senior Infrastructure Specialist

Senior Infrastructure Specialist

GSUOA

Karidjatou Kragbe Team Member Temporary Program Assistant GEE07

Mathias Gogohounga Team Member Senior Procurement Specialist

Procurement GGO07

Maurice Adoni Team Member Senior Procurement Specialist

Procurement GGO07

Nash Fiifi Eyison Team Member Senior Energy Specialist Energy Specialist GEE07

Nathalie Tchoumba Bitnga Team Member Program Assistant Program Assistant GEE07

Paivi Koskinen-Lewis Team Member Senior Social Development Specialist

Senior Social Development Specialist

OPSPF

ix

Robert A. Robelus Team Member Consultant Senior Environmental expert

GEN05

Tatia Lemondzhava Team Member Consultant Energy GEE08

Zubair K.M. Sadeque Team Member Senior Energy Specialist Financial Analysis GEE08

Extended Team

Name Title Location

Federico Ciampitti Dam Specialist Milan, Italy

Susan V. Bogach Senior Energy Economist Ottawa, Canada

Locations

Country First Administrative Division

Location Planned Actual Comments

Liberia Republic of Liberia X

Côte d'Ivoire Republic of Côte d’Ivoire

Sierra Leone Republic of Sierra Leone

X

Guinea Republic of Guinea X

Institutional Data

Parent Project: (WAPP APL4 (Phase 1) - Côte d’Ivoire, Liberia, Sierra Leone, and Guinea Power Interconnection Project and WAPP Integration and Technical Assistance Project (P113266)

Practice Area (Lead)

Energy and Extractives

Contributing Practice Areas

Additional Financing: (WAPP APL4 (Phase 1) - CLSG Power Interconnection Project and WAPP Integration and Technical Assistance Project (P163033)

Practice Area (Lead)

Energy and Extractives

Contributing Practice Areas

1

I. Introduction

1. This Project Paper seeks the approval of the Executive Directors to provide Additional Financing (AF) for the West African Power Pool (WAPP) - Côte d’Ivoire, Liberia, Sierra Leone, and Guinea (CLSG) Power Interconnection Project (P163033) in the form of an additional International Development Association (IDA) credit in the amount of US$22,66 million and an additional IDA grant in the amount of SRD 16.10 million (US$22.66 million equivalent) to the Republic of Liberia, a credit in the amount of US$59.57 million to the Republic of Sierra Leone, and an additional IDA grant to the WAPP in the amount of SDR 12.40 million (US$17.50 million equivalent) for the WAPP Integration and Technical Assistance Project.

2. The parent project will interconnect the four participating countries (Côte d’Ivoire, Liberia, Sierra Leone and Guinea) into the 225 kV (kilo Volt) regional energy market in West Africa. It will also enable the connection to the WAPP of the planned hydropower plants (HPPs) in Bumbuna Extension, Yiben and Bekongor in Sierra Leone and Mount Coffee in Liberia and other future generation projects. This integration in a regional interconnected market will bring significant benefits to the four participant countries; it will allow the countries, notably Liberia and Sierra Leone, to obtain more electricity at a lower cost by allowing power generators to access a larger regional market instead of being restricted by the small size of the different national economies. Furthermore, the construction of CLSG interconnection is a major addition to the national transmission backbone in Liberia and Sierra Leone. Once the CLSG interconnection is operational, it will provide access to electricity from national or regional sources to large users (mines and plantations) that have until now been forced to generate their own electricity. Finally, the CLSG regional interconnection will also allow the countries to improve the reliability and stability of their national and regional systems because it allows for a diversification of sources of electricity for any given country. It also improves the grid stability of the national and regional networks, as well as the scale up of intermittent renewable energy, because it increases access to the primary reserve (HPPs generation), which is a valuable flexibility tool to maintain stability in the overall system.

3. The construction of interconnectors enables the leveraging of commercial capital for regional power generation projects at scale, as the interconnectors ensure access to markets beyond national borders. In that sense, CLSG interconnection project maximizes financing available for development, as it facilitates the participation of the private sector in the energy sector of the participating countries.

4. The parent project has two components1. The first, the WAPP CLSG Power Interconnection (Component 1), focuses on the construction of the CLSG interconnector and is financed with an IDA credit (Cr. IDA-5110-LR) of US$144.5 million equivalent (SDR 93.3 million) to the Republic of Liberia. The second, the WAPP Integration and Technical Assistance (Component 2), supports WAPP integration with an IDA grant (Gr.IDA-H770-3A) of US$31.5 million equivalent (SDR 20.4 million equivalent) to the WAPP Secretariat. The World Bank Board approved the parent project on May 31, 2012.2 This is supplemented by financing from other donors and the governments, which, together with IDA, provided an initial financing package of US$475.88 million.

1 These components were referred to as “Projects’ in the Project Appraisal Document of the Parent Project, but to avoid any confusion, we will continue instead hereafter to use the term “components” as defined in this paragraph. 2 The parent project benefits from parallel co-financing by the African Development Bank (AfDB), the European Investment Bank (EIB), and the German Development Bank (Kreditanstalt für Wiederaufbau, KfW).

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5. The proposed AF aims to fill a financing gap due to several factors3 of US$104.9 million of the WAPP CLSG Power Interconnection component to avoid delays in completing the line. It also provides US$17.5 million of AF for the WAPP Integration and Technical Assistance component to scale up the impact of this component, and to fill a financing gap created by the fluctuations of the SDR/US$ exchange rate. Scaling up the technical assistance’s (TA) impact is achieved by financing preparatory studies for possible hydropower development in Liberia to produce cost-effective electricity that could be exported using the CLSG transmission line, and by providing TA to the CLSG countries as needed to support efficient energy trade through the CLSG interconnection.

6. The Project Development Objective (PDO) of the parent WAPP CLSG Interconnection Project is stated into parts, corresponding to each of the components. PDO for Component 1 is to (a) reduce the cost of and increase the electricity supply at the utility level and (b) increase the export capability of Côte d’Ivoire. The PDO of the parent project for Component 2 is to increase the WAPP network’s technical integration. As part of the AF, it is proposed to revise the PDO of the parent project for Component 1 to capture its developmental impact more comprehensively. This PDO for the Component 2 will remain unchanged. The project’s Results Framework will be updated to accurately measure the impact of the proposed AF and reflect the proposed change in the PDO. Progress toward the achievement of the development objectives and implementation progress have been rated Moderately Satisfactory for the past 12 months.

7. The proposed AF would be accommodated under the existing project components. As part of this AF, it is also proposed to extend the WAPP CLSG Power Interconnection closing date by 14 months and the WAPP Integration and Technical Assistance closing date by three years, bringing the closing date for both to December 15, 2020. Activities under this AF are not expected to change the project’s current safeguard classification of ‘A’. Besides the safeguard policies already triggered under the parent project, the AF will trigger OP 4.37 (Safety of Dams), OP 7.50 (International Waterways), and OP 4.36 (Forests), since the area where the future Via Reservoir might be located still contains significant natural forests.

II. Background and Rationale for Additional Financing

A. Regional and Country Context

8. Despite Sub-Saharan Africa’s significant energy endowment, approximately 600 million people, or two-thirds of its population, live without access to electricity. For those with electricity access, average residential electricity consumption per capita in 2014 was equivalent to about half the average level of China or one-fifth that of Europe.4

9. While current levels of consumption are among the lowest in the world, demand for electricity is expected to increase manifold in Sub-Saharan Africa over the coming years. A 2015 study on African electricity markets by McKinsey estimates that demand for electricity in Sub-Saharan Africa will register a fourfold increase between 2010 and 2040, representing an average growth of 4.5 per cent per year.5 This

3 Losses from exchange rate fluctuations, cost variations of costs between 2009 cost estimates and actual bid in 2016, post-Ebola effect; additional cost of using enhanced low cost technology for electrification; additional budget for TRANSCO due to project delays; and a provision for price/costs contingencies on all contracts. (See

paragraph 61 for a more detailed analysis). 4 International Energy Agency. World Energy Outlook 2014 Factsheet: Energy in Sub-Saharan Africa Today. 5 Castellano, A., A. Kendall, M. Nikomarov, T. Swemmer. 2015. Brighter Africa: The Growth Potential of the Sub-Saharan Electricity Sector. McKinsey and Company.

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increase in demand could vary significantly among sub-regions. In West Africa, for instance, it is expected that demand for industrial and commercial electricity would grow faster than average, by 5.3 percent per year.6

10. Sub-Saharan Africa also has enormous potential for electric power generation. Excluding solar power, the McKinsey study estimates that there are 1.2 terawatts (TW) of potential power. Solar-based power generation was estimated at a staggering potential of 10 TW. There is potential for (a) 400 gigawatts (GW) of gas-based power (Mozambique, Nigeria, and Tanzania represent 60 percent of this capacity); (b) 350 GW of hydropower (the Democratic Republic of Congo accounts for 50 percent); (c) 300 GW of coal-based power (Botswana, Mozambique, and South Africa represent 95 percent); and (d) 109 GW of wind-based power, although at relatively high cost. The geothermal resource potential is 15 GW, 80 percent of which is concentrated in Ethiopia and Kenya.

11. If each country were to build infrastructure to fulfill its electricity needs, the McKinsey study estimates that Sub-Saharan Africa would require approximately US$490 billion of capital for new power generation by 2040, as well as another US$345 billion for transmission and distribution. In this context, regional integration is a game changer that could shape the energy landscape of Sub-Saharan Africa. The study estimates that increasing regional integration could save more than US$40 billion in capital spending and save the African consumer nearly US$10 billion per year by 2040, because the levelized cost of energy would fall from US$70 to US$64 per megawatt hour (MWh). Similarly, an assessment undertaken by the World Bank in 2010 estimates that fostering regional electricity trade could reduce the annual costs of power system operation and development by up to US$2 billion per year. The range of cost savings for the beneficiary countries is estimated to be from US$0.01 to US$0.07 per kWh (kilowatt hour).7 Other events could fundamentally change the sector in Africa. Completing the Grand Inga Dam Hydroelectric Project could save US$32 billion in investment, while tapping the underexplored gas potential on the coasts could result in lower levelized costs of energy.

12. Promoting inter-regional interconnections allows not only an increase in the total electricity supplied at a cheaper average cost of supply, but it also brings about a diversification of sources of electricity, which increases the reliability of the system as a whole, and the stability of the grid due to greater access to primary reserves. In particular, regional integration facilitates the deployment and scale up of these types of renewable sources of energy, because the higher stability that resulted from being part of an integrated regional system increases the amount of intermittent sources of electricity that can be connected to the grid in each country without endangering the stability of their respective systems.

13. There are differences among sub-regions across Africa with regard to long-term security of supply (that is, the extent to which potential base load capacity exceeds long-term demand for power). The McKinsey study notes that Central Africa is the best endowed sub-region due to its massive hydro potential, even though this potential has proven to be difficult to harness. On the other hand, West Africa appears to have the tightest supply and demand picture, as its total estimated base load potential supply capacity is 105 GW, and the demand gap in 2040 is likely to reach 101 GW. In this context, it is important to optimize supply through regional integration that maximizes economies of scale, links sources of supply

6 This strong growth of electricity demand results from relatively high economic growth, rapid urbanization, large population increases, and active policies to expand access. This is particularly the case for developing and emerging countries where the rate of growth of commercial and industrial demand usually exceeds gross domestic product (GDP) growth by an average of 1.66 percent. Efforts to increase efficiency may reduce the rate of growth, but this is a gradual process that would likely affect the later part of the forecast period. 7 Foster, V. and C. Briceño-Garmendia. 2010. Africa’s Infrastructure: A Time for Transformation. World Bank.

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to distant centers of consumption, increases the reliability and stability of the systems, as well as enables the development of cost-efficient sources of supply, such as hydroelectricity and gas. West African Power Pool 14. Faced with the task of expanding the power system to meet the development needs of countries in the sub region, the 15 member states8 of the Economic Community of West African States (ECOWAS) have acknowledged that past efforts to achieve national self-sufficiency in electricity supply have been uneconomic due to the high cost of establishing power generation and transmission infrastructure at national levels. They have decided instead to support a regional approach to effectively address the need for more energy. Table 1 offers a snapshot of available supply and demand in the ECOWAS sub-region (in 2015). Large surpluses of energy in some countries, namely Ghana, and Côte d’Ivoire, are contrasted with scarcity of cost-efficient sources of electricity in others, offering fertile ground to develop regional energy trade. An analysis of opportunities for trade of electricity has been undertaken as part of the economic analysis of the regional transmission projects developed with financing from the World Bank, and the results for the CLSG Project are summarized in Annex 4 of this document.

Table 1. Supply/Demand Situation: WAPP

Source: Trimble, Chris, Masami Kojima, Ines Perez Arroyo, and Farah Mohammadzadeh. 2016. “Financial Viability of Electricity Sectors in Sub-Saharan Africa: Quasi-Fiscal Deficits and Hidden Costs.” Policy Research Working Paper 7788, World Bank,

Washington, DC. https://openknowledge.worldbank.org/handle/10986/24869. cited in: Energy and Extractive Global Practice, World Bank.: “From Transmission Lines to Regional Power Markets”, April 24, 2017

15. To foster the expansion of regional energy markets, ECOWAS established the WAPP in 1999 as a cooperative mechanism for integrating national power systems (except Cape Verde) into a regional electricity market, with the expectation that, over the medium to long term, this mechanism would help to provide stable and reliable electricity supply at affordable cost. The WAPP, a ‘flagship infrastructure project’ of the New Partnership for African Development (NEPAD), aims to foster the development of electricity in all ECOWAS member states.

8 Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo.

5

16. The implementation of the ‘road map’ of the WAPP Infrastructure Program was launched based on five distinct but mutually reinforcing infrastructure subprograms, which, when fully realized, will

converge into a unified, well-functioning regional power pooling mechanism in West Africa. These programs are being implemented through a number of investment projects supported by the World Bank, the African Development Bank (AfDB), and other multilateral and bilateral institutions. Countries in the WAPP sub-region are already engaged in bilateral exchanges,9 trading about 6 percent of sub-regional generation capacity.10 Trade is expected to increase further in the medium term, when various regional transmission lines under implementation are completed (CLSG, Organization for the Development of the River Gambia [Organisation de Mise en Valeur du Fleuve Gambie, OMVG], Organisation for the Development of the River Senegal [Organisation de Mise en Valeur du Fleuve Sénégal, OMVS], and Guinea-Mali).

17. The original five subprograms in the original road map that launched the implementation of the WAPP Infrastructure Program were the following (see also Figure 1):

(a) Coastal Transmission Backbone Subprogram (Côte d'Ivoire, Ghana, Benin/Togo, and Nigeria): The subprogram aims to establish a robust interconnection between the ECOWAS coastal member states.

(b) Interzonal Transmission Hub Subprogram (Burkina Faso and Mali through Ghana): The subprogram aims to establish secure, reliable transmission corridors for transfer of low-cost energy to replace diesel-based sources, especially in Burkina Faso, through Ghana.

(c) OMVG and OMVS Power System Development Subprogram (The Gambia, Guinea, Guinea-Bissau, Mali, and Senegal): The subprogram aims to interconnect national systems of The Gambia, Guinea, Guinea-Bissau, Mali, and Senegal and secure access to sources of low-cost energy to be built on the Gambia River, the Senegal River, and the Konkoure River Basins.

(d) North-core Transmission Subprogram (Nigeria, Niger, Burkina Faso, and Benin): aims to upgrade and extend existing capacity to transfer low-cost energy supply to Niger, Burkina Faso, and northern Benin and Togo.

(e) Côte d'Ivoire-Liberia-Sierra Leone-Guinea Power System Redevelopment Subprogram (Côte d'Ivoire, Liberia, Sierra Leone, Guinea): The subprogram aims to interconnect CLSG into the WAPP Energy System and to develop the hydropower resources in the sub-region.

9 Côte d’Ivoire has signed export agreements with Mali, Burkina Faso, Benin and Liberia. Nigeria exports electricity to Niger and Benin, also based in bilateral agreements. 10 Mercados. 2016. Power Pools in Africa.

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Figure 1. Map of WAPP Infrastructure

18. During the initial phase of market development, the WAPP is strengthening commercial arrangements to foster sustainable trade of electricity in addition to developing regional infrastructure. This is necessary because, despite strong political commitment to regional integration, the existing trading arrangements often lack well-crafted contracts, with clear rights and responsibilities for all parties and well-defined conflict resolution mechanisms. As a following step, the World Bank is conducting analytical work to determine how best to securitize electricity trade, taking into account that most of the utilities in West Africa do not have cost reflective tariffs, and subsidies are pervasive. As of June 2017, there are substantial payment arrears among the power utilities of Côte d’Ivoire, Liberia, Ghana, Togo, Benin, and Nigeria. On the other hand, importers like Burkina Faso, which regularly pays its electricity imports, have complained of unreliability in the delivery of imported electricity. Faced with this situation, the WAPP is committed to strengthening trading arrangements through well-articulated medium- and long-term power purchase agreements (PPAs) that will reduce the risks both for the investors in large generation projects and for the large consumers and utilities purchasing this power, and through securitization of electricity trade that ensures that exporters are paid and importers receive a reliable service. The first PPAs signed under the CLSG project in 2016, for the sale of 81 MW from Côte d’Ivoire to Liberia, Sierra Leone and Guinea (27 MW each), are examples of improved commercial agreements.11 Once regional interconnectors are established and countries experience the benefits of trading electricity, they are also likely to engage in the day-ahead market to address short-term gaps in electricity generation.

World Bank Support to the WAPP

19. The World Bank has developed a strong partnership with the WAPP. Together with other donors it is financing parts of the five WAPP Master Plan Investment subprograms. It also supports the preparation of key generation projects for cost-efficient electricity for the region and assists member countries in building commercial and technical instruments to create an energy market. To channel this

11 These PPAs are expected to become effective once the line is commissioned in late 2019 or early 2020.

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support, the World Bank uses three main instruments: (a) investment project financing; (b) TA; and (c) guarantees.

20. The World Bank’s rationale for supporting this regional integration agenda as a major tool to expand access to affordable and reliable electricity in West Africa is grounded in several considerations: (a) the need for West Africa regional transmission infrastructure to bring generation to markets as cost-effective energy generation, such as hydropower, is often far from markets; (b) the fact that a regional power system allows a number of countries to overcome inefficiencies related to their small economies, allowing development of large projects and export of excess production or import of lower-cost electricity from other countries; (c) the fact that regional integration increases the reliability and stability of national and regional systems and facilitates, for that reason, the deployment at larger scale of some renewable sources of energy such as wind and solar generation; (d) a regional approach optimizes the use of resources for electricity supply across the region and reduces the overall capital costs of generation, even if energy trade is not fully developed and infrastructure is not fully used in the short term; and (e) regional interconnectors serve as an important part of the national transmission grid for countries such as Liberia and Sierra Leone, where national transmission networks are nascent, as they become part of the national transmission backbone in those countries and can also provide access to electricity for communities located along the lines. This access can be achieved by providing electricity from the substations and also directly from the transmission line, through the use of low-cost shield wire technology. Grid access is complemented by off-grid solutions that will bring access to more remote areas where the grid is unlikely to be extended in the short to medium term.

21. The World Bank has provided concessional financing through IDA/IBRD credits for the construction of regional transmission infrastructure in the region and, to a lesser extent, through IDA credits for the construction of regional generation projects based on renewable energy, mostly large hydro projects. It first financed a WAPP project in June 30, 2005, when the World Bank Board endorsed the application of the then Adaptable Program Loan (APL).12 At that time, the World Bank dedicated US$350 million in IDA resources under the IDA Regional Pilot Program to establish a multiyear, programmatic framework to support the timely implementation of WAPP priority investments and TA activities under the revised WAPP Master Plan. The APL provided a framework for IDA support to the original set of WAPP priority projects and allowed for the reinforcement of policies through policy triggers, such as country commitments and ratification of the ECOWAS Energy Protocol. Beyond the support provided through this WAPP APL program, the World Bank has increased its support for the expansion of regional infrastructure and is considering contributing to the financing of the high-voltage transmission from Nzérékoré in Guinea to Sanankoroba in Mali, as well as the construction or extension of seven substations, of which six are in Guinea and one in Mali. The project will also involve the electrification of rural communities along the line. The World Bank is also preparing on- and off-grid access projects/components to connect about 500,000 new customers and benefit about 3 million people and an off-grid regional electrification project using renewable energy (mostly solar) in multiple countries in the region.

22. Ongoing World Bank support to the WAPP energy investment program is summarized in Table 2 below. There are also a number of projects under preparation supporting the regional integration agenda in the electricity sector in West Africa that will be presented to the Board for its consideration in due time.

12 See Report No: 32276-AFR.

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Table 2. The WAPP Infrastructure Program

Project Countries World Bank Project World Bank

Financing (US$, millions)

Project Cost (US$,

millions)

Expected Date of

Commissioning

P1 - Coastal Transmission Backbone

Coastal Transmission Backbone

Ghana and Benin

APL1-Phase 1: Ghana (P075994) APL2-Phase 2: Ghana-Benin (P094917)

40 to Ghana 45 to Ghana 15 to Benin Total: 60

83

75

2010 2013 (Ghana) Not yet built (Benin)

P2 - OMVG and OMVS Interzonal Transmission Hub

OMVS Mauritania, Senegal, and Mali

OMVS Felou Hydropower APL2 - Phase 1 (parent project (2006) (P094916) and Additional Financing (2009) (P114935) OMVS reinforcement - APL2 - Phase 3 (P147921)

67.5 to Mali 25 to Mauritania 67.5 to Senegal Total: 160 97 to Senegal.

175

103

2013

2020

OMVG Senegal, The Gambia, Guinea, Guinea-Bissau

OMVG Interconnection loop APL2- Phase 2 (P146830)

47 to The Gambia 30 to Guinea 78 to Guinea-Bissau 45 to Senegal. Total: 200

711 2019

P3 - Interzonal Transmission Hub

Interzonal Transmission Hub

Burkina Faso, Mali, and Ghana

Phase 1: Ghana (Bolgatanga)-Burkina Faso (Ouaga)a (P094919)

16 to Burkina Faso 25.9 to Ghana Total: 41.9

111 2018

P4 - WAPP - CLSG Power System Redevelopment

WAPP - CLSG Power Interconnection Project

Côte 'Ivoire, Liberia, Sierra Leone, Guinea

CLSG Interconnection Phase 1 (with single circuit) (P113266)

144.5 to Liberia

444.3 2019

Note: a. Phase 2 is planned: Burkina Faso (Bobo Dioulasso) - Mali (Sikasso).

23. The World Bank provides TA to the WAPP Secretariat and its member countries to strengthen the legal and regulatory framework, build the capacity for planning and managing regional energy trade, address specific issues that hinder power trade, and scale up initiatives that could strengthen this trade. For instance, the original CLSG Project includes a US$20 million grant to the WAPP for capacity building, improving the synchronization of national systems, scaling up the use of storage capacity to enhance system reliability and the use of renewable sources of energy, and preparing new strategic generation and transmission projects included in the WAPP Master Plan. A new programmatic TA to facilitate power trade in Sub-Saharan Africa is under preparation, seeking to identify commercial arrangements aimed at strengthening the payment discipline, developing mechanisms to securitize payments, and eventually

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incentivizing private sector participation at both the regional and transaction-specific levels. Finally, the World Bank has initiated TA to support the development of solar generation in West African countries.

24. The World Bank is also supporting private investment in regional projects through guarantee instruments to back up off-taker payments. In particular, the World Bank extended IBRD enclave guarantees of up to US$200 million and an IDA guarantee of up to US$500 million in support of the Sankofa

Gas Project in Ghana13, which is expected to leverage private sector participation and enable the mobilization of nearly US$8 billion of foreign direct investment in the country in order to increase the availability of natural gas for clean power generation.

Country Context

25. Liberia experienced substantial economic growth after the end of the 14-year civil conflict in 2003. Real gross domestic product (GDP) grew by an average of 6.2 percent per year from 2003 to 2013, while real GDP per capita expanded by an annual average of 3 percent. This growth was driven by exports, which increased between 2008 and 2013 at an average of 6.8 percent per year. Economic growth reduced the poverty rate by 11 percent, from 64 percent in 2007 to 54 percent in 2014, although not fast enough to offset rapid population growth. However, the situation changed dramatically when the country was hit by the Ebola Virus Disease (EVD) crisis in 2014 and more recently when prices of primary commodities such as iron ore and rubber fell significantly. The twin shocks severely hit the economy and eroded the important gains Liberia had made in reducing poverty and vulnerability. Estimated annual GDP growth declined from 6.8 percent to 3 percent, leading to an estimated foregone GDP of US$180 million in 2015.14 Poverty rose to an estimated 57.6 percent in 2016, leaving Liberia as one of the poorest countries in the world, with a Gross National Income (GNI) per capita of US$835 (purchasing power parity [PPP]) in 2015.15

26. Today, Liberia has recovered from the EVD. Major efforts are under way to rebuild the country’s health system. The situation is returning to normal. Economic activity has restarted, including in the mining sector, although Liberia continues to face low prices for primary commodities. The Government has no fiscal space to stimulate demand, because it strives to maintain a tight fiscal stance in an adverse macroeconomic climate, and to protect the recent gains in poverty reduction while restoring sustainable growth. In this context, improving access to reliable electricity services is key to supporting the provision of basic services (such as health, potable water, and education) to improve the living standards of the population and create the basic conditions for economic activity and structural transformation of the Liberian economy.

27. In Sierra Leone, since 2002, the Government of Sierra Leone (GoSL) has maintained peace and conducted three successful elections. Post-conflict recovery was characterized by strong economic growth. The start-up of two large-scale iron ore mines in 2011 and a recovery in other mining subsectors, including bauxite, gold, and rutile, drove growth in the industrial sector and exports. GDP growth averaged 17.6 percent from 2010–2013 and the share of people living below the poverty line from 64 percent to 53 percent between 2003 and 2011. Sierra Leone’s economic recovery after the end of the civil war in 2002 was halted by the EVD in 2014 together with the closure of the two largest iron ore mines due to the global iron ore price decline. GDP fell in 2015 by 20.5 percent, affecting the country’s fiscal position, as

13 Ghana Sankofa Gas Project (P152670); 14 Thomas, Mark Roland, Gregory Smith, Francisco H. G. Ferreira, David Evans, Maryla Maliszewska, Marcio Cruz, Kristen Himelein, and Mead Over. 2015. “The Economic Impact of Ebola on Sub-Saharan Africa: Updated Estimates for 2015.” Working Paper 93721. World Bank, Washington, DC. 15 World Bank Data 2017 (data.worldbank.org/indicators).

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well as the inflow of foreign exchange. As of 2014, Sierra Leone ranked 181 out of 188 countries in the United Nations Human Development Index with an estimated GNI per capita of US$1,569 in 2015 (PPP). Despite being ranked among the top 10 global reformers in the 2012 Doing Business Report, Sierra Leone ranked 147 out of 189 countries in the report.

28. Sierra Leone’s economy has shown remarkable resilience in these adverse circumstances. GDP growth in 2016 reached 6.1 percent (against a growth of 4.9 percent projected by the International Monetary Fund), with resumption of iron ore production. Non-iron ore growth performed better than expected at 4.3 percent compared to a projected 3.7 percent, due to activity in commerce, tourism, and services. This recovery is not without challenges. High government spending during the second half of 2016 and lower fiscal revenues resulted in a fiscal deficit much higher than expected, at 8.3 percent of GDP. Since late 2016, high inflation of 17 percent and falling foreign exchange reserves have emerged as new macroeconomic problems, fueled by government spending.

29. Growth is expected to reach 7 percent in the medium term, but the pace of recovery will depend on adequate financing, broadening of the economy, and effective implementation of recovery plans. The most immediate priority is the enhancement of health care systems to prevent re-emergence of the EVD. Equally important is the need to reestablish fiscal discipline, increase foreign exchange reserves and domestic fiscal revenues, reduce domestic inflation, and facilitate an effective and sustainable resumption of broad-based economic growth. The immediate policy challenge is to reestablish fiscal discipline, while scaling up infrastructure spending and bolstering the social safety net to support higher and inclusive growth. Delivery of reliable electricity services will play a key role in achieving these objectives, enabling effective provision of basic services including health and clean water, economic recovery, and a broadening of economic activities to support job creation.

B. Sector Context

30. Liberia’s electricity sector has recovered from near total destruction in the aftermath of the war. With the support of international donors including the World Bank, the Government of Liberia (GoL) has embarked on projects to expand the national grid in Monrovia and along key economic corridors and to develop decentralized systems in remote areas. Electricity services have been reestablished in key areas of Monrovia; the national utility, the Liberia Electricity Corporation (LEC), had 43,500 customers as of September 2017, up from 2,469 in 2010. Peak demand in the national grid increased from 4 MW (Megawatt) in 2010 to 18.5 MW in March 2017, and demand projections in the Least Cost Power Development Plan (2014) indicate that peak demand is expected to reach 310 MW in 2033.16

31. The Government is committed to increasing the supply of reliable electricity while shifting the supply mix away from expensive diesel toward cheaper thermal sources of electricity based on heavy fuel oil (HFO), increasing the share of renewable sources of electricity, mostly hydropower, and importing cheaper electricity from the regional market through the CLSG line. In a first step to implement this strategy, LEC’s installed generation capacity increased from 22 MW in 2009 (consisting entirely of diesel-based generation) to a diesel-free and more diversified 126 MW in September 2017 (38 MW HFO and 88 MW hydro). Going forward, GoL’s strategy is expected in the medium term to substitute this thermal electricity with cheaper and cleaner imported electricity. In the longer term, the development of a regional energy market should allow Liberia to further diversify toward renewable sources (hydro or hydro-solar), because access to the regional market makes it viable to develop hydropower that would

16 Least Cost Power Development Plan, Fichtner, April 2014.

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not have been viable in a smaller, national market. Furthermore, the construction of the CLSG line is a major addition to the national transmission backbone in Liberia. Once the CLSG line is operational, it will provide access to electricity from national or regional sources to large users (mines and plantations) that have until now been forced to generate their own electricity.

32. While significant progress is being made, Liberia still has one of the lowest access rates in Africa: 4.9 percent nationally and 20 percent in Monrovia. As of September 2017, electricity tariff is of USc38.5 per kWh as of September, 2017. While this represents a reduction from USc49–52 per kWh following the introduction of lower cost electricity from the Mount Coffee HPP and HFO plants in December 2016, this remains still a very high tariff by regional standards.17 This high tariff is due to LEC’s reliance on thermal generation and significant losses in distribution.18 Electricity remains unavailable and unaffordable for most Liberians. Poor households rely on traditional energy sources (kerosene, battery powered lamps, and so on) or informal and expensive electricity providers. The high tariff also imposes a severe burden on businesses, reducing their competitiveness. Mines and agricultural/commercial enterprises rely on expensive diesel-based self-generation.

33. Having secured generation supply for the short term and with the prospects of imports of cheaper electricity from the region in the medium term, the GoL is now focused on addressing three pressing issues: (a) the need for rapid implementation of sub-transmission and distribution, to be able to evacuate the available electricity and increase service to end users; (b) further development of its hydropower resources and mitigation of its seasonal variability to expand availability of hydropower all year long, which could significantly reduce the cost of generation; and (c) improvement of LEC’s operational and commercial performance19 in serving clients, which could increase rapidly if LEC is able to deliver reliable electricity. The GoL also needs to define a tariff policy that allows end users to benefit from recent reductions in energy costs from lower-cost Mount Coffee and HFO generation, while providing the resources for LEC to become financially viable.

34. In Sierra Leone, the GoSL has an objective to double access by 2020. To achieve this goal, it will need to overcome significant constraints due to insufficient and highly seasonally variable supply of electricity, poor electricity infrastructure network and low-performing national electricity utility. It will need to significantly increase the supply of power, scale up the efficient development of its hydropower potential and diversify supply away from high-cost thermal Purchase Power Agreements (PPAs) obtained from unsolicited proposals. It will also need to strengthen the capacity of the Electricity Distribution and Supply Authority (EDSA) of Sierra Leone, the national electricity utility, to effectively deliver services to its customers and improve its financial performance, so that it can become a reliable off taker from the different suppliers of electricity.

35. Sierra Leone’s poor electricity infrastructure poses a major constraint to expanding electricity access. During the 1991–2001 war, electricity infrastructure suffered widespread destruction and lack of maintenance. The current national electricity access rate is 10 percent, of which 95 percent is in Freetown. The main distribution network covers only 40 percent of residents of Freetown and the surrounding

17 In comparison, the average tariffs in Ghana and Côte d’Ivoire are US$0.09 and US$0.11 per kWh, respectively. 18 Total losses amounted in December 2016 to 45 percent, calculated as the ratio of electricity consumed but not billed over the total amount of electricity generated (source: Tetra Tech. 2016. Loss Reduction Program for the Liberia Electricity Corporation, prepared for Power Africa, Transactions and Reforms Program). The actual number for July 2016 was 45 percent, of which 32 percent is commercial and 12 percent technical, as cited in LEC financial statements for 2016.

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Freetown Capital Western Area. Isolated systems provide limited services in Bo-Kenema, Lungi, Lunsar, Kono, and Makeni. In rural areas, where the bulk of the population resides, electricity access is practically nonexistent. The mining sector relies entirely on high cost self-generation, which reduces competitiveness.

36. Present generation capacity is inadequate; only a fraction of the supply is available year-round due to the seasonality of hydropower and the high maintenance and fuel cost of thermal plants. Installed system capacity serving the Freetown Capital Western Area totals 84 MW, which is predominantly hydroelectric. This includes the 50 MW Bumbuna Hydroelectric Plant (Bumbuna I), two thermal power plants at Kingtom (9 MW) and Blackhall Road (15 MW), and containerized generation units at Kingtom. An additional 35 MW feeds the isolated Bo-Kenema, Lungi, Lunsar, Kono, and Makeni systems. High costs of imported fuel and poor management of thermal plants significantly reduce available capacity at Kingtom and Blackhall Road to 7 MW and 11 MW, respectively. Of the 10 MW of containerized units, only 5 MW is available. In Freetown, the power is primarily supplied by the 50 MW Bumbuna Plant, with highly seasonal production ranging from 30–40 MW in the wet season to 10 MW in the dry season. Unsuppressed demand for 2015 is estimated at 110 MW for the Freetown Capital Western Area, whereas the current available generation capacity in the rainy and dry seasons are approximately 53 MW and 38 MW, respectively. The lack of dependable capacity and a poor network result in unreliable and unpredictable power supply. There are interruptions on 183 days per year, on average, with an average duration above 10 hours. In the capital, commercial and industrial entities must resort to high-cost diesel generators for backup or align their business and production activities with the power supply. In the rest of the country, where 90 percent of the population live, there is little access to electricity.

37. In the short term, the GoSL has received World Bank’s support, through an IDA guarantee, for the development of a CECA SL Generation Limited’s 57 MW greenfield thermal power plant based on a build-operate-transfer model, the first phase of a project that could expand thermal capacity up to 128 MW, aimed to increase cost-effective electricity through mobilizing private investment. For the medium and long run, the GoSL aims to increase electricity supply to the expansion of hydro power and its insertion in the regional energy market through the CLSG regional transmission line. With respect to hydropower, the GoSL has completed the negotiations of a PPA for hydropower from Bumbuna II, a hydropower generation plant with potentially 325 MW of capacity in wet season (80 MW in dry season) and it is now seeking to mobilize the necessary funds to achieve financial closure in 2018. Another possible hydropower project is the Begonkor generation plant with 160 MW of installed capacity in wet season, and 18 MW in dry season. The design for this plant has been approved and the feasibility and financial model have been submitted to the GoSL for its consideration. In the meantime, negotiations for a Power Purchase Agreement (PPA) are ongoing between the GoSL and Hydro China. With respect to increasing regional energy trade, the participation of EDSA in the CLSG regional interconnector will help reduce electricity cost, as it will provide the option of cheaper and cleaner electricity imports from the region and facilitate development of Sierra Leone’s hydropower potential. Furthermore, the construction of the CLSG line is a major addition to the national transmission backbone in Sierra Leone. Once the CLSG line is operational, it will provide access to electricity from national or regional sources to large users (mines and others) that have until now been forced to generate their own electricity.

38. EDSA has limited capacity, with an outdated and inadequate network and system, high technical and commercial losses (35–38 percent), and low reliability. Tariffs are relatively high at US$0.22 per kWh, electricity services are of poor quality, and sector management is inadequate. The GoSL has taken measures to address these issues. A new management contract for EDSA has been established, aiming to

13

achieve a significant improvement in its performance, while building local capacity to make the gains sustainable after the end of the contract.

39. According to a 2014 Demand Forecast Study for Sierra Leone,20 demand for electricity is estimated at 104.8 MW for 2015 in the Freetown Capital Western Area. Demand is projected to reach 135 MW by 2020 and 235 MW by 2030 driven mainly by the development of new industrial and residential areas. If this analysis is extended to also cover the evolution of demand in cities and towns outside of Freetown, unconstrained demand is estimated to total 128.3 MW in 2015, and to grow to 187 MW in 2020, reaching 400 MW in 2030.

C. Higher Level Objectives to which the Project Contributes

40. The proposed AF contributes to the overall regional agenda for the development of efficient regional energy trade and it is also fully aligned with the National Government’s Strategies of Liberia and of Sierra Leone for the development of their electricity sector and the expansion of electricity services to their populations.

41. For Liberia, the proposed AF is fully aligned with the World Bank Group’s Liberia Country Partnership Strategy (CPS) FY13-17.21 The CPS places a strong priority on expanding electricity services and making them more affordable to businesses and households in order to spur economic growth, job creation, and poverty reduction. Energy trade through the CLSG transmission line will bring to Liberia cheaper supply of electricity, and support the Government’s effort to achieve such expansion of services at a more affordable cost. This will contribute to the World Bank’s twin goals of reducing extreme poverty and boosting shared prosperity.

42. This AF is also aligned with the GoL’s development strategy. Liberia’s Agenda for Transformation FY12-17 (the second Poverty Reduction Strategy) aims to achieve a more prosperous and inclusive society by 2030. Under pillar 2 of the Agenda for Transformation as also highlighted in the 2015 Economic Stabilization and Recovery Plan, the expansion of electricity services and the reduction of the cost of electricity are identified as essential conditions for achieving and sustaining economic transformation.

43. For Sierra Leone, the project is consistent with the most recent IDA, IFC, MIGA, and African Development Bank “Joint Country Assistance Strategy (CAS) FY10-FY13 for the Republic of Sierra Leone”22. It will contribute to Pillar 2: “Promoting Inclusive Growth” by focusing on results area 8: “broadening electricity supply throughout the country”. Efforts to expand electricity supply in Sierra Leone will only translate into improved electricity services if there is sufficient electricity generation, transmission and distribution capacity. The CAS identified insufficient and unreliable electricity supply as a key barrier to improving the country’s investment climate and as a binding constraint to economic growth.

44. The proposed operation is aligned with the Growth Pillar of the World Bank’s “Africa Strategy” by contributing to reliable supply of electricity for growth and private investment as well as with the guiding principles outlined in the WBG’s Directions for the energy sector “Toward a Sustainable Energy Future for All”.

20 PPA Energy. 2014. Integrated Resource Plan and Tariff Study: Demand Forecast Report. 21 Report No. 74618-LR, July 1, 2013. 22 Report No. 52297-SL, March 4, 2010.

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D. Original Project Description and Performance

45. Parent project performance. The parent project was approved on May 31, 2012; the grant became effective on December 27, 2012 and the credit on February 13, 2015 (see later in this section, explanation for the delay in effectiveness of the credit). Project ratings for ‘progress toward achievement of the development objective’ and ‘overall implementation progress’ have been Moderately Satisfactory over the past 12 months in the project’s Implementation Status and Results Reports (ISRs). Overall disbursements as of September 2017, were 31.6 percent of total resources (32.61 percent of the credit and 28.84 percent of the grant). Financial management is rated Moderately Satisfactory, and all project interim financial reports are up to date. Procurement and safeguards performance are both rated Satisfactory.

46. Parent project components. The two components of the parent project -- the WAPP CLSG Power Interconnection and the WAPP Integration and Technical Assistance-- are implemented independently. The CLSG Interconnection component is implemented by Transmission Company Côte d’Ivoire, Liberia, Sierra Leone, and Guinea (TRANSCO CLSG); and the WAPP Technical Assistance is implemented by the WAPP Secretariat. Each component is described below.

Component 1: WAPP CLSG Power Interconnection (US$444.4 million equivalent)

47. This component supports the construction of 1,349 km of transmission line interconnections between Côte d’Ivoire, Liberia, Sierra Leone and Guinea, together with associated substations. TRANSCO CLSG, the regional transmission company owned equally by the four national utilities, was created to implement and operate the regional CLSG transmission line. Financiers of this component are IDA, AfDB, EIB, and Kreditanstalt für Wiederaufbau (German Development Bank) (KfW). Component 1 has three subcomponents (see original Project Appraisal Document [PAD] for details).

Subcomponent 1.A: Power Interconnection between Côte d’Ivoire, Liberia, Sierra Leone and Guinea (US$321.9 million equivalent, of which IDA US$84.8 million equivalent, AfDB US$106.9 million, EIB US$82.9 million, KfW US$37.0 million, and CLSG Governments US$10.1 million).

48. This subcomponent finances the construction of the 1,349 km of 225 kV double circuit overhead transmission lines between the four countries, the associated 10 new substations,23 voltage regulation systems in four existing substations, and the extension of one existing substation. It includes transmission and distribution interconnections, substations, Supervisory Control and Data Acquisition (SCADA) system, compensation and frequency regulation equipment, and implementation of Environmental and Social Management Plans (ESMPs) and Resettlement Action Plans (RAPs), the preparation of which is financed by the participating Governments. The four Governments have adopted a coordinated procurement strategy for the structuring of the bidding process and bidding documents.

Subcomponent 1.B: Institutional Framework and Project Oversight (US$45.4 million equivalent, of which IDA US$45 million and AfDB US$0.4 million).

23 One of the original 11 substations, Linsan in Guinea, was eliminated during implementation as it is being constructed under another regional project financed by AfDB.

15

49. This subcomponent provides financial support to TRANSCO CLSG during construction of the line, as well as support for an Owner’s Engineer. TRANSCO CLSG will be self-financed once the line starts operating, with revenues from the wheeling fees.

Subcomponent 1.C: Physical and Price Contingencies (US$77.0 million equivalent of which IDA US$14.6 million, AfDB US$25.8 million, EIB US$22.2 million, KfW US$3.7 million, and CLSG Governments US$10.7 million).

50. These contingencies are also categorized as unallocated costs and interest during construction (IDC).

Component 2: WAPP Integration and Technical Assistance (US$31.5 million equivalent)

51. This component aims to foster the regional supply of electricity and strengthen the technical integration of the WAPP network. Implemented by the WAPP Secretariat and funded solely by IDA, it includes the two subcomponents described below.

Subcomponent 2.A: Supply Alternatives Studies and Project Preparation Support (IDA US$10 million equivalent)

52. As part of the group of activities under 2.A.1 Supply Alternative Studies, key studies are conducted to prepare development of generation capacity along the CLSG line on time and in accordance with least-cost principles in the medium to long term. As part of the group of activities under 2.A.2 Project Preparation Support, support is provided for the preparation of the CLSG project (including support for the establishment of TRANSCO CLSG).

Subcomponent 2.B: Technical Assistance and Integration of WAPP network (IDA US$21.5 million equivalent).

53. This subcomponent supports integration of networks from WAPP countries and provides TA to the WAPP Secretariat. The group of activities under 2.B.1 Technical Integration of WAPP network includes (a) updates of studies on the optimal technical specifications for synchronizing the networks of nine ECOWAS countries and Mauritania and (b) the supply of synchronizing equipment based on the results of these studies to strengthen synchronization of interconnected networks. This subcomponent will also support a study to explore ways to foster the development of an ancillary services market within the Electricity Market of WAPP. The group of activities under 2.B.2 Technical Assistance to WAPP also finances the hiring of specialized experts for the WAPP Secretariat to strengthen its technical expertise and foster its role as a leading institution in the development of energy markets in the region.

54. Parent project performance. The performance of each component of the parent project is discussed below.

55. WAPP CLSG Power Interconnection. Delays in effectiveness were caused mainly by a long list of prior actions for effectiveness, including a legal framework with an international treaty that had to be signed by the four heads of state and ratified by the four parliaments, as well as the setting up of a regional transmission company to implement the project. In addition, many of these actions were sequential and required the prior signature and ratification of the treaty and a no-objection of all donors was required in most cases. Finally, the adverse circumstances created by the EVD outbreak were a major obstacle to completion of all pending actions after the institutional framework was adopted, because

16

officials had to focus on these urgent matters and the outbreak slowed down procurement and recruitment processes needed to finalize these actions.

56. Project implementation has advanced significantly since effectiveness on February 13, 2015. Most major contracts for construction of the transmission lines and substations in Liberia, Sierra Leone, Guinea, and Côte d’Ivoire have been signed, including the contracts for the Owner’s Engineer Phase II for supervision of the works and the extension of the contract for the Owner’s Engineer Phase I for study and procurement assignment. Contractors for the construction of the lines in Liberia and Sierra Leone were mobilized from March 2017 and the topographic surveys are ongoing. Regarding the transmission line covering Côte d’Ivoire, the North-East of Liberia, and the East of Guinea (Man-Yekepa-Nzerekore), the mobilization of the contractor is effective since June 2017 and since August 2017 in Côte d’Ivoire and Guinea respectively. The related topographic surveys are ongoing. The contractor for the construction for three of the five substations of Sierra Leone has also been on board since March 2017. The finalization of the contract for the construction of the four substations in Liberia is nearing completion. The contract for the construction of the two remaining substations in Sierra Leone and the substations in Côte d’Ivoire and Guinea is being relaunched as a result of the unsuccessful contracting process. This process is expected to be concluded in the next six months. The procuring of all other contracts that are needed to finalize the construction phase is ongoing. The first PPAs to sell 81 MW have been signed, with 27 MW to be exported from Côte d’Ivoire to each of the other three countries. TRANSCO CLSG has signed Transmission Service Agreements (TSAs) with the three purchasing countries.24 TRANSCO CLSG has opened local offices in Liberia, Sierra Leone, and Guinea, with country managers for the three offices in place. Their presence in each participating country is expected to facilitate timely implementation of the project and communication among the stakeholders.

57. Key next steps in the coming months will be the payment of compensations to the project affected persons (PAPs) in the four countries so that works can start as planned. All mechanisms are in place in the participating countries for payment of compensation under the RAPs, in accordance with respective national laws. A consultant and nongovernmental organizations (NGOs) to support the compensation process have been recruited and will be fully on board in the coming weeks. The final counting of PAPs will take place when the contractor completes the topographical surveys, as adjustments of the line have been made.25 This final counting will also inform all parties whether the funds made available for the RAPs by the four Governments are sufficient. In relation to the RAP payments, the GoL is engaged in discussions with Firestone, a large rubber company, which questioned the compensation price of rubber trees that had been approved by the Ministry of Agriculture and used as the basis for tree crop compensation in the RAPs. A final proposal was discussed with all interested parties in Monrovia (GoL, Firestone, TRANSCO) on October 20, 2017, and it is expected that the Ministry of Justice will issue a final decision by early November 2017. The GoL expects this issue to be resolved in time to avoid delaying the schedule of the works. The World Bank team is closely monitoring these developments.

58. WAPP Integration and Technical Assistance. Implementation of the different activities financed under this component have advanced. The list of strategic activities was extracted from the 2012 WAPP Master Plan and has evolved together with changes in the electricity sector strategies in each participating country. While the original list of studies included the generation projects of Souapiti and

24 Signature of the PPA and TSAs were disbursement conditions for the project. 25 Payment of RAP compensation will be made by sections, following the final count of PAPs once the contractors have defined the final routing of the line. Work will start on each section of the line only after the RAP payments have been completed.

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Kassa B in Guinea and Bekongor in Sierra Leone (see paragraph38), it was agreed to focus instead on Souapiti, but not on the other two sites, because (a) the Government of Guinea (GoG) decided not to proceed for now with the Kassa B site and (b) the Bekongor site is expected to be developed by Chinese companies. The review of the feasibility study (FS) for Souapiti was completed under the parent project and used by the GoG in negotiations with Chinese contractors, who have since commenced its construction. Subsequently, the WAPP proposed, in consultation with its members and the World Bank, to finance (a) further preparatory studies for the Amaria hydroelectricity plant in Guinea; and (b) the development of the North Core Regional Transmission Line, a core project of the WAPP Infrastructure Program (see Table 2). These two activities are in the preparation and procurement phases and are expected to start implementation during FY18.

59. The update of the synchronization study for the national transmission systems of nine WAPP countries and Mauritania has been finalized and discussed with the participating countries. Preparation of bidding documents for the acquisition of equipment to strengthen the synchronization of interconnections with national networks, based on the agreed specifications, has been completed. The procurement process is expected to conclude in FY18, aiming to synchronize the interconnections between Nigeria, Benin, and Niger. While the support to the WAPP in building the participating countries’ institutional capacity under the grant initially faced difficulties in attracting and retaining qualified experts, the WAPP has hired a highly experienced senior hydroelectricity specialist and a seasoned senior procurement specialist to strengthen its capacity to lead the preparation and implementation of priority projects, as part of the implementation of the WAPP Core Infrastructure Program.

E. Rationale for Additional Financing

60. The proposed AF aims to fill a financing gap for both the WAPP CLSG Power Interconnection and the WAPP Integration and Technical Assistance to ensure that both components deliver on time the expected results, and to scale up the impact of the WAPP Integration and Technical Assistance to foster more efficient trade of energy in the sub-region. In supporting these objectives, the AF would make an important contribution to the WAPP’s realization of a regional energy market and the realization of the ECOWAS vision of the WAPP. The AF is aligned with the project’s PDOs and would be accommodated under the existing subcomponents.

61. Rationale for AF for the WAPP CLSG Power Interconnection. Major progress has been made in the project, with six of the 14 key contracts for transmission lines, substations, and the Owner’s Engineer signed and contractors mobilized for the lines in Liberia and Sierra Leone. However, after the opening of the bids for the transmission lines and substations in September 2016, TRANSCO CLSG alerted the donors to a financing gap between the resources available and the actual cost of the project. This financing gap was due to several factors (see Figure 2 for an estimation of the weight of these different factors into the total existing gap):

o Losses from the SDR, Unit of Account (UA), and euro exchange rate fluctuations in relation to the U.S. dollar. Exchange rate fluctuations between approval in May 2012 and March 2017 have reduced the original financing commitments in U.S. dollar terms from US$424 million to US$373 million, a reduction of US$51 million or 12 percent of the original financing.

o A variation between the cost estimates in the FS in 2009 and the actual bid offers in 2016

18

o The post-Ebola effect, which has increased the costs of bids, especially for Liberia, Sierra Leone, and Guinea.

o Additional costs from using three shield wires instead of two to permit using low-cost shield wire technology connecting people directly from the transmission line (See Annex 2B)

o The delay in project effectiveness that extended the time that TRANSCO CLSG will need to rely on project funding (from IDA) before receiving user fees.

o A provision for price/costs contingency on all contracts.

Figure 2. Sources of the WAPP CLSG Financing Gap (Gap Calculated in Early 2017)

62. At the request of the GoL and GoSL and to avoid delays in the signature of the contracts and the commissioning of the CLSG regional transmission line, IDA will provide resources to cover the majority of the financing gap related to the costs of the transmission line in both Liberia and Sierra Leone (see Table 4). This approach will ensure that all contracts are fully funded. While the AfDB and European Investment Bank (EIB) are providing financing to Sierra Leone under the parent project, they do not have resources to fully cover the financing gap in Sierra Leone. AfDB will reallocate funds to ensure that there is no gap both in Guinea and in Côte d’Ivoire, while KfW is funding the small gap in financing the costs of the substations in Liberia. Annex 2 provides details on the donor contributions to fill the various financing gaps under the project.

63. As a significant part of the funds allocated under this AF would fill the gap resulting from a higher than expected cost of these contracts, the team performed a due diligence process to ensure that the actual costs of the contracts were reasonable and that an AF to fill the gap was justified (see Annex 2A for details on the benchmarking exercise). The team examined a sample of transmission projects undertaken over the last two decades in Sub-Saharan Africa, with the following main conclusions: (a) the average bidding cost for all lots is a rate of US$0.210 million per km; (b) for Lots 1 and 2, the winning bid price is about 7 percent to 9 percent higher than the estimate; and (c) for Lots 3 and 4, the winning bid price is about 10 percent lower than the estimate. This average cost is consistent with the benchmark on the market price (US$0.203 million per km) in West Africa and with the updated costs estimated in May 2015. The bidding prices for the four lots of 220 kV transmission lines are confirmed as reasonable and competitive.

19

Table 3: Addressing WAPP CLSG Power Interconnection Financing Gap, by Country and Donor (US$, millions)

Countries

Revised Financing

(March 2017)

New Project Costs

Finance Gap

AF

IDA AfDB KfW Total AF Gap Prov. For

Exch. Rate

Fluctuation. a

Gap

Prov. for Exch. Rate Fluctuation

a

Côte d’Ivoire

36.1 37.0 −0.9 — — 0.9 — — 0.9

Liberia 182.6 235.5 −52.9 40.6 4.7 3.0 2.5 2.1 52.9

Sierra Leone

113.3 172.9 −59.6 59.2 0.4 0.0 — — 59.6

Guinea 41.0 37.1 3.9 — — −3.9 — — −3.9

Totalb 373.0 482.5 −109.5 99.8 5.1 0.0 2.5 2.1 109.5

104.9 0.0 4.6

Note: a. A provisional amount has been included for possible exchange rate variations until negotiations; b. Totals may not add due to rounding.

64. Rationale for AF for the WAPP Integration and Technical Assistance. Building on the rehabilitation of the Mount Coffee Plant on the St. Paul River and the opportunity of future access to the regional market through the CLSG line, the GoL has expressed strong interest in exporting part of the hydropower generated today in Liberia into the regional market and in engaging in further development of part of the 500 MW remaining hydropower potential of the St. Paul River. Development of storage and new generation on the St. Paul River, which was included in the pool of possible projects identified in the WAPP Master Plan, is in line with the WAPP’s drive to augment hydropower in its energy mix. It is also considered an essential project for the efficient expansion of the Liberian energy sector as stated in Liberia’s Least Cost Development Plan (LCDP).26 Such development would contribute to short- and medium-term exports from Liberia and could simultaneously increase availability of firm, year-round generation capacity within Liberia, thus reducing the need for costlier thermal generation. At the same time, from a regional perspective, this flexible hydropower generation capacity located at the heart of the CLSG would also support synchronization and stability of the regional network by providing ancillary services to the regional system.

65. The project’s focus on Liberia’s use of the CLSG line to export hydroelectricity is not in contradiction with the Government’s objectives of expanding supply of electricity service to the domestic market, but rather complements and enhances this strategy. Despite a very low rate of electrification in Liberia and the existence of a large repressed demand currently relying on expensive diesel-based generation, LEC is facing now an excess of electricity supply during the wet season when Mount Coffee’s

26 Hydropower has been identified in the LCDP as a key source of electricity to diversify the supply mix away from expensive imported fossil fuel. In addition, the Investment Plan for Renewable Energy (IPRE) prepared under the Scaling Up Renewable Energy in Low Income Countries Program (SREP) Grant (September 2013) focused on assessing the potential for development of other renewable sources of electricity, such as biomass, and wind and solar, in Liberia. This IPRE plan in turn was the basis for (a) the development of mini-hydropower development of Lofa (under SREP and IDA financing - Liberia Renewable Energy Access Project (LIRENAP) project) and (b) the preparation of an investment project for the east of the country which considers both hydro and biomass options (currently under preparation by the AfDB with SREP financing).

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four turbines generate at full capacity. The discrepancy between the large needs for more electricity and the limited actual demand for such electricity arises because the national distribution network has expended at a slower rate than supply of cheaper electricity, despite the support of the international development community. There is a strong access program to electricity services in the country financed by the World Bank27 and various other donors—with most projects under implementation and a few in preparatory stage. This access program has advanced slower than expected, due, among various reasons, to the weak institutional capacity of LEC, the national utility company. On the other hand, new sources of electricity supply have been recently added (88 MW of hydropower in Mount Coffee, 38 MW of thermal electricity). As a result, given the current limitations of the national grid, there is now an excess availability of electricity generation during the wet season in Liberia.

66. In this context, the possibility of exporting this excess supply of hydropower to the regional energy market through the CLSG line provides a venue for the immediate evacuation of this excess supply on the regional market. Access to a larger regional energy market also provides a justification for a project to increase availability of hydropower in Liberia and in the region, which would have been impossible in the absence of a larger regional market, to overcome the limitations of the national Liberian market.

67. The financing provided under this AF would also contribute to the sustainability of regional energy trade by helping the CLSG countries to develop robust commercial mechanisms, learn from the experience of other more advanced power pools, and adopt technical rules and procedures to optimize the exchanges of electricity through the CLSG line.

68. Finally, this AF also provides the resources to compensate the loss of resources incurred since 2012 by the IDA grant to the WAPP under the parent project, due to fluctuations of exchange rates between the unit in which the grant is denominated (SDR) and the currencies in which most of the expenses are occurred (mostly US$). Filling the gap will allow the WAPP to realize all the activities agreed upon under the parent project.

F. Consideration of Other Options

69. The World Bank team considered including in this AF a new component focused on the expansion of access to electricity in Liberia and Sierra Leone, to increase the impact of the CLSG transmission line on

27 The World Bank has been extensively involved in supporting the energy sector in Liberia since its re-engagement in 2008 and has a large energy portfolio of over US$200 million (including the CLSG IDA financing to Liberia). It has financed projects to expand access to electricity, foster the use of renewable energy, strengthen the capacity of the Ministry of Lands, Mining and Energy (MLME), and improve the operational and commercial viability of LEC. There are currently three active investment projects and a grant for technical assistance: (1) Lighting Lives in Liberia - Global Environment Facility Grant (P124014) (US$1.45 million), to scale up the market for solar lantern distribution; (2a) Liberia Accelerated Electricity Expansion Project (LACEEP) (P133445) (US$35 million), to support electrification in Monrovia and the corridor of Monrovia-Kakata, and the construction of HFO storage and transport facilities for LEC to facilitate the shift from diesel to HFO; (2b) AF for LACEEP (P153124) (US$60 million), for the electrification of N-W Monrovia and the economic corridor of Monrovia-Grand Cape Mont-Bomi, as well as the acquisition, deployment, and associated training of modern integrated management systems for LEC; (3) SREP and IDA -LIRENAP(P149683) (US$27 million) to continue the expansion of access to electricity with a mini-grid powered mainly by hydroelectricity in Lofa County; and (4) Sustainable Energy for All Grant (P145844): (US$1.8 million) that supports the GoL in sector planning for sustainable access. All projects have consistently supported building capacity in the various public sector institutions.

21

people’s welfare and foster local ownership of the line among the communities in the vicinity of the project, to help protect the line against vandalism. However, completing due diligence on such a component, including safeguards, would require significant time. As the need to address the financing gap for the WAPP CLSG Power Interconnection is urgent—to avoid further implementation delays—it was decided to proceed with this AF for the project’s existing components. Expansion of access associated with the CLSG transmission line could be addressed through separate access projects such as for instance the regional access operation currently in preparation (see Table 3).

70. The World Bank team also considered that TA on possible development of the next hydropower project in Liberia could be done through a separate grant-financed project with the GoL or a new TA component under the AF but with financing to the GoL rather than adding to the existing TA component under the WAPP. These options were rejected for several reasons: (a) a grant to the GoL for a separate project would not encourage full examination of the regional dimensions of hydropower development in Liberia and would not take advantage of the hydropower experts in the WAPP that are working on other projects (for example, using a single committee of experts) and (b) a separate TA component to be implemented under the AF would suffer from the same problems and require that a new implementing agency be added, since the WAPP Secretariat could not do it and TRANSCO CLSG does not have the required expertise in this field.

71. The chosen option of using the existing TA component executed by the WAPP has the following benefits: (a) the structure and implementing agencies of the parent project would be retained and (b) the hydropower expertise in the WAPP Secretariat would be used and strengthened with the addition of expertise on environmental and social safeguards that would benefit not only the studies of a project in Liberia under the AF but also the studies of other projects under the parent TA component.

III. Proposed Changes

Summary of Proposed Changes

The proposed AF would (i) fill a financing gap for the construction of the CLSG regional transmission lines and substations in Liberia and Sierra Leone under the WAPP CLSG Power Interconnection (Component 1); and (ii) provide TA for the development of hydroelectric generation capacity in Liberia to serve both national and regional markets, support the strengthening of the commercial framework to trade energy through the CLSG regional interconnector and compensate for the resources lost due to exchange rate fluctuations under the WAPP Integration and Technical Assistance (Component 2). As part of the AF, other changes are proposed, including a revision of the PDOs of the WAPP-CLSG Interconnection component, a triggering of three additional safeguard policies due to the introduction of the study on the St. Paul River, a revision of the Results Framework, a reallocation among disbursement categories, a revision of components and costs, an extension of the closing date of both the IDA credit and grant to December 15, 2020, an update of disbursement estimates, and an update of the implementation schedule to reflect the impact of all the changes listed above.

Change in Implementing Agency Yes [ ] No [ X ]

Change in Project's Development Objectives Yes [ X ] No [ ]

Change in Results Framework Yes [ X ] No [ ]

Change in Safeguard Policies Triggered Yes [ X ] No [ ]

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Change of EA category Yes [ ] No [ X ]

Other Changes to Safeguards Yes [ ] No [ X ]

Change in Legal Covenants Yes [ X ] No [ ]

Change in Loan Closing Date(s) Yes [ X ] No [ ]

Cancellations Proposed Yes [ ] No [ X ]

Change in Disbursement Arrangements Yes [ ] No [ X ]

Reallocation between Disbursement Categories Yes [ X ] No [ ]

Change in Disbursement Estimates Yes [ X ] No [ ]

Change to Components and Cost Yes [ X ] No [ ]

Change in Institutional Arrangements Yes [ ] No [ X ]

Change in Financial Management Yes [ ] No [ X ]

Change in Procurement Yes [ ] No [ X ]

Change in Implementation Schedule Yes [ X ] No [ ]

Other Change(s) Yes [ ] No [ X ]

Development Objective/Results

Project’s Development Objectives

Original PDO

The Project Development Objectives (PDOs) for the WAPP CLSG Power Interconnection are (a) to reduce the cost of and increase the electricity supply at utility level, and (b) to increase the export capability of Côte d’Ivoire. The PDO of the WAPP Integration and Technical Assistance is to increase the technical integration of the WAPP network.

Change in Project's Development Objectives

Explanation:

It is proposed to modify the PDOs of the Interconnection component to capture the developmental impact of the project more comprehensively and to ensure that the corresponding indicators measure this impact accurately. This PDO would be modified to clarify that most cost savings from the energy trade are expected to take place in Liberia and Sierra Leone, where cheaper imports through the CLSG line would replace thermal-based generation that today constitutes the bulk of domestic electric supply. The revised formulation would also clarify that CLSG will allow greater energy exports to take place in all four countries, not only in Côte d’Ivoire, and that exchanges may include imports and exports among all countries rather than one country only exporting or importing, depending on the availability and relative cost differential of domestic versus imported supply. No changes are proposed for the PDO of the WAPP Integration and Technical Assistance component.

Proposed New PDO - Additional Financing (AF)

The revised PDOs for the WAPP CLSG Power Interconnection are to: (a) reduce the cost of electricity supply at the utility level for Liberia and Sierra Leone and (b) increase the amount of electricity traded

23

among all the participating countries. The Development Objective of the WAPP TA is to increase the technical integration of the WAPP network.

Change in Results Framework

Explanation:

The Results Framework will be updated to reflect the impact of the proposed AF, to reflect the proposed change in the development objectives of the WAPP CLSG Power Interconnection, and to reflect the results of the 2017 midterm review of the WAPP Integration and Technical Assistance. The proposed revisions are shown in Table 5. In addition, all indicators are subject to the revised end target date in accordance with the proposed new closing date of the project.

Table 4: Proposed Changes in Project Result Framework

Indicator Status Original under Parent Project

Revised under AF Comment

WAPP CLSG Power Interconnection (Component 1)

Development Objective Indicator

Revised Annual weighted cost of electricity supply at power utility level in Liberia and Sierra Leone.

Difference between the annual weighted cost of imported electricity through CLSG and the annual weighted cost of other sources of supply for the utilities in Liberia and Sierra Leone.

This difference is expected to be negative, as imports through the CLSG line are expected to be lower than the average cost of other sources of electricity supply for utilities in these two countries

Intermediate Results Indicators

Revised Eleven (11) 225 kV Substations constructed (disaggregated by location):

(1) Yekepa

(2) Nzerekore

(3) Buchanan

(4) Monrovia

(5) Mano

(6) Kenema

(7) Bokongor

(8) Bumbuna

(9) Yiben

(10) Kamakwie

(11) Linsan

Ten (10) 225 kV Substations constructed (disaggregated by location):

(1) Yekepa

(2) Nzerekore

(3) Buchanan

(4) Monrovia

(5) Mano

(6) Kenema

(7) Bokongor

(8) Bumbuna

(9) Yiben

(10) Kamakwie

One of the 11 new substations included under the project, Linsan Substation in Guinea, has been eliminated, as it has been financed under another regional project.

24

New Number of grievances received and satisfactorily resolved.

A new indicator has been included to measure beneficiary feedback.

WAPP Integration and Technical Assistance (Component 2)

Intermediate Results Indicators

New Supply alternative analyses completed.

A number of supply alternative analyses completed to the feasibility stage.

Indicator was revised to better measure results by target date. Revised to include quantitative monitoring of the indicator.

Revised WAPP Master Plan priority projects prepared to financial closure.

WAPP Master Plan priority projects brought to the point where investment-grade feasibility studies and associated documentation have been completed.

Considers the effects of the EVD outbreak and integrates the lessons learned from this and other regional and country projects. These lessons include the fact that the World Bank does not control the process and time line for regional institutions, national counterparts, and other commercial financiers to reach financial closure. This indicator will be updated to reflect the current list of priority projects being prepared under the grant, including hydroelectric projects on the St. Paul River. Furthermore, this indicator has shifted from being a development objective indicator to become and intermediate result indicator, because there was already an adequate development objective indicator for this issue.

Compliance

Change in Safeguard Policies Triggered

Explanation: The safeguards category of the AF remains the same as the parent project, Category A, as there are no new activities (Component 2 already included the financing of preparatory studies for several strategic hydropower projects that could connect to the CLSG line). The addition of preparatory studies for a hydropower project on the St. Paul River in Liberia under the WAPP Integration and Technical Assistance Project results in the triggering of three additional safeguard policies: OP 4.36 on Forests, OP 4.37 on Safety of Dams, OP/BP 7.50 on Projects on International Waterways. OP/BP 7.50 is triggered because the St. Paul River originates in Guinea and is therefore considered an international waterway. OP 4.37 on Safety of Dams is triggered as the AF is financing studies related to a dam. OP 4.36 on Forests is triggered since the area where the future Via Reservoir might be located still contains significant natural forest areas.

25

Current and Proposed Safeguard Policies Triggered: Current (from Current Parent ISDS)

Proposed (from Additional Financing ISDS)

Environmental Assessment (OP/BP 4.01) Yes Yes

Natural Habitats (OP/BP 4.04) Yes Yes

Forests (OP/BP 4.36) No Yes

Pest Management (OP 4.09) No No

Physical Cultural Resources (OP/BP 4.11) Yes Yes

Indigenous Peoples (OP/BP 4.10) No No

Involuntary Resettlement (OP/BP 4.12) Yes Yes

Safety of Dams (OP/BP 4.37) No Yes

Projects on International Waterways (OP/BP 7.50) No Yes

Projects in Disputed Areas (OP/BP 7.60) No No

Covenants - Additional Financing- WAPP - Côte d'Ivoire, Sierra Leone, Liberia, and Guinea (CLSG) Power Interconnection and WAPP Integration and Technical Assistance (P163033)

Source of Funds

Finance Agreement Reference

Description of Covenants Date Due Recurrent

Frequency

Action

IDA Grant D2440

WAPP Financing Agreement, Schedule 2, Section I.B.4.

The Recipient shall establish and, maintain throughout Project implementation, an independent panel of experts, under terms of reference and staffed with personnel with qualifications and experience satisfactory to the Association. The panel shall include a dam safety specialist, a hydrologist, a hydraulic engineer, an electromechanical engineer, an environmental specialist, a social specialist and a health and safety specialist, with the purpose of, inter alia, providing advice on any potential riparian issues, technical design, construction procedures, dam safety, environmental, social and health safety aspects to support and inform the development of the studies being undertaken under the Project.

June 29, 2018

New

IDA Grant D2440

WAPP, Financing Agreement, Schedule 2 Section I.B.7

The Recipient shall establish and, thereafter

maintain throughout Project implementation, a

focal team vested with the main responsibility of

providing technical and operational support to

HLSC, all under terms of reference and staffed

with personnel with qualifications and experience

satisfactory to the Association. The focal team will

be composed of a Project coordinator, a technical

coordinator, two (2) junior engineers and other

June 29, 2018

New

26

experts, such as solar or social and environment

safeguard experts, which may be called upon to

reinforce the team if and as needed. The focal

team will be responsible, inter alia, for: (i)

providing technical inputs to the terms of

reference of the studies to be carried out under

the Project; (ii) facilitating the provision of

documentation to the consultants; (iii) reviewing

the studies progress reports to ensure quality and

relevance of the outputs; (iv) providing

summaries and briefings to the HLSC; and (v)

supporting consultations with stakeholders.

Risk

Risk Category Rating (H, S, M, L)

1. Political and Governance Substantial

2. Macroeconomic High

3. Sector Strategies and Policies High

4. Technical Design of Project or Program Moderate

5. Institutional Capacity for Implementation and Sustainability High

6. Fiduciary Substantial

7. Environment and Social High

8. Stakeholder Substantial

9. Other High

OVERALL High

Finance

Loan Closing Date - Additional Financing WAPP- Côte d'Ivoire, Liberia, Sierra Leone and Guinea (CLSG) Power Interconnection and WAPP Integration and Technical Assistance (P163033)

Source of Funds Proposed Additional Financing Loan Closing Date

International Development Association (IDA)

15-Dec-2020

IDA Grant 15-Dec-2020

27

Loan Closing Date(s) – West African Power Pool (WAPP) Côte d'Ivoire, Liberia, Sierra Leone and Guinea (CLSG) Power Interconnection and WAPP Integration and Technical Assistance (P113266)

Explanation: It is proposed to extend the WAPP CLSG Power Interconnection closing date by 14 months and the WAPP Integration and Technical Assistance closing date by 36 months so that both will close on December 15, 2020. This will allow sufficient time for the activities under the AF to be completed.

Ln/Cr/TF Status Original Closing Date Current Closing

Date Proposed Closing Date

Previous Closing Date(s)

IDA-51100 Effective 31-Dec-2017 31-Oct-2019 15-Dec-2020 31-Dec-2017; 31-Oct-2019

IDA-H7700 Effective 31-Dec-2017 31-Dec-2017 15-Dec-2020 31-Dec-2017

Change in Disbursement Estimates

(including all sources of Financing)

Explanation: Disbursement estimates are updated to reflect the AF and the proposed new closing date.

Expected Disbursements (in US$, million) (including all sources of financing)

Fiscal Year 2018 2019 2020 2021

Annual 77 78 42 10.95

Cumulative 147 225 267 277.95

Allocations - Additional Financing- West African Power Pool (WAPP) - Côte d'Ivoire, Liberia, Sierra Leone and Guinea (CLSG) Power Interconnection and WAPP Integration and Technical Assistance (P163033)

Source of Fund

Currency

Category of Expenditure Allocation

Disbursement % (Type Total)

Proposed Proposed

IDA Cr. 61500 IDA Gr. 2470

US$

(1) Goods, works, non-consulting services, consultants’ services, workshops, training, and operation cost Part A.1 of the Project for Liberia

40,600,000 100

(2) Unallocated 4,710,000 100

IDA Cr. 61480

US$

(1) Goods, works, non-consulting services, consultants’ services, workshops, training, and operation cost for Parts A.1 (vii) and A.2 (ii) of the Project for Sierra Leone

59,100,000 100

(2) Unallocated 470,000 100

IDA Gr. D2440

(1) Goods, workshops, non-consulting

services, consultants’ services and 17,500,000 100

28

training for Part A of the WAPP Integration and Technical Assistance.

Total: 122,400,000

The AF includes a clause for the possibility of retroactive financing: SDR 6,400,000 for the Republic of Liberia, US$11,914,000 for the Republic of Sierra Leone, and SDR 2,400,000 for the WAPP.

Reallocation between Disbursement Categories PHH

Explanation: It is proposed to reallocate funds among disbursement categories under the parent IDA credit to Liberia (IDA-51100) from the allocation approved by the World Bank on January 30, 2015, in response to the request of the Government of Liberia dated November 14, 2014, and described in the column “Current Allocation” of the table below. The reallocation proposed here, described in the “Proposed Allocation” column of that table reflects the changes requested by the Government of Liberia in a second demand for reallocation from January 4, 2016, and some further minor adjustments to minimize the size of the financing gap, and thus the need for additional resources.

Ln/Cr/TF

Currency Current Category of

Expenditure

Allocation Disbursement %(Type Total)

Current Proposed Current Proposed

IDA-5110

SDR

Goods, works, non-consulting services, consultants’ services, workshops, training, and operation cost under Part A.1

45,700,000 58,700,000 100.00 100.00

Goods, works, non-consulting services, consulting services, workshops, training, operation cost under Part A.2, A.4

7,500,000 1,300,000 100.00 100.00

Goods, works, workshops, non-consulting services, consultants’ services, training, and OP under Part B

27,800,000 27,300,000 100.00 100.00

Goods, works, non-consulting services, consultants’ services, workshops, training, and operation cost under Part A.5

600,000 700,000 100.00 100.00

Unallocated 9,500,000 2,994,849.8

9 100.00 100.00

29

PPF refinancing 1,300,000 1,305,150.1

1 100.00 100.00

Interest accrued during construction

900,000 1,000,000 100.00 100.00

Designated Account 0.00 0,00 0.00 0.00

Total: 93,300,000 93,300,000

IDA-H7700

SDR

GDS, WKS, NCS, CS and WORKSHOPS

18,800,000 18,800,000 100.00 100.00

PPF refinancing 1,600,000 1,600,000 100.00 100.00

Designated Account 0.00 0.00 0.00 0.00

Total: 20,400,000. 20,400,000

Components

Change to Components and Cost

Explanation:

The AF will fill a financing gap under the WAPP CLSG Power Interconnection. It will finance scale up activities and also fill a financing gap under the WAPP Integration and Technical Assistance. The activities to be financed under each component are described below.

Component 1: WAPP CLSG Power Interconnection. A total amount of US$104.9 million in new IDA credit resources would be added to cover the majority of the financing gap identified. The remainder of the gap will be covered either by the other donors or, in the case of activities financed with IDA resources, by a reallocation of funds among disbursement categories under the parent project. Details for the net AF required under the AF are as follows:

• Subcomponent 1.A Power Interconnection between Côte d’Ivoire, Liberia, Sierra Leone, and Guinea. The proposed AF would provide US$99.8 million in new IDA resources to Liberia and Sierra Leone (excluding the provision for exchange rate fluctuations listed below).

• For Liberia, the proposed AF would provide an additional US$40.6 million to complete the financing of the construction of transmission lines.

• For Sierra Leone, the proposed AF would provide an additional US$59.2 million to co-finance, with the EIB, the cost of transmission lines and, with the AfDB, the cost of substations.

The activities to be carried out in Subcomponent 1.A are as described in the original project PAD except for the elimination of the Linsan Substation in Guinea, because it is being financed under another regional project. Ten new substations will be constructed under the project.

• Subcomponent 1.C: Physical and Price Contingencies. A provision of US$5.1 million (US$4.7 million for Liberia and US$0.5million for Sierra Leone) has been included in the unallocated category to account for potential further variations of the exchange rates or other unforeseen events.

•

Component 2: WAPP Integration and Technical Assistance. The AF will provide additional IDA grant resources of US$17.5 million to (i) support the CLSG countries and TRANSCO CLSG to strengthen the commercial framework for energy trade through the CLSG line; (ii) finance the identification and

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preparation of further development of hydropower on the St. Paul River in Liberia; and (iii) compensate for the losses of revenues incurred since the original grant was approved in 2012, due to the fluctuations of the exchange rates. To this end, the AF will follow the same structure of the parent project (cf. the coding of components, subcomponents and groups of activities of the parent project) and finance the following additional groups of activities under the parent project’s Subcomponent 2.A (Supply Alternative Studies and Project Preparation Support):

• Group of Activities 2.A.2-bis: Support for the Preparation of Commercial Energy Exchanges through CLSG (US$1.5 million equivalent): The proposed AF will provide support to TRANSCO CLSG and member states to strengthen the commercial framework. This support will include the following activities:

o Update of the expected demand and supply of electricity from the CLSG countries and neighboring countries to understand the potential for trade.

o Technical assistance to develop interconnection agreements and other technical issues that will be reflected in the annexes to the PPAs and TSAs already signed, and for other future commercial agreements to trade electricity through the CLSG Line.

o Support to the preparation of PPAs based on the opportunities created by the development of the CLSG.

o Technical support as needed to support sound trading arrangements to foster the efficient exchange of energy through the CLSG line, including using lessons learned from other power pools.

• Group of Activities 2.A.3: Supply Alternatives Studies and Project Preparation for Hydropower Development on St. Paul River (US$11.0 million equivalent): The proposed AF would provide an assessment of and preparation for future hydropower development on the St. Paul River in Liberia. The component will help Liberian decision makers to select the optimal design for their next priority hydropower project on the St. Paul River. The assistance will then advance the preparation of the selected project on technical, safeguards, and financing aspects. To this end, the following activities will be undertaken:

o an Optimization Study that will include: (i) an assessment of the relevant national and regional market for electricity capacity and generation for a new hydroelectric project in Liberia; (ii) an updated assessment of potential sites based on further collection of topographic (LIDAR), socio-environmental data and a risk analysis; and (iii) an identification of an optimal development plan for the St. Paul River cascade and an associated priority project (including reservoir, generation, and transmission and possible complementary solar generation) through a multi-criteria analysis (with a focus on socio-environmental aspects).

o A Feasibility Study (including complementary geotechnical investigations) of the priority project selected by the Liberian authorities;

o An Environmental and Social Impact Assessment (ESIA) of the priority project, including preparation of an ESMP, labor influx, Work Camp Management Plan, a comprehensive analysis of alternatives, a Cumulative Impact Assessment, which will include the part of the St. Paul River Basin in Guinea, and a RAP; and

o A strategic adviser to help identify options for the financial structuring of the project, including possible participation of private investors or commercial financing.

• Group of Activities 2.A.4: Institutional Strengthening and Support of Technical and Safeguards Experts (US$2.2 million equivalent):

o An international panel of experts (PoE) will provide high-level technical and socioenvironmental safeguards expertise. The technical experts will review hydropower schemes to strengthen technical robustness and to support full compliance with the World Bank safeguards policy on

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dam safety. The environmental, social and health and safety experts will provide guidance based on international standards and best practices, including World Bank safeguard policies. This panel will be hosted under the WAPP to support all hydropower projects supported under the IDA grant. Costs for this panel will be distributed between the parent project and this AF, as the panel will oversee all the studies for hydropower development undertaken under the current grant.

o A focal team will provide technical and operational support to the High-Level Steering Committee (HLSC), composed of senior government officials in Liberia and a WAPP representative who will provide strategic direction to the studies and ensure their relevance. The Focal Team which will be standing as Liberian counterpart to the WAPP and to the Consultants who will undertake studies and activities on St Paul River. The Focal Team will include representatives from the Ministry of Land, Mine & Energy (MLME), the Liberia Electricity Corporation (LEC), and the Presidential Delivery Unit (PDU) and will also include technical experts (through a Technical Assistance firm), which will provide technical support and specific expertise, as needed during the preparation and review of these studies. Among others, the focal team will be responsible for (a) provision of technical inputs to the Terms of Reference (ToR) of studies; (b) facilitation of the provision of documentation to the consultants; (c) review of progress reports to ensure quality and relevance of the outputs; (d) provision of summaries and briefings to the HLSC; and (e) support for consultations with stakeholders. Other experts, such as solar or social and environment safeguard experts, may be called on to reinforce the team when needed.

o The TA will further support institutional strengthening and capacity building for the energy sector in Liberia and within the WAPP, as well as consultations and dissemination workshops at key stages of the process. Capacity building will take place through training and on-the-job activities, mainly in hydropower, water management, and possibly the solar sector. Key activities in this area will be the mentoring by senior international specialists of local junior engineers.

• Group of Activities 2.A.5: Provision for Past Losses from Exchange Rate Fluctuations (SDR vs. US$ or Euro) A provision of US$2.8 million has been made to account for the resources lost under the IDA Grant of the parent Project since it was originally provided to the WAPP in 2012

Current Component Name

Proposed Component Name

Current Cost (US$,

millions) 2012 (IDA financing)

(A)

Proposed Cost (US$, millions)

(IDA financing)

(B)

Action

1.A. Power Interconnection between Côte

d'Ivoire, Liberia, Sierra Leone and Guinea

1.A. Power Interconnection between Côte d'Ivoire, Liberia, Sierra Leone and Guinea

84.80 179.06 Revised

1.B. Institutional Framework and Project Oversight

Institutional Framework and Project Oversight

45.07 39.91 Revised

1.C. Unallocated & Unallocated & Interest Accrued During 14.63 12.52 Revised

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Interest Accrued During Construction

Construction

2.A. Supply Alternatives Studies and Project Preparation Support

Supply Alternatives Studies and Project Preparation Support

10.00 24.75 Revised

2.B. Technical Assistance and Integration of WAPP Network

Technical Assistance and Integration of WAPP Network

21.50 21.50 No change

Total: 176.00 277.95

Column B in this table shows the amount of IDA resources available today to the project. It sums the IDA of the AF (US$122.4 million) to the value of the IDA original financing at 2017 values instead of at 2012 values (US$155.35 million instead of US$176 million). This adjustment is needed because, as explained in the reasons for the financing gap, part of AF will contribute to replace resources from the parent project eroded by the fluctuations of the SDR/US$ exchange rate. Therefore, the total resources actually available are less than if calculated at historical values (summing US$ [2012] and US$ [2017]). Categories used in the first column corresponds to those in the Revised Table of Disbursement as approved by the WB upon completion of the first restructuring of the Parent Project, on January 30, 2015.

Other Change(s)

Implementing Agency Name Type Action

The CLSG Regional Transmission Company (TRANSCO CLSG)

Implementing Agency No Change

WAPP Secretariat Implementing Agency No Change

Change in Implementation Schedule

Explanation: The implementation schedule has been updated to reflect the proposed new activities and closing date.

IV. Appraisal Summary

Economic and Financial Analysis PH

Economic Analysis. An update of the economic analysis was carried out to determine the impact of the proposed AF and other changes reflected in the proposed AF on the estimated net economic benefit from the WAPP CLSG Power Interconnection. The results of this analysis show that the project still yields significant net economic benefits for the four participating countries despite (a) the increase in project costs; (b) delays in the start of project implementation; and (c) the twin shocks of the EVD crisis and fall of primary commodities and mineral prices that have depressed economic activity and thus the demand for electricity. Based on the difference in net present value (NPV) between with and without project scenarios, the project yields a positive NPV of US$475 million at a 10 percent discount rate, and an economic rate of return (EIRR) of 20 percent for the four countries combined, under the base case assumptions. As in the original analysis, the EIRR results suggest that Côte d’Ivoire

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and Liberia will benefit more from the project, with EIRRs of 64 percent and 30 percent, respectively, while Sierra Leone and Guinea will also benefit significantly but to a lesser degree, with EIRRs of 13 percent and 16 percent, respectively. The sensitivity analyses carried out demonstrate that the project’s economic viability is robust to variations of discount rates and fuel prices. See Annex 4 for details.

Financial Analysis. A financial analysis was carried out to determine the impact of the AF on the viability of the project as well as the viability of the regional transmission company (TRANSCO CLSG). The analysis reveals that the required average transmission tariff will have to increase to USc2.92 per kWh in the base case scenario compared to USc2.0 per kWh estimated at original appraisal, to cover the operation and maintenance (O&M) costs and the debt service obligations of the CLSG line. However, the cost of imported electricity including the revised transmission tariff remains well below the cost of domestically generated thermal power.

Evaluations of the potential fiscal impact of the AF on the participating countries and on the participating utilities were also carried out. The analysis reveals that the project continues to be financially viable and that the potential fiscal impact is expected to be limited. In addition, the project will contribute to the improvement of the currently difficult financial situation of the participating utilities by making available lower cost of electricity for the buyers/importers (initially Liberia, Sierra Leone and Guinea), and higher export revenue for the sellers (initially Côte d’Ivoire). Financial viability was found to be robust to cost increases and capacity utilization of the CLSG line. Details are presented in Annex 4.

Technical Analysis PHHASTA

Explanation:

WAPP CLSG Power Interconnection

The parent project to which this AF will contribute resources includes (a) the construction of 1,349 km of 225 kV double circuit overhead transmission line interconnecting CLSG and (b) construction of 10 new associated substations, voltage regulation systems in four substations, and the extension of one substation.

The project uses well-established technologies and presents no unusual construction or operational challenges. The equipment and the technologies involved in construction and operation of transmission lines and substations are well known and proven, including in Sub-Saharan Africa. The design, including technical parameters for the transmission lines, has been established by an FS, technical specifications, and tender documents prepared by reputable international engineering consulting firms.

As part of the project's implementation arrangements, an Owner’s Engineer was contracted to assist both in the procurement of the contractor(s) who are to construct the line and in the supervision of design and construction of the line.

The AF will provide additional resources to complete the transmission lines in Liberia (two lots), and in Sierra Leone (two lots). These four lots were procured in a joint process using the World Bank Procurement Guidelines, with the lots in Liberia financed by the World Bank and those in Sierra Leone by the EIB and AfDB. During project preparation, the World Bank and EIB agreed that the four lots be procured through one combined procurement process following the World Bank’s Procurement Guidelines. The bidding prices for the four lots of 220 kV transmission lines in Liberia and in Sierra Leone are confirmed as reasonable and competitive according to (a) the costs calculated by the Owner’s Engineer in May 2015 as an update of the estimations in the PAD and (b) the due diligence done during the preparation of the prequalification document in May 2015 (see Annex 2A). The average bidding cost for all lots is US$0.21 million per km, consistent with the market price benchmark of US$0.203 million per km in West Africa.

The proposed AF will also contribute to financing one substation in Sierra Leone. This substation, Yiben, was

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initially planned to be financed as part of the AfDB substation package that also finances another substation in Sierra Leone, one substation in Côte d’Ivoire, and two substations in Guinea (as presented in Annex 2). The three other substations in Sierra Leone are financed by the EIB. The substation contract that includes the Yiben Substation is being procured with joint prior review by using AfDB and World Bank Procurement Guidelines. According to the awarded offers for the two substation packages, the average bidding cost of a new 225 kV substation with two line bays, one transformer bay 225/33 kV (40 MVA), and all of the associated equipment is US$10 million, including 10 percent contingency. This average cost is consistent with the market price in West Africa for equivalent design of about US$9 million without contingencies. After carrying out an internal due diligence of the bid evaluation report on the AfDB substation package, the World Bank team concluded that the price that had been obtained for the Yiben Substation Contract (US$9.4 million) is reasonable and competitive. In a subsequent development, as part of the coordination with other regional transmission projects currently under implementation, TRANSCO CLSG, the GoG, and AfDB agreed to have the Linsan Substation in Guinea, originally included in this CLSG procurement package, be built instead as part of the OMVG regional transmission line project, because this substation is connected to both regional networks. This resulted in a significant reduction of the scope of the works under the CLSG-financed substation contract, due to the size of this substation. For this reason, all parties agreed that a new proposal should be requested from the prequalified firms for the remaining package under the CLSG. Bidding documents are currently being revised accordingly and will be approved by both AfDB and the World Bank.

WAPP Integration and Technical Assistance

The proposed AF would provide financing for an assessment of future hydropower development in Liberia. The additional activities proposed use a step-by-step approach so that studies and activities can unfold one after another. The first step will be to assess the size and time line of the national and regional electricity market targeted by the next hydropower development in Liberia. This market analysis will help to define the needs for base and peak loads and ancillary services.

The second step will seek confirmation of the St. Paul River as the next area for hydropower development, as Liberian authorities have concluded based on existing studies and on the fact that firm capacity could be enhanced in this basin. The activities proposed under the AF will help verify this assessment, based on comparison with the other hydropower potential sources of the St. John and Mano Rivers, using a multi-criteria analysis based on updated technical and socioenvironmental criteria.

The third step will be to explore the optimal mix among hydro, solar, and existing generation plants, to reduce the cost of electricity, socioenvironmental impacts, and the carbon footprint. Use of water storage and hydropower complemented by solar generation will be simulated resulting in identification of a development plan, including sequencing of projects and potential offset of HFO plants over time.

The priority project to be developed will be approved by the Liberian authorities. Development of the project will entail studies and advisory support, which have been provided successfully in Sub-Saharan Africa. ToR for the feasibility studies, the preparation of the ESIA, ESMP, and RAP will follow best practices used by the World Bank for other hydroelectricity generation projects with dams in the region. It is expected that there will be no major technical issues in these preparatory studies because the project is not foreseen to require any underground works. Design of the proposed activities also benefits from lessons learned from hydropower work in Africa and other regions.

Regarding the transboundary aspects of this project, it is important to note that the Liberian section of St. Paul River is downstream Guinea and the most upstream development considered under the project (Via Reservoir) will not result in a transboundary reservoir. In that sense, the project will not cause harm to Guinea. Reciprocally, at this stage, no major upstream developments that could affect this project are expected to be developed on

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the Guinean section of St. Paul River (locally called Diani River). A few hydropower schemes (Gozoguézia and N’Zébéla) have been studied only at a very preliminary stage and even they were to be developed; they should not appreciably harm the project owing to the large storage capacity planned for Via Reservoir. The optimization will further confirm this analysis. A Cumulative Impact Assessment, which will include the part of the St. Paul River Basin in Guinea, will also be part of the ESIA study.

Fiduciary Analysis

Explanation:

Procurement

The New Procurement Framework (including Procurement Regulations for Borrowers) that applies to projects with PCNs held after July 1, 2016 would normally apply. However, an exception has been granted by the World Bank’s Chief Procurement Officer on August 7, 2017, that all procurement under the proposed AF should follow: (a) the World Bank’s “Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits and Grants” dated January 2011; revised July 2014, and (b) “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers” dated January 2011, revised July 2014.

Although procurement on the WAPP CLSG Power Interconnection and the WAPP Technical Assistance Project has been challenging, the WAPP has conducted procurement activities for the parent project in a moderately satisfactory manner. To strengthen the procurement capacity of the WAPP Secretariat, a consultant senior procurement specialist was recruited in June 2017 for one year under the project to support project implementation and train local staff, and a WAPP Secretariat procurement specialist will be competitively recruited and trained by this consultant. A World Bank procurement specialist will undertake regular supervision and a post-procurement review at least once a year. With regard to risk, given the experience under the parent project and mitigation measures proposed, procurement risk is rated Substantial.

Financial Management

The overall FM system and performance of the TRANSCO CLSG - Special Purpose Company (IDA c 51100 – 3A) and the WAPP Secretariat (IDA H770 – 3A) under the parent project are acceptable to IDA. The PCU and the FM units set up within the TRANSCO CLSG and WAPP Secretariat will be responsible for FM aspects of the AF and remains the World Bank focal point. The FM teams are familiar with the World Bank FM requirements and are currently managing the parent project of this IDA-financed project. The World FM arrangements of the AF will follow the same approach like the implementation arrangements in place for the parent project (e.g frequency of submission of IFR and annual audit reports…). The overall performance of the FM teams is acceptable to IDA. The FM performance was rated Moderately Satisfactory (MS) following the last supervision missions completed respectively in February 2017 for the WAPP Secretariat and in August 2017 for TRANSCO CLSG. The key FM issues identified following these supervisions have been implemented or are being implemented. The fiduciary risk has been assessed as Moderate for WAPP Secretariat and Substantial following the primary risk assessment which considered the current risk rating of the parent project and the mitigation measures required for the AF.

To mitigate the risks, the following key measures will be required:(i) the existing FM procedures manual which was prepared for the parent project will be revised to reflect the aspects of the AF; (ii) the annual work plan and budget should be submitted to the World Bank for discussions and review not later of November of each calendar year; (iii) an Internal audit function both at TRANSCO and WAPP Secretariat should be strengthened and the mission reports shared with the World Bank and governance committees; and (iv) the contracts of the external

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auditor of the parent project will be revised to include the activities of the AF. The implementation of these actions and measures are expected within 2 to 5 months and will be closely monitored as part of FM supervision during project implementation.

Social Analysis PHHASSA

Explanation:

Under the parent project, OP 4.12 (Involuntary Resettlement) was triggered because of the civil works related to the WAPP CLSG Power Interconnection Project, which will require land acquisition and cause both physical and economic resettlement. A RAP was prepared to address the impacts and to lay out the compensation scheme. The RAP was disclosed on January 27, 2012 in each participating country and on January 30, 2012 by the World Bank. As in the parent project, OP.4.10 (Indigenous People) is not triggered under the AF. The AF will rely on the same implementing agencies and arrangements as the parent project. Staffing and capacity to address environmental and social issues is in place both at TRANSCO CLSG and national/local levels. For the parent project, census updates are under way in each country in parallel with the finalization of the line routing. Grievance Redress Committees have been established and their respective members trained.

Under the AF, a RAP will be prepared under the WAPP Integration and Technical Assistance once the priority project for development on the St. Paul River in Liberia has been chosen. The RAP will include the following elements: socioeconomic studies (including a census); a legal framework; valuation of and compensation for losses; eligibility; resettlement measures; site selection preparation and relocation; housing, infrastructure, and social services; environmental protection and management; community participation and consultations; integration with host populations; a grievance redress mechanism; an institutional framework; organizational responsibilities; an implementation schedule; costs and budget; and monitoring and evaluation. ToR for the ESIA and RAP that will be undertaken as part of the additional TA provided to the WAPP Secretariat were disclosed on February 27, 2017 in Liberia, on the WAPP’s website, and by the World Bank.

Finally, AF under Component 2 will follow World Bank emerging guidance on hydropower TA.

Environmental Analysis

Explanation:

The following environmental safeguard policies were triggered under the parent project: OP 4.01 (Environmental Assessment), OP 4.04 (Natural Habitats), and OP 4.11 (Physical Cultural Resources). Corresponding safeguards policy documents were prepared and disclosed for each country on January 27, 2012 and on January 30, 2012 at the World Bank’s InfoShop, including an ESIA, ESMP, Chance Finds procedures in construction contracts, and a RAP.

The AF will trigger OP 4.37 (Safety of Dams), OP 7.50 (Projects on International Waterways) and OP 4.36 (Forests) in addition to the OPs triggered under the parent project. In compliance with OP 4.37, a PoE will be mobilized and housed in the WAPP Secretariat, to cover technical, dam safety, and socioenvironmental safeguards, advising on the activities under the project and other hydropower projects in the sub-region, including riparian issues.

In carrying out the TA, the WAPP shall ensure that all TA under the project, the application of whose results would have environmental or social implications, shall only be undertaken pursuant to ToR reviewed and found satisfactory by the Association, such ToR to ensure that the TA takes into consideration, and calls for application of, the Association’s safeguard policies and the relevant participating countries’ own laws relating to the environment and social aspects. In addition, the WAPP shall ensure that ToR for a plan for construction supervision and quality assurance, an instrumentation plan, an operation and maintenance plan and an emergency preparedness plan for a potential hydropower project for the St. Paul River, are prepared, all

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satisfactory to the Association and duly incorporating and taking into consideration the requirements of the Association’s safeguard policies. OP/BP 7.50 has been triggered because St. Paul River in Liberia originates in Guinea and is therefore considered as an international waterway. Nevertheless, AF activities that are likely to have a transboundary component involve only prefeasibility and feasibility studies on St Paul River and will not include any detailed design and engineering studies nor the financing of any physical infrastructure activities on this waterway. Given the scope of these activities (studies only), as per paragraph 7(b) of OP 7.50, an exception to the notification requirement was approved by the regional management on September 29, 2017. In addition, from preliminary analysis and as additional rationale for requesting an exception to the requirement of notifying the other riparian states in the case of the Saint Paul River in Liberia, that the most upstream development considered so far in Liberia under the project (Via reservoir) should not result in any appreciable transboundary impacts and will therefore not impact Guinea. Furthermore, at this stage, no major upstream developments that could significantly affect this Project are expected on the Guinean section of St Paul River (locally called Diani River).

The environmental analysis of the project under the original project also highlighted potential benefits of the project in terms of emission reduction of CO2 gases. The realization of the project is expected to result in reduced use of hydrocarbon fuels in the four countries and helps avoid more than 5.6 million tons of carbon emissions over the life of the project in comparison to the ‘without’ project scenario,

Risks

Explanation:

The AF will retain the overall High risk rating of the parent project as it faces similar risks. The risks that have been rated High or Substantial are the following:

Political and governance risks. While the governments of the CLSG countries have strongly supported the parent project as well as the proposed AF, CLSG countries are fragile states that face political and economic constraints, such as rent-seeking behavior that might impact the project.

Risk management. The four countries have signed a treaty to establish a regional transmission company, confirming their commitment to the project. The WAPP Secretariat will continue to promote regional integration among the CLSG countries. A comprehensive legal framework has been developed to minimize the risk of political interference. Further, the regional transmission company (TRANSCO CLSG) will develop, own, maintain, and operate the transmission line, minimizing the direct involvement of the Governments and stakeholders and making potential interference by third parties more transparent.

Macroeconomic risks. One key risk relates to exchange rate fluctuations and potential further loss of funds denominated in other currencies (mainly in SDR, UA, and euros) in relation to the currency used in most contracts (U.S. dollars). These differences have widened because of exchange rate fluctuations between the U.S. dollar and the other currencies/currency baskets, and have resulted in significant losses of resources when expressed in U.S. dollars.

Risk Management. To mitigate this risk, a provision for exchange rate variation has been included in cost estimates of the AF to Liberia, Sierra Leone, and the WAPP, and the funds committed for Liberia and Sierra Leone under the proposed AF will be denominated in U.S. dollars, which will help align planning of revenues and expenses to complete the project.28

23. Financing through a regional IDA grant cannot be denominated in any other currency, but SDR.

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Sector strategy and policy risks. While there is political buy-in for the project and AF in the four participating countries, the performance of the electricity sector in three of them, Liberia, Sierra Leone, and Guinea, remains weak. Slower-than-planned expansion of the domestic network limits the absorption capacity of the domestic market in these countries, despite significant unserved demand. In addition, national power utilities in these countries that will be the main off-takers of power from the transmission line suffer from lack of capacity, low financial viability, and political-economic challenges that prevent them from being creditworthy customers. The weak financial performance of utilities is a risk for the project, as it may put at risk the viability of TRANSCO CLSG, which depends on revenues from the users of the line. Finally, there is a risk that CI-Energies will decide not to export further if arrears on exports grow, thus limiting its ability to attract investments in power generation.

Risk management. To help minimize these risks, there are four PPAs between CI-Energies and the other three national utilities (from Liberia, Guinea, and Sierra Leone) that were signed before the project becoming effective, to ensure that the regional line will be put into use as soon as it enters into service, and that should generate revenues for TRANSCO CLSG, once support from the project is finished. Furthermore, the transmission tariff included in the four TSAs between TRANSCO CLSG and the national utilities of Liberia, Guinea and Sierra Leone associated with the PPAs, is calculated using a methodology that ensures the financial viability of TRANSCO CLSG. Finally, the financing agreements between the international financiers and the participating countries all stipulate that in the event that TRANSCO CLSG’s revenues fall short of covering the service of the debt for the project, the four Governments are responsible for making up for the shortfall. Finally, the CLSG line will have an open access policy. Large potential users, such as mines in Liberia, have expressed interest in using the line to import cheaper electricity from Côte d’Ivoire instead of investing in more capacity. This would diversify TRANSCO CLSG’s customer base and reduce its exposure to the weaknesses of the electric utilities. CI-Energies and the World Bank are working on establishing a mechanism for nonpayment for generation exports; the World Bank is also working on restructuring the debt of CI-Energies, thus enabling it to continue to export to clients that pay.

Institutional capacity for implementation and sustainability risks. There are two implementing agencies, TRANCSO CLSG for the transmission line and the WAPP Secretariat for TA activities. TRANSCO CLSG is fully functional and has led the preparation and procurement of all major contracts under the parent project with the support of the project Owner’s Engineer. However, it lacks experience in the supervision of the actual construction, a critical phase for the success of the project. The WAPP has a proven track record of implementing World Bank grants and sufficient capacity to handle the proposed activities, even though high turnover of procurement officers has diminished its procurement capacity related to the use of the grant.

Risk management. TRANSCO CLSG has launched the recruitment of two additional senior engineers, in addition to establishing local offices in all the countries, and has appointed a specialist responsible for contract management in headquarters (HQ) and each local office. The WAPP Secretariat has recently completed the recruitment of a consultant senior procurement specialist, and he has joined the WAPP Secretariat in June, 2017. The discussion above on sector strategies and ensuring open access to the line and TRANSCO CLSG’s financial viability is key to ensuring sustainability of the project.

Fiduciary Risks. This risk is rated as substantial mainly because of the initial delays in reporting by TRANSCO CLSG while the entity was setting up fiduciary systems and establishing procedures to deal with the four donors financing the project. In the case of the WAPP, the fiduciary risk had been rated Substantial.

Risk management. The World Bank financial management specialists have been working closely with TRANSCO CLSG and have agreed on an action plan to allow TRANSCO CLSG’s financial department to perform in a satisfactory manner. The new consultant senior procurement specialist has been on board at the WAPP since mid-June, 2017, and the measures agreed to strengthen financial management during the midterm review of the WAPP Grant are expected to be implemented.

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Environmental and social risks. As with all large-scale infrastructure projects, delays in the implementation of the ESMP or RAPs, would delay the start of the civil works and could in turn generate cost overruns if the contractors have been mobilized. This could be due to potential lack of capacity on implementing and monitoring of environmental and social issues. There is an ongoing discussion between the GoL and Firestone regarding the rates for compensation for rubber trees. TRANSCO CLSG and the World Bank team through the Country Management Unit are closely monitoring this process.

Risk management. To ensure that proper attention is paid to environmental and social concerns and the implementation of the ESMPs and RAPs for the parent project, special care was placed on the recruitment of seasoned social and environmental experts for TRANSCO CLSG; local experts in these two fields have also been recruited in the national offices in the four countries. The AF will rely on the same implementation arrangements. Systems for payment of compensation are in place following the national procedures in the four countries. A final counting of PAPs is under way in the four countries. This work will be done in coordination with the topographical survey by the contractors, which will define the final routing of the CLSG lines. TRANSCO CLSG has informed the Ministries of Finance in each country of a possible need for additional resources to finalize payments to the PAPs. During the preparation of the parent project, contingencies were built into the RAP budgets. Grievance Redress Committees have also been set up as per the RAPs. On the TA side, the proposed activities include capacity building of authorities on social and environmental aspects related to hydropower projects. The focal team will also be expected to support authorities on that matter.

Stakeholders. A major risk for the project at this stage is the possible delay in concluding all major contracts to ensure that the construction of the line and substations advances in a synchronized manner. Timeliness of the donors in completing their respective reviews is a critical element in this process. All major contracts have been approved, with the exceptions of the contract for four substations in Guinea, Sierra Leone, and Côte d’Ivoire, currently under review by the AfDB, after the scope was readjusted to reduce the financing gap; and the contract for the substations located in Liberia financed by KfW, currently under review by KfW.

Risk management. The World Bank team is working very closely with TRANSCO CLSG and the AfDB to ensure that this contract will be finalized in the coming weeks. However, this ultimately depends on the internal procurement procedures of the AfDB and on the speed at which TRANSCO CLSG will integrate any eventual comments.

Other Risks. The ability to implement the project within budget and on schedule is a key risk. Implementation delays can be due to problems related to the capacity of TRANSCO CLSG to effectively supervise project implementation. Implementation can also be delayed if any of the donors does not provide its contribution on time so that construction can be completed as scheduled.

Risk management. The Owner’s Engineer for the supervision and monitoring of the works supports efficient implementation of the project. TRANSCO CLSG has established three local TRANSCO CLSG offices that will allow the TRANSCO CLSG HQ in Abidjan to follow on the ground, the progress in implementation of the different contracts. Furthermore, the AF includes a provision on the works contracts for 10 percent contingencies, in addition to resources in an unallocated category, and an additional year of the contract for the Owner’s Engineer. The risk of donors falling behind in their commitments and timely approval of procurement processes is mitigated by regular dialogue among the donors (World Bank, AfDB, EIB, and KfW), to ensure that there is no interruption in the works due to inadequate funding.

Climate and disaster risks. The AF has been screened for risks related to climate change and disaster risk management. The potential impacts are expected to be negligible as climate risks have limited impact on the transmission and distribution components.

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V. World Bank Grievance Redress

Communities and individuals who believe that they are adversely affected by a World Bank (WB)-supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel, which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/GRS. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org.

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nnex 1: Revised Results Framework

Project Development Objectives

Original Project Development Objective - Parent:

The project development objectives for the two components are (i) to reduce the cost of and increase the electricity supply at utility level, and to increase the export capability of Cote d’Ivoire, and (ii) to increase the technical integration of the WAPP network.

Proposed Project Development Objective - Additional Financing (AF):

The revised project development objective for the WAPP CLSG Power Interconnection is to: (i) reduce the cost of electricity supply at the utility level for Liberia and Sierra Leone and (ii) increase the amount of electricity traded among all the participating countries. The development objective of the WAPP TA is to increase the technical integration of the WAPP network.

Results

Core sector indicators are considered: Yes Results reporting level: Project Level

Project Development Objective Indicators

Status Indicator Name Corpo rate

Unit of Measure Baseline Actual(Current)

End Target

Revised Direct project beneficiaries

Number Value 0.00 0.00 5.20

Date 04-May-2012 22-May-2017 15-Dec-2020

Comment Revised end target date according to proposed new closing date of the project

No Change

Female beneficiaries

Percentage Value 0.00 0.00 52.00

Sub Type

Supplemental

Revised Annual electricity supply from CLSG imports at utility level (disaggregated: Liberia Electricity Corporation, Sierra Leone National Power Authority, Guinea - Electricite de Guinee (Component 1)

Gigawatt-hour (GWh)

Value 0.00 0.00 300.00

Date 04-Feb-2013 22-May-2017 15-Dec-2020

Comment Revised end target date according to proposed new closing date of the project

42

Revised Difference between the annual weighted cost of imported electricity through the CLSG and the annual weighted cost of others sources of supply for utilities in Liberia and Sierra Leone (Component 1)

Amount(US$) Value 0.42 0.42 0.30

Date 04-Feb-2013 22-May-2017 15-Dec-2020

Comment Revised to take into account impact of EVD, lessons learned and end target date according to proposed new closing date of the project

Revised Cote d' Ivoire export capability to CLSG countries (Component 1)

Megawatt Value 0.00 0.00 200.00

Date 04-Feb-2013 22-May-2017 15-Dec-2020

Comment

Revised WAPP Priority projects brought to the to the point where investment-grade feasibility studies and associated documentation have been completed

Number Value 6.00 6.00 9.00

Date 04-Feb-2013 22-May-2017 15-Dec-2020

Comment

Revised Ratio of annual total hours of synchronization of WAPP Zone A against total hours in a year within TCN-CEB-GRIDCO interconnection. (Component 2)

Percentage Value 0.00 0.00 50.00

Date 04-Feb-2013 22-May-2017 15-Dec-2020

Comment

Intermediate Results Indicators

Status Indicator Name Corporate

Unit of Measure Baseline Actual (Current)

End Target

No Change

Transmission lines constructed or rehabilitated under the project

Kilometers Value 0.00 0.00 1349.00

Date 04-Feb-2013 22-May-2017 31-Oct-2019

Comment

Revised Transmission line from Kamakwie to Linsan

Kilometers Value 0.00 0.00 160.00

Sub Type Date 04-Feb-2013 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

43

Revised Transmission line constructed from Yiben-Kamakwie

Kilometers Value 0.00 0.00 60.00

Sub Type Date 04-Feb-2013 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Transmission line constructed from Bumbuna-Yiben

Kilometers Value 0.00 0.00 73.00

Sub Type Date 04-May-2012 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Transmission line constructed from Bekongor to Bumbuna

Kilometers Value 0.00 0.00 146.00

Sub Type Date 04-Feb-2013 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Transmission line constructed from Kenema-Bekongor

Kilometers Value 0.00 0.00 96.00

Sub Type Date 04-Feb-2013 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Transmission line constructed from Mano-Kenema

Kilometers Value 0.00 0.00 115.00

Sub Type Date 04-Feb-2013 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Transmission line constructed from Monrovia-Mano

Kilometers Value 0.00 0.00 107.00

Sub Type Date 04-Feb-2013 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Transmission line constructed from Buchanan-Monrovia

Kilometers Value 0.00 0.00 112.00

Sub Type Date 04-Feb-2013 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

44

Revised Transmission line constructed from Yekepa-Buchanan

Kilometers Value 0.00 0.00 229.00

Sub Type Date 04-Feb-2013 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Transmission line constructed from Yekepa-Nzerekore

Kilometers Value 0.00 0.00 49.00

Sub Type Date 04-Feb-2013 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Transmission line constructed from Man-Yekepa

Kilometers Value 0.00 0.00 152.00

Sub Type Date 04-Feb-2013 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Transmission lines rehabilitated under the project

Kilometers Value 0.00 0.00 0.00

Sub Type Date 04-May-2012 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

New Number of grievances received and satisfactorily resolved.

Percentage of grievance satisfactory resolved from total received

Value 0.00 0.00 100

Date 04-May-2012 22-May-2017 15-Dec-2020

Comment

New Number of supply alternative analyses completed at Feasibility Stage

Number Value 0.00 1.00 3.00

Date 04-Feb-2013 22-May-2017 15-Dec-2020

Comment Replace former qualitative indicator with hereby proposed quantitative indictor. This indicator also clarifies what is a supply alternative analysis (feasibility) to include quantitative monitoring of the indicator, studies on the St. Paul River in Liberia and end target date according to proposed new closing date.

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Revised 225 kV Substations constructed (disaggregated by location) (Component 1)

Number Value 0.00 0.00 10.00

Date 04-Feb-2013 22-May-2017 15-Dec-2020

Comment Revised end target date according to proposed new closing date of the project

Marked for Deletion

Linsan

Number Value 0.00 0.00 1.00

Sub Type Date 04-May-2012 22-May-2017 31-Oct-2019

Breakdown Comment

Revised Kamakwie

Number Value 0.00 0.00 1.00

Sub Type Date 04-May-2012 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Yiben

Number Value 0.00 0.00 1.00

Sub Type Date 04-May-2012 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Bumbuna

Number Value 0.00 0.00 1.00

Sub Type Date 04-May-2012 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Bekongor

Number Value 0.00 0.00 1.00

Sub Type Date 04-May-2012 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Kenema

Number Value 0.00 0.00 1.00

Sub Type Date 04-May-2012 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

46

Revised Mano

Number Value 0.00 0.00 1.00

Sub Type Date 04-May-2012 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Monrovia

Number Value 0.00 0.00 1.00

Sub Type Date 04-May-2012 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Buchanan

Number Value 0.00 0.00 1.00

Sub Type Date 04-May-2012 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Nzerekore

Number Value 0.00 0.00 1.00

Sub Type Date 04-May-2012 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Yekepa

Number Value 0.00 0.00 1.00

Sub Type Date 04-May-2012 22-May-2017 15-Dec-2020

Breakdown Comment Revised end target date according to proposed new closing date of the project

Revised Regional Transmission Company fulfillment of obligations on time and to the quality required. (Component 1)

Text Value none yes yes

Date 04-May-2012 30-Jun-2015 15-Dec-2020

Comment

Marked for Deletion

Supply alternative analysis completed (Component 2)

Yes/No Value No Yes Yes

Date 04-Feb-2013 30-Jun-2016 30-Jun-2016

Comment

Revised Key experts recruited to support WAPP Secretariat

Number Value 0.00 1.00 5.00

Date 04-May-2012 22-May-2017 15-Dec-2020

Comment

47

Revised Synchronization equipment installed

Yes/No Value No No Yes

Date 04-May-2012 22-May-2017 15-Dec-2020

Comment

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Annex 2: Detailed Description of Modified or New Project Activities

1. Since the AF will not change the activities to be carried out by the WAPP CLSG Power Interconnection component, its project description below will focus on the financial gap that has emerged during project implementation and the plan for how to fill the gap. In the case of the WAPP TA component, the description will focus on the additional activities to be financed under the AF with respect to possible development of a hydropower project that would increase cost-effective and sustainable national and regional energy supply while enhancing the use and functioning of the CLSG transmission line.

Component 1: WAPP CLSG Power Interconnection (IDA US$104.9 million)

2. This section describes (a) the components and costs of the parent project; (b) the status of the parent project and the financing gap; (c) the plan to fill the parent project financing gap; and (d) the AF proposed by the World Bank.

3. Subcomponents of the Parent WAPP CLSG Power Interconnection Project. The parent Component 1, with an original cost of US$444.4 million, of which the World Bank financed US$144.5 million, supports the construction of the 1,349 km of transmission line interconnections between Côte d’Ivoire, Liberia, Sierra Leone, and Guinea and associated substations. It also supports TRANSCO CLSG, the regional transmission company owned equally by the four national utilities to implement and operate the CLSG transmission line until it becomes self-sufficient from user fees. Financiers of this component are IDA, the AfDB, the EIB, and KfW. The project has the following three subcomponents (for more details see the parent PAD):

o Subcomponent 1.A: Power Interconnection between Côte d’Ivoire, Liberia, Sierra Leone, and Guinea (original financing of US$321.9 million equivalent, of which IDA US$84.8 million, AfDB US$106.9 million, EIB US$82.9 million, KfW US$37 million, and CLSG Governments US$10.1 million). This subcomponent finances the construction of the 1,349 km of 225 kV double circuit overhead transmission lines between the four countries, the associated ten new substations,29 voltage regulation systems in four existing substations, and the extension of one existing substation.

o Subcomponent 1.B: Institutional Framework and Project Oversight (original financing of US$45.4 million equivalent, of which IDA US$45 million and AfDB US$0.4 million). This subcomponent provides financial support to TRANSCO CLSG during construction of the line, as well as support for an owner’s engineer to support TRANSCO CLSG. TRANSCO CLSG will be self-financed once the line starts operating, based on the wheeling fees.

o Subcomponent 1.C: Physical and Price Contingencies (original financing of US$77.0 million equivalent of which IDA US$14.6 million, AfDB US$25.8 million, EIB US$22.2 million, KfW US$3.7 million, and CLSG Governments US$10.7 million). These contingencies also include unallocated costs and interest during construction.

29 One of the eleven substations, Linsan in Guinea, was eliminated during implementation as it is being constructed under another regional project financed by the AfDB.

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4. WAPP CLSG Power Interconnection financing gap. Major progress has been made in advancing the Interconnection component, with six of the 14 key contracts for transmission lines, substations, and the Owner’s Engineer signed, and contractors mobilized for the lines in Liberia and Sierra Leone. However, after opening the bids for the transmission lines and substations in September 2016, TRANSCO CLSG identified a financing gap of US$109.5 million.

5. Donors’ financing of the parent project, expressed in US dollars, is shown in Table 2.1, at approval in May 2012 and in values of March 2017 after accounting for the loss of value due to exchange rate fluctuations.

Table 2.1. Original Financing of the WAPP CLSG Power Interconnection, by Country and Donor (US$, millions)

Original Financing at May 2012 US$ Exchange Rate Values

Revised Original Financinga at March 2017 US$ Exchange Rate Values

Total By Donor

Countries Total All Donorsa All Donors IDA AfDB KfW EIB

Côte d’Ivoire 40 36 — 36 — —

Liberia 198 183 127 11 45 —

Sierra Leone 140 113 — 113 — 82

Guinea 46 41 — 41 — —

Total 424 373 127 373 45 82

Note: a. Totals are for donor financing and exclude the contributions of the four governments.

6. The financing gap between current estimates of project costs in U.S. dollar terms and available financing in today’s US$ values amounts to US$109.5 million equivalent (see Table 2.2).

Table 2.2. WAPP CLSG Interconnection Component: Financing Gap by Country and Donor (US$, millions)

7. Plan to fill the financing gap of the WAPP CLSG Power Interconnection Component. At the request of the GoL and GoSL, and to avoid delays in the CLSG line, IDA and KfW will provide the necessary additional resources to cover the total financing gap of this component by increasing resources available to the Governments of Liberia and of Sierra Leone, while AfDB will relocate existing resources across countries, but without adding any new funds. The proposed approach will ensure that all contracts are fully funded. The plan to fill the financing gap is described in the following paragraphs by country, donor, and component/activity and is shown in detail in Table 2.3.

Countries New

Project Costs

Financing (March 2017)

Financing Gap

Total IDA

AfDB

KfW

EIB

Côte d’Ivoire 37.0 36.1 −0.9 — −0.9 — —

Liberia 235.5 182.6 −52.9 −45.3 −3.0 −4.6 —

Sierra Leone 172.9 113.3 −59.6 — −8.2 — −51.3

Guinea 37.1 41.0 3.9 — 3.9 — —

Grand total 482.5 373.0 −109.5 −45.3 −8.2 −4.6 −51.3

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Table 2.3. Revised Project Cost and Proposal for Donor Financing to Meet Financing Gaps under the WAPP CLSG Power Interconnection by Country and by Donor (US$, millions)

Countries New Project

Costs

Revised Financing

(March 2017)

Financing Gap

AF

IDA AfDB KfW Total AF

Additional Funds

Exchange Rate

Fluctuation

Provisiona

Gap

Exchange Rate

Fluctuation Provisiona

Côte d’Ivoire

37.0 36.1 −0.9 0.9 0.9

Liberia 235.5 182.6 −52.9 40.6 4.7 3.0 2.5 2.1 52.9

Sierra Leone

172.9 113.3 −59.6 59.2 0.4 0.0 59.6

Guinea 37.1 41.0 3.9 −3.9 −3.9

Totalb 482.5 373.0 −109.

5

99.8 5.1 0.0 2.5 2.1 109.5

104.9 0.0 4.6

Note: a. These total costs exclude financing by the four Governments. Totals may not add due to rounding. b. A provisional amount has been included for possible exchange rate variations until negotiations.

8. Liberia. The World Bank will provide US$45.3 million to cover the financing gap including (a) US$40.6 million to complete the funding for the two transmission line contracts including a 10 percent contingency and (b) US$4.7 million to cover future exchange rate variations. KfW will cover the financing gap of the four substations of US$2.5 million, including a 10 percent contingency, (SS KfW-EIB 05-Lot 2) and an exchange rate variation provision of US$2.1 million. The AfDB will finance the remaining financing gap of US$3 million for the AfDB transmission line package through reallocation of funds.

9. Sierra Leone. The World Bank will provide in total AF of US$59.6 million, which will cover the deficit of EIB and of AFDB in that country. To this end, the WB will co-financing with the EIB two contracts for the transmission line (IDA funds of US$50.9 million) and with the AfDB, the contract for the Yiben substation (IDA funds of US$8.2 million), as well as providing for an exchange rate variation provision of US$0.4 million. The co-financing with the EIB will cover the cost of the transmission line contracts and the entire cost of the contract for the substations. Similarly, the co-financing of the Yiben substation will cover the financial gap of the contracts of the AfDB for the substation package (US$6.3 million) and the transmission line section between Yiben and Guinea Border (US$1.9 million).

10. Côte d’Ivoire. The original financing gap was eliminated through an adjustment in the design of the System Voltage Control package to maximize the use of existing US$16.2 million. The initial contract included SVC equipment for the Man and Ferkessedougou substations. After discussions with Côte d’Ivoire Utility, the SVC in Ferkessedougou will be implemented by CI-Energy. For CLSG, the SVC package will include only the equipment in the Man substation, and therefore the contract was adjusted to US$6.9 million. The remaining US$9.3 million will be used to fill the gap for the substation package (US$4.6 million) and transmission lines package (US$5.7 million) and to finance the SCADA for the Man substation. The AfDB will need to provide AF of US$0.9 million.

11. Guinea. The original financing gap will be reduced as one of the substations (Linsan), initially funded by the AfDB, will be built with resources available from the Islamic Development Bank (IDB) under

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another regional transmission project, the OMVG, which is also currently under implementation with the support of the World Bank and other donors. AFDB”s emaining funding (US$12.2 million) will be used to fill the financing gap for the transmission lines package (US$8.1 million), to finance the Nzerekore substation and the SCADA for Linsan.

Table 2.4. Detailed Proposal for Donor Financing to Meet Financing Gaps under the WAPP CLSG Power Interconnection AF, by Country, Donor, and Component/Activity (US$, millions)

Country Donor Revised Financing

March 2017

Project Cost September

2016 Financing Gap

Côte d’Ivoire

AfDB 36.1 37.0 −0.9

Transmission lines 17.5 23.1 −5.7

Substations 1.8 6.4 −4.6

SCADA 0.5 0.6 −0.1

SVC 16.2 6.9 9.4

Services 0.1 0.1 0.0

Total Côte d’Ivoire 36.1 37.0 −0.9

Liberia

AfDB 11.2 14.2 −3.0

Transmission lines 7.2 9.8 −2.6

Frequency control 3.5 3.9 −0.4

Services 0.1 0.1 0.0

Operating costs 0.3 0.4 0.0

World Bank 126.6 171.9 −45.3

Transmission lines 77.5 118.3 −40.8

Frequency control 1.8 1.7 0.1

Owner’s engineer 22.7 15.7 7.0

Functioning of TR 15.5 21.4 −6.0

ESMP + IDC 2.3 2.3 0.0

PPF 1.8 1.8 −0.1

Unallocated 5.1 5.2 −0.1

Spare parts 0.8 −0.8

Provision for foreign exchange variation 4.7 −4.7

KfW 44.8 49.4 −4.6

4 Substations 44.8 45.8 −0.9

Spare parts and others 0.0 1.6 −1.6

Provision for foreign exchange variation 2.1 −2.1

Total Liberia 182.6 235.5 −52.9

Sierra Leone

AfDB 31.3 39.5 −8.2

Transmission lines 17.2 19.1 −1.9

Substations 14.1 20.4 −6.3

Services 0.1 0.1 0.0

EIB 82.0 133.3 −51.3

Transmission lines 60.0 99.5 −39.5

Substations 22.0 33.2 −11.2

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Spare parts 0.2 −0.2

Provision for foreign exchange variation 0.4 −0.4

Total Sierra Leone 113.31 172.8 −59.6a

Guinea

AfDB 41.01 37.1 3.9

Transmission lines 15.6 23.7 −8.1

Sub stations 23.2 11 12.2

SCADA 2.2 2.3 −0.1

SVC 0.0 0.0 0.0

Services 0.1 0.1 0.0

Grand total Grand total 373.00 482.5 −109.5

Note: a. To be financed by the World Bank under this AF.

12. AF for the WAPP CLSG Power Interconnection. The World Bank will contribute AF totaling US$104.9 million in new IDA credit resources to cover the parent project financing gap, for Liberia by providing the additional amounts needed for the financing of the transmission lines and for Sierra Leone by co-financing with the AfDB and the EIB the additional costs for contracts for lines and substations, respectively. The AF is described below by subcomponent:

• Subcomponent 1.A: Power Interconnection between Côte d’Ivoire, Liberia, Sierra Leone, and Guinea (US$99.8 million). The proposed AF will provide US$99.8 million in additional IDA credit resources to Liberia (US$40.6 million) and Sierra Leone (US$59.2 million). The activities to be completed under this subcomponent are the same as those described in Annex 3 of the PAD of the parent Interconnection Project, except that the Linsan substation in Guinea, will be built under another regional project as explained earlier.

• Subcomponent 1.C: Provision for Additional Losses from Exchange Rate Fluctuations (US$5.1 million). Provision has been made for future losses from exchange rate fluctuations (SDR and US$ in Liberia, Euro/UA and US$ in Sierra Leone) of US$5.1 million (US$4.7 million for Liberia and US$0.4 million for Sierra Leone).

Component 2: WAPP Integration and Technical Assistance (IDA US$17 .5 million)

13. Parent project description. Under Component 2 of the parent project, studies are conducted as part of the TA to ensure that the generation capacity of several projects will be developed along the line on time and in accordance with least-cost principles.

• Subcomponent 2.A: Supply Alternatives Studies and Project Preparation Support (IDA US$10 million equivalent). As part of the group of activities under 2.A.1 Supply Alternative Studies, key studies are conducted to prepare the development of two generation capacity projects along the CLSG line on time and in accordance with least-cost principles in the medium to long term. As part of the group of activities under 2.A.2 Project Preparation Support, support to the preparation of the CLSG project is provided (including support to the establishment of TRANSCO CLSG).

• Subcomponent 2.B: Technical Assistance and Integration of WAPP Network (IDA US$21.5 million equivalent). This subcomponent supports the integration of networks from WAPP countries and provides TA to the WAPP Secretariat. Activities under 2.B.1 Technical Integration of WAPP Network includes (a) updates of studies on the optimal technical specifications for synchronizing the networks of nine ECOWAS countries and Mauritania and (b) the supply of synchronizing equipment based on

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the results of these studies to strengthen synchronization of interconnected networks. Activities under 2.B.2 Technical Assistance to WAPP also finances the hiring of specialized experts for the WAPP Secretariat to strengthen its technical expertise and foster its role as a leading institution in the development of energy markets in the region.

14. Activities proposed under the AF. The AF will provide an additional US$17.5 million in IDA grant resources for the project. Under Subcomponent 2.A. Supply Alternatives Studies and Project Preparation, The AF will provide additional IDA grant resources to (i) support the CLSG countries and TRANSCO to strengthen the commercial framework for energy trade through the CLSG line; (ii) finance the identification and preparation of further development of hydropower on the St. Paul River in Liberia; and (iii) compensate for the losses of revenues incurred since the original grant was approved in 2012, due to the fluctuations of the exchange rates. Complementary capacity-building activities will also be fostered under this subcomponent. These activities are described in detail in the following paragraphs.

• Group of Activities 2.A.2-bis: Support for the Preparation of Commercial Energy Exchanges through CLSG (IDA US$1.5 million equivalent). The proposed AF will provide support to TRANSCO CLSG and member states to strengthen the commercial framework. This support will include the following activities:

o Update of the expected demand and supply of electricity from the CLSG countries and neighboring countries to understand the potential for trade.

o Technical assistance to develop interconnection agreements and other technical issues that will be reflected in the annexes to the PPAs and TSAs already signed, and for other future commercial agreements to trade electricity through the CLSG Line.

o Support to the preparation of PPAs based on the opportunities created by the development of the CLSG.

o Technical support as needed to support sound trading arrangements to foster the efficient exchange of energy through the CLSG line, including using lessons learned from other power pools.

• Group of Activities 2.A.3: Supply Alternatives Studies and Project Preparation for Hydropower Development on St. Paul River (IDA US$11.0 million). Activities under this subcomponent will assess the potential contribution of St. Paul River’s hydropower resources to electricity supply at Liberian and regional levels in the medium to long term. This includes the following activities:

o an Optimization Study to define a priority investment project for hydropower generation on St. Paul River, including storage, generation, and transmission

o a Feasibility Study of the priority project selected by the Liberian authorities, including complementary geotechnical investigations;

o a detailed Environmental & Social Impact Assessment (ESIA) of the priority project, including an ESMP and a RAP. The ESIA will also include a comprehensive Analysis of Alternatives and a Cumulative Impact Assessment, which will include the part of the St. Paul River Basin in Guinea.

o a strategic adviser to identify adequate options for structuring and financing the project

15. Activity 2.A.3.i: Optimization Study for a Priority Hydropower Project (IDA US$2.8 million). This activity will finance a consultancy that will identify a Priority Hydropower Project on the St. Paul River, including storage, production, and transmission. The optimization study will identify a long-term

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development plan that will optimize the development of the St. Paul cascade, considering market opportunities and developments in the basin since previous studies. It will rank potential projects in order of merit in the short and medium term and propose a priority project.

16. The St. Paul River has a technical hydropower potential of nearly 600 MW. This potential could be exploited by means of one or two upstream regulating reservoirs (Via Reservoir and Diversion Reservoir, also called SP4) and a downstream cascade of three to four HPPs as follows: one plant at the foot of Via Reservoir (around 130 MW), one at St. Paul 2 Dam (214 MW), one at St. Paul 1B Dam (120 MW) and the Mount Coffee HPP. Today only the Mount Coffee HPP exists; it underwent major rehabilitation and will reach 88 MW installed capacity (see Figure 2.1). Additional turbines could also be added to Mount Coffee HPP as two additional water intakes had been built initially in the dam.

17. The first step of the optimization study will be a market study for electricity from the next hydropower project in Liberia.30 This will include (a) a review of regional and Liberian electricity demand forecasts under different assumptions, including mining projects; and (b) a review of existing and potential generation and transmission projects (including potential imports). This market analysis will explore national needs and export/import opportunities over time (2025, 2035, and 2045) and will assess the needs for base and peak loads as well as ancillary services expected from the future developments. For memory, in the WAPP Master Plan, Liberia is expected to export 1,860 GWh by 2025, with most of this electricity coming from St. Paul River hydropower development.

18. The second step will confirm the location of best sites for hydropower development. Previous studies and national authorities identified St. Paul River as the priority. The TA will confirm this identification, based on comparison with other hydropower sources (St. John and Mano Rivers) and updated socio-environmental data, especially on forestry and on the population likely to be affected. A LIDAR will be deployed to collect topographic and land use data, as well as to identify households and infrastructure likely to be affected. Hydrological data will be reviewed and revised to integrate climate change dimensions. Geological and seismic data will be collected and analyzed including, where necessary, simple geotechnical investigations such as seismic lines. Prefeasibility studies of different sites and river cascades will be harmonized to facilitate comparison. Sites will be ranked on technical-economic criteria and potential environmental and social impacts.

30 Preliminary analysis (ESW and 2014 Least Cost Development Plan) demonstrated that WAPP regional imports to Liberia could range between US$0.11 and US$0.17 per kWH. Preliminary studies on St. Paul River showed that next development could range between US$0.07 and US$0.15 per kWh, hence demonstrating its competitiveness. Once the Via Reservoir is developed, an available study shows that SP1B and SP2 HPP development could range between US$0.05 and US$0.06 per kwh. One objective of the proposed optimization study will be to further analyze this point.

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Figure 2.1. St. Paul River Hydropower Cascade as Studied in 1982 (by Chas. T. Main International)

19. The third step will explore the optimal mix among hydro, solar, and existing generation, aiming to reduce cost of electricity and socioenvironmental impact including carbon emissions. Use of water storage and hydropower to complement intermittent generation such as solar will be simulated. A balance between storage, power production, and environmental and social impacts will be sought, including fine-tuning of reservoir operating levels. A multi-criteria and economic analysis will be implemented including sequencing of projects over time and potential offset of existing HFO plants. As part of the multi-criteria analyses, risk analysis, readiness for implementation, and sensitivity analysis will be conducted. Integration of proposed projects within the national and regional grids as well as needs for transmission lines and/or substations will also be analyzed.

20. To support the integrated use and management of water resources on the St. Paul River, the consultant will also review other water uses in the basin as well as the water resources management framework in Liberia. Results of this review will be integrated in the design of the project.

21. The consultant will also develop a model of the cascade at different time steps (monthly, daily, and hourly) to reflect hydraulic regimes as well as power production over time measured against demand forecasts and daily consumption patterns. Potential for irrigation and other multipurpose uses of the water resource will also be captured. The most promising and balanced development plan of the cascade shall then be presented for decision on the priority project. A workshop presenting the draft outcomes will help develop consensus and collect feedback from key stakeholders.

22. A preliminary social analysis of the characteristics of the populations likely to be affected by the priority project will be conducted, before full ESIA studies. The analysis will consider among other issues

Monrovia

SP-1B

SP-2

Via

SP-4

Mount Coffee

57

demographics, livelihoods, forestry, severity of impacts, numbers of affected people and assets, and whether physical resettlement would be necessary.

23. Activity 2.A.3.ii: Feasibility Study of the Priority Project to be Developed (IDA US$4.1 million). The activity will develop an investment-grade FS for the development of the priority project, including storage and transmission lines to evacuate the power. The investment-grade FS will facilitate mobilization of financial resources for the project. The FS will be detailed enough to support preparation of tenders. To facilitate a smooth transition to the development stage, the consultant in charge of preparing the FS may be asked to include in his/her bid the cost of the preparation of tenders for contractors.

24. The FS will follow technical best practices including design criteria, civil engineering and hydraulic studies, electro- and hydromechanical studies, electrotechnical studies (including transformers and substations), design of the SCADA, control systems, ancillary equipment, and so on. It will also include a Geological Baseline Report (GBR) tier A to be developed on the basis of an informed risk analysis. The GBR will be developed to a level of detail suitable for integration in future tender documents. The scope of work will include geotechnical investigations in key locations and laboratory testing. If solar development is included, the FS will cover aspects related to this technology.

25. The FS will also include detailed analysis of the integration of the priority project within the CLSG and national transmission systems. Necessary transmission lines (225 and 66 kV) will be studied and simulated on a power system simulator for engineering model. Static and dynamic simulations of the grid will be implemented to define the transmission network and demonstrate the adequacy of the proposed design with regard to performance and stability of HPP integration to the networks.

26. Finally, detailed construction schedules will be prepared and the critical interfaces among subcomponents defined. To achieve the best outcome of the technical studies, save time, and avoid unnecessary transaction costs, the procurement of the FS consultant will be implemented in parallel with the optimization study. The technical consultants will work closely with the consultant for ESIA.

27. Activity 2.A.3.iii: ESIA and other Studies for the Priority Project (IDA US$3.3 million). Environmental and social safeguard studies and activities will be carried out for the priority project, including (a) review of the environmental and social screening from the optimization study; (b) evaluation of the design of the project including dam, HPP, and transmission lines; and (c) development of the required ESIA, ESMP, RPF, RAP, Labor Influx, and Work Camp Management Plans for associated infrastructure, a comprehensive Analysis of Alternatives and a Cumulative Impact Assessment, which will include the part of the St. Paul River Basin in Guinea. The ESIA consultant will work closely with the technical consultants for the optimization study and FS. The consultant will make recommendations for socioenvironmental aspects of the project including confirmation of environmental flows, needs for maintaining the ecological continuum, forestry management, and so on. Existing biodiversity and fish migration patterns will also be reviewed. The assessment will include any transmission lines and other infrastructure required, such as access roads, work camps, and site installations.

28. This consultancy will also include participatory and communication activities, including public consultation and workshops, based on socioenvironmental studies (the ESIA, ESMP, RAP, and so on) to address issues such as future benefit sharing with host communities, citizen engagement and grievance collection mechanisms, labor influx and work camp issues, social conflict prevention, gender equality, and access to electricity in the project area.

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29. These studies and activities will inform the GoL, LEC, and other stakeholders about potential socioenvironmental impacts of the project and propose mitigation measures. The studies will be implemented according to World Bank safeguards policies and international best practices and will follow with World Bank emerging guidance on hydropower TAs.

30. Activity 2.A.3.iv: Strategic Adviser to Support Hydropower Project Development (IDA US$0.8 million). The strategic adviser will provide strategic, financial, and legal advice for the development of the priority project. This will include an assessment of different financing options, based on public, private, or public-private partnerships. Based on an informed risk analysis, the strategic adviser will facilitate identification of optimal and bankable financial structuring that considers market conditions as well as the priorities of the stakeholders and the appetite of financiers for such a project.

31. The adviser will provide inputs to help orient and scope out the FS. At the end of the FS, the adviser will facilitate a decision on the best option for development as well as provide a detailed road map. In doing so, the adviser will conduct (a) an analysis of the financial sustainability of the sector in Liberia and the region; (b) a financial analysis of the project and recommendations for tariffs; and (c) consultation with potential financiers (public, private, or IFIs) including organization of a round table.

32. The adviser will also assist in defining the institutional setup for O&M of the priority project. Recent experiences of the World Bank have shown the need to address the O&M phase during early stages of project preparation, with a focus on institutional arrangements and a suitable O&M model to be secured as part of the financing arrangement. Benefiting from the Sustainable O&M for Hydropower Initiative of the World Bank and inputs from the technical consultants, and based on his own expertise, the strategic adviser will identify the most relevant option(s) for the O&M. This will include an analysis of the costs, benefits, merits, and limitations of each option and definition of the legal, budget, and implementation requirements.

33. At the end of this activity, a road map and preliminary sources of funds for next steps will be identified, including a vision on upcoming procurement steps to be implemented.

Group of Activities 2.A.4: Institutional Strengthening and Support from a Panel of Technical and Safeguards Experts (IDA US$2.2 million)

34. Activity 2.A.4.i: International Panel of Experts (IDA US$0.5 million). An international PoE will provide high-level technical and socioenvironmental expertise and guidance. The environmental and social experts will follow international best practices, including World Bank safeguards policies. The technical experts will review the design of the priority project to strengthen its technical robustness and to ensure compliance with the World Bank safeguards policies, especially on dam safety. The technical experts will include a dam specialist (with expertise in civil and geotechnical engineering), a hydrologist, a hydraulic engineer, a geologist, and an electromechanical specialist. The socioenvironmental experts will include an environmental specialist with experience in forestry, a social specialist, and a health and safety specialist. This panel is expected to be put in place three months after effectiveness of the AF and will be hosted by the WAPP and will provide support to all hydropower projects that will be considered under IDA-financed WAPP activities. Input from the panel will be provided at key stages of the TA, such as validation of ToR and methodologies, review of draft reports, and support to decision making on options. As the PoE will be responsible for overseeing all the studies on hydropower development undertaken under this IDA grant to the WAPP, costs for the socioenvironmental experts and travel costs for the whole PoE are carried by the AF while others will be covered by the parent project.

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35. Activity 2.A.4.ii: Institutional Strengthening and Support to the Focal Team (IDA US$1.7 million). The TA will support capacity building of regional and local authorities through training and on-the-job activities related to hydropower, water management, and possibly solar power. The proposed activities will also include capacity building of authorities in socioenvironmental aspects so that they gain skills in managing the sustainability of hydropower projects. Institutional strengthening and capacity building will target authorities in Liberia, including staff from LEC, the MLME, and the PDU. It will also support the financing of the focal point team that will follow these activities locally and will include, among others; (a) a PDU coordinator; (b) an international Technical Assistance specialist that will support Liberia in collecting technical data and preparing and supervising studies; (c) a local hydropower specialist; and (d) a local socioenvironmental specialist. This activity will also support the organization of workshops and logistical expenditures by the focal point team and for the PoE, such as travel costs.

• Group of Activities 2.A.5 Group of Activities 2.A.5: Provision for Past Losses from Exchange Rate Fluctuations (SDR vs. US$ or Euro) A provision of US$2.8 million has been made to account for the resources lost under the IDA Grant of the Parent Project since it was originally provided to the WAPP in 2012.

36. As a result of additional activities, the activities of Component 2 (TA) will be as follows.

Table 2.5. Activities under Component 2 of the IDA Grant to the WAPP

Title/Component Parent Project AF

Subcomponent 2.A: Supply Alternatives Studies and Project Preparation Support

2.A.1: Supply Alternative Studies (excluding St. Paul-Liberia) X

2.A.2: Project Preparation Support – CSLG X

2.A.2-bis: Support for the Preparation of Commercial Energy Exchanges through CLSG

X

2.A.3: Supply Alternative Studies and Project Preparation for Hydropower Development on St. Paul River

X

2.A.4: Institutional Strengthening and Support from a Panel of Technical and Safeguards Experts

X

2.4.5: Provision for Past Losses from Exchange Rate Fluctuations X

Subcomponent 2.B: Technical Assistance and Integration of WAPP Network

2.B.1: Technical Integration of WAPP Network x

2.B.2: Technical Assistance to WAPP x

37. The articulation and sequencing of activities are summarized in Figure 2.3.

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Figure 2.2. Articulation and Scheduling of Activities

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Annex 2A: Due Diligence and Benchmarking on the Cost of 225 kV Transmission Line

1. Works under the parent WAPP CLSG Power Interconnection Project were procured through Engineering, Procurement and Construction contracts (EPC) financed by four donors (AfDB, EIB, KfW, and World Bank) in the four participating countries (Côte d’Ivoire, Liberia, Sierra Leone and Guinea). As a significant part of the funds allocated under this AF would fill the gap resulting from a higher than expected cost of these contracts, the team performed a due diligence process to ensure that the actual costs of the contracts were reasonable and that an AF to fill the gap was justified.

2. This due diligence was done through two different exercises. First, before the bids were received, cost estimates were updated in 2015 during the preparation of the prequalification bid documents based on market prices at that moment. Second, the team undertook a benchmarking exercise based on the costs in the African region of similar transmission lines for projects realized in recent years. The two exercises and the resulting conclusions are described in the following paragraphs.

Procurement Packages Under the Parent Project

3. For Subcomponent 1.A, the parent project consists of the following packages:

Table 2.3. Procurement Packages for construction of the CLSG interconnector

EPC Tender Package Description Funding Agency

Package Transmission Lines Length (km)

EPC-TL-AfDB-01

Lot 1: Transmission line: Man (CI) -Yekepa (L) - Nzérékoré(G)

201 AfDB

Lot 2: Transmission line: Yiben (SL) - Kamakwie (SL) - Linsan (G)

215

EPC-TL-World Bank/IEB-04 31

Lot 1: Transmission line: Yekepa (L) - Buchanan (L)

230 World Bank

Lot 2: Transmission line: Buchanan (L) - Monrovia (L) - Mano (L)

219

Lot 3: Ligne de Transmission: Mano (L) - Kenema (SL) - Bekongor (SL)

213 EIB

Lot 4: Transmission line: Bekongor (SL) - Bumbuna (SL) - Yiben (SL)

221

Package Substations

EPC-SS-AFDB-02 Substation Man (CI), Nzérékoré(G), Linsan (G), Yiben (SL), and Kamakwie (SL)

AfDB

EPC-SS-BEI/KfW-05

Lot 1: Substations Kenema, Bekongor et Bumbuna (all SL)

EIB

Lot 2: Substations Yekepa, Buchanan, Monrovia (Mount Coffee), and Mano (All L)

KfW

Compensation Equipment (SVC)

EPC-SVC-BAD-03 Compensation equipment AfDB

31 Lots 1 through 4 for this EPC-TL-WB/IEB-04 have been procured following the World Bank’s Procurement Guidelines.

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EPC Tender Package Description Funding Agency

SCADA

SCADA SCADA in Guinea and backup in Côte d’Ivoire AfDB

Frequency Regulation

Regulation Frequency regulation equipment AfDB

Figure 2.3. WAPP CLSG: Line Packages

Figure 2.4. WAPP CLSG: Substation Packages

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Updated Cost Estimates of Transmission Lines for the Prequalification

4. The cost estimate for the four lots had been updated during the due diligence on the preparation of the prequalification document for the EPC transmission line package in May 2015 based on the bidding design and the market price level.

Table 2.5. Design Assumptions

Span 400 m

Tower weight 24 t per km

Section length 5 km (13 towers = 12 suspension + 2 tension)

Weight suspension tower 6.5 t

Weight tension tower 21 t

Suspension foundation 10 m3 per tower

Tension foundation 30 m3 per tower

Foundation volume 36 m3 per km

Tower average height arm 24 m

Total tower height 46.5 m

5. The updated cost estimate for each lot has been calculated based on an average rate of US$210,000 per km. The cost breakdown is illustrated in Figure 2.6.

Figure 2.5. Cost Breakdown 220 kv Transmission Line (US$210,000 per km)

6. In the Prequalification Document, Section III: Qualification Criteria and Requirements for the four lots was updated according to this estimation with the following financial criteria.

• Criteria 3.1: Financial Capabilities

• Criteria 3.2: Average Annual Construction Turnover

• Criteria 4.2: Specific Construction and Contract Management Experience

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Table 2.6. Comparison of Bids

7. Conclusion. While the lowest bid on two lots were below and on two lots were above the estimation, the deviation is 0 percent on average.

Benchmark of Cost for 220 kV Transmission Line in Africa

8. The team examined a sample of transmission projects undertaken over the last two decades in Sub-Saharan Africa (see Table 2.8 and Figure 2.7).32 The main conclusions of this benchmarking exercise are the following:

• The average bidding cost for all lots is a rate of US$0.210 million per km.

• For Lots 1 and 2, the winning bid price is about 7–9 percent higher than the estimate.

• For Lots 3 and 4, the winning bid price is about 9 percent lower than the estimate.

Conclusion

9. This average cost is consistent with the benchmark on the market price (US$0.203 million per km) in West Africa and with the updated costs estimated in May 2015. The bidding prices for the four lots of 220 kV transmission lines are confirmed as reasonable and competitive.

32 The data set is obtained from the World Bank Project Cost Review of Transmission Development in Africa (P152329).

BID OPENING

(APRIL 2016)

Estimation Criteria 3.1 Criteria 3.2 Criteria 4.2 Lowest Bid

Trasnmission Lines k$ M$ M$ M$ k$

Lot 1 48090 12.0 48.1 38.5 51398 7%

Lot 2 45990 11.5 46.0 36.8 50065 9%

Lot 3 44310 11.1 44.3 35.4 40483 -9%

Lot 4 45990 11.5 46.0 36.8 41738 -9%

184380 183684 0%

Criteria Definition for Pre-Qualification (MAY 2015)

Percentage

Deviation

Lowest Bid vs

Estimation

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Table 2.7. International comparisons of Bids for Transmission Lines and Substations

# Country Project Title LengthHarmonized

USD Price

Project Year

BidVoltage Level

1 West Africa (Mali

Mauretania Senegal)

OMVS Manantali System Ouest

191 11,743,200 1999 225kV

2 ETH Ethiopia Ethopia Sudan Interconnection

137.2 17,947,682 2008 220kV

3 ETH Ethiopia Ethopia Sudan Interconnection

121 3,529,621 2008 220kV

4 ETH Ethiopia Ethopia Sudan Interconnection

36.5 6,868,159 2008 220kV

19 UGA Uganda Nkeda Hoima Transmission Line Project

224 48,981,980 2014 220kV

27 TJK Tajikistan Regional Power Transmission Line Project

(RPTP) Lot 1 extensions140 22,000,000 2012 220kV

28 AFG Afghanistan Energy Sector Development

Tranche 4 DABS/010/ICB 151 29,000,000 2014 220kV

33 COG Congo R. D. CONGO : Projet de MarChé d'électricité

en Afrique Australe (SAPMP)

Marché 3 Ligne aérienne 220 kV Fungurume

Kasumbalesa

273 67,455,890 2008 220kV

48 KEN Kenya 280MW LOT C OLKARIA SUSWA

TRANSMISSION LINES & ASSOCIATED

SUBSTATIONS

51 25,741,483 2010 220kV

54 KEN Kenya Rabai Malindi Garsen Lamu T. line Project

328 70,678,600 2011 220kV

56 KEN Kenya

OLKARIA LESSOS KISUMU TRANSMISSION

LINES LOT 2 (220kV & 132kV LESSOS

KISUMU)

73 19,579,361 2014 220kV

66 KEN Kenya 220 kV Turkwel Ortum Kitale Transmission

line & Substations 138 11,603,549 2012 220kV

68 UGA Uganda LOT 1: Kawanda Masaka 220kV

Transmission line 137 22,032,649 2013 220kV

66

Figure 2.6.Africa Benchmark Costs: 220 kV Transmission Lines

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Annex 2B. Incremental cost from using Shield Wire Technology with Three Earth Wires

1. The two-shield wire system (SWS) technology uses the earth as a phase conductor. This technology has the practical and economical advantage that only minor modifications of the shield wire peaks of the towers are required, with the addition of the insulators. The structural loading conditions of towers (transversal, vertical, and longitudinal) remain approximately the same. Redesign of the towers is not required and only minor tower design adjustments are necessary. One of the major issues with this technology is its acceptance by the distribution company. Some power distribution engineers express hesitation at accepting the use of earth as a conductor, as many of them are not familiar with the technology and its operational constraints (regular monitoring of earthing of the MV network quality is required).

2. A new approach is the ‘three-phase’ SWS technology corresponding to a conventional MV line. The addition of the third earth wire requires a modification/accommodation of tower design and involves an increase of cost of the transmission line. On the other hand, it allows important simplifications of the electrical analysis, MV material specifications, and operation.

Figure 2.7 Alternative Outlines of the Modified Shield Wire Cross Arm on a Double-Circuit 161 kV Transmission Line for Addition of the Third Shield Wire

3. Using this three-shield wire option instead of the two-shield wire with return to earth adds a small extra cost for the project. The following items should be considered when estimating the extra cost of installation of the third shield wire (material procurement, transport, and installation) on the transmission line: supply of the third shield wire and insulators, fittings and stringing of the third shield wire, increase of structural outline dimension sand thus the and thus the weight of the towers.

4. In the case of the CLSG, the technology was specified as an option in the Bidding Documents, and the contractors were requested to provide a quote on this option. After the negotiations with the different contractors on the option of 3 SWS, the average negotiated price on the five lots, per km, is US$11,623 per km, which will increase the average price of the line by 5.6 percent above the average price of the base offer with only the traditional 2 SWS technology. It is important to note that the negotiations allow

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for the reduction of the cost of approximately 50 percent on the original costs submitted by the contractors and result in savings of approximately US$13 million.

Table 2.8. Cost of 3 SW Options after negotiations

ITEMS UnitLOT1

WB

LOT2

WB

LOT3

EIB/WB

LOT4

EIB/WB

LOT2

AfdBTOTAL

NEGOTIATED PRICE FOR THE 3SWS OPTION

(Schedule 1b) + Underground Connection$ 2,175,669 3,397,699 3,400,463 1,814,317 2,007,251 12,795,398

Length km 230 219 213 221 215 1,098

COST FOR THE 3SWS per km $/km 9,459 15,515 15,965 8,210 9,336 11,653

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Annex 3: Revised Implementation Arrangements and Support

Project Institutional and Implementation Arrangements

1. Implementation arrangements for the WAPP CLSG Power Interconnection and the WAPP TA (Components 1 and 2 of the AF) will remain as under the parent project. Activities under the WAPP CLSG Power Interconnection will be implemented by TRANSCO CLSG, a regional transmission company owned in four equal parts by the four national utilities of the participating countries of the CLSG project. As per the TRANSCO CLSG organigram presented in Figure 3.1, TRANSCO CLSG HQ has a full complement of staff in place and is operational. TRANSCO CLSG has established offices in each country (Liberia, Sierra Leone, and Guinea) headed by a country manager to ensure the timely implementation of the project and communication among all stakeholders. The TRANSCO CLSG HQ will oversee and coordinate construction and other project management activities with support from the Owner’s Engineer and each country office.

2. The WAPP Secretariat will implement activities under the WAPP TA, as the implementing agency for all activities financed under the IDA grant. Since most activities require a strong engagement of other parties for a successful undertaking, a strong coordination between the WAPP and thes other entites will be key for their successful realization. More specifically:

a. For activities 2.A.2-bis focusing on the support for the preparation of commercial energy exchanges through the CLSG Transmission Line, the technical aspects will be led by TRANSCO CLSG as those activities aim to support the development of efficient energy trade through the Interconnector being developed under the West African Power Pool -Côte d’Ivoire, Liberia, Sierra Leone and Guinea Power Interconnection Project (“CLSG Project”). At the same time, the active participation of the WAPP in technical discussions will be essential, since a key objective of these activities is to tap on the work done already by the WAPP, and share experiences from the work realized under the CLSG Project. On the fiduciary aspects, as the WAPP will have the fiduciary responsibility for the resources, TRANSCO CLSG will need to share with sufficient time in advance the description specific activities, TORs, budget, time line and all the necessary information so that the WAPP can request the necessary non-objections to the World Bank in a timely manner. To facilitate this coordination, the WAPP Secrétariat and TRANSCO will have a written agreement describing these procedure, which will also be reflected in the Project Implementation Manual, which will need to be updated accordingly, no later than three months after the effectiveness of the project.

b. For activities 2.A.3 supporting the preparation for Hydropower Development on St. Paul River, and the related institutional support activities under Activities 2.A.4, an HLSC will be formed in Liberia to provide strategic guidance to the studies and to ensure that the studies undertaken in the WAPP TA are consistent with the overall Government strategy for the expansion of the power sector in Liberia. A technical focal point for these studies will be appointed to support the HLSC, provide its technical feedback, facilitate the circulation of information to and from the consultants, ensure the active participation of the beneficiary, the GoL, in the preparation and implementation of the studies, and ensure the relevance and the local ownership of the work. To foster consistency with WAPP activities, a WAPP representative will be also appointed as a member of the HLSC.

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Procurement, Financial Management, and Disbursement

Procurement Strategy

3. The New Procurement Framework (including Procurement Regulations for Borrowers) that applies to projects with PCNs held after July 1, 2016 would normally apply. However, an exception has been granted by the World Bank’s Chief Procurement Officer on August 7, 2017, that all procurement under the proposed AF should follow: (a) the World Bank’s “Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits and Grants” dated January 2011; revised July 2014, and (b) “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers” dated January 2011, revised July 2014.

4. Although procurement on the WAPP CLSG Power Interconnection and the WAPP Technical Assistance Project has been challenging, the WAPP has conducted procurement activities for the parent project in a moderately satisfactory manner. To strengthen the procurement capacity of the WAPP Secretariat, a consultant senior procurement specialist was recruited in June 2017 for one year under the project to support project implementation and train local staff, and a WAPP Secretariat procurement specialist will be competitively recruited and trained by this consultant. A World Bank procurement specialist will undertake regular supervision and a post-procurement review at least once a year. With regard to risk, given the experience under the parent project and mitigation measures proposed, procurement risk is rated Substantial.

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Figure 3.1. TRANSCO CLSG Organizational Chart

23

25

28

21

26

7

4/5

6

10

24

10 7

3

15

16

20

18

19

20 19

14

14

14

13 13 15 13 13 15

13 13 1513 13 15

Supports Staff• No.8 8 drivers Head Quarter• No.22 15 drivers Local Office (5 per National Office)• No.17 4 Secretaries for Commercial and Technical Department• No.21 2 drivers for Commercial and Technical Department

9

9 9

27

27 27

27

27

27

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Assessment of the Capacity of the Agencies to Implement Procurement

5. TRANSCO CLSG has been entrusted with the fiduciary management (procurement and financial management) of the parent project. After two years of implementation of the parent project, six contracts out of 13 have been signed, representing 83 percent of contract values procured. This AF completes the initial financing without adding new activities. The TRANSCO CLSG procurement team has a senior procurement specialist and an assistant. TRANSCO CLSG is being assisted by the Owner’s Engineer, an international consultant, in procurement and contract management.

6. Therefore, it is proposed that the new additional operation be implemented by TRANSCO CLSG as per the arrangements of the ongoing parent project.

Frequency of Procurement Reviews and Supervision

7. World Bank prior and post reviews will be carried out on the basis of thresholds indicated in the agreed Procurement Plan for the AF. The World Bank will conduct supervision missions and annual post-procurement reviews, with the ratio of post review at least one to five contracts. The World Bank may also conduct an independent procurement review at any time until two years after the closing date of the project.

Financial Management

8. The overall FM system and performance of the TRANSCO CLSG - Special Purpose Company (IDA c 51100 – 3A) and the WAPP Secretariat (IDA H770 – 3A) under the parent project are acceptable to IDA. The PCU and the FM units set up within the TRANSCO CLSG and WAPP Secretariat will be responsible for FM aspects of the AF and remains the World Bank focal point. The FM teams are familiar with the World Bank FM requirements and are currently managing the parent project of this IDA-financed project. The World FM arrangements of the AF will follow the same approach like the implementation arrangements in place for the parent project (e.g frequency of submission of IFR and annual audit reports…). The overall performance of the FM teams is acceptable to IDA. The FM performance was rated Moderately Satisfactory (MS) following the last supervision missions completed respectively in February 2017 for the WAPP Secretariat and in August 2017 for TRANSCO CLSG. The key FM issues identified following these supervisions have been implemented or are being implemented. The fiduciary risk has been assessed as Moderate for WAPP Secretariat and Substantial following the primary risk assessment which considered the current risk rating of the parent project and the mitigation measures required for the AF.

9. To mitigate the risks, the following key measures will be required:(i) the existing FM procedures manual which was prepared for the parent project will be revised to reflect the aspects of the AF; (ii) the annual work plan and budget should be submitted to the World Bank for discussions and review not later of November of each calendar year; (iii) an Internal audit function both at TRANSCO and WAPP Secretariat should be strengthened and the mission reports shared with the World Bank and governance committees; and (iv) the contracts of the external auditor of the parent project will be revised to include the activities of the AF. The implementation of these actions and measures are expected within two to five months and will be closely monitored as part of FM supervision during project implementation. 10. Upon Grant effectiveness, transaction-based disbursements will be used. The grant (WAPP Secretariat) and the credits (Liberia and Sierra) will finance 100 percent of eligible expenditures inclusive of taxes. Two new Designated Accounts (DA) will be opened in US dollars in a commercial bank operating in Cote d’Ivoire for Liberia and Sierra Leone. One DA will be opened in Benin for WAPP Secretariat. The

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Sub-accounts in local currency will be opened in the same commercial banks under terms and conditions acceptable to IDA. The existing signatories’ arrangements of the parent project will remain unchanged. An initial advance up to the ceiling of the DAs will be made and subsequent disbursements will be made against submission of Statements of Expenditures (SOE) reporting on the use of the initial/previous advance. Funds will therefore flow when needed, from the DAs in US$ to sub accounts in local currency of each participating country. All other existing disbursement arrangements under the ongoing parent project will continue.

11. A description of the project’s financial management arrangements above indicates that they satisfy the World Bank’s minimum requirements under the World Bank-IPF Directive and Policy.

Disbursement Categories

12. Resources under the proposed AF will be provided as part of an addition to an existing credit to the GoL and of an existing grant to the WAPP Secretariat, while they will be provided to the GoSL through a first credit to Sierra Leone.

13. The following paragraphs describe the disbursement tables for each of the three Financing Agreements with the GoL and of GoSL and for the WAPP Secretariat.

Reallocation under Parent Project and AF for Liberia

14. The disbursement table in Section IV.A.2, Schedule 2 of the Financing Agreement for the Cr. 5110 (WAPP CLSG credit) to the GoL, originally signed on August 16, 2012, included a distribution of the SDR 93.3 million in various distribution categories as described Table 3.1.

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Table 3.1. World Bank IDA Financing: WAPP CLSG- Liberia Projected Cost and IDA Financing

Category

Financing Agreement

Parent (SDR, millions)

Financing Agreement

Parent (US$, millions)

Project Cost (US$,

millions

IDA Financial Gap (US$, millions) February

2017

AF (US$, millions)

February. 2017 +

˂reallocation*˃

Total Financing

Parent + AF (US$,

millions) February

2017

Revised with SDR

Exchange Rate March

2017

Revised in US$ Exchange

Rate March 2017

Updated (F) (H) (I)

(1) Goods, works, non-consulting services, consultants' services, training, workshops, and operating costs:

(a) under Part A.1 (i) of the project

57.1 77.5 120.2 (42.7) 40.6

<2.1> 120.2

Transmission lines

(b) under Part A.2 (i) and A.4 of the project

1.3 1.8 1.7 0.1 1.7

Substation and frequency control

(c) under Part B of the project 28.1 38.1 37.1 1 37.1

Institutional framework and project oversight

(d) under Part A.5 of the project

0.7 0.9 0.9 0.9

ESMPs and RAPs implementation

(2) Unallocated 3.8 5.1 4.1 1 4.1

(3) Refund of Preparation Advance No. Q7070-LBR

1.3 1.8 1.8 1.8

(4) Interest Accrued during Construction

1.0 1.4 1.8 1.8

Provision rate exchange (SDR/US$)

4.7 (4.7) 4.7 4.7

TOTAL 93.3 126.6 171.9 (45.3) 45.3 171.9

* See below in text explanation for values of categories 1a of column H.

15. Financing the gap through reallocation of existing funds and of new resources. For two categories of the project, the existing financing gap was addressed in two ways: first with a reallocation of existing funds from other categories where there was excess of funds, and second with the injection of new resources through the AF. More specifically:

• Category (1a): To finance the gap of US$42.7 for the two transmission line contracts in Liberia (Lot 1 and 2), there will be a reallocation to this category of US$2.1 million under the parent project

75

and in addition, the proposed AF would provide US$40.6 million additional IDA credit resources. The additional reallocation of US$2.1 million will come from other activities:

o US$0.1 million from category 1b (Substation and Frequency Control) o US$1.0 million from category 2 (Unallocated) o US$1.0 million from category 1c (Institutional framework and project oversight)

AF for Sierra Leone

16. For Sierra Leone, the proposed AF would provide an additional amount of US$59.5 million in new IDA credit resources to co-finance the EIB and AfDB’s packages: the cost of the transmission lines and with the AfDB the cost of substations.

• Co-financing with the EIB the cost of the transmission lines contracts (Lots 3 and 4) with a contribution of IDA resources (US$50.9 M)

• Co-financing with the AfDB the cost of four substations (Man, Nzerekoré, Kamakwie, and Yiben) with a contribution of IDA resources (US$8.2 million) toward the cost of the Yiben substation

17. A first restructuring of the credit, approved by the World Bank on January 30, 2015, addressed the request of the GoL to use IDA resources to finance the ESMP and the interests accrued during construction (IDC). To this end, SDR 1.5 million, equivalent to US$2.28 million, was reallocated from category 1a to categories 1d and 4, respectively, as described in Column B. However, a second letter from the GoL, dated January 4, 2016, requested the amounts of SDR allocated to this end to be increased because the devaluation of the SDR versus the U.S. dollar meant that the SDR amount allocated to categories 1d and 4 was no longer sufficient to cover the cost in U.S. dollars. Column C (in SDR) and Column D (in US$) reflect the reallocation of SDR 0.32 million from category 2 (unallocated) to categories 1d and 4, respectively, requested by the GoL, although no legal amendment of the Financing Agreement took place at that moment. The reallocation of IDA resources of the parent project proposed in this document considers the modifications requested by the Government in Column C and the financial gap described in Column F, and it is summarized in Column G (in SDR) and Column H (in US$). Details of this proposed reallocation are explained next with reference to the values in U.S. dollars.

• Category (1a): To finance the gap of US$57.1 for the two transmission line contracts in Liberia (Lots 1 and 2), there will be a reallocation to this category of US$15.5 million under the parent project for a total of US$77.5 million in that category. The additional reallocation of US$15.5 million will come from other activities:

o US$8.5 million from category 1b (Substation and Frequency Control)

o US$7.0 million from category 2 (Unallocated)

In addition, the proposed AF would provide US$41.6 million additional IDA credit resources.

• Category (1b): US$8.5 million will be reallocated to category 1a, as the World Bank financing is not financing the Yekepa substation, the cost of which is now financed under KfW. World Bank financing under category 1b will hence only finance the frequency control study (US$1.7 million).

76

• Category (1c): To finance the gap of US$1.6, there will be a reallocation to category 1c of US$0.3 million to the parent project (US$37.7 million). This will come from other activities:

o US$0.2 million from category 2 (Unallocated)

o US$0.1 million from category 4 (Interest Accrued during Construction)

• Category (2): There will be a reallocation from this category of US$7.2 million to categories 1a (US$7.0 million) and 1c (US$0.2 million). There will be therefore US$5.2 million remaining in this category.

18. As explained earlier, there is an additional provision for fluctuations of exchange rates, that will be included in the unallocated category, as per the decision taken during the project negotiations..

AF for Sierra Leone

19. For Sierra Leone, the proposed AF would provide an additional amount of US$59.5 million in new IDA credit resources to co-finance the EIB and AfDB’s packages: the cost of the transmission lines and with the AfDB the cost of substations.

• Co-financing with the EIB the cost of the transmission lines contracts (Lots 3 and 4) with a contribution of IDA resources (US$50.9 M)

• Co-financing with the AfDB the cost of four substations (Man, Nzerekoré, Kamakwie, and Yiben) with a contribution of IDA resources (US$8.2 million) toward the cost of the Yiben substation

Table 3.2. World Bank IDA Financing for Sierra Leone Projected Costs and IDA Financing (US$, millions)

Category Project Cost

February 2017 Financial Gap February 2017

IDA Financing February 2017

(1) Goods, works, non-consulting services, consultants' services, training, workshops, and operating costs:

Transmission lines 118.6 −50.9 59.2

Substation (Yiben) 53.6 −8.2

Others (spare parts, and so on) 0.3 0.0 —

Provision rate exchange (SDR/US$) — — 0.4

TOTAL 172.5 (59.2) 59.6

20. This strategy will allow the AfDB to cover the remaining financing gap related to Sierra Leone, Guinea, and Côte d’Ivoire (US$23million) and will allow the EIB to have the available resource to fully finance the substation contract (Kenema, Bekongor, and Bumbuna) in Sierra Leone, as originally planned.

77

AF to the WAPP

21. The AF will provide an additional amount of US$17.5 million in new IDA grant resources to finance the identification and preparation of optimal development of hydropower generation on the St. Paul River, under the subcomponent of the grant (2A) dedicated to supporting the preparation of strategic generation or transmission projects that can foster regional energy trade.

Table 3.3. World Bank Grant to the WAPP (HA7 3700) AF

Category

Parent Project (SDR,

millions) 2012

AF (SDR, millions)a February

2017

Revised Grant

with AF (SDR,

millions)

Parent Project (US$,

millions) 2012

Parent Project (US$, millions)

2017

AF (US$, millions) February

2017

Revised Grant

with AF (US$,

millions)

Goods, works, Non-consulting Services, Consultants Service, Training, workshops, and Operating Costs

18.8 12.3 31.12 29.0 26.7 17.5 44.2

PPF Refinancing 1.6 0.0 1.60 2.5 2.3 0 2.3

Total 20.4 12.3 32.72 31.5 28.97 17.5 46.5

Note: a. Calculated using exchange rate of August 28, 2017: SDR 1 = US$1.42.

22. Specifically, this TA aims at advancing the preparation of a second-generation project to further develop the hydroelectric generation potential of that river. To this end, the AF will finance under this component:

• Support to the preparation of energy and commercial exchanges through CLSG: US$1.5 million

• Preparatory studies for new hydroelectricity generation project in Liberia: US$11 million

• Support of technical and safeguards experts and capacity building: US$2.0 million

Procurement Plan for the AF

23. The proposed IDA AF will (a) co-finance jointly with the EIB two contracts for transmission lines in Sierra Leone that have been procured and signed under the World Bank’s Procurement Guidelines; (b) co-finance jointly with the AfDB one contract for four substations in Sierra Leone, Guinea, and Côte d’Ivoire; and (c) finance consulting services under the IDA Integration and Technical Assistance Grant.

24. The team has obtained the clearance from the World Bank’s Chief Procurement Officer for all the contracts to be financed under the AF to continue to follow the World Bank’s Procurement Guidelines of 2011 (revised in 2014), since the AF resources will finance the cost overruns of existing contracts that have been procured under these World Bank Procurement and Consultant Guidelines. This would ensure continuity and consistency for these contracts. The same applies to the contracts for consultancies financed with the AF, as part of the support to TRANSCO CLSG.

25. In particular, the contract for Substations to be co-financed under the AF, will be treated as advance contracting since the contract, currently being procured, would possibly be signed before the signing of the AF Financing Agreements. The prequalification process was undertaken following the AfDB

78

procurement procedure. World Bank task team reviewed the prequalification process and found it acceptable. It was advertised online on the United Nations Development Business (UNDB) site and no bidders had been disqualified or rejected based on eligibility requirements related to AfDB membership. The prequalified bidders meet the World Bank’s procurement eligibility requirements and have not been subject to any sanctions by the AfDB or the World Bank. World Bank task team further consulted the Chief Procurement Officer, who advised to conduct prior review jointly with the AfDB of the onward bidding process and ensure that the bidders declare in their bids to accept the World Bank’s Guidelines on Preventing and Combating Fraud and Corruption in Projects financed by IBRD Loans and IDA Credits and Grants ((revised as of July 2016) . The prior review will ensure bidding documents and the bidding process towards the contract award comply with the World Bank’s Procurement Guidelines.

26. In Sierra Leone, the proposed AF will provide US$59.2 under Subcomponent 1.A: Power Interconnection between Côte d’Ivoire, Liberia, Sierra Leone, and Guinea, to co-finance together with the EIB the cost of transmission lines and with the AfDB the cost of substations, as described in Table A3-4.33

33 No new procurement activities are expected under this subcomponent.

79

Table 3-4. Works and Goods Contract Packages for TRANSCO CLSG R

ef.

No

.

De

scri

pti

on

Esti

mat

ed

Am

ou

nt

(US$

)

Pro

cure

men

t

Me

tho

d

Pre

qu

alif

icat

i

on

(Y

es/

No

)

Do

me

stic

pre

fere

nce

(Ye

s/N

o)

Pri

or

Re

vie

w

(Ye

s/N

o)

Esti

mat

ed

Bid

s o

pe

nin

g

Dat

e

Exp

ect

ed

Co

ntr

act

Sign

atu

re

Dat

e

Co

mm

en

ts

1

Lot 3 (co-financing World Bank/EIB) of 225 kV transmission lines (Sierra Leone)

28,250,000

ICB Yes No Yes 14-

Sept-16 18-

Jan-17

Works. No new contract/amendments will be procured. The funds will be used to finance cost over the existing contract procured and signed following the World Bank’s Procurement Guidelines.

2

Lot 4 (co-financing World Bank/EIB) of 225 kV transmission lines (Sierra Leone)

23,450,000

ICB Yes No Yes 14-

Sept-16 19-

Jan-17

Works. No new contract/amendments will be procured. The funds will be used to finance cost over the existing contract procured and signed following the World Bank’s Procurement Guidelines.

3

AfDB substation package (World Bank co-financing 100%) of the YIBEN substation (Sierra Leone)

8,200,000

ICB Yes No Yes 14-

Sept-16

31-Mar-

17

Works. Contract being procured following AfDB procedure

Note: ICB = International Competitive Bidding.

WAPP Integration and Technical Assistance Project

27. Based on the project’s description provided in Annex 2, the following procurement activities are foreseen:

80

Table 3.5. WAPP Integration and Technical Assistance AF Procurement Activities R

ef.

No

.

De

scri

pti

on

Esti

mat

ed

Am

ou

nt

(US$

)

Pro

cure

men

t

Me

tho

d

Pri

or

Re

vie

w

(Ye

s/N

o)

Esti

mat

ed

Bid

s

op

en

ing

Dat

e

Exp

ect

ed

Co

ntr

act

Sign

atu

re D

ate

Co

mm

en

ts

1 Optimization Study

2,800,000 QCBS Yes 20-Jun-18 5-Sep-18

2 FS 4,100,000 QCBS Yes 21-Mar-19 6-Jun-19

3 ESIA studies for the Priority Project

3,300,000 QCBS Yes 21-Mar-19 6-Jun-19

4

Strategic adviser to support the project’s development

800,000 QCBS No 21-Dec-18 8-Mar-19

5 Environmental specialist (PoE)

102,000 IC No 19-Feb-18 16-Apr-18 PoE

6 Social specialist (PoE)

102,000 IC No 19-Feb-18 16-Apr-18 PoE

7 Focal team PDU counterpart

354,000 IC No 15-Dec-17 16-Jan-18 Member of focal team

8 TA to focal team

799,500

Single Source or QCBSb

Yes 19-Feb-18 16-Apr-18

Member of focal team - will also include also a working space for Focal Team & logistical support (transportation…)

9

Expenditures for focal point, PoE, organization of workshops

442,500

Shopping Multiple contracts under 100.000 $

10

Institutional strengthening and capacity building

400,000 Shopping Multiple contracts under 100.000 $

11 Organization of a sub-regional workshop on CLSG market opportunities

200,000 CQS Yes 14-Jun-18 19-Jul-18

12 Support to the preparation of the PPAs based on the opportunities created by the development of the CLSG

300,000 QCBS Yes 19-May-18 24-July-18

81

13 Preparation of technical annexes to signed PPAs and for other future PPAs and TSAs through the CLSG Line.

500,000 QCBS Yes 19-May-18 24-July-18

14 Development of trading arrangements for energy exchanges through the CLSG line.

500,000 QCBS Yes 19-Apr-18 24-May-

18

Note: b. Extension of TA from the parent project if services are satisfactory. QCBS = Quality- and Cost-Based Selection; IC = Individual Consultant; and CQS = Selection Based on the Consultants’ Qualifications.

82

Annex 4: Updated Economic and Financial Analysis

Economic Analysis

1. An update of the economic analysis was carried out to determine the impact of the proposed AF on the estimated net economic benefit from the WAPP CLSG Power Interconnection. The results of this analysis show the project still yields significant net economic benefits for the four participating countries despite: (a) the increase in the costs of the project; (b) delays in the start of project implementation; and (c) the twin shocks of the EVD crisis and fall of primary commodities and mineral prices that depressed economic activity and thus demand for electricity. Based on the difference in the NPV between with and without project scenarios, the project yields a positive NPV of US$475 million at a 10 percent discount rate and an EIRR of 20 percent for the four countries, under the base case assumptions.

2. As in the original analysis, the EIRR results suggest that Côte d’Ivoire and Liberia will benefit most from the project, with EIRRs of 64 percent and 30 percent, respectively, while benefits for Sierra Leone and Guinea are also significant but somewhat lower with EIRRs of 13 percent and 16 percent, respectively. This can be explained as follows:

• Côte d’Ivoire benefits both from exporting electricity to the other countries in the short and medium term and from importing cheaper hydropower from these countries in the medium and long term.

• Liberia also benefits from large fuel savings as imports displace more costly domestic thermal generation and from exporting the surplus from hydropower generation on the St. Paul River from the existing Mount Coffee generation plant, until the national grid is expanded to allow for electricity delivery to the large repressed domestic demand.

• Sierra Leone benefits in the short term from cheaper imports of electricity displacing more expensive domestic thermal electricity and in the medium and longer term from exporting hydropower to the region, but it will have to fully absorb the investment costs of developing its hydropower potential.

• Guinea’s electricity sector will obtain large benefits from having access to the regional energy market and realizing its potential as an energy exporter, while benefitting in the shorter term from cheaper imports of energy from Côte d’Ivoire. However, net benefits are reduced because Guinea will have to bear the full cost of the investment in hydropower generation.

3. The original economic analysis presented in the Project Appraisal Document of the parent project assessed the impact of the project on each country by contrasting two scenarios over 2012–2042:

(a) An initial scenario using the optimal expansion plans of the electrical systems of each of the four countries (Cote d’Ivoire, Liberia, Sierra Leone and Guinea) without the CLSG interconnection line, this is called the ‘without project scenario’.

(b) An integrated planning scenario, which is the same as above, but includes the CLSG transmission line and adjusted power generation investments in the participating countries to derive the maximum benefit from the interconnection. This is the ‘with project scenario’.

4. In this context, the potential net benefits of the project will come from the following:

• Fuel and investment savings due to energy trade among the CLSG countries (and others connected) due to the cost differential among countries/locations in the CLSG region.

83

• Gains from the reduction of the spinning reserves needed in each country because interconnected systems are able to maximize the exchange of energy and reduce the need for each country to have large spinning reserves. This translates into generation cost savings.

• Gains from smoothening of the load curve, as interconnecting power systems lead to a total load curve with a peak level below the sum of the individual peak loads related to each separate country. This again translates into generation cost savings.

• Gains from CO2 emission reductions because the interconnection results in reduced use of hydrocarbon fuel in the four countries.

5. The economic analysis for the proposed AF maintains the same approach as the original analysis and focuses on the analysis of key changes that have affected the project since it was approved in 2012.These changes are as follows:

• Period of the analysis has been changed to 2017–2047.

• Investment costs of CLSG has been updated.

• Demand projections for the four countries have been updated (see Table 4.1).

• The oil price has been reduced to account for the fall in world oil prices.

Table 4.1. Demand Forecasts for the CLSG Countries

Demand (MW) 2017 2018 2019 2020 2025 2030 2035 2040 2045

Côte d'Ivoire 1,344 1,478 1,626 1,780 2,381 3,039 3,879 4,951 5,458

Liberia 20 25 31 67 194 292 345 413 445

Sierra Leone 119 125 132 167 231 287 359 455 502

Guinea 245 254 279 388 655 927 1090 1259 1292

Demand (GWh)

Côte d'Ivoire 7,173 7,890 8,679 9,500 12,713 16,226 20,708 26,430 29,139

Liberia 116 145 181 389 1126 1694 2001 2394 2580

Sierra Leone 428 451 475 601 831 1029 1290 1634 1802

Guinea 1308 1356 1490 1995 3330 4692 5470 6286 6459

6. The economic costs incorporated in the economic analysis were the additional costs that the CLSG countries would incur if the interconnection project was built when compared to the baseline scenario.

7. Table 4.2 summarizes the results of the economic analysis in terms of costs, benefits, net benefits, and EIRR, for each country and for all four countries combined, using a discount rate of 10 percent.

Table 4.2. Summary of Costs and Benefits (in US$, millions; NPV at 10%)

Item Total Côte

d’Ivoire Liberia

Sierra Leone

Guinea

Benefits

Total savings from fuel and generation costs compared to the baseline scenario 627 1124 197 105 ($799)

Smoothening of the load curve 65 44 2 4 16

Reduction of spinning reserve 200 97 18 12 68

Total benefits 892 1265 217 95 (716)

Costs

Investment over costs (416) (42) (213) (120) (42)

84

Net revenue transfers 0 (979) (31) (44) 1,053

Net benefits 475 245 26 38 480

EIRR (%) 20% 64 30 13 16

8. CO2 emission reductions. The realization of the project results in reduced use of hydrocarbon fuels in the four countries and helps avoid more than 5.6 million tons of carbon emissions over the life of the project in comparison to the ‘without’ project scenario, as explained in the original analysis. Assuming a damage cost value of US$20 per ton, overall gains from avoided carbon emissions have been valued at US$52.4 million in NPV terms, discounted at 10 percent.

9. Sensitivity analysis. The sensitivity analyses carried out demonstrate that the project’s economic viability is robust to variations of discount rates and fuel prices. Under the CLSG distributed exchange scenario where 200 MW of power is transferred from 2016 and 2×200 MW from 2020, the NPV is positive for discount rates of less than 36 percent. If the price of oil increases, the benefits from the regional hydroelectricity are very significant.

Table 4.3. Summary of Sensitivity Analysis

Discount Rate (%) Net Benefit (US$, millions) Price of Oil (US$/bbl) Net Benefit (US$, millions)

8 400 60 369

10 369 80 523

12 280 100 678

— — 120 832

Financial Analysis

10. A financial analysis was carried out to determine the impact of the AF on the financial viability of the WAPP CLSG Power Interconnection as well as the viability of the regional transmission company (TRANSCO CLSG). The analysis reveals that the required average transmission tariff will have to go up to USc2.92 per kWh during the project period in the base case scenario compared to the USc 2.0 per kWh estimated at the original appraisal, to cover the O&M costs and the debt service obligations of the CLSG line.

11. The financial analysis covers the scope of the WAPP CLSG Power Interconnection implemented by TRANSCO CLSG. The original costs of the WAPP CLSG Power Interconnection (Component 1) were estimated to be US$444.4 million and the WAPP TA (Component 2) US$31.5 million. Original costs of the two components together were therefore US$475.885 million, of which IDA financing was estimated to be US$176 million (US$144.5 million for Component 1 and US$31.5 million for Component 2). The original financial analysis assumed the total cost of US$475.885 million to be on the books of TRANSCO CLSG. However, since then, more clarity on the roles and responsibilities of TRANSCO CLSG have since determined that only Component 1 is within the scope of TRANSCO CLSG. This AF financial analysis therefore covers only the revised costs and benefits of Component 1.

12. The revised costs of the WAPP CLSG Power Interconnection are estimated to be US$489 million including donor financing of US$482 million and Government equity of US$7 million (see Table 4.4). Due to the increase in U.S. dollar costs since approval of the parent project, together with foreign exchange rate fluctuations that have decreased the U.S. dollar value of original donor commitments, there is a total financing gap of US$109.5 million (see tables 2.1 and 2.2 and explanations in Annex 2). IDA AF is estimated to be US$104.9 million, with the remainder financed mostly by KfW. The foreign exchange losses are borne by the participating utilities and not by TRANSCO CLSG.

85

13. Evaluations of the potential fiscal impact of the AF on the participating countries and on the participating utilities were carried out as part of the financial analysis. The analysis reveals that the WAPP CLSG Power Interconnection continues to be financially viable and that the potential fiscal impact is expected to be limited. In addition, the project will contribute to the improvement of the currently difficult financial situation of the participating utilities by making available lower cost of electricity for the buyers (initially Liberia, Sierra Leone, and Guinea) and higher export revenue for the seller (initially Côte d’Ivoire). Table 4.4 shows the revised costs and the lending terms for different foreign loans.

Table 4.4. Total Project Cost and Financing Plan with Terms

Lender Original

Amount (US$, thousands)

Revised Amount

including AF (US$,

thousands)

Tenure (years) Grace Period (years)

Interest Rate (%)

Service Charge

EIB 105,180 73,810 18 5 1.4 US$2.7 million

AfDB (loan) 28,831 74,100 50 10 0.75 0%

AfDB (grant) 104,263 53,700 — — — —

IDA (Credit) 176,000 208,740 40 10 0 0.75%

IDA (Grant) 0 22,650

KfW (grant) 40,774 49,400 — — — —

Government equity

20,837 7,270 — — — —

Total 475,885 489,670 — — — —

14. Key assumptions of the financial analysis. Against the original construction period for Phase I of 2013–2015, the revised construction period is expected to be 2018–2020.34A 30-year project period is assumed (as in the original analysis), starting in 2018. To be conservative, the analysis does not include Phase II of the double circuit line. The impact of Phase II is expected to be positive, as it will be adding further capacity with marginal costs. The key assumptions are summarized in Table 4.5.

Table 4.5. Key Assumptions for the Financial Analysis

Parameter Unit Value (2012) Value (2017)

Concession period Year 30 30

Construction

2013–2015(Phase I)/2020–2020(Phase II)

2018–2020 (Phase II)

Contracted amount MW

145 (2016–2011)/290 (2022–2042)

Starts with 81and increases to 174by 2030

O&M costs*

Transmission line % of investment

1 1

Substation % of investment

3 3

SCADA % of investment

10 10

TRANSCO CLSG costs during the operation period

34 TRANSCOCLSG follows the calendar year (January–December) as the fiscal year.

86

Directors 5 US$142,000 per person

FY2015’s actual operating costs of US$4.051 million expected to go up by 2% per year

Supervisors and managers

14 US$27,000 per person

Assistants 9 US$12,000 per person

Other costs % of labor costs

15

External services

Technical support for TRANSCO CLSG

US$1,330,000 per year

15. As per the Implementation Agreement, TRANSCO CLSG is to recover its operating costs and maintain a debt service coverage ratio (DSCR) of a minimum of 1.5 from the transmission tariff it charges to the participating utilities. TRANSCO CLSG does not bear the foreign exchange risk; it is borne by the participating utilities (or the respective governments).

16. Key results of the financial analysis. The average transmission tariff required to cover the O&M costs and the debt service obligations will be USc2.92 per kWh (up from USc2.0 per kWh during the appraisal estimate). The tariff will initially be in the higher range of USc3.6per kWh until 2028 due to low initial utilization of the line. Once constructed, the line is expected to carry an initial load of 81 MW from 2020 that is expected to gradually go up to 174 MW from 2030 and remain at that level. Table 4.6 shows the original and revised estimates of the expected tariff at different times of the project period.

Table 4.6. Original and Revised Average Tariff (USc per kWh) during Different Periods of the Project

Original Estimates AF Estimates

2016–2021 2016–2042 2021–2028

2021–2047

83 MW in 2016~2021, thereafter gradually to 290 MW 3.7 2.0 — —

81 MW in 2021, thereafter gradually going up to 174 MW in 2030 — — 3.6 2.92

17. Based on the revised average tariff, the project has a financial internal rate of return (FIRR) of 2.18 percent and an NPV of US$153 million35 at the weighted average cost of capital of 0.77 percent. The tariff is designed to ensure that TRANSCO CLSG can meet its operating and maintenance costs and debt service obligations, while maintaining a positive level of equity. The tariff is not designed to earn any return on equity since the participating countries to TRANSCO CLSG had agreed to invest their resources not for making profits but for bringing down the cost of electricity transmission to encourage energy trade in the region.

18. Table 4.7 provides the key projected financial data of TRANSCO CLSG.

Table 4.7. Highlights of Projected Financial Performance (US$, thousands)

2021 2022 2023 2024 2025

Income items

Revenue 14,576 14,576 14,576 14,576 28,371

35 The original appraisal analysis estimated the project to have a negative EIRR of 2 percent and a negative NPV of US$194 million. However, the results between this analysis and the original analysis are not comparable as the financial model used in the original analysis had gone through a number of changes in assumptions and an audit was done on the financial model. During this AF analysis, the revised audited model was updated with the latest assumptions for costs and other variables.

87

2021 2022 2023 2024 2025

Operating expenses

O&M costs 3,290 3,356 3,423 3,492 3,562

Other costs 4,563 4,654 4,748 4,842 4,939

Depreciation 17,974 17,974 17,974 17,974 17,974

Operating income

−11,251 −11,408 −11,568 −11,732 1,896

Nonoperating expense

3,745 3,726 3,698 3,670 3,626

Net loss/income −14,996 −15,134 −15,266 −15,402 −1,730

Balance sheet items

Total assets 471,583 456,474 441,235 425,859 420,774

-Current assets 4,269 7,134 9,868 12,466 25,355

-Fixed assets 467,314 449,340 431,367 413,393 395,419

Total liabilities 357,941 357,967 357,993 358,020 354,665

-Trade payable 1,291 1,317 1,343 1,370 1,397

-Debts 356,650 356,650 356,650 356,650 353,267

Total equity 113,642 98,507 83,241 67,839 66,110

Total liabilities plus equity

471,583 456,474 441,235 425,859 420,774

Cash flow items

Cash flow from operations

1,873 2,865 2,734 2,598 14,004

Cash flow from investing

— — — — —

Cash flow from financing

0 0 0 0 -16,244

Cash/cash equiv. at the end of year

1,873 4,738 7,472 10,070 7,830

DSCR 1.50 1.77 1.73 1.69 0.68

Cumulative DSCR 1.50 2.27 3.00 3.69 2.10

TRANSCO CLSG’s cash operating expenses

Operating expense

7,853 8,011 8,171 8,334 8,501

Interest 3,745 3,745 3,745 3,745 3,727

Principal — — — — 16,244

Total 11,598 11,756 11,916 12,079 28,472

19. Sensitivity analysis. Analysis shows that a 15 percent increase in total project cost would translate into a 6.5 percent increase in the average tariff required. Total project cost would have to increase by about 60 percent for the project return to become negative. The required transmission tariff to cover the costs in this scenario is estimated to be USc3.70 per kWh. It was assumed that the line would start with a load of 81 MW in 2021 to be gradually increased to 174 MW by 2030 in the base case. If the capacity utilization were to be 90 percent of the base case (73 MW in 2021 gradually going up to 156 MW by 2030), the average transmission tariff required to cover all costs of TRANSCO CLSG would increase to USc3.24 per kWh compared to USc2.92 per kWh in the base case. If the capacity utilization decreased to 75 percent

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(61 MW in 2021 and 130 MW by 2030), the average tariff required would go up by 33 percent to USc3.89 per kWh. In the unlikely event of the capacity utilization being just half of the base case scenario throughout the project period (41 MW in 2021 and 87 MW by 2030), the average tariff will have to double to cover the costs of the CLSG line. Table 4.8 shows the results of the sensitivity tests on the average tariff required.

Table 4.8. Summary of Project Financial Analysis Results

Scenarios Average Tariff (USc per

KWh) NPV (at WACC) (US$,

millions) FIRR (%)

Base case 2.92 153 2.18

1. Project costs increased by 15% 3.11 119 1.66

2. Project costs increased by 50% 3.57 30 0.72

Base case: 81 MW in 2021, 174 MW by 2030

2.92 153 2.18

1. 90% utilization of the capacity 3.24 153 2.18

2. 75% utilization of the capacity 3.89 153 2.18

3. 50% utilization of the capacity 5.83 153 2.18

20. Fiscal impact analysis. As per the Implementation Agreement, any foreign exchange losses arising from the debt service obligations are to be covered by the participating utilities (and are a contingent liability to the participating governments). Assuming a 1 percent appreciation per year of the three debt currencies (SDR for IDA, Euro for the EIB, and UA for the AfDB) against the U.S. dollar, the total foreign exchange losses could amount to US$66 million over the project period. In addition, the interest during construction of about US$4.4 million is also to be covered by the participating utilities, making the total estimated obligation to be US$70 million or US$17.67 million for each of the participating utilities during the life of the project. While the participating utilities’ cash flows are generally weak, if the participating utilities cannot meet these obligations, the impact on the Government of these contingent liabilities is expected to be minimal. These obligations represent about 0.86 percent, 0.42 percent, 1.67 percent, and 0.06 percent of the 2016 GDP of Liberia, Sierra Leone, Guinea, and Côte d’Ivoire, respectively.36

21. Benefits to the participating utilities. As explained in the original appraisal analysis, the participating utilities will benefit financially from trading using the CLSG line through (a) increased revenues from exporting electricity (Côte d’Ivoire and later Guinea and Liberia); (b) reduced costs from importing power that is obtained at a lower cost than domestic generation (Liberia, Sierra Leone, and Guinea); and (c) additional revenues by being able to dispatch more power than they would otherwise have available (Liberia, Sierra Leone, and Guinea). The estimated cost of import through the CLSG line is expected to be less than the marginal cost of generation (assumed to be HFO or diesel) in Liberia, Guinea, and Sierra Leone. This will help reduce the cost of power in the importing countries by replacing high-cost HFO or diesel generation.

22. The highest current export price from Côte d’Ivoire is UCs12 per kWh (see Table 4.9), and adding the national distribution costs and transmission and distribution losses (30 percent), the cost of imported electricity delivered is estimated to be USc20.9 per kWh. This compares favorably with the estimated thermal electricity costs including transmission and distribution costs of USc37.6 per kWh in case of HFO-based generation and USc56.5 per kWh for diesel generation.

36 2016 GDP estimates were US$2.05 billion, US$4.21 billion, US$1.06 billion, and US$31.76 billion for Liberia, Sierra Leone, Guinea, and Cote d’Ivoire, respectively (Source: World Bank). The total contingent liabilities during the project period (not the present value of the contingent liabilities) are compared with the current GDP.

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Table 4.9. Comparison of Electricity Costs by Source (USc per KWh)

a Highest export price in Côte D'Ivoire 12 Source: Côte D'Ivoire

b TRANSCO CLSG wheeling charges 02.92 Financial Model projection

c Distribution costs 2.4 Estimated at 20% of export price

d Transmission and distribution losses 3.6 Estimated at 30% of export price

e Total costs of import 20.9 a + b + c + d

f Average cost of generation based on HFO 31.6 Source: LEC

g Average cost of generation based on diesel 50.5 Source: LEC

h Estimated cost of supply based on HFO 37.6 f + c + d

i Estimated cost of supply based on diesel 56.5 g + c + d

23. As mentioned previously, the project costs would have to increase by 60 percent for the project returns to become negative. The average transmission tariff required in this scenario would be USc3.70 per kWh. Even with this tariff, the total cost of imports is estimated to be USc22 per kWh, which is much less than that the cost of supply from diesel- or HFO-based generation, making imports still a viable option for replacing high-cost diesel or HFO generation in the importing countries. In the unlikely scenario of the capacity utilization being only half of the contracted capacity throughout the Project period, the required transmission tariff will have to be doubled (USc5.83 per kWh) and the resulting cost of import will be USc23.8 per kWh, which is still considerably lower than the average cost of supply based on HFO or diesel.