AFRICAN DEVELOPMENT FUND

Transcription

1 Language: ENGLISH Original: French AFRICAN DEVELOPMENT FUND PROJECT : PROJECT TO INTERCONNECT THE POWER GRIDS OF THE CENTRAL AFRICAN REPUBLIC AND THE DEMOCRATIC REPUBLIC OF CONGO FROM THE BOALI HYDRO-POWER SYSTEM PHASE 1 MULTINATIONAL: CENTRAL AFRICAN REPUBLIC AND DEMOCRATIC REPUBLIC OF CONGO PROJECT APPRAISAL REPORT Date : August 2012 Appraisal Team Peer Reviewers Team Leader J. B. NGUEMA-OLLO ONEC I. KONATE ONEC S. ASSYONGAR-MASRA ONEC D. IBRAHIME ONEC ONEC.3 M.A. BEZZAOUIA Team Members Cons R. KITANDALA CDFO 6338 C. DJEUFO CMFO 6809 J. BISSAKONOU CMFO 6807 M. YARO ORPF Sector Division Manager A. ZAKOU ONEC CFFO Resident Representative M. SANGARE CFFO 7160 CDFO Resident Representative V. ZONGO CDFO 6333 Sector Director H. CHEIKHROUHOU ONEC 2034 Regional Director M. KANGA ORCE 2060 A.MOUSSA ONEC P. DJAIGBE ONEC N. NDOUNDO ONEC I TOURINO SOTO ONEC R. ARON ONEC A. FOURATI ONEC O.T. DIALLO ONEC Cons. K.DIALLO ORCE 2578 O. FALL OPSM 3820 S. WAKANA CDFO 6350 S. B. TOUNKARA CMFO 6822 C. AHOSSI CMFO 6811 C. BOLLO TEMA CMFO 6813

2 TABLE OF CONTENTS 1 STRATEGIC THRUST AND RATIONALE Project Linkages with the Two Countries Strategies and Objectives Rationale for Bank s Involvement Aid Coordination PROJECT DESCRIPTION Project Components Technical Solutions Adopted and Alternatives Explored Project Type Project Cost and Financing Arrangements Project Target Areas and Beneficiaries Participatory Approach Bank Experience and Lessons Reflected in Project Design Key Performance Indicators PROJECT FEASIBILITY Financial and Economic Performance Environmental and Social Impacts PROJECT IMPLEMENTATION Implementation Arrangements Project Monitoring Governance Sustainability Risk Management Knowledge Building LEGAL FRAMEWORK Legal Instrument Conditions Associated with Bank s Intervention RECOMMENDATION Annex I. CAR Comparative Socio-Economic Indicators Annex II. DRC Comparative Socio-Economic Indicators Annex III. Table of ADB Portfolio in the Two Countries Annex IV. Key Projects Related to the Development of the Two Countries Annex V. Map of Project Area

3 CURRENCY EQUIVALENTS, WEIGHTS AND MEASURES, ACRONYMS AND ABBREVIATIONS October 2011 UA XAF UA USD UA EUR UA CNY Fiscal Year 1 January 31 December WEIGHTS AND MEASURES M Metre 1 m V Volt 1 V Cm Centimetre 0.01 m KV Kilovolt 1000 V Mm Millimetre 0.001m kva Kilovolt-ampere 1000 VA Km Kilometre 1000 m W Watt 1 W m² Square metre 1 m² kw Kilowatt 1000 W cm² Square centimetre 0.01 m² MW Megawatt 1000 kw mm² Square millimetre m² GW Gigawatt 1000 MW km² Square kilometre m² kwh Kilowatt-hour 1000 Wh Ha Hectare m² MWh Megawatt-hour 1000 kwh Kg Kilogramme g GWh Gigawatt-hour kwh T Tonne kg Kgoe Kilogramme of oil equivalent ADB ADF ACER AFD ARSEC BCFAF BDEAC CAPP CAR CSP DRC DSFC ECC ECCAS EIRR ENERCA EU FIRR GDP GEF HV IEC IEPF LV MDG MV NGO NPV PEFA PRGSP PRSP MUA UNDP UPDEA WB ACRONYMS AND ABBREVIATIONS African Development Bank African Development Fund Central African Rural Electrification Agency French Development Agency Central African Autonomous Electricity Regulatory Agency Billion CFA Francs Development Bank of Central African States Central Africa Power Pool Central African Republic Country Strategy Paper Democratic Republic of Congo Financial and Accounting Services Directorate Energy Consumption Control Economic Community of Central African States Economic Internal Rate of Return Enérgie Centrafricaine (Central African Energy Utility) European Union Financial Internal Rate of Return Gross Domestic Product Global Environment Facility High Voltage Information, Education, Communication Institute of Energy and the Environment of La Francophonie Low Voltage Millennium Development Goals Medium Voltage Non-Governmental Organization Net Present Value Public Expenditure and Financial Accountability Poverty Reduction and Growth Strategy Paper Poverty Reduction Strategy Paper Million Units of Account United Nations Development Programme Union of Producers, Transporters and Distributors of Electric Power in Africa World Bank i

4 GRANT INFORMATION Donees Executing Agencies Client Information Central African Republic Democratic Republic of Congo CAR Ministry in charge of Energy DRC Ministry in charge of Energy FINANCING PLAN PHASE 1 Sources Amount in UA Million Total CAR DRC Instrument TOTAL ADF Grant ADF Country Share Grant ADF Regional Share Grant Total Project Cost ADF KEY FINANCING INFORMATION Grant Currency Unit of Account (UA) Interest Type Not Applicable Interest Rate Margin Not Applicable Commitment Fee Not Applicable Service Charge Not Applicable Interest Type Not Applicable Tenor Not Applicable Grace Period Not Applicable FIRR 26.04% NPV UA million EIRR 45.36% NPV UA million TIMEFRAME AND MILESTONES Concept Note Approval 7 September 2011 Project Approval 19 September 2012 Effectiveness 20 November 2012 Completion 30 June 2017 Last Disbursement 31 December 2017 Last Reimbursement Not Applicable ii

5 PROJECT SUMMARY 1 Project Overview: The Project for interconnection of the CAR and DRC power grids from the Boali hydro-power system is an anchor operation which will help to strengthen bilateral economic cooperation and sub-regional integration. It will help to build a section of the electrical system of CAR and DRC border areas and to supply electricity to these areas, which are characterized by an infrastructure deficit. Apart from improving power service quality which will benefit all users, the project will connect new subscribers. The project will be implemented in two phases over a 48-month period starting from Phase 1, which is the subject of this report, will cover the rehabilitation and strengthening of power generating units, transmission lines, transformer substations and distribution grids. It will concern mainly the CAR but also the localities of Zongo and Libenge in DRC. Phase 2 will essentially concern the high voltage line linking Zongo to Libenge. The total project cost is estimated at UA million, of which UA million for Phase 1. ADF intervention in CAR falls under an Electricity Infrastructure Emergency Rehabilitation Programme (PURCE) which is also supported by the World Bank, the French Development Agency and China. It comprises energy efficiency measures which will help to (i) reduce line losses (rehabilitation of power grids, switchover from 63 to 110 kv, etc.); and (ii) increase electricity production without increasing the reservoir capacity (rehabilitation of hydro-power plants). These measures will reduce greenhouse gas emissions because they increase the quantity of renewable energy and reduce self-generation by individuals and ENERCA s thermal generation. Equipping the Boali 3 power plant for power generation will provide more renewable energy and reduce the use of thermal power plants to cover the generation deficit. It is an exemplary climate change adaptation measure which will optimize hydro-power infrastructure and enhance the potential of River M bali, from the reservoir built about twenty years ago. 2 Needs Assessment: in the energy sector, CAR and DRC are facing constraints related to the deterioration of power infrastructure and, in some cases, its destruction during conflicts. The result of this situation is insufficient power generation and low electricity access rates (14% for CAR and 9% for DRC despite a huge hydro-power potential) which are deepening poverty. The capacity of the key institutional actors is weak. Concerning CAR, the reforms implemented in the sector have not produced the expected results. The situation of the sector, characterized by losses of over 40% and power cuts of more than 10 hours a day, is catastrophic. The rehabilitation of infrastructure and its strengthening in the first phase of the project is the best solution, in terms of cost and time, to the emergency. 3 Bank s Value Added: PURCE s objectives will not be achieved without the Bank s intervention, which will also include actions to build the capacity of the national electricity operator. Lastly, the inclusion of cross-border electrification in a programme initiated by the Central Africa Power Pool is value added for the Bank. 4 Knowledge Building: during implementation, the Bank s project team will benefit from the experience through workshops, study validation seminars and site meetings that could be tapped to resolve major technical problems. The Bank will also be able to use of results of the Information, Education and Communication (IEC) and Energy Consumption Control (ECC) campaigns envisaged, in assessing the degree of ownership of the project by the beneficiaries. These results will serve as a basis for designing similar projects that the Bank could initiate in other countries. iii

6 RESULTS-BASED LOGICAL FRAMEWORK Country and Project Name : Multinational - Interconnection of CAR and DRC Power Grids from the Boali Hydro-Power System Project Goal : Increase the availability of electricity and meet the growing electricity needs of the two countries Start-Up Date : June 2013 Completion Date : December 2017 Design Team : J.B. NGUEMA-OLLO, O. FALL, M. ADAMA, S. MASRA Performance Indicators Baseline Situation in Means of Results Chain Indicator Target by Verification (including CSI) CAR DRC CAR DRC Reduction in electricity costs Energy cost reduction rate Costs could fall by at least 10% in 2017 Reports Number of income-generating activities not not Evaluation during supervision and Population s purchasing power increased created recorded recorded at end of project Number of income-generating activities not not Evaluation during supervision and Impacts created by women recorded recorded at end of project Number of household appliances not not Evaluation during supervision and Population s living conditions improved purchased recorded recorded at end of project Number of women trained in optimal not not Evaluation during supervision and use of electricity recorded recorded at end of project Increased generating capacity Installed power in MW Increased energy exchanges Volume of energy exchanges in GWh Electrification rate improved Countries electrification rate 4% 9% 7% 16% Electricity access rate improved Electricity access rate 14 % 9% 22 % 21% Outcome Rural electrification rate improved Rural electrification 1% 1% 3% 3% s Reduction in technical losses Rate of reduction in technical losses 42% 25% 25% 10% Reduction in commercial losses Rate of reduction in commercial losses 42% 5% 5% 2% Outputs Increased HV/MV/LV grids Rehabilitation and strengthening of power generation units Construction and strengthening of transmission network Project Management Number of km. of HV/MV/LV transmission lines Installation of Boali 3 plant Installed power in MW Rehabilitation of Boali 1 and Boali 2 Installed power in MW Installed power in MV 2.5 MV 0 8 MV 500 kw Rehabilitation of thermal power plant Construction and strengthening of 110 kv Number of km of 110 kv lines transmission lines Construction and strengthening of MV transmission lines Number of km of MV lines Construction of HV/MV substations Construction of MV/LV substations Number of HV/MV substations Construction of HV/MV substations Number of MV/LV substations Construction of MV/LV substations Indemnifications paid Indemnifications and individual compensation Monitoring control, auditing and IEC Studies on Bangui-Zongo-Libenge transmission line Works control and supervision Auditing of accounts Environmental and social audit Not stated Operating and maintenance equipment Logistical support to executing agencies Training activities Individual and collective compensations. Compensation plan completed in 2014 Control of monitoring, audit and IEC Action plan completed in December 2014 Studies on Bangui-Zongo-Libenge transmission line Recruitment process Studies completed in 2013 Works monitoring and supervision Quarterly Status Report Auditing of accounts Audit of accounts carried out Annual report submitted on 30 June Environmental and social audit Half-year audit carried out Report submitted and quarterly status report Operating and maintenance equipment Procurements made All procurements completed in 2012 Logistic support to the executing agency Logistic equipment procured All procurements completed in 2012 Training activities Training programme carried out Training programme completed in 2013 iv Appraisal Report Grant Agreement Engineering Contracts Contracts with contractors Status reports Supervision reports Completion reports Audit reports Risks/Mitigation Measures Statements of Risks Fragility of power generation and distribution management companies. Weak State financial and institutional capacity. Weak capacity of implementation units composed of staff of the two national electric power utilities Mitigation Measures Efficiency of power distribution utilities under

7 Key Activities Components (base costs, Phase 1 and 2) Rehabilitation and strengthening of generating units Construction and strengthening of transmission grid Rehabilitation and extension of distribution grid Project Management Activities Financial Resources Sources of Financing Human Resources Recruitment of works contractors UA 7.41 million ADF; Recruitment of works contractors UA million ADF; Recruitment of works contractors UA million ADF; Recruitment of individual consultants UA million ADF; Recruitment of consulting engineer (Assistance) Recruitment of auditors of accounts and ESI controllers Operating and maintenance equipment Logistic Equipment, management tools Implementation of staff training programme Personnel costs (allowances) Contractors Consultants Executing Agency Bank s monitoring team Other financial partners the impetus of institutional reforms in this sector. Availability of necessary human resources. Recruitment of technical assistance (firm) to assist the unit in different areas of expertise Charts dont match and one missing v

8 PROJECT IMPLEMENTATION SCHEDULE vi

9 REPORT AND RECOMMENDATION OF MANAGEMENT TO THE BOARD OF DIRECTORS CONCERNING A PROPOSAL TO AWARD ADF GRANTS TO THE CENTRAL AFRICAN REPUBLIC AND THE DEMOCRATIC REPUBLIC OF CONGO Management hereby submits this report and recommendation concerning a proposal to award an ADF grant of UA million to the Central African Republic (CAR) and an ADF grant of UA 5.55 million to the Democratic Republic of Congo (DRC) to finance the first phase of the Project to Interconnect the Power Grids of CAR and DRC from the Boali Hydro-power System. 1 STRATEGIC THRUST AND RATIONALE 1.1 Project Linkages with the Two Countries Strategies and Objectives Access to basic social services constitutes the project s linkage with the national strategies of the two countries. In fact, in CAR, one of the strategy guidelines is the development of human capital and essential social services (Poverty Reduction Strategy Paper PRSP ). In DRC, one of the pillars of the Poverty Reduction and Growth Strategy Paper (PRGSP-II, ) seeks to improve access to basic social services and strengthen human capital. The project is in keeping with the joint Bank and World Bank strategy (JCPSP, ) for CAR one of whose thrusts is the rehabilitation and development of socio-economic infrastructure. The project plugs into the second pillar of the Results-Based Country Strategy Paper (RBCSP ) prepared by the Bank and which is aimed at achieving pro-poor growth by improving, among other things, the population s access to basic services including electricity through the rehabilitation of power infrastructure and rural electrification At the regional level, the project is in line with the regional integration strategy recommended by the Economic Community of Central African States (ECCAS) and the Central African Economic and Monetary Community (CEMAC). One of the objectives of the strategy in the energy sector is to evolve from a compartmentalized community space to an integrated space, with the establishment of a programme to interconnect the electrical grids of Central African countries in order to ensure sufficient power supply in each State and enable the country to have access to a supply mix allowing it to choose between local power generation and purchase of electric power to optimize its electric power mix. The project forms part of the cross-border electrification programme established by the Union of Producers, Transporters and Distributors of Electric Power in Africa (UPDEAC) and the Central Africa Power Pool (CAPP) whose vision is to tap the region s hydro-power potential to meet all forms of demand through efficient and prosperous energy highways and power markets. The implementation of this project is in line with the objectives of the Regional Integration Strategy Paper (RISP) one of whose two pillars is the development of regional infrastructure. 1.2 Rationale for Bank s Involvement The CAR and DRC are facing major economic and social development difficulties stemming from numerous constraints. Constraints related to the energy sector are due to the deterioration of power infrastructure and, sometimes, their destruction owing to conflicts. The result of this situation is insufficient power generation and low electricity access rate (14% for CAR and 9% for DRC) which are deepening poverty. 1

10 1.2.2 The Bank s intervention will help to remove the sector s constraints by increasing generating capacity by 10MW and developing access to electricity thanks to the rehabilitation of power plants and the construction of distribution grids as well as the implementation of 29; 000 connections in border localities. In the 1990s, CAR and DRC signed an electrification agreement for Zongo town (DRC) from CAR power grids. The agreement served as a basis for the design of the first phase of this project. In June 2006, both countries agreed to extend the transmission line to Libenge, 100 km from Zongo, thereby l supplying power to six DRC localities along the line. The finalization of studies on this line will help to design the second phase of the project The construction of the power transmission line between CAR and DRC, included in the second phase of the project, will strengthen cooperation between the two countries and regional integration. It will ultimately help build a major link in the infrastructure for interconnection of power grids in Central Africa, specifically between the Boali and Lobaye (CAR) and Mobayi Mbongo (DRC) power plants. The result will be an improvement in electric power supply security. The Bank s intervention in this project is in line with ADF-12 priorities which focus on the promotion of poverty reduction through growth driven by investment in infrastructure, governance and regional integration. It will complement those of other donors (notably AFD, World Bank and China) and is indispensable for restoring minimum capacity following the destruction and deterioration of power infrastructure. 1.3 Aid Coordination In both countries, the task of seeking financing and development aid falls within the remit of the Ministries of Finance, Economy, Planning and International Cooperation. These Ministries coordinate and centralize preparation and monitoring activities relating to public investment programmes, management of which is the responsibility of the sector ministries. The financial partners intervening in the energy sectors in the two countries include: AFD, ADB, the World Bank, the European Union, UNDP, GEF, the Kuwait Fund, EIB, Chinese Cooperation, JICA and IEPF. Their interventions have included, in particular: A.) B.) In CAR: (i) the establishment of the Central African Rural Electrification Agency (ACER) and the Central African Autonomous Electricity Regulatory Agency (ARSEC); and (ii) implementation of power generating, transmission and distribution infrastructure, energy sector electrification and support programmes, as well as implementation in recent years of the following operations: (a) partial rehabilitation of the Bangui distribution grids in 2000 on AFD financing, (b) periurban connections from 2008 to 2011 on EU financing; (c) preparation in 2004 of the Electricity Code and analysis of the of the poor populations access to energy services, on UNDP financing; and (d) energy sector human capacity building on financing from IEPF, Chinese Cooperation and Japanese Cooperation. In DRC: (i) preparation of the Electricity Code and the Oil Code; (ii) preparation of a rural electrification master plan; (iii) establishment of a Public-Private Partnership Development Framework; and (iv) strengthening of power infrastructure as well as implementation of the following projects: (a) rehabilitation of the Inga and Katanga province hydro-power plants; (b) rehabilitation of the transmission and distribution grid; and (c) the Inga site development study In addition to these projects, the two countries will receive assistance from the Bank Group, ECCAS and CAPP for: (i) implementation of a common energy policy; (ii) implementation of the cross-border electrification programme; (iii) development of power grid interconnections; and (iv) promotion of renewable energy. 1 The Boali 3 Dam is intended to regulate River Boali flows in order to optimize the operation of the Boali 1 and 2 hydro-power plants located downstream. The Bank contributed to financing Boali. 2

11 2 PROJECT DESCRIPTION 2.1 Project Components The Project will: rehabilitate and strengthen the Boali 1 (8.75 MW), Boali 2 (20 MW) and Boali 3 1 (10 MW) hydro-power plants in CAR as well as the Bangui (CAR), Zongo and Libenge (DRC) thermal power plants; build and strengthen the transmission grid with, in particular, a 110kV line between Bangui and Libenge; rehabilitate and extend the distribution grid including implementation of connections. It will be implemented in two phases. This phasing of the project is justified by the need to urgently respond to the calamitous situation regarding electric power generation, transmission and distribution infrastructure in CAR, which no longer meets the needs of basic services such as drinking water supply The first phase of the project will mainly involve the rehabilitation and strengthening of generating units as well as preparatory studies for the second phase. The major activity of the second phase will be the construction of the line from Bangui to Libenge. The two phases will involve the extension of distribution grids Phase I will involve the rehabilitation and strengthening of: (i) the Boali system generating units; (ii) the 110kV transmission line linking Boali to Bangui currently operated with 63kV; (iii) the obsolete Bangui, Zongo and Libenge thermal generating plants; (iv) the electrification of CAR localities crossed by the lines; (v) the electrification of Zongo; and (vi) building of the human and technical capacity of ENERCA, SNEL and CAPP. During this phase, all the necessary studies for the construction of the 110kV line from Bangui to Libenge will be finalized Phase 2 will concern: (i) construction of the 110/132kV HV line from Bangui to Libenge and the related substations; and (ii) electrification of 5 other localities in DRC crossed by the line. The project cost and cost by component and by phase are as follows: Table 2.1 Detailed Project Costs by Component, Phase 1 and 2 No. Components Sub-components Phase 1 1 Rehabilitation and Strengthening of Generating Units Rehabilitation and Strengthening of Generating Units Construction and 7.41 Phase 2 Description Rehabilitation and extension of Boali 2 and Boali Rehabilitation of the Bangui thermal power plants Rehabilitation of the Zongo and Libenge thermal power plants 2 Construction and Strengthening of the Transmission Grid Strengthening of Transmission Lines Construction and Strengthening of Construction of 123 km of 110/132 kv transmission line (Bangui-Zongo-Mole-Libenge) Strengthening of 130 km of Boali 2 to Bangui transmission line (from 63kV to 110kV) Construction of two 132 kv HV substations (DRC) Strengthening of three 110 kv HV substations (CAR) Transformer Substations Construction of 45 MV/LV substations (CAR 45) 3 Rehabilitation and Extension of the Distribution Grid Construction, Rehabilitation and Extension of MV/LV Grids Rehabilitation of 26 km of underground MV transmission line in Bangui (CAR) Construction of 29 km of MV line in Bangui (CAR) 3

12 Connections and Public Lighting Rehabilitation of 90 km of LV line in Bangui (CAR) Construction of 90 km of LV line (CAR) Construction of 105 km of MV line in Zongo Libenge (DRC) Construction of 81 km of LV line in Zongo-Libenge (DRC) Single-phase connections (CAR and DRC) Three-phase connections (CAR and DRC) Public lighting units (CAR and DRC) Land transport (three 4x4 vehicles) Operating and maintenance tools and equipment Operating and Maintenance Equipment CAR and DRC ESMP CAR and DRC CRP 4 Project Management Establishment of the ESMP ,92 Energy Consumption Control Information-Education-Communication (IEC) Project Studies, Control and Supervision Recruitment of consulting engineer and technical auditor Project Administration Recruitment of technical assistance firm Audit of project accounts Total Base Cost Physical Contingencies (7%) Price Escalation (5%) Total Cost Environmental and social audit The technical design of structures, detailed costs and financing arrangements are presented in paragraphs C.8 of Technical Annexes The technical solution adopted is based on the rehabilitation and strengthening of power plants to increase generating capacity instead of the construction of new generating units. It is justified by the fact that none of the alternatives explored produced the expected results within the timeframes imposed by the emergency situation. The options explored take into consideration their feasibility and their short- and medium-term operating impacts. Table 2.2 below presents the alternatives for enhancing power generation and strengthening the transmission grid explored and the reasons for their rejection in the current context. 4

13 Table 2. 2: Alternative Solutions Explored and Reasons for their Rejection Solutions Descriptions and Characteristics Reasons for Rejection Strengthening generation by a new power plant (Boali 4 Strengthening generation by a new power plant (Palambo Plant) Strengthening generation by a new power plant (Lobaye Plant) Strengthening the transmission grid 2.3 Project Type Increase of generating capacity by 28 MW Construction of the dam on the Oubangui and a 30 MW hydro-power plant. Development of the Lobaye plant for 24 MW will ensure the expansion of the interconnected grid and rural electrification. Equipping of Boali 3 + transmission to Boali 2 The construction of this plant requires the permanent closure of Boali 1 and limits any expansion of Boali 2. This would amount to a 47 % reduction in existing generating capacity and would increase the deficit or require the use of thermal power with highly significant GHG emissions. Given its multinational character and the very high cost of the dam, this project s feasibility can only depend on CAR and, therefore, cannot be the subject of any short- or medium-term planning. Not all the required studies for development of the Lobaye are available and would take a very long time to prepare, especially in the case of the environmental studies for a new hydro-power facility. Operation in an un-looped network is acceptable. However, regarding transmission line losses, the positive impacts of switching over to 110 kv will not be visible, and the supply will not be, fully guaranteed This is a multinational investment project. The Bank will provide ADF resources in the form of grants to CAR and DRC. The Bank s financing will complement that of other development partners including Chinese Cooperation, the French Development Agency and the World Bank. In August 2011, Chinese Cooperation signed a financing agreement with the Government of the Central African Republic, with one third of the funding concerned in grant form and two thirds as an interest-free loan. AFD and the World Bank will also contribute to the project financing through their emergency programmes approved in 2007 and 2009, respectively. These two operations have just been restructured and should now be completed in Project Cost and Financing Arrangements Project Financing Arrangements: the entire project (Phases 1 and 2) is included in the ADF-12 programme of regional integration operations for a total amount of UA million. ADF financing comes from the DRC (UA 1.93 million) and CAR (UA 1.67 million) country allocations as well as from the regional operations envelope (UA million, comprising UA 3.62 million for DRC and UA for CAR). Both countries will transfer the resources granted to their respective national power utilities, ENERCA and SNEL, in the form of a grant and on the same terms as the ADF. CAR and DRC are not expected to contribute to the project financing, given their classification in the category of Post-crisis, Fragile States In CAR, ADF financing is complementary to that already granted by the World Bank (USD million or UA 7.85 million), the French Development Agency (EUR 2.78 million or UA 2.41 million) and China (CNY million or UA million), within the overall framework of support to the electricity sector. ADF and World Bank financing were approved respectively in 2007 and 2009, for the Boali Electricity Infrastructure Emergency Rehabilitation Programme (PURCE). There has been a long delay in implementing PURCE. The two institutions have just restructured it and its completion is now scheduled for Chinese Cooperation s contribution concerns the installation of Boali 3 electrical facilities and the construction and strengthening of HV lines linking the power plants as well as Bangui. 5

14 2.4.3 Project Cost (Phase 1): the total project cost, net of taxes and customs duties, is estimated at UA million, comprising UA million in foreign exchange (FE) and UA million in local currency (LC). This cost includes a 7% provision for physical contingencies and 5% for price escalation. The project cost by component, source of financing and expenditure category as well as the expenditure schedule are indicated in Tables 2.3 to 2.6 below. Table 2.3 Estimated Project Cost by Component, Phase 1 Amounts in UA million % Components FE LC Total FE Rehabilitation and Strengthening of Generating Units % Construction and Strengthing of Transmission Grid % Rehabilitation and Extension of Distribution Grid % Project Management % Total Base Cost % Physical Contingencies (7%) % Price Escalation (5%) % Total Cost % Table 2.4 Sources of Financing, Phase 1 (Amounts in UA million) Source of Financing Cost in FE Cost in LC Total %Total Cost ADF % Government Counterpart Contributions: the AfDB policy on expenditure eligible for Bank Group Financing and the note on counterpart financing determine the criteria for States to be fully or partially exempt from counterpart financing. Both CAR and DRC have financial parameters that allow them to be fully exempt from counterpart financing. Furthermore, both countries are considered by the Bank to be post-conflict, fragile States and no direct contribution is therefore expected from them. Nevertheless, the two power utilities will participate in project implementation by providing personnel, logistic resources and consumables. New customers will contribute partially to the financing of connections. Table 2.5 Project Cost by Expenditure Category, Phase 1 (Amounts in UA million) Expenditure Category Total Project DRC CAR FE LC Total FE LC Total FE LC Total Goods Works Services Operation Other Items Total Base Cost Physical Contingencies (7%) Price Escalation (5%) Total Cost Percentage 70% 30% 100% 70% 30% 100% 70% 30% 100% 6

15 Table 2.6 Expenditure Schedule by Component, Phase 1 (Amounts in UA million) Components Total Rehabilitation and Strengthening of Generating Units Construction and Strengthening of Transmission Grid Rehabilitation and Extension of Distribution Grid Project Management Total Base Cost Physical Contingencies (7%) Price Escalation (5%) Total Cost Project Target Areas and Beneficiaries The project area extends from the Ombella M poko Prefecture in CAR to Equateur Province in DRC. It covers thirteen localities, including villages and some neighbourhoods on the CAR side, and six localities on the DRC side, that is respective target populations of 111,030 and 112,193 inhabitants. In CAR, Bangui, the capital, is the largest town with a population of about 630,000 and a density of 9,295 inh./km 2. The main activity on the CAR side of the project area is food crop farming which employs almost 80% of the workforce. Bangui s industries manufacture textiles, food products, beer, shoes and soap. The main exports are diamonds, cotton, wood, coffee and sisal. The Zongo locality in DRC, with its population of about 54,000 lies opposite Bangui. The two towns are linked by ferry and trading has resumed since the re-opening of the CAR border.. The commercial interdependence between Bangui and Zongo brings the populations closer together - a key factor in sub-regional integration. The urbanization rate in the area is low and the population makes a living from agriculture and trading. Agriculture is dominated by food crops (cassava, maize, groundnut, plantains, coco-yam and sweet potato) and perennial crops (coffee and oil palm) The project impact area in CAR and DRC is poor. In 2010, 62% of the CAR population lived below the poverty line. Most make a living from extensive farming (64%) and the informal urban sector (26%) with a high youth and male migration rate (51.3%). The poverty situation in both countries kept life expectancy at birth low in 2010 (47.7 years in CAR and 48 years in DRC). The two countries have very low human development index ratings (0.315 in CAR and in DRC). They are ranked 159 th and 168 th respectively, out of 169 countries according to the 2010 classification. This situation of poverty also has an impact on maternal and child health; under-5 mortality rates in 2010 were for DRC and 101 for CAR, compared to an African average of about The main project beneficiaries are: (i) ENERCA and SNEL, whose generation costs will drop and whose income will increase as a result of new customers and enhanced reliability of the grid; (ii) ENERCA and SNEL s customers, including the private sector, who will benefit from improved service quality; (iii) the inhabitants of the project area who will be employed on the project sites; and (iv) the two governments, which will collect additional tax revenue and benefit from increased productivity of the administration, thanks to improved working conditions. 2.6 Participatory Approach Concerning Phase 1 of the project, socio-economic surveys were conducted in CAR and DRC among the populations concerned and validation seminars organized, bringing together the stakeholders identified. These activities made it possible to accurately determine the population s expectations, adopt measures to protect housing and minimize damage to farms and natural sites. 7

16 They also offered an opportunity to measure the determination of the Central African and Congolese Authorities, for whom this project is a vehicle for transforming the economic and social development of the communities concerned The population, local authorities, civil society and NGOs have been consulted and their opinions on the project taken into account. The list of persons affected by the project has been validated and approved by the administrative and customary authorities. This approach that was followed at project preparation and appraisal will continue during its implementation through IEC and ECC campaigns and through the measures to mitigate the negative environmental and social impacts. 2.7 Bank Experience and Lessons Reflected in Project Design Bank Group Interventions: in CAR, the Bank s last intervention in the energy sector dates back to 1988 with the financing of M Bali dam (Boali 3), whose performance was deemed satisfactory. However, given its age, with its Completion Report prepared in 1966, it is the lessons learned from the recent portfolio review that are deemed more relevant for the design of this project. The review highlighted the poor project quality at entry and the limited capacity of the Administration to provide the indemnification due. There is need to conduct detailed technical studies and carry out in-depth institutional and fiduciary assessments In DRC, the Bank s activities in the energy sector had been suspended after the approval in 1989 of a last project relating to power transmission. Cooperation in the energy sector was resumed in 2007 with the approval of the Project to Rehabilitate and Strengthen the Inga Hydro-Power Plants and the Kinshasa Distribution Grid followed by the Peri-urban and Rural Electrification Project in The main lessons from the implementation of these projects relate to the fulfilment of conditions precedent to disbursement concerning compensation and delay in the procurement of goods, services and works At regional level, both countries are involved in the Study on the Interconnection of the Power Grids of ECCAS Member Countries on ADF financing, the Study on Cross-border Electrification Projects in Central Africa on IPPF/NEPAD financing and the Study on the Development of the Inga Hydro-Power Site and Related Power Interconnections on ADF financing. During the implementation of these multinational operations, there were difficulties in establishing the study organs and in meeting conditions precedent to disbursement and procurement The main lessons from the national and multinational projects taken into account in this project are as follows: (i) the need to define conditions precedent to first disbursement that take into account the fragile State status of both countries; and (ii) the need to build capacity for project preparation and implementation. Hence, conditions precedent to first disbursement have been relaxed and the project has made provision for the recruitment of a consulting engineer and technical assistance for ENERCA. 2.8 Key Performance Indicators The indicators presented in Tables 2.7 and 2.8 below will ensure the timely identification of factors likely to affect project implementation and taking of appropriate corrective measures for the attainment of the set objectives. In particular, these factors include the timely fulfilment of the grant conditions precedent, plans for any resettlement, indemnification and compensation for persons affected by the project, the recruitment of consulting engineering firms and works contractors, and the timely availability of ENERCA and SNEL resources. 8

17 Table 2.7: Impact and Outcome Indicators in CAR CAR Impact Indicators Expected Progress at Project End Electricity access rate (Number of households From 14% in 2009 to 22% in 2017 electrified/total number of households) Costs could fall by at least 10% in 2017 Electricity generation and cost reduction rate Outcome Indicators Expected Medium-Term Progress Number of localities electrified in the project area From 18 in 2009 to 30 in 2017 Number of cases of load shedding and outages Duration of load shedding and outages From 4015 in 2009 to less than 1000 in 2017 Technical loss reduction rate Commercial loss reduction rate From 3011 hours in 2009 to less than 1500 in 2017 Country s electrification rate (Number of localities From 42% in 2009 to less than 25% in 2017 electrified/total number of localities) From 42% in 2009 to less than 5% in 2017 Rural electrification rate From 4% in 2009 to 7% in 2017 From 1% in 2009 to 3% in 2017 Table 2.8: Impact and Outcome Indicators in DRC DR Congo Impact Indicators Expected Progress at Project End Electricity access rate From 9% in 2009 to 21% en 2017 Electricity cost reduction rate Costs will fall by at least 10% in 2017 Outcome Indicators Expected Progress in 2017 Number of localities electrified in the project From 0 in 2009 to 6 in 2017 area To less than 1000 in 2017 Number of power outages and cuts To less than 1500 hours in 2017 Duration of power outages and cuts To less than 25% in 2017 Technical loss reduction rate To less than 5% in 2017 Commercial loss reduction rate From 9% in 2009 to 16% in 2017 Country s electrification rate From 1% in 2009 to 3% in 2017 Rural electrification rate 3 PROJECT FEASIBILITY 3.1 Financial and Economic Performance Table 3.1: Key Project Financial and Economic Indicators (Amounts in UA million) Financial Performance FIRR FNPV Baseline scenario 26.04% A 5% increase in investment costs 21.56% A 5% increase in operating costs 24.60% A 10% increase in electricity tariffs in CAR 26.01% A 10% reduction in the average 25.87% electricity selling price in CAR Economic Performance EIRR ENPV Baseline scenario 45.36% A 5% increase in investment costs 37.28% A 5% increase in operating costs 44.01% A 10% increase in electricity tariffs in CAR 47.29% A 10% reduction in the average electricity selling price in CAR 44.72% Financial Performance: the project financial internal rate of return (FIRR) and the net present value were calculated based on costs and revenue related to the construction and operation of the project facilities. Project revenue is derived from additional sales of energy linked to consumption of new customers assessed at the 2010 average tariff. Project costs comprise investment costs net of price contingencies, annual operating and maintenance costs estimated at an average of 3% of the investment cost and the cost price of power supplied. 9

18 3.1.2 Economic Performance: the economic costs used in calculating the economic internal rate of return (EIRR) and the economic net present value (ENPV) are the investment costs, net of taxes and price escalation, adjusted by appropriate conversion factors for equipment, works, services and labour. Maintenance and other operating costs have been similarly adjusted. The project s economic benefits are savings on fuel consumption due to the closure of the thermal plants as well as the reduction in technical and commercial losses. In addition to these benefits, the installation of additional capacity will result in savings on the trade balance (CAR), owing to the replacement of thermal power by hydro-power. In light of ENERCA s current generating structure, this saving is estimated at about EUR 20 million per year, beginning from 2014, i.e. EUR 1.1 billion over a total operating period of 25 years, not considering the upward trend in oil prices Sensitivity: the sensitivity of the project s financial performance was analysed in relation to: (i) a 5% increase in investment costs; (ii) a 5% increase in operating costs; (iii) a 10% increase in electricity rates in CAR; and (iv) a 10% drop in the average selling price of CAR electricity. The sensitivity of the project s economic performance was analysed in relation to: (i) a 5% increase in investment costs; (ii) a 5% increase in operating costs; (iii) a 10% increase in electricity rates in CAR; and (iv) a 10% drop in the average selling price of CAR electricity. This analysis shows that the project s internal economic and financial rates of return and net present value, although sensitive to changes in these different factors, remain at acceptable levels and above the weighted average cost of capital and the opportunity cost of capital in all the cases considered, as shown in Table 3.1 above, thus confirming its financial and economic viability. 3.2 Environmental and Social Impacts Environment: on 24 April 2011, the project was classified under Environmental Category 2. From the environmental standpoint, Phase 1 of the project includes works to rehabilitate and strengthen the generating capacity and rehabilitate the former HV lines. Since works will be implemented within the generating sites or on land pre-prepared for that purpose, they will only have environmental and social impacts that are specific to the project sites as presented in paragraphs B.8.3 of the Technical Annexes. Regarding the construction of the 7 km of HV line between Boali 3 and Boali 2 and the 30 km of the Bangui loop, these will not have a significant impact on the environment since the areas crossed have become savannah due to extremely intensive forest clearing. The ESMP summary was posted on the Bank s website on 16 November The most significant negative impacts of the project during the works phase relate to the establishment of the workers camp (waste water and ordinary household waste) and the generation of solid waste (excavated materials, scrap iron, dirty rags and barrels contaminated by chemical products, etc.) and used lubricants, all during the works implementation phase. The contractor shall take every measure to prevent erosion, restore topsoil after filling trenches and completing the concrete base work on the poles and pylons, level the access roads to the improved or rehabilitated lines after the works, strip polluted top soil and ensure the disposal of such waste at the proper sites. The contractor shall also take care not to discharge polluting effluents on the soil or into rivers, and to organize the cleaning up of the work sites. In addition, the mitigation measures will involve choosing works itineraries away from parks and reserves, avoiding forest areas and minimizing the works rights-of-way as much as possible. ENERCA and SNEL will be responsible for proper implementation of all ESMP-related activities on their respective territories Climate Change: the project comprises many energy efficiency measures which will help to: reduce line losses (rehabilitation of distribution and transmission grids: switchover from 63 to 110kv); and (ii) increase electricity production without increasing the reservoir capacity (rehabilitation of hydro-power plants). These measures will contribute to increasing the quantity of renewable energy and reducing self-generation by individuals and ENERCA s thermal generation. 10

19 Combined with the rehabilitation of power plants (to reduce specific consumption) which are indispensable elements of the energy mix, they will help to mitigate climate change through the reduction of greenhouse gas emissions Equipping the Boali 3 power plant to increase generating capacity by 10 MW will ensure availability of more renewable energy and reduce the use of thermal power plants to cover the generation deficit. Generation from the Boali 3 dam which has been used only as a regulating dam since its construction in 1992 is an exemplary adaptation measure. The project is designed to tap the available hydro-power potential of River M Bali to the maximum. Power generation is increased from the same reservoir with very little decay of plant matter in the reservoir. The project will hardly emit GHG, given the age of the reservoir (more than 20 years) Gender: in the project area in CAR and DRC, there are marked gender disparities in terms of income-generating activities. Many constraints and socio-cultural obstacles continue to impede women s participation in economic activities and limit the optimization of their savoir faire and skills. The project will have a very small negative impact on gender. In rural areas, the recruitment of labour to clear the route would concern the men or youth. This would omit part of the labour pool available for agriculture and increase the chores of women, who would have to carry out most of the agricultural and domestic tasks alone In contrast, the expected positive impact on gender will be enormous. Electrification, while facilitating the supply of stable energy to the population, will be especially beneficial to women and children who will be relieved of the chore of gathering fuel wood especially for lighting. The purchase of household appliances will facilitate the domestic duties of women and girls, and improve the living environment of households. The freed-up time will enable them to develop new lucrative activities, and access formal and literacy education. The electrification of villages and households will have an impact on school performance due to improved lighting for studies; it will also improve girls access to schooling and to NICTs, as well as the functioning of basic social services and the promotion of micro-businesses initiated by women. Women s access to sources of information through the media will emancipate them and encourage them to acquire production assets to build up their financial resources Social: The project could have some negative effects on the populations concerned and the availability of energy may lead to an increase in noise pollution in the villages and neighbourhoods. The process of social and cultural exchanges between Bangui City and the Zongo border post could step up, with the risk of acculturation as a result of the intercultural influences. However, these negative impacts will be very rapidly mitigated by the project s positive effects that will contribute to poverty reduction and promote economic and social activities. The project s expected positive impacts far outweigh its negative consequences. Obviously, electricity is a factor of production, the availability and quality of which can boost the productive sector, improve economic growth and consequently create decent jobs for the poor and disadvantaged segments of the population. Industrial development is only possible with the availability of energy sources. Small generating, transmission and service units could spring up in villages, helping to reduce the unemployment rate in the project area. The sources of energy will facilitate IEC activities through the use of equipment for the projection of educational films to raise awareness on communicable diseases and reproductive health and for sexual education of young people and information on major endemic diseases. The electrification of villages will undoubtedly reverse rural-urban migration, as it is expected that young people who acquire know-how will return to the land. Consequently, labour will become more readily available for agricultural activities and the local economy The project will help to develop handicrafts and transform the economic landscape in the target area. The electrification of neighbourhoods and lighting of public thoroughfares will improve security conditions for the population and consequently bring down crime and delinquency rates in 11

20 the towns and villages. The project will foster major changes in the social indicators in the localities concerned and consequently contribute to the achievement of the MDGs. About 3,000 rural households are concerned by rural and peri-urban electrification in CAR, and 2,000 households in Zongo (Phase 1) in DRC. The cost of sensitizing the population to the risks of accidents during the works phase of the project components and the participatory approach-related expenditures are estimated overall at CFAF 14,000,000, i.e. about UA 18, Involuntary Resettlement: the components under Phase 1 of the project financed by the Bank do not entail any involuntary resettlement measures. However, the construction, on Chinese Cooperation financing, of the 110 kv transmission lines for 7 km between Boali 1 and Boali 2,as well for 30 km to circumvent Bangui, will entail eviction and expropriation measures. Although the route defined is based on the least social cost incurred in terms of the shorter and least costly option, it will run through highly urbanized areas on the outskirts of the town. An Inter-ministerial Committee has been tasked with identifying and assessing adequate indemnification and compensation for land, private property and goods affected by the project. This Committee has already drawn up a list of names of persons (both genders) and the amounts owed. Under the contract signed with the Chinese company, the cost of the environmental and social impact mitigation measures will be borne by CAR. The Central African Government has already included CFAF 500 million in the 2012 budget in respect of project-related indemnification and compensation. It shall provide the Bank with evidence of a cohesive mechanism for compensating displaced persons and resources secured for that purpose. Furthermore, the Government shall undertake to inform the Bank, as the works progress, of the status and outcome of the indemnification of persons affected by the construction of the Chinese cooperation-financed 110 kv transmission lines over lengths of 7 km between Boali 1 and Boali 2, as well as 30 km bypassing Bangui. 4 PROJECT IMPLEMENTATION 4.1 Implementation Arrangements The CAR and DRC Ministries of Energy will be the project executing agencies. They will establish a Joint Steering Committee (JSC), including the Central Africa Power Pool (CAPP). The JSC will have a decision-making role. It will ensure compliance with project objectives and implementation conditions, and be responsible for: (i) issuing strategic guidelines and directions to the national project implementation units; (ii) approving the annual work plan and budget as well as the periodic activity reports; and (iii) evaluating the performance of the project implementation units. CAPP will act as the secretariat for the JSC. Project implementation will be entrusted to ENERCA and SNEL. Both companies have financial deficits and cash flow situations marked by the use of costly bank overdrafts and adversely affected by the cumulative debts of the central government and para-statals, as well as weak management and internal control capacity. ENERCA and SNEL will set up autonomous Project Implementation Units (PIUs) within their structures and run by their staff, including: a project Coordinator, one substation engineer, one network engineer, one civil engineer, an environmentalist, a procurement expert, a financial and administrative officer and an accountant. In the case of ENERCA, the CVs of the said personnel will receive the Bank s prior approval based on their qualifications and experience in the required areas of expertise. In the case of SNEL, the implementation unit of the on-going Rural Electrification Project approved in October 2010 will be strengthened to enable it to monitor this project as well. These arrangements will ensure joint implementation of the project, which will rely more on the sector capacities in both countries A consulting firm will be recruited to control and supervise works. It will assist the PIUs in the procurement of goods, services and works. Furthermore, there are plans to recruit technical assistance under the project, to strengthen the ENERCA implementation unit during the project 12